4 reasons to buy the dip after the 17% decline

Eli Lilly and Company NYSE: LLY is a leading global pharmaceutical company Medical sector. The company grabbed headlines with its dominance GLP-1 drugTirzepatide is marketed as Mounjaro for type 2 diabetes and Zepbound for obesity. Although there are many potential contenders in clinical trials, the current GLP-1 market is a duopoly dominated by Eli Lilly. Novo Nordisk A/S NYSE: NVOManufacturers of semaglutide sold under the Ozampic and Vegovi brands. In addition, Lilly has a strong pipeline led by its recently FDA-approved and launched Alzheimer’s disease drug, donemeb, marketed as Kisunla. Miricizumab is a treatment for Crohn’s disease, and lebrikizumab is for atopic dermatitis and asthma. Pirtobrutinab is a next-generation BTK inhibitor.

Record sales of its GLP-1 drugs lifted Lilly’s stock to a new all-time high of $972.59 in 2024 but has fallen 17.75% by January 10, 2025. Lilly authorized a $15 billion stock buyback on December 9, 2024. Investors, this return could be the opportunity they’ve been waiting for. Here are four reasons not to look the gift horse in the mouth and consider taking a position at the company on this pullback.

1) Earnings are still down, but $2.83 billion in IPR&D expenses results in the quarter

Lilly has been an earnings powerhouse, but its recent earnings fell short of consensus estimates, which was the primary driver before its selloff. Eli Lilly reported Q3 2024 EPS of $1.18, missing consensus estimates by 27 cents. Revenue rose 20.4% YoY to $11.44 billion, missing consensus analyst estimates of $12.09 billion. Supporting revenue for its olanzapine portfolio Zyprexa, which Lilly sold global commercial rights to CHPLAPHARM in April 2023, revenue actually grew 42% YoY while worldwide volume rose 36% YoY.

Additionally, Q3 earnings also included a one-time charge known as an in-process research and development (IPR&D) charge of $2.83 billion or $3.08 per share. These are the charges that Lilly took on its acquisition of Morphic and its combination therapies, which led to a 17% YoY revenue growth.

2) Tirzepatide is still crushing, getting more approval

Lilly’s GLP-1 drugs are showing no signs of slowing down. They also proved superior to Novo Nordisk’s semaglutide, as evidenced by a 20.2% mean body weight loss compared to a 13.7% weight loss in its SURMOUNT-5 trials. Tirezepetide was also approved for obstructive sleep apnea on December 20, 2024 and is being studied for additional indications, including chronic kidney disease, cardiovascular risk reduction (heart failure risk reduced by 38%). and metabolic dysfunction-associated steatohepatitis (MASH). . On July 22, 2024, China also approved tirzepetide for obesity, the country’s first and only dual GIP/GLP-1 agonist. However, there are 15 copycat GLP-1 drugs in development, which will greatly increase competition in the world’s second-largest population.

In the third quarter of 2024, worldwide Monjaro revenue grew 121% to $3.11 billion. Zapbound revenue grew to $1.28 billion. If there was no shortage of supply, the revenue would be higher. Zepbound was launched in the United States in November 2023.

3) Retatretide is the next-gen GLP-1 coming

Lilly expects to launch its pill version of tirzepetide in 2026 under Orforglipron. To further cement its GLP-1 throne, Lilly is already developing its next-generation GLP-1 blockbuster retatrutide, a triple agonist targeting GIP, GLP-1, and glucagon receptors. Phase 2 studies show that participants lost an average of 17.5% weight in just 24 weeks and a 24.2% reduction in body weight in 48 weeks. The safety profile was similar to other incretin-based therapies, with reported gastrointestinal side effects.

Dr. Ania Jesterboff commented, “Participants treated with the highest dose of retatrutide achieved an average reduction of 24.2%; this translates to an average absolute weight loss of approximately 58 pounds over the 11 months of the study.”

Dr. “Given that the participants had not yet reached a weight plateau at the time the study ended, it appears that the full effectiveness of weight loss had not yet been achieved,” Jesterboff added. will enable comprehensive evaluation of the efficacy and tolerability of this potential pharmacotherapeutic.”

4) LLY stock is forming a daily symmetrical triangle breakout

A symmetrical triangle consists of a descending (falling) upper trendline resistance with an ascending (rising) lower trendline support at the top point. A breakout occurs when the stock rises above the upper trendline resistance. A breakdown occurs when the stock falls below the lower trendline support. A breakout or breakdown becomes prominent as the stock moves closer to the top point as the channel narrows.

The symmetrical triangle of LLY formed its descending upper trendline resistance at $907.98 to align at the top point with its ascending lower trendline support starting at $711.40. Daily anchored VWAP support is at $776.82. The breakout initiated the rally through trendline resistance above $787.22. The daily RSI is rising to the 56-band. Fibonacci (Fib) pullback support levels are at $771.36, $747.56, $717.51, and $678.79.

Actionable alternative strategies: Bullish investors may consider using Cash-secured put Fib pullback at support levels to buy the dip. If the shares are fixed, writing a covered call at the fib levels is a Wheel strategy For income in addition to its 0.83% annual dividend yield.

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