What Happened?
Shares of global pharmaceutical company Eli Lilly (NYSE: LLY) jumped 8.6% in the afternoon session after the stock's positive momentum continued as the White House revealed plans to launch a website for consumers to purchase drugs from manufacturers at a discount, providing clarity for the pharmaceutical industry on future pricing policies. The positive sentiment was bolstered by news that competitor Pfizer had already secured a deal to lower some of its U.S. drug prices. Following this, Eli Lilly confirmed it is in "active discussions with the administration to further expand patient access." This development has eased investor concerns about potential government-imposed price controls, which had created uncertainty for the sector. The prospect of reaching favorable agreements is now seen as an opportunity for major drugmakers, leading to a rally across the industry.
The shares closed the day at $825.43, up 8.3% from previous close.
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What Is The Market Telling Us
Eli Lilly’s shares are somewhat volatile and have had 11 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 1 day ago when the stock gained 5.5% on the news that reports revealed a potential drug-pricing agreement between the White House and the pharmaceutical industry. The Trump administration is advancing its “Most Favored Nation” initiative, which aims to lower prescription drug costs for Americans. This policy would tie the prices of medications in the U.S. to the lowest costs paid by other wealthy nations. As part of this push, Pfizer has reportedly entered into an agreement to voluntarily sell its medications through Medicaid at these reduced prices. The move comes as the administration intensifies pressure on drugmakers to make prices more affordable. While pricing controls can often be a headwind, the market's positive reaction suggests that investors may see this voluntary agreement as a way to resolve regulatory uncertainty, providing a clearer path forward for the industry.
Eli Lilly is up 6% since the beginning of the year, but at $824.61 per share, it is still trading 11.5% below its 52-week high of $932.06 from October 2024. Investors who bought $1,000 worth of Eli Lilly’s shares 5 years ago would now be looking at an investment worth $5,715.
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