What You Need To Know
Eli Lilly And Co (NYSE: LLY) is one of the world's largest pharmaceutical companies. The FDA has approved Eli Lilly's Tirzepatide for weight loss, paving the way for wider use of the drug in the U.S. Tirzepatide, already approved for treating Type 2 diabetes under the name Mounjaro, will be marketed as Zepbound for chronic weight management. The drug works by activating two hormones that slow stomach emptying, suppress appetite and promote weight loss.
Studies have shown that Tirzepatide can lead to significant weight loss, with some participants losing up to 22.5% of their body weight. However, the drug is associated with side effects such as nausea, diarrhea, vomiting, constipation, and fatigue.
Tirzepatide was being used off-label for weight loss even before its official FDA approval, further intensifying the demand for weight-loss medications like Novo Nordisk's Wegovy and Ozempic. The surge in demand has caused supply chain disruptions for these drugs that have persisted for months.
It is also unclear whether Zepbound will have the same supply issues that Mounjaro has experienced.
Why This Is Important for Retail Investors
Potential for significant revenue growth: Eli Lilly is a large pharmaceutical company with a strong track record of success in developing and marketing new drugs. The approval of Zepbound could lead to significant revenue growth for the company, as it could be prescribed to a large and growing patient population.
Competition in the weight loss drug market: The weight loss drug market is currently dominated by two drugs: Novo Nordisk's Wegovy and Ozempic. Zepbound is the first new weight loss drug to be approved in the U.S. in several years, and it could compete with these two drugs for market share.
Potential for off-label use: Even before its official FDA approval, Tirzepatide was being used off-label for weight loss. This suggests that there is a strong demand for the drug and that it could be used off-label even after its official approval.
Potential for pipeline expansion: Eli Lilly has a pipeline of other weight loss drugs in development. The approval of Zepbound could provide the company with the resources and momentum to advance these other drugs through clinical trials and towards FDA approval.
Potential for positive impact on Eli Lilly's stock price: The approval of Zepbound is likely to be seen as positive news by investors, and it could lead to an increase in Eli Lilly's stock price.
How Can You Use This Information?
Here are some of the investing ideas that can be explored using this information:
Growth Investing
The approval of Zepbound could be a catalyst for Eli Lilly's growth, as the drug could help the company expand into new markets and increase its share of the weight loss drug market. Therefore, investors who are bullish on the potential of Zepbound may view Eli Lilly as a growth investment opportunity.
Growth investing focuses on stocks of companies expected to grow at an above-average rate compared to other stocks in the market; learn more in our article titled 'What is Growth Investing?'.
Momentum Investing
If the approval of Zepbound leads to a surge in Eli Lilly's stock price, it could be seen as a momentum investing opportunity. Investors who are looking to capitalize on short-term price movements may want to consider investing in Eli Lilly's stock following the drug's approval.
Technical analysts may use the approval of Zepbound as a catalyst for technical analysis, such as moving averages crossover, candlestick patterns, or relative strength index.
If the stock price breaks out of a resistance level or experiences a strong upward trend following the approval, technical analysts may view it as an opportunity to buy Eli Lilly's stock.
Momentum investing rides the wave of existing market trends by buying assets that have shown an upward price trend and selling those in a downtrend.
Long-Term Investing
The approval of Zepbound could be a long-term investment opportunity, as the drug's potential to significantly increase Eli Lilly's revenue and profits could make it a valuable asset for the company over the long term. Investors who are looking for long-term growth potential in their investments may want to consider adding Eli Lilly's stock to their portfolio.
Defensive investing
Investors may want to consider diversifying their portfolios by adding Eli Lilly's stock to their holdings.
The drug's approval could be a way to diversify into the pharmaceutical industry, which is generally considered to be a defensive industry.
Defensive Investing focuses on securing a portfolio by choosing companies that are less sensitive to economic downturns.
Read What Others Are Saying
Bloomberg: Ozempic, Wegovy Face Weight Loss Drug Competition From Lilly's Zepbound
Reuters: Lilly weight-loss drug Zepbound gets US, UK approval to rival Wegovy
CNBC: FDA approves Eli Lilly’s tirzepatide for weight loss, paving way for wider use of blockbuster drug
New Scientist: Highly effective weight-loss drug Zepbound approved for use in the
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