Eli Lilly aims for a new high after launching DTC service for weight-loss drugs. Cramer says let it ride

Published Thu, Jan 4 20242:13 PM EST

Kevin Stankiewicz @in/kevin-stankiewicz-b5593466 @kevin_stank

Eli Lilly is on track for a new high Thursday after unveiling a service aimed at making it easier for patients to access weight-loss drugs. Jim Cramer says investors should let LLY stock ride. The Club holding launched LillyDirect, a website that connects patients directly to a telehealth provider who can prescribe the drugmaker's weight-loss therapy Zepbound. Eli Lilly says the direct-to-consumer (DTC) service will help alleviate burdens patients may face in accessing the drug, which U.S. regulators approved in November. It became available at U.S. pharmacies in December. Shares of Eli Lilly climbed 0.5% Thursday, to around $621 each. If that gain holds, it will mark a fresh record-high close. The Indianapolis-based drugmaker's previous all-time high of $619.13 came on Nov. 8. Over the past 12 months, the stock has soared more than 70%, due in large part to optimism around its emerging place in the fast-growing obesity-drug market. "What you don't need to trim is Eli Lilly," Jim Cramer said Thursday, reiterating his long-held belief that the active ingredient behind Zepbound, called tirzepatide, will be the best-selling drug in history. Tirzepatide —which was first approved for type-2 diabetes in May 2022 under the Mounjaro brand — is key to our investment thesis in Eli Lilly. In addition to obesity, LillyDirect also includes diabetes and migraine medications. Eli Lilly is the first pharmaceutical company to offer a telehealth platform for weight-loss drug access, according to NBC News. However, non-drug companies, such as Weight Watchers and Ro, offer telehealth services for obesity drugs, which have surged in popularity since last year. To offer the direct-to-consumer obesity services, Eli Lilly partnered with Form Health, a telehealth provider specializing in weight-loss care. Form Health's doctors are responsible for meeting with patients and determining whether they should be written a weight-loss prescription. Form Health's doctors can prescribe any FDA-approved obesity drug, such as Zepbound and Wegovy, which is made by Lilly rival Novo Nordisk . "While the providers are not required to prescribe Lilly's drugs, Zepbound is the most clinically relevant approved adoption given superior efficacy and tolerability vs. Wegovy," BMO Capital Markets analyst Evan Seigerman wrote Thursday. Eli Lilly will not provide any financial compensation to Form Health or its doctors if Zepbound is prescribed, CEO Dave Ricks told NBC News. In instances where Zepbound is prescribed, Eli Lilly will provide home delivery of the medication. Zepbound and Novo Nordisk's Wegovy belong to the same class of drugs known as GLP-1s, which mimic a gut hormone to improve blood sugar control and effectively suppress appetite, thus helping with weight loss. In a late-stage trial, patients without diabetes on Zepbound lost up to 22.5% of their body weight. In its own trial, Wegovy helped recipients without diabetes shed about 15% of their body weight. Lilly's Mounjaro and Novo Nordisk's Ozempic are GLP-1s marketed for type-2 diabetes. Some Wall Street analysts project annual sales of GLP-1 drugs to eventually swell to more than $100 billion. In 2024, analysts estimate combined Zepbound and Mounjaro revenue to total $12.2 billion, according to FactSet. Meanwhile, Novo's Wegovy and Ozempic are forecast to generate nearly $25 billion in combined sales, FactSet data shows. The FDA approved Wegovy and Ozempic in 2021 and 2017, respectively. The obesity market is still early in its cycle, and patients being able to access to the drugs is "critical" to its future growth, Jefferies biotech analyst Michael Yee said on CNBC Thursday morning. Against that backdrop, Yee called LillyDirect an "interesting" program. "I wouldn't say it's game-changing, of course, but it's incremental in getting access to people online ... without necessarily having to go into see a doctor in the office," he said. In general, investors and analysts alike believe improving insurance coverage is important for the expensive weight-loss drugs to reach their commercial potential. However, some health insurers have been hesitant to broadly cover GLP-1s for obesity due to their high costs. Right now, people whose commercial insurance covers Zepbound may be eligible for a savings card that provides prescriptions for one or three months for as low as $25. Patients whose insurance doesn't cover Zepbound may be able to pay $550 a month for the drug — roughly half of its $1,060 monthly list price. Another development that could help GLP-1 drugs meet investors' high hopes is regulatory approval to treat other conditions, such as cardiovascular disease and sleep apnea. In a study published this year, Wegovy cut the risk of strokes, heart attacks and deaths linked to heart problems in patients by 20%. The data was viewed as generally positive for the entire GLP-1 category. BMO's Seigerman said LillyDirect helps strengthen the company's commercial position in the competitive obesity market, "as well as supporting broad uptake with reliable – and now easily accessible – supply." That distinguishes Zepbound from Wegovy, which still has "unresolved supply challenges" despite entering the market more than a year before Eli Lilly, Seigerman wrote. (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. 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The Eli Lilly logo is shown on one of the company's offices in San Diego, California, Sept. 17, 2020.

Mike Blake | Reuters

Eli Lilly is on track for a new high Thursday after unveiling a service aimed at making it easier for patients to access weight-loss drugs.