Eli Lilly is Friday's IBD Stock Of The Day. After announcing a $1.4 billion acquisition, Eli Lilly stock is bounding off its 50-day moving average.
When shares hit their 21-day moving average, they could become actionable.
Investors are also looking for what's next from the company's efforts in diabetes and weight-loss drugs. On Friday, Bank of America analyst Geoff Meacham raised his price target on Eli Lilly stock to 700 from 600. He notes that Lilly is working on two injectable and one oral drug for obesity treatment.
"We don't think it's a zero-sum game, with different patient populations likely to opt for different modalities," he said in a report to clients. "Indeed, we think that the strategy of an obesity armamentarium with (drugs called) tirzepatide, orforglipron and retatrutide provides several administration options and positions Lilly well in the competitive obesity landscape."
On today's stock market, Eli Lilly stock popped 4.4% to close at 565.22.
Eli Lilly Stock: Radiation-Based Drugs
Early this week, Lilly said it would buy Point Biopharma for $1.4 billion, sending Point stock into the stratosphere. Meanwhile, Lilly shares lost 2.4%.
But Eli Lilly stock has climbed since then. Evercore ISI analyst Umer Raffat says the deal is "very smart." On the day following Lilly's announcement, RBC Capital Markets analysts noted that Eli Lilly has announced five bolt-on acquisitions in the past 12 weeks.
Point Bio is working on delivering targeted radiation, limiting the damage to healthy tissue surrounding tumors. It does this by linking a radioisotope to a molecule capable of sussing out cancer cells. Point also owns its own manufacturing facility for specific radioisotopes.
"Given the inherent complexities associated with the supply chain for radiopharmaceuticals, we believe Point's manufacturing expertise was an important consideration for Lilly when pursuing the deal," William Blair analyst Andy Hsieh said in a note to clients.
He says the deal bodes well for other radiopharmaceutical companies, particularly those with their own established manufacturing capabilities. Point Biopharma is partnered with Lantheus Holdings on its two latest-stage efforts, one in prostate cancer and the other in neuroendocrine tumors, rare cancers that have cells similar to nerve cells and hormones producing cells.
"Lilly will also be able to leverage the commercial infrastructure from Lantheus, assuming that (the prostate cancer drug called) PNT2002 achieves regulatory approval, as Lantheus and Lilly will become partners after the deal closes," Hsieh said.
He doesn't have a rating on Eli Lilly stock, though he has an outperform rating on Lantheus and a hold rating on Point shares.
Weight-Loss Drugs Are Key
Analysts are also closely watching the diabetes and obesity treatment space through a mechanism called GLP-1. These drugs impact feelings of satiety, slow how fast the stomach empties itself and improves markers of diabetes like A1C.
Eli Lilly makes several GLP-1 drugs, including Mounjaro. Mounjaro — also known by the test name tirzepatide — loops in a second mechanism and has approval in the U.S. for patients with type 2 diabetes. But Mounjaro has also shown promise as a weight-loss drug. In one notable study, patients without diabetes lost up to 22.5% of their body weight over 72 weeks.
Like its closest rival, Novo Nordisk's Ozempic, Mounjaro is an injected drug. Lilly is also working on an injectable drug called retatrutide that adds in a third mechanism to, potentially, improve weight loss. Further, the company's orforglipron is an oral drug, which could open the GLP-1 market to needle-phobic patients. Lilly is testing the latter two drugs in diabetes and obesity treatment.
Bank of America's Meacham, who has a buy rating on Eli Lilly stock, also increased his expectations for sales of next-generation weight-loss drugs. He expects orforglipron to eventually top $8 billion in sales and retatrutide to bring in more than $4 billion in annual sales.
Meacham also raised his forecast for Lilly's potential Alzheimer's treatment, donanemab, to more than $5 billion in yearly sales. Donanemab could gain Food and Drug Administration approval this year, following Biogen and Eisai's Leqembi. Donanemab and Leqembi both remove built-up plaque called beta amyloid in the brains of Alzheimer's patients. This helps slow cognitive decline.
Eli Lilly Stock Has Pulled Back
Eli Lilly stock has a strong Relative Strength Rating of 96 out of a best-possible 99, according to IBD Digital. This means LLY ranks in the leading 4% of all stocks when it comes to 12-month performance. Lilly stock's Composite Rating is even higher at 97. This is a 1-99 measure of a stock's fundamental and technical performance.
LLY shares hit a record high of 601.84 on Sept. 14 but have since pulled back. The pullback is due to "macro uncertainties and selling pressure, not from any fundamental concerns," Meacham said.
According to MarketSmith.com, Lilly stock has dropped out of a profit-taking zone above a buy point at 469.87. But bounding above its 50-day moving average is a bullish sign for Eli Lilly stock.
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