Analysts revamp Eli Lilly stock price target on weight-loss drugs

Published 3:47 pm Wednesday, February 7, 2024

By Rob Lenihan

: Analysts respond to Eli Lilly's first-quarter results

Last September, U.S. health officials warned of an “urgent priority” facing Americans.

The Centers for Disease Control had issued a study that found 22 states had at least 35% of adults with obesity in 2022, up from 19 states in the previous year.

Ten years ago, the CDC said, no state had an adult obesity prevalence at or above 35%.

“Our updated maps send a clear message that additional support for obesity prevention and treatment is an urgent priority,” Karen Hacker, director of the CDC’s National Center for Chronic Disease Prevention and Health Promotion, said in a statement.

In addition, a CDC report estimated that 136 million adults are living with diabetes or prediabetes in the U.S.

In November, Eli Lilly (LLY) won approval from the U.S. Food & Drug Administration for its obesity treatment Zepbound [terzepatide].

Zepbound played an important role in Eli Lilly’s fourth-quarter earnings report as the Indianapolis, IND.-based company beat Wall Street’s expectations, leading analysts to revamp their stock price targets.

Eli Lilly’s sales surged thanks to demand for weight-loss drugs Mounjaro and Zepbound.

Eli Lilly

Sales of the weight loss drug Zepbound surge

Eli Lilly reported fourth-quarter income of $2.49 a share, beating the FactSet consensus of $2.30. Revenue totaled $9.35 billion, ahead of Wall Street’s call for $8.9 billion in sales.

The company earned $2.09 per share a year ago on $7.3 billion in sales.

“We continue to invest in quality, the reliability and the resilience of our company’s manufacturing infrastructure, and most importantly, delivered new lifesaving and life-changing medicines to more patients,” Dave Ricks, chairman and CEO, told analysts during the company’s earnings call.

Eli Lilly’s quarterly results were the first to include Zepbound sales totaling $176 million.

Guggenheim analyst Seamus Fernandez told CNBC in November that Zepbound had a very strong shot at “being the biggest drug of all time.”

Fernandez said that the company competes with Novo Nordisk’s (NVO) obesity drugs Ozempic and Wegovy, “but we think that this category for sure will be the largest pharmaceutical market of all time.”

During the call, Eli Lilly’s Chief Financial Officer Anat Ashkenazi told analysts that Zepbound coverage is off to a good start since its early December launch.

Ashkenazi said that Mounjaro, which contains the same active ingredient as Zepbound but is only indicated for use in type 2 diabetes, “continued its robust growth as more Type 2 diabetes patients benefited from the medicine.”

Before Zepbound’s approval, many patients reportedly got off-label prescriptions for Mounjaro for weight loss. Doctors can approve drugs for off-label use at their discretion.

Fourth-quarter sales of Mounjaro grew to over $2.2 billion globally, up from $1.4 billion in the previous quarter. U.S. sales accounted for $2.1 billion of Mounjaro’s fourth-quarter total, up from $1.3 billion in Q3 2023. The jump in sales benefited from a one-time change in estimates for rebates and discounts.

“While we expect Mounjaro and Zepbound to be drivers of revenue growth, this will be partially offset by an expected continuation of the softer Trulicity sales trends that we saw in the second half of 2023,” Ashkenazi said, referring to the company’s other diabetes medication.

She said that recent revenue declines for Trulicity in the U.S. have been driven by supply tightness.

Analyst notes impressive market share gains

Truist Securities was impressed by Eli Lilly’s weight-loss-driven momentum.

It increased its price target for Eli Lilly $850 from $650, while reiterating a buy rating on the stock, citing the firm’s heightened confidence in Eli Lilly’s product pipeline, particularly the performance of Mounjaro and Zepbound, according to Investing.com.

More Wall Street Analysts:

The firm noted Zepbound’s impressive market share gains since its launch in late November. By January 19, it had captured 28% of the obesity treatment market.

Truist said that this rapid growth, along with the demand for Mounjaro, has led to an optimistic outlook on the trajectory of both drugs.

Wells Fargo & Company raised its price target on Eli Lilly to $825 from $700, while Barclays boosted its price target by $130 to $810.

And, not to be left out, BMO Capital analyst Evan Seigerman raised the firm’s price target on Eli Lilly to $865 from $710 while keeping an outperform rating on the shares.

Seigerman said that consensus estimates again underestimated Zepbound/Mounjaro growth as demand continues to outstrip supply, a trend that’s likely to continue.