Is Eli Lilly Stock a Buy After Gaining 10% in 1 Month?

Key Points

• Eli Lilly's shares have increased by about 10% over the past month.

• Clinical progress in the past few weeks has helped solidify its lead in the weight loss market.

• The company's prospects remain attractive, especially while the stock is still down year to date.

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It's been a volatile year for Eli Lilly (NYSE: LLY), with the pharmaceutical giant experiencing some setbacks. However, the drugmaker has been on a roll over the past month, with several catalysts propelling the stock and resulting in a 10% gain during this period. It's seldom a good idea to make investment decisions based on a single month of strong performance, but some ongoing developments with Eli Lilly are definitely worth a second look.

Eli Lilly's weight loss pill inches closer to approval

Eli Lilly has established itself as a leader in the rapidly growing weight loss market, thanks to Zepbound, a medication administered subcutaneously. The company also remains a top player in the diabetes drug market thanks to Mounjaro, which is generating impressive quarterly sales. However, the company is looking to improve its already excellent lineup in these areas. Eli Lilly is developing orforglipron, an oral GLP-1 medicine for diabetes and weight management.

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Oral pills have certain advantages compared to subcutaneous injections. The former don't require autoinjector devices, which often come with strict storage and transportation requirements for manufacturers. Many patients also prefer pills, since they are less painful and more discreet.

Image source: Getty Images.

All those factors point to a medicine like orforglipron, if it proves effective in clinical trials, being able to carve out a decent niche of the diabetes and weight loss markets. That now looks likely, considering the therapy's recent data readouts. Eli Lilly shared results from three phase 3 studies for orforglipron this year across diabetes and obesity. The medicine did well in all three, though its performance in helping overweight or obese (and non-diabetic) patients wasn't quite as impressive as Wall Street wanted. Even so, orforglipron's latest data readout, which was for weight management in patients with diabetes, was strong and sent the stock price soaring.

The medicine looks likely to be a hit on the market. It could generate $12.7 billion in revenue by 2030, according to some projections. There is even more good news. Some analysts on Wall Street are speculating that orforglipron could be approved in the U.S. by the end of the year. It normally takes the U.S. Food and Drug Administration 10 months to review a regulatory application for a medicine and issue a decision on whether to approve it or not. However, the agency recently created a program that expedites the review of some meds to just one or two months -- and some think orforglipron is a prime candidate for this new program.

If the medicine hits the market almost a year before schedule, that will be a big win for Eli Lilly.

Is Eli Lilly stock a buy?

Orforglipron wouldn't be the first oral GLP-1 approved for diabetes. Novo Nordisk's Rybelsus, which treats diabetes, has been on the market for years, and the Denmark-based pharmaceutical giant is awaiting approval for an oral version of Wegovy. Rybelsus shares Wegovy's active ingredient: Semaglutide. However, in a head-to-head trial, orforglipron proved better than oral semaglutide in controlling diabetes patients' A1C levels and helping them lose weight.

Eli Lilly is once again proving its dominance in this field. It is already helping the company post incredibly strong financial results. Eli Lilly's second-quarter revenue increased by 38% year over year to $15.6 billion, while its non-GAAP (generally accepted accounting principles) earnings per share came in at $6.31, 61% higher than the year-ago period. With Mounjaro and Zepbound still early in their growth trajectories, potential label expansions, and the launch of new products like orforglipron, Eli Lilly's results should remain excellent.

Eli Lilly isn't just a weight loss company, though. It has blockbuster products, as well as exciting pipeline candidates, across various areas, including oncology, immunology, and neuroscience. In short, Eli Lilly's prospects in the next five years look incredibly attractive. The stock is slightly in the red for the year, despite its strong run over the past month. It may or may not maintain that momentum in the short run, but over the long run, Eli Lilly still looks like a market beater.

Should you invest $1,000 in Eli Lilly right now?

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Prosper Junior Bakiny has positions in Eli Lilly and Novo Nordisk. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.