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Why Eli Lilly Was Such a Healthy Stock Today

Source The Motley Fool

Most investors are aware of the vast sales potential for the effective new weight loss treatments known as GLP-1 drugs, and the market for them is still relatively quite young. On Tuesday, the Congressional Budget Office (CBO) put a number on one piece of that market's potential. As that figure was large, weight loss drug producer Eli Lilly (NYSE: LLY) saw a nearly 2% bump in its share price in response. That compared well to the just under 1% gain of the S&P 500 index during the session.

$35 billion potential

The CBO's report was titled "How Would Authorizing Medicare to Cover Anti-Obesity Medications Affect the Federal Budget?" One of its major takeaways is that if the government's health insurance program were to cover weight loss drugs like Eli Lilly's Zepbound starting in January 2026, it would add a total of $35 billion in federal spending from that year through 2034.

Currently, there are precious few Food and Drug Administration (FDA) authorized GLP-1 treatments for obesity, giving Zepbound an early-mover advantage.

While additional drugs in the same class are sure to earn FDA approval in the coming years, Eli Lilly is well positioned in the segment. Given its immense resources, it should be able to maintain a significant market share.

Robust demand

If the government decides to authorize obesity drug coverage by Medicare, it would surely give a boost to the healthcare market, although the impact might be less dramatic than some would imagine. Demand for such treatments in the U.S. is already sky-high; it's safe to say that a great many eligible patients will make use of GLP-1 treatments with or without assistance from their insurance provider.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Disclaimer: For information purposes only. Past performance is not indicative of future results.

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