Promise of Eli Lilly’s weight-loss drug for sleep apnea adds another reason to own the stock
Eli Lilly ‘s weight-loss drug Zepbound showed promise as a treatment for sleep apnea — giving investors more confidence to keep owning the world’s most valuable health-care company even after it’s been crushing the S & P 500’s performance over the past three years. The study results released by Eli Lilly on Wednesday highlight the range of health benefits that drugs like Lilly’s Zepbound and Mounjaro — known as GLP-1s — can have outside their increasingly popular uses in treating obesity and type-2 diabetes. Lilly is also looking at GLP-1s to reduce the risk of cardiovascular events, such as heart attacks and strokes, and a type of fatty liver disease. Lilly’s main rival in the category, Novo Nordisk , recently secured U.S. approval to also market its obesity drug Wegovy as a treatment for heart disease in overweight patients. Novo Nordisk was first to market with GLP-1s Wegovy and Ozempic for diabetes. While Ozempic is a diabetes drug, it’s become the public face of this emerging class of drugs that also lead to substantial weight loss. Eli Lilly said it plans to ask U.S. regulators to expand Zepbound’s label to include obstructive sleep apnea, or OSA, later this year. OSA is one of the three common types of sleep apnea, according to the Mayo Clini c. Approval for this indication could help bolster the insurance reimbursement case for Zepbound and further illustrate that losing weight can deliver more than just cosmetic improvements to health. Insurance coverage of Zepbound has been spotty since hitting the U.S. market late last year due, in large part, to its cost, with a monthly list price of $1,060. “Some of these numbers, I think, the insurance companies are going to have to take notice,” Jim Cramer said Wednesday on CNBC. The active ingredient behind Zepbound and Mounjaro — known as tirzepatide — is at the core of our investment thesis in Eli Lilly. Jim has long said tirzepatide could become the best-selling drug of all time for its ability to treat obesity and other conditions. It was first approved to treat type-2 diabetes under the Mounjaro brand in May 2022 . Shares of Eli Lilly have ridden the GLP-1 craze to new heights over the past few years. The stock hit an all-time of $800.78 per share on March 4, with a market cap of over $750 billion. LLY YTD mountain Eli Lilly YTD The data on obstructive sleep apnea could open the door for Medicare to cover Zepbound for that condition, analysts at Morgan Stanley said in a note to clients Wednesday. Medicare’s prescription drug plans, known as Part D, are currently barred from covering strictly obesity drugs. Last month, the U.S. government agency that administers the health program for seniors enabled coverage for Novo’s Wegovy when the drug is prescribed to lower the risk of heart attacks and strokes. Obstructive sleep apnea is characterized by airway blockages that cause people to repeatedly stop breathing during sleep and experience low blood oxygen, which triggers them to wake up to start breathing again, according to the Cleveland Clinic . This disrupts their ability to get high-quality sleep — and over time, it can lead to other health complications, such as drowsiness during the day, heart damage, and even sudden death. Obesity can contribute to the development of OSA, which is estimated to affect roughly 39 million U.S. adults, according to the National Council on Aging . The current standard of care for obstructive sleep apnea is positive airway pressure, or PAP, machines, which help keep patients’ airways open while they sleep. Eli Lilly released preliminary data from a pair of late-stage trials Wednesday, both of which showed that obese patients with moderate-to-severe obstructive sleep apnea saw improvements in their OSA over the course of a 52-week trial. In one trial, patients who took only Zepbound experienced on average 27.4 fewer incidents of restricted or completely blocked airflow per hour of sleep. Those on the placebo saw on average a reduction of only 4.8 incidents per hour. In a second trial, OSA patients who took Zepbound and used a PAP machine experienced on average 30.4 fewer incidents per hour, compared with six fewer in the placebo group. The results, which have yet to be peer reviewed, met Wall Street’s threshold to be considered a success, Deutsche Bank analysts said in a note Wednesday. Eli Lilly will present full data at an American Diabetes Association conference in late June. The popularity of GLP-1s has skyrocketed in recent years. They mimic a hormone in the gut to improve blood sugar control and effectively suppress appetite, leading to weight loss. The active ingredient in Novo Nordisk’s Ozempic and Wegovy, semaglutide, works in a similar fashion as Lilly’s tirzepatide. The key difference: Lilly’s compound targets a second hormone, called GIP, believed to boost its effectiveness. LLY NVO mountain 2021-05-09 Eli Lilly vs. Novo Nordisk Shares of both companies have been on fire. Eli Lilly has gained nearly 300% over the past three years, including a 28% year-to-date gain. Novo Nordisk shares have surged about 243% over the past three years and 19.5% so far in 2024. Along the way, those gains have blown away the performances of the S & P 500 and the health-care sector index. The companies currently have a duopoly in the GLP-1 market, which some Wall Street analysts project could be worth $100 billion by the end of the decade. Despite the promise of treating other conditions, the lion’s share of GLP-1 sales are still likely to come from diabetes and obesity. In a note to clients last month, Bank of America raised its 2030 revenue forecast for tirzepatide to roughly $62 billion, with $54 billion for diabetes and obesity. Analysts projected obstructive sleep apnea revenue of $3 billion. (Jim Cramer’s Charitable Trust is long LLY. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
An injection pen of Zepbound, Eli Lilly’s weight loss drug, is displayed in New York City on Dec. 11, 2023.
Brendan Mcdermid | Reuters
Eli Lilly‘s weight-loss drug Zepbound showed promise as a treatment for sleep apnea — giving investors more confidence to keep owning the world’s most valuable health-care company even after it’s been crushing the S&P 500’s performance over the past three years.