Eli Lilly (LLY) scored a major win for its weight-loss drug in December when the Food and Drug Administration approved Zepbound for patients with obstructive sleep apnea.

But Lilly’s stock continues to struggle.

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Zepbound is now the first and only drug approved to treat moderate to severe sleep apnea, a space historically dominated by continuous positive airway pressure, or CPAP, devices. Sleep apnea occurs when a person’s airway closes during sleep. This causes temporary interruptions in breathing.

Patients who took Zepbound lost an average of 20% of their body weight and had at least 25 fewer breathing interruptions every hour while they slept.

Notably, the FDA also ruled in late December that tirzepatide, the chemical backbone behind Zepbound and the diabetes drug Mounjaro, is no longer missing. This means that compounding pharmacies will soon no longer be able to offer knock-off versions of popular medications.

Promisingly, before Thanksgiving, President Joe Biden proposed that Medicare and Medicaid pay for obesity treatments. The proposal would increase the use of Zepbound and Novo Nordisk‘s (NGO) rival drug, Wegovy. Today, Medicare does not pay for obesity drugs unless they treat a related condition such as diabetes or reduce the risk of heart attacks or strokes.

Bass player, Lilly third quarter missed sales calls for Zepbound and Mounjaro. That led the pharmaceutical giant to cut its full-year guidance.

So, is Lilly stock a buy or a sell right now?

Eli Lilly Stock: Sales, Earnings Lag

In the third quarter, Eli Lilly earned an adjusted $1.18 per share, widely missing expectations of $1.45, according to FactSet. Sales rose 20% to $11.44 billion, but missed forecasts of $12.09 billion. Lilly noted that it sold a drug for schizophrenia and bipolar disorder called Zyprexa. Excluding sales of Zyprexa in the prior year, total revenue rose 42%.

But sales of Lilly’s flagship product, tirezapatide, missed expectations. Mounjaro generated $3.11 billion in sales. Sales soared 121%, but fell short of forecasts of $3.77 billion. Weight-loss drug Zepbound generated $1.26 billion in sales, missing the street call by $1.73 billion.

The company said third-quarter US sales “were negatively impacted by inventory declines in the wholesale channel.”

For the fourth quarter, analysts expect adjusted earnings per share of $5.46 on sales of $13.96 million. Earnings would jump 119% as sales increase more than 49%.

After the third-quarter report, Eli Lilly cut its earnings target to $13.02 to $13.52 per share. The midpoint of that guidance missed analysts’ estimate of $13.42. The company also lowered the high end of its sales outlook and now expects $45.4 billion to $46 billion in sales. That completely missed the mark by $46.24 billion in sales.

Eli Lilly Stock Analysis

Shares of Eli Lilly undercut 50-day moving average in October and his 200 day line in november The existence of LLY is consolidating with a point of purchase to 972.53, seconds MarketSurge. But the stock could struggle to break through those key lines.

The shares have an average value Assessment of relative strength of 32 of a 99 best possible, IBD Digital shows This puts LLY stock in the bottom third of all stocks when it comes to 12-month returns. Lilly stock also has one Composite rating of 71, a measure of fundamental and technical metrics.

Recent news around Lilly Stock

The race to develop new weight loss drugs it continues to heat up.

In a recent study, Lilly’s Zepbound outperformed Novo’s Wegovy in the first head-to-head study.

Participants with obesity and another medical condition, but not diabetes, lost up to 20.2% of their body weight over 72 weeks. In comparison, Wegovy recipients lost 13.7% of their body weight. That translated to about 50 pounds and 33 pounds, respectively.

LLY shares fell in July after that Pfizer (PFE) i Viking Therapeutics (VKTX) announced plans to conduct additional trials for obesity treatments. A weight loss treatment study of Roche (RHHBY) also weighed on Lilly’s stock.

Lilly is also working on a next-generation weekly shot called retatrutide. While tirzepatide targets two hormonal targets for promoting weight loss, retatrutide targets three. Its oral weight loss drug, called orforglipron, is also expected to be the first weight loss pill to hit the market.

In other news, Lilly’s Alzheimer’s drugdonanemab, won FDA approval in July. It will be sold under the Kisunla brand.

Kisunla works by removing a build-up of a protein called amyloid beta. In tests, Kisunla worked best in patients whose amyloid included a protein called tau. In all patients, donanemab slowed cognitive decline by 22% to 29% over 18 months. In patients with intermediate levels of tau, donanemab slowed the decline by 35% to 36%.

It competes biogen (BIB) i Eisai‘s (ESAY) of this group.

In the UK, Kisunla is now approved for patients with one copy of a genetic mutation that makes them more susceptible to developing early-onset Alzheimer’s disease or non-carriers. People with two copies of this mutation are more likely to experience brain swelling as a result of amyloid clearance.

Is LLY Stock a Buy or a Sell Right Now?

Eli Lilly stock was neither a buy nor a sell on January 8. The stock is below its 50-day and 200-day lines, making a definitive move above them, and an early breakout, unlikely.

In particular, Lilly’s third-quarter report dragged down LLY stock. While growth remains strong, sales of its two biggest products lagged expectations.

It will be key to see how the markets for weight loss drugs and Alzheimer’s treatments develop.

To find the best stocks to buy and watch, take a look IBD Stock Lists. Also make sure to keep the tabs shares to buy or sell.

Follow Allison Gatlin on Twitter at @IBD_AGatlin.

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