To The Moon

$Eli Lilly(LLY)$ $Nasdaq100 Bear 3X ETF(SQQQ)$ $NASDAQ(.IXIC)$ 

Eli Lilly and Company is an American-based pharmaceutical company operating in the human therapeutics segment. The company discovers, develops, manufactures, and markets various human therapeutics, and is well known for its diabetes, oncology, immunology, and neuroscience products. The company focuses on the US (c.64% of FY22 sales) and Europe (c.15% of FY22 sales). As of 8 September 2023, Eli Lilly is globally the largest pharmaceutical company by market capitalisation.

Investment Overview

Since 2018, Eli Lilly’s track record implies six events that would move its share price: (1) key drug launches, (2) favourable clinical findings, (3) spin-off of non-core unit for IPO, (4) patent expiries, (5) product withdrawals, (6) price cut. In 2018-19, its stock price rose c.60% following three successful drug launches and spin-off of its animal health business. In 2019, its stock price dipped c.15% over patent expiries, product withdrawals, and price cuts from public medical insurance programs. In 2020-22, the stock price surged c.133% following the launch of COVID-19 antibodies and Eisai (4523 JP)’s proof of concept for its Alzheimer’s drug. Regarding the Alzheimer’s drug, Eisai’s Lecanemab received positive phase III clinical data in 2020. As Lilly was testing a similar drug, Donanemab, its stock price surged on expectations for approval. Eli Lilly’s phase III clinical data in 2021 delivered positive results.

Share price driver ahead 1: potential approval for Donanemab to treat Alzheimer’s disease (AD). Globally, there are 39 million patients suffering from AD. In 1998-2017, the pharmaceutical industry has submitted at least 150 drugs for approval to treat AD, but only 4 were approved (see: https://www.ft.com/content/28bd7d74-75c9-48d6-8505-717e9f56ca98 ). Most AD drugs that have been launched help to alleviate the symptoms, and not address the reason for onset of AD. Until Jan 2023, Eisai received accelerated approval to launch Lecanemab which targets a protein in the human body which induces AD – beta-amyloid. Accumulation of beta-amyloid is a major reason of AD. The drug slowed down disease progression by 27%. Eisai’s share price surged by 38% in 6 months. Eli Lilly has a drug pending U.S. FDA approval which also targets beta-amyloid – Donanemab. In terms of efficacy, it is stronger than Lecanemab and can slow down the disease progression by at least 35%. Approval of this product can move its share price. GlobalData predicts sales of this product could reach US$2bn by 2030, equal to c.7% of group sales in 2022

Share price driver ahead 2: potential approval to extend Tirzepatide’s indication from diabetes to obesity. Obesity is a disease with huge patient size globally. World Health Organization estimates >1.9 billion adults are overweight (see: https://www.who.int/news-room/fact-sheets/detail/obesity-and-overweight ). Among 20 therapy areas, in terms of expected global spending CAGR in 2023-27, IQVIA (IQV US) estimates drugs for obesity is the strongest at 35-38%, while others range from -1%-16%. Recently, glucagon-like peptide 1 (GLP-1) has been found to be an effective drug target to treat obesity. Novo Nordisk’s (NVO US) Ozempic targets GLP-1 and can reduce body weight by 15% after 68 weeks. Eli Lilly has another drug to target GLP-1 - Tirzepatide - pending US FDA approval to launch. This could be more powerful for weight reduction – 21.1% after 12 weeks, 26.6% after 84 weeks (see: https://www.drugwatch.com/drugs/ozempic/mounjaro/ ). Approval of this product to treat obesity could drive Eli Lilly’s share price. In 2022, Tirzepatide contributed 1.7% of group sales. Currently, the approved indication of Tirzepatide is diabetes.

Patent cliff for key products. The patents of Alimta came off in 2021-22 in Europe, Japan and the U.S. That means that its competitors can copy the product and launch a generic version at a much lower price. We expect Alimta to face price pressure in next 5 years. Alimta is used for cancer treatment and made up 3% of group sales in 2022. In 2027-29, the patent of another key product – Trulicity - will expire in different regions

The product is used to treat diabetes and contributed 26% of group sales in 2022. We expect drug sales to come under pressure after 2027.

@TigerEvents @Daily_Discussion @TigerStars @MillionaireTiger 

DYODD