Why Eli Lilly Stock Is Up By 8% Today

Vladimir Zernov
Published: Jun 24, 2021, 15:37 UTC

The stock made an attempt to settle above $239.

Eli Lilly

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Eli Lilly Stock Gains Ground As Its Alzheimer’s Drug Gets Nod From FDA

Shares of Eli Lilly gained upside momentum after the company revealed that its drug for treatment of Alzheimer’s disease (donanemab) received FDA’a Breakthrough Therapy designation.

Eli Lilly stated that it would submit a biologics licence application for donanemab under the accelerated approval pathway.

Alzheimer’s disease is a major problem that is growing fast as the population ages in developed countries. This year, potential treatments for this disease attract investors’ attention. Recently, FDA approved Biogen‘s Aduhelm (aducanumab), sending its shares from $280 to $460. Currently, Biogen’s stock has settled near $350.

What’s Next For Eli Lilly Stock?

Analysts expect that Eli Lilly will report earnings of $7.9 per share in 2021. It should be noted that analyst estimates for 2021 have been declining in recent months. In 2022, Eli Lilly is projected to report earnings of $8.6 per share so the stock is trading at 27 forward P/E.

I’d also note that Eli Lilly’s market capitalization exceeds $200 billion and it produces many drugs, so traders should not expect a market reaction similar to what we’ve seen in the case of Biogen.

At the same time, treatments for Alzheimer will likely grow into a strong market segment due to the severity of the disease and the fact that the number of patients with Alzheimer is expected to grow at a fast pace.

According to Eli Lilly, dementia due to Alzheimer’s disease is the most common form of dementia, and there are currently more than 50 million people living with dementia. The number of people suffering from dementia is projected to exceed 150 million by 2050.

While the current valuation at 27 forward P/E does not look very cheap, it is a reasonable valuation for the current market environment. Traders and investors will likely remain focused on the potential growth of the market for Alzheimer’s treatments, and Eli Lilly stock has decent chances to continue its upside move.

For a look at all of today’s economic events, check out our economic calendar.

About the Author

Vladimir is an independent trader and analyst with over 10 years of experience in the financial markets. He is a specialist in stocks, futures, Forex, indices, and commodities areas using long-term positional trading and swing trading.

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