Is Eli Lilly stock a no-brainer buy after the company’s brilliant Zepbound move?

If the price is right, sales can increase. This is true for any product — even prescription drugs.

Tuesday, Eli Lilly (LLY -0.58%) announced a new pricing plan for its latest blockbuster drug, Zepbound. The therapy will now be available to self-pay patients at a discount of 50% or more to the list price of other GLP-1 obesity drugs. Is Lilly stock a no-brainer buy after the company’s Zepbound move?

Why Lilly’s Zepbound Strategy Is Brilliant

First, I think Lilly Zepbound’s strategy is brilliant. It should open up a bigger market for the company’s obesity drug.

As James Zervos, chief operating officer of the Obesity Action Coalition, explained in Lilly’s press release announcing its move, “people living with obesity have long been denied access to the treatment and essential care needed to manage this serious chronic disease”. He added: “Despite obesity being recognized as a serious chronic disease with long-term consequences, it is often misclassified as a lifestyle choice, leading to many employers and the federal government excluding medication such as Zepbound from insurance coverage”.

Zervos is right that some health insurers are reluctant to cover Zepbound and other obesity drugs. In addition, some people do not have employer health insurance or are not eligible for the Lilly Zepbound Savings Card program. Lilly expects its new option to help millions of adults gain access to Zepbound.

The company charges $399 for a four-week supply of Zepbound’s 2.5 mg single-dose vial and $549 for a four-week supply of the 5 mg dose. Although it is still expensive, it is much cheaper than the cost Novo Nordiskit’s Wegovy. Lilly distributes Zepbound at a low cost through its LillyDirect online channel, which allows it to eliminate any fees that pharmacies or pharmacy benefit administrators would charge.

Beyond obesity

However, Lilly’s success is not entirely dependent on its anti-obesity drug. Mounjaro, which is approved for type 2 diabetes, is the same drug under the hood as Zepbound and also has tremendous commercial prospects. Together, Mounjaro and Zepbound generated nearly $6.7 billion in the first half of 2024.

Verzenio is another big winner for Lilly. Sales for the breast cancer drug rose 42 percent year over year in the first half of this year to about $2.4 billion. Three other Lilly products also continue to post double-digit percentage sales growth: rapid-acting insulin Humalog, type 2 diabetes and chronic heart failure drug Jardiance, and autoimmune disease drug Taltz.

The company has what I believe is a surefire blockbuster in the market now with Kisunla. The US Food and Drug Administration approved Kisunla to treat Alzheimer’s disease in July 2024. Wall Street consensus is that the drug will generate peak annual sales in the $5 billion stage.

Looking ahead, Lilly hopes to win FDA approval for tirzepatide (Mounjaro/Zepbound) to treat obstructive sleep apnea in obese adults. It is evaluating pirtobrutinib (Jaypirca) in several late-stage studies in hopes of expanding the approved indications. The company also has several new experimental drugs in late-stage development targeting Alzheimer’s disease, breast cancer and other conditions.

Is Lilly stock a no-brainer buy?

The main argument against buying Lilly is its valuation. The stock is trading at nearly 59 times forward earnings. However, investors should look further into the future to fully appreciate Lilly’s growth potential. When they do, they’ll find that Lilly’s rating isn’t worrisome.

Mounjaro, Zepbound, Kisunla and Lilly’s other products and promising pipeline programs should enable Lilly to deliver impressive growth for years to come. I think Lilly’s latest move to increase sales for Zepbound makes the stock even easier to buy than it already was.