On Friday, Eli Lilly (LLY) saw its stock price rise more than 3% against the market trend, hitting a record high during trading and reaching a total market capitalization of 1.09 trillion US dollars. On the news front, the company’s flagship weight-loss drug Zepbound recently had its insurance coverage restored by CVS Caremark, a major US pharmacy benefit manager. At the same time, the newly approved oral weight-loss drug Foundayo has also been added to the formulary, further expanding Lilly’s GLP-1 product portfolio.
Previously, although Eli Lilly held a dominant position in the weight management market, it faced obstacles such as uneven insurance coverage for anti-obesity medications. On May 28, CVS Caremark, the pharmacy benefit management division of CVS Health, announced that it would begin covering Zepbound starting October 1. This news was particularly significant because CVS had previously removed this drug from its formulary, making this a major reversal. In addition, CVS Health will also cover Eli Lilly’s new oral GLP-1 drug Foundayo starting June 1.
These developments allow Eli Lilly to catch up with its biggest competitor, Novo Nordisk, whose weight-loss drugs had already been covered by CVS Caremark. More importantly, all three major US pharmacy benefit managers will now cover both Zepbound and Foundayo. Broader access to these medications will help more patients obtain them at reasonable prices and also help Eli Lilly fend off threats from some telehealth companies offering cheaper generic copies.
Against the backdrop of current US stock market capital rotating from technology stocks into value sectors such as healthcare and finance, Eli Lilly has become a core target for safe-haven capital, thanks to its strong fundamentals and leading position in the weight-loss drug space. Citi reaffirmed a Buy rating on Eli Lilly with a price target of 1,500 US dollars. The upcoming diabetes conference is expected to release more data on retatrutide, which may further highlight the drug’s differentiated advantages over already marketed products.
Eli Lilly’s extensive product portfolio helps meet the needs of patients who are still on the sidelines. In the first quarter, Eli Lilly’s sales increased by 56% year-over-year to 19.8 billion US dollars; adjusted net earnings per share surged to 8.55 US dollars, a 156% increase from the same period last year. Approximately 80% of Foundayo patients had never used a GLP-1 drug before, possibly due to a dislike of injections.
In addition to its core diabetes and weight-loss products, Eli Lilly also has a meaningful research and development pipeline. Over the next five years, the company is expected to launch several new non-GLP-1 drugs while also increasing sales of existing medications. Although its forward price-to-earnings ratio stands at 29.3 times, higher than the healthcare sector average of 16.9 times, this premium is justified given the company’s outstanding performance and strong R&D pipeline. The stock remains attractive at its current price level.
