Ever stumble upon a treasure chest you almost walked past? That's how I feel about Eli Lilly (LLY) these days. When I last weighed in on LLY earlier this year, I was hesitant, pretty much like a seasoned sailor eyeing stormy seas.

The stock's valuations at the time were sky-high, especially when stacked against its arch-rival Novo Nordisk A/S (NVO). But the market, ever the trickster, loves to flip the script when you least expect it.

Since May, LLY has soared by an impressive 24.5%, leaving most of its pharmaceutical peers scrambling in its wake. Only Viking Therapeutics (VKTX) has managed to keep pace in this high-stakes race.

So, what's ignited this rocket?

For starters, Eli Lilly finally ironed out the kinks in its supply chain. By early August 2024, the shortages plaguing their weight-loss blockbuster, Mounjaro, were a thing of the past.

Those bottlenecks had put a damper on Mounjaro's performance in the first half of 2024, but now the gates have swung wide open.

But that's not all. LLY's got some serious production muscle coming online from the first half of 2025. This isn't just adding fuel to the fire — it's like pouring jet fuel on a bonfire.

That means we could see Mounjaro and Zepbound sales shooting for the moon in late 2024.

Now, here's the masterstroke. In January 2024, Eli Lilly launched LillyDirect, a direct-to-consumer platform that's nothing short of ingenious.

By slashing prices for self-pay patients on Zepbound, they're not just expanding their market reach—they're throwing a wrench into the burgeoning market for compounded GLP-1 drugs.

Let's crunch some numbers for more context.

A four-week supply of 2.5 mg Zepbound via LillyDirect costs $399 out of pocket. That's in the same ballpark as the $199 monthly fee charged by telehealth platforms like Hims & Hers Health (HIMS) for compounded GLP-1 injectables.

Contrast that with the eye-watering $1,790 monthly price tag for Novo Nordisk's Ozempic or the $1,990 for Wegovy, and it's clear why Lilly's strategy is turning heads and opening wallets.

All this momentum has Lilly's management grinning like the cat that ate the canary. They've bumped up their 2024 revenue guidance to a staggering $46 billion — a 34.8% year-over-year leap.

As for earnings, they're forecasting an adjusted EPS of $16.35, a jaw-dropping 158.7% increase from last year. Even a market veteran like me has to tip his hat.

Wall Street analysts are also joining the party, projecting Lilly's top and bottom lines to grow at a compound annual growth rate of 26.1% and 66.7%, respectively, through 2026.

Now, you might be scratching your head and thinking, "Isn't LLY overvalued at this point?"

Surprisingly, despite a forward P/E ratio of 55.39x — well above its historical averages — Lilly's forward PEG ratio sits at a comfortable 1.30x. That's lower than its 5-year mean of 2.19x and even the sector median of 2.00x.

In plain English, there's still some juice left in this orange for value investors.

But let's not get ahead of ourselves. Viking Therapeutics is hot on Lilly's heels with its VK2735 candidate, boasting impressive Phase 3 trial results.

Imagine 14.7% weight loss from baseline in just 13 weeks with their injectable version — that's actually warp speed compared to Lilly's current offerings.

And it's not just Viking sharpening their knives. The GLP-1 arena is set to become a battlefield, with up to 16 new drugs potentially launching by 2029.

So, where does that leave us? I'm cautiously upgrading Eli Lilly to a Buy, but I'm keeping my eyes wide open.

The market is frothy, perhaps a bit too exuberant for my taste. You might want to hold your horses and wait for a pullback into the $780–$845 range before jumping in.

Keep an eye on Lilly's balance sheet, too. Expansion at this scale doesn’t come cheap.

The company’s net debt has swelled to $25.53 billion, a hefty 59.6% increase from last year. Annualized interest expenses are creeping up as well, now at $734.4 million.

It’s not a five-alarm fire, but it’s smoke worth watching.

Eli Lilly has made bold moves in the GLP-1 market, positioning itself as a leader while others scramble to catch up. The question is, are you ready to take a seat at the table?

After all, in the words of the great Kenny Rogers, "You've got to know when to hold 'em, know when to fold 'em." And right now, LLY's hand is looking pretty strong.

 

Remember when Muhammad Ali got knocked down by Joe Frazier? Well, Merck (MRK) just had its Ali moment, courtesy of a plucky little biotech named Summit Therapeutics (SMMT).

Ivonescimab, a cancer drug developed by this relatively under-the-radar biotech company, just gave Merck's golden goose, Keytruda, a serious run for its money—and not by a small margin.

In a recent announcement, Summit Therapeutics revealed that Ivonescimab reduced the risk of disease progression or death by a whopping 49% compared to Keytruda. Let that sink in for a moment

In the trial, aptly named HARMONi-2 (these folks love their capitalization), Ivonescimab held tumor progression at bay for a median of 11.1 months. Keytruda? A mere 5.8 months.

Needless to say, Summit just landed a haymaker that has Merck seeing stars.

Now, before you rush to dump your Merck stock faster than a hot potato, let's put this in perspective. The trial was conducted in China with Summit's collaboration partner, Akeso. It's a significant result, no doubt, but we're not talking FDA approval just yet.

Still, Wall Street took notice. Summit's stock shot up 61% in Monday's premarket while Merck's stock took a hit.

But here's where it gets interesting. Merck's been the undisputed heavyweight champ of pharma for years, with Keytruda as its championship belt. This wonder drug has been laying billion-dollar eggs for nearly a decade, and the nest keeps growing.

In 2022, the Keytruda market was valued at $20.8 billion, and by 2023, it raked in a staggering $25.01 billion.

With AbbVie’s (ABBV) Humira out of the running, projections for 2024 now peg Keytruda as the top-ranked drug worldwide, with sales expected to surpass $27 billion.

By 2032, it's expected to soar to $45.9 billion, with a compound annual growth rate (CAGR) of 9.20% from 2024 to 2032.

Just last quarter, Keytruda accounted for a whopping 45% of Merck’s $16.1 billion revenue—that’s $7.3 billion from a single drug. Talk about putting all your eggs in one basket.

And therein lies the rub. Keytruda's patent expires in 2028. That's not tomorrow, but in the pharma world, it's just around the corner.

It's like watching the countdown timer on a bomb in an action movie - you know it's coming, but you can't look away.

Merck's not blind to this. They've been diversifying as fast as they could.

Their next largest product, Gardasil, brought in $2.5 billion last quarter, growing at a modest 4%. Not Keytruda numbers, but nothing to sneeze at.

They're also betting big on new drugs. There's Winrevair, a treatment for pulmonary arterial hypertension that could bring in up to $11 billion by 2029.

Then there's Capvaxive, a pneumococcal vaccine that could hit $1 billion in sales by 2027. And let's not forget their $5.5 billion deal with Daiichi Sankyo for three antibody-drug conjugates.

So, what's the play here? Merck's trading at 15 times next year's earnings. That's like finding a designer suit at a thrift store price.

The stock's up 5.3% this year, lagging behind the S&P 500's 16% growth. Some might see a bargain, others a warning sign.

Here's my take: Merck's got challenges, no doubt. But they've also got a track record of success and a pipeline that could make a pharmacist drool.

If you've got the patience of Job and the stomach for biotech's wild rides, Merck could be a solid long-term play.

But don't take your eyes off Summit Therapeutics. They’ve just proved they can punch above their weight class.

Besides, in this high-stakes arena of biotech, where one breakthrough can knock the competition to the mat, it’s the unexpected contenders that often deliver the biggest surprises.  So, keep your eyes on the ring—the next round promises to be a thriller.

 

 

There’s nothing like a little competition to shake things up in the vaccine world, and it looks like Vaxcyte (PCVX) just lobbed a serious challenge at the reigning king of pneumococcal shots, Pfizer (PFE).

You know that satisfying smack when a basketball, held under water, bursts free and cracks you in the nose? That’s what’s happening in the vaccine market right now.

Vaxcyte just threw down the gauntlet with its experimental pneumococcal vaccine, VAX-31, going toe-to-toe with Pfizer’s Prevnar 20 in an early-stage trial. And let’s just say, the results are giving Pfizer’s brass plenty to worry about at their next earnings call.

VAX-31 didn’t just keep pace—it outperformed Prevnar 20, showing a stronger immune response against 18 out of 20 strains of those pesky streptococcus bacteria. This isn’t just a pat on the back; it’s a flashing neon sign that a market shake-up is on the horizon.

For those not yet familiar with Vaxcyte, let’s break it down. This biotech upstart is developing next-generation vaccines designed to do more than just fight infections—they’re engineered to outsmart them.

Vaxcyte’s secret weapon? That would be their XpressCF platform, a game-changing cell-free protein synthesis technology that’s rewriting the rules of vaccine development.

Unlike conventional methods that rely on live cells to produce proteins—a process that can be as slow and finicky as trying to bake a soufflé in a wind tunnel—XpressCF takes a completely different approach.

Essentially, XpressCF makes it possible to create complex proteins in a controlled environment without the need for live cells.

By extracting and using only the essential components from Escherichia coli bacteria, Vaxcyte can synthesize proteins with a level of precision that’s simply unattainable with traditional cell-based systems.

This not only speeds up the production process—cutting out the unpredictable nature of working with live cells—but also allows Vaxcyte to fine-tune the proteins to be more effective against the bacteria they’re targeting.

And as for the result? Vaccines that are not just produced faster, but are also more precisely engineered to take down the most stubborn pathogens. It’s like swapping out a sledgehammer for a scalpel—more targeted, more effective, and less room for error.

This leap forward in technology means Vaxcyte can potentially offer broader protection with fewer side effects, all while dodging the common production headaches that have plagued traditional vaccine development for decades.

And, as expected, Vaxcyte’s pipeline is packing some serious heat with VAX-31 and VAX-24, targeting 31 and 24 strains of IPD, respectively.

These vaccines are aimed squarely at protecting the most vulnerable—infants and adults over 50—from these dangerous infections.

While VAX-24 is leading the charge with Phase 2 trials already showing promising results, VAX-31 is closing in fast and could be the breakout star when it hits the market.

And here’s where it gets even more interesting. Vaxcyte has its sights set on a Phase 3 trial for VAX-31 in adults by mid-2025, with data expected to roll in by 2026.

If everything goes according to plan, Vaxcyte could have not one but two blockbuster vaccines ready to rock the market by 2027 — just as Pfizer and Merck (MRK) might be getting a little too comfortable in their respective corners.

Now, let’s pivot to the bigger picture. Pfizer’s Prevnar 20 and its predecessor, Prevnar 13, are nothing short of cash cows, raking in $6.4 billion in 2023—more than all but two other Pfizer products.

Merck isn’t just sitting on the sidelines, either. Their Vaxneuvance and Pneumovax 23 contributed a cool $1.1 billion to the bottom line last year.

With VAX-31 stepping into the ring, though, it’s like David just found a very large and very effective rock.

But before we get too far ahead of ourselves, let’s remember that biotech is a high-stakes game. The risks are real, and the path to FDA approval is littered with potential setbacks.

Still, Vaxcyte’s got a few things going for it that could make this a winning bet.

For starters, they’ve got $518.7 million in cash, $934 million in short-term investments, and zero debt. That’s a war chest of $1.5 billion to fund their march toward FDA approval without breaking a sweat.

From a valuation standpoint, Vaxcyte’s market cap is sitting pretty at $12.5 billion, and while some might balk at their price-to-book ratio of 6.3 compared to the sector’s median of 2.4, I’d argue that you get what you pay for.

After all, you’re not just buying into a company. If anything, you’re actually buying into a potential industry leader. And in a market where the reigning king is starting to sweat, that might be the most valuable investment of all.