December 20, 2024
Since pharmaceutical giant Eli Lilly (NYSE: LLY) reported earnings for the third quarter on Oct. 30, shares have been punished by investors. As of this writing, Lilly's stock price has plunged as much as 14% since Q3 earnings, and it's currently trading 6% lower than it was prior to the report.
This precipitous sell-off has placed Lilly stock near its lowest levels in six months. Below, I'll explore what's been driving the sell-off, and assess whether Lilly has any catalysts that could make this price action a good opportunity to buy the dip .
Two primary factors played a role in Lilly's current sell-off.
First, investors were not pleased with the financial results for the company's diabetes and obesity care drugs -- Mounjaro and Zepbound. Although both medications have become multibillion-dollar sources of revenue, Lilly has a mismatch between supply and demand . This dynamic can cause investors to doubt whether the company is taking the right approach to manufacturing and distributing its biggest sources of growth.
Second, constrained supply dynamics also allow competitors to take advantage of demand-driven bottlenecks. One such competitor that has emerged recently is telemedicine company Hims & Hers Health ; it's offering patients compounded versions of mainstream weight loss treatments, which are not approved by the Food and Drug Administration (FDA).
While Lilly's supply constraints for its diabetes and obesity treatments might look like a cause for concern, management is addressing this issue head-on. Below, I've broken down what moves it's making in order to right the ship in its weight loss operation. I've also included several other opportunities Lilly has in the works.
Although Lilly stock trades well above where it started the year, the current sell-off is the biggest drop since the summer:
And yet since Lilly stock took a breather back in July, the company received approvals for two new major drugs and has made important moves to ensure it can meet the roaring demand for its blockbuster weight loss treatments.
Declines of this magnitude are rare for companies like Lilly. If you're a long-term investor, I see the current price action as a great opportunity to buy the dip and lower your cost basis.
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