1. Eli Lilly and Company (NYSE:LLY)
Number of Hedge Fund Investors: 109
Eli Lilly, a leading obesity medicine manufacturer and one of the top insulin producers, is involved in the drug manufacturing industry. The company is involved in the discovery, development, manufacturing, and marketing of pharmaceutical products for human use. It makes therapies for obesity, diabetes, and cardiometabolism.
With its weight loss medications being a major factor, Eli Lilly and Company (NYSE: LLY) has had one of the most impressive rises in recent years. The stock has shot up by more than 79% over the past 12 months. FDA-approved Tirzepatide, the GLP-1 receptor agonist marketed under the names Zepbound for managing weight and Mounjaro for diabetes, is largely responsible for this rise.
Tirzepatide received approval for long-term weight control on July 19th from the National Medical Products Administration in China. This comes after the European Union approved weight control and Type 2 diabetes in April 2024. Eli Lilly’s market penetration outside of the US, where it made up 63.9% of its sales in 2023, has increased dramatically as a result of these approvals.
Since 2004, China’s adult obesity rate has risen by 14.1%, with 34.8% of the population being overweight. Overweight or obese adults make up 52.7% of the adult population in the European Union. Consequently, there are market opportunities for Eli Lilly and Company (NYSE:LLY).
Here’s what management had to say about Mounjaro and Zepbound during the Q1 2024 earnings call:
“Lilly’s first quarter performance reflects solid year-over-year revenue growth with strong sales of Mounjaro and Zepbound,” said David A. Ricks, Lilly’s chair and CEO. “Our progress in addressing some of the world’s most significant health care challenges has resulted in increased demand for our medicines. As we continue to make pipeline investments that position us for future growth, we are rapidly expanding manufacturing capacity to make our incretin medicines available to more patients.”
LLY has demonstrated robust financial performance overall driven by strong sales of FDA-approved obesity medications. The company has $2.59 billion in cash and cash equivalents, which is ample to fund growth.
Eli Lilly is currently facing a serious supply shortage as a result of its inability to construct enough facilities to produce enough dosages to meet the rapidly increasing demand. According to the U.S. FDA, there will be a scarcity of Zepbound and Mounjaro dosages through Q2 2024. Despite this, a solid portfolio of current drugs and a promising R&D pipeline make LLY one of the best GLP-1 and weight loss stocks to buy now.
Eli Lilly’s obesity treatments are part of a family of drugs called GLP-1 agonists that were first created for the treatment of diabetes. Patients who take these medications can lose up to 20% of their body weight on average. Tema ETF investing associate David Song stated, “I would say Lilly’s doing a good job in trying to address the situation. There’s a lot of demand for these… therapies.” Furthermore, Lilly and its primary competitor are striving to present clinical proof that their GLP-1 drugs offer health advantages beyond diabetes and weight loss, as well as heart-protective capabilities that may increase insurance coverage.
Analysts are bullish on the stock and rate it as a Strong Buy. In the first quarter of 2024, 109 hedge funds out of 920 reported holding an ownership stake. Joe Dimenna’s ZWEIG DIMENNA PARTNERS is the largest stakeholder in the company, with 19,680 shares worth $17.82 million.
Baron Health Care Fund stated the following regarding Eli Lilly and Company (NYSE:LLY) in its first quarter 2024 investor letter:
“Eli Lilly and Company (NYSE:LLY) is a global pharmaceutical company that discovers, develops, manufactures, and sells medicines in the categories of diabetes, oncology, neuroscience, and immunology, among other areas. Stock performance was strong due to robust fourth quarter sales of Mounjaro/ Zepbound, better-than-anticipated initial guidance for fiscal year 2024, and ongoing enthusiasm surrounding the company’s obesity and diabetes franchises. We continue to think Lilly is well positioned to grow revenue and earnings at attractive rates through the end of the decade and beyond.”
In conclusion, tirzepatide’s introduction by Eli Lilly into China and the European Union has created new opportunities for the company. On the other hand, investors might want to wait and see until the forthcoming financial reports, given the supply issues.
While we acknowledge the potential of Eli Lilly and Company (NYSE:LLY) to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than LLY but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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