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Eli Lilly and Company (NYSE:), a biopharmaceutical industry stalwart, continues to attract the attention of Wall Street firms, and the latest analysis from BMO Capital Markets Corp. projects strong growth for its diabetes portfolio. The company's GLP-1 treatments, particularly tirzepatide marketed as Mounjaro, and the recently approved Zepbound, are driving this optimism. Eli Lilly's strategic focus on diabetes, obesity, Alzheimer's and oncology care is expected to support sustainable growth and profitability.
Market performance and product segments
Eli Lilly's diabetes treatment Mounjaro (tirzepatide) continues to outperform, reaching an all-time high in total prescriptions with 288,184 for the week, indicating strong market acceptance and potential for significant revenue growth . The company's oncology portfolio, bolstered by the recent approval of Zepbound, is showing a promising start with significant increases in prescriptions. The upcoming introduction of Alzheimer's drug donanemab is expected to contribute substantially to Eli Lilly's financial performance, with tirzepatide revenue projected at $4.98 billion for FY23.
Competitive landscape and market trends
The company's strategic positioning within the biotechnology sector has allowed it to effectively navigate the competitive dynamics. With the incretin market growing 1.6% week over week, Eli Lilly's focus on tirzepatide for both type 2 diabetes (T2D) and obesity is expected to continue capturing market share. However, the competitive environment remains complex, with patent challenges and regulatory hurdles posing potential risks to Eli Lilly's market dominance.
Regulatory environment and customer base
With the continued growth of tirzepatide and anticipated approval for its use in obesity, Eli Lilly's customer base is poised for significant expansion. The company remains well positioned to address supply-demand mismatches and navigate the changing reimbursement landscape, which is crucial to sustaining growth.
Management and Strategy
Analysts have highlighted Eli Lilly's strategic acquisitions and investments in gene editing technology as key moves to strengthen its drug portfolio and maintain its competitive advantage. The company's expertise in the cardiovascular space is expected to drive BEAM's acquired programs, reflecting a forward-thinking approach to drug development.
Potential impacts of external factors
Supply chain management remains a critical factor for Eli Lilly, especially given the broader macroeconomic environment and recent industry-wide supply constraints. However, the company's ability to avoid FDA shortage lists indicates strong supply chain capabilities.
Upcoming product launches
Zepbound's launch momentum, including availability in all six approved doses and competitive pricing, along with an access program for patients with commercial insurance, is expected to enhance its market presence. Dual branding of tirzepatide for diabetes (Mounjaro) and weight management (Zepbound) provides Eli Lilly with competitive advantages and flexibility in negotiations with payers.
Stock performance
BMO Capital Markets Corp. has upgraded its rating to “Outperform” with a price target of $710.00, reflecting a total return potential of 25%. As of December 14, 2023, the stock price stood at $573.67, with a market capitalization of approximately $543.04 billion. Earnings per share (EPS) forecasts for the first and second fiscal years are $6.60 and $12.42, respectively.
Bear case
Is Eli Lilly facing significant competition in the incretin market?
Despite strong growth in Mounjaro prescriptions, Eli Lilly's incretins market share could be affected by overall market dynamics, indicating potential competition or market saturation challenges. Mylan (NASDAQ:) Pharmaceuticals' patent challenge against Novo Nordisk's (NYSE:) semaglutide remains a concern for the competitive landscape.
Could regulatory hurdles affect Eli Lilly's future product launches?
Regulatory hurdles continue to pose a risk to Eli Lilly's product portfolio, including the early introduction of donanemab for Alzheimer's disease. The company must successfully address these challenges to avoid delays in the approval and launch of new products.
Bull Case
What are the growth prospects for Eli Lilly's Mounjaro?
Mounjaro's continued prescription growth, with new weekly prescriptions (NRx) increasing by 2.6% to 172,721, indicates strong acceptance and increasing market share. The planned approval for the use of tirzepatide in obesity further supports Eli Lilly's significant market expansion potential.
Will Eli Lilly be able to maintain its strong position in the biopharmaceutical industry?
Eli Lilly's strong product portfolio and strategic initiatives, including acquisitions and a focus on gene editing technology, position the company for sustained industry leadership. Positive clinical data and favorable outcome prospects contribute to a bullish outlook on the company's future.
SWOT Analysis
Strengths:
– Strong pipeline of projects with potential blockbusters such as donanemab for Alzheimer's disease.
– Leadership position in the diabetes market with Mounjaro.
– Strategic acquisitions and focus on gene editing technology.
Weaknesses:
– Slowing momentum in the GLP-1 drug class and potential competition.
– Regulatory obstacles that could affect future product launches.
Opportunities:
– Expansion to the obesity treatment market with tirzepatide.
– Label expansions and new drug approvals could drive revenue growth.
Threats:
– Problems in the supply chain that affect product availability.
– Patent litigation and competitive pressures.
Analyst Objectives
– Barclays Capital Inc. (BCI) – “Overweight” rating with a price target of $630.00 (December 18, 2023).
– BMO Capital Markets Corp. – “Outperform” rating with a price target of $710.00 (December 18, 2023).
– Cantor Fitzgerald – “Overweight” rating with a price target of $630.00 (November 13, 2023).
This analysis covers September to December 2023.
InvestingPro Insights
Eli Lilly and Company (NYSE:LLY) stands out in the biopharmaceutical landscape with a strong growth trajectory, underlined by its latest revenue figures. According to data from InvestingPro, the company's revenue for the last twelve months ending in the third quarter of 2023 reached $32.07 billion, representing a growth rate of 9.69%. This acceleration in revenue growth is particularly notable as it aligns with one of InvestingPro's tips, which highlights the company's accelerating revenue growth trend.
Another dimension of the company's financial health is return on invested capital, which is highlighted as a key strength at InvestingPro Tips. Eli Lilly's strategic investments and focus on high-growth areas such as diabetes care and oncology have generated a high return on invested capital, suggesting efficient use of shareholder funds.
With a market capitalization of $512.96 billion and a P/E ratio (adjusted for trailing twelve months to Q3 2023) of 64.71, Eli Lilly is trading at a high earnings multiple. This reflects investor confidence in the company's future earnings potential, despite the high valuation. InvestingPro's fair value estimate stands at $488.84, providing a data-driven perspective on the stock's valuation.
For investors who want to delve deeper into the financial nuances of Eli Lilly, InvestingPro offers an extensive list of additional tips. Subscribers can access more than 18 InvestingPro tips for LLY, ranging from dividend consistency to insights into stock volatility, by visiting: https://www.investing.com/pro/LLY. Additionally, the InvestingPro subscription is now on a special Cyber Monday offer, offering a discount of up to 60%. Use coupon code research23 to receive an additional 10% discount on a 2-year InvestingPro+ subscription, ensuring comprehensive research tools at your fingertips.
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