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Eli Lilly
stock can benefit from drugs that tackle the obesity epidemic, both in the short-term and more than a decade into the future, according to Citi.
Eli Lilly’s
(ticker: LLY) diabetes drug Mounjaro is expected to be approved to treat obesity in the near future. The drug could eventually reach peak sales of around $60 billion, with $37 billion in sales coming from obesity treatments, according to Citi analyst Andrew Baum.
“In the near-term, we rely on increasing Mounjaro capacity and forthcoming obesity approval to continue to drive share price momentum,” Baum wrote.
Baum raised his target price on Eli Lilly to $675 from $525, while maintaining a Buy rating. Lilly shares were down 0.2% at $583.50 in premarket trading on Monday.
Lilly’s Mounjaro is competing with
Novo Nordisk’s
(NVO) Ozempic in the class of weight-loss drugs known as incretins which have been shown to suppress appetite and reduce food intake. Lilly is lining up two more drug candidates of the same class, retatrutide and orforglipron.
Baum said he was increasing his estimates for Lilly’s incretin sales to $71 billion in 2035 compared with $55 billion previously. He noted it was difficult to predict the long-term upside of the drugs given that obesity affects more than 42% of the U.S. population.
That compares with an estimate from J.P. Morgan that Lilly’s sales from its incretin portfolio will rise from $8 billion last year to $50 billion in 2030, giving it broadly half the market alongside Novo Nordisk.
Notably, Citi’s Baum doesn’t expect the expiration of Novo Nordisk’s U.S. patent for the active ingredient in Ozempic in 2032 to notably harm the growth rate of the market. He said the heavy capital expenditure requirement of producing biosimilar drugs should limit the competitive effect.
Write to Adam Clark at [email protected]
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