Over the past year, Eli Lilly (NYSE:LLY) has gatecrashed the AI party. Shares of the pharma giant have rallied like a true member of the tech elite, delivering returns of 118%, 31% of which have been generated in 2024 alone.
The success has been built on LLY’s standing in the diabetes/obesity market, with the type 2 diabetes blockbuster drug Mounjaro and the more recently approved weight loss drug Zepbound – both based on the molecule tirzepatide – driving the narrative.
But those aces could soon be joined by another lucrative drug. While the aforementioned medications are both injectables, LLY is on working on an oral weight loss drug, the small molecule GLP-1 agonist orforglipron, currently being tested in Phase 3 trials (for obesity and type 2 diabetes) after reporting positive Phase 2 data last year.
The late-stage trials have been enrolling patients since 2023 and Citigroup analyst Andrew Baum now believes the “risk of drug-related hepato-toxicity is diminishing.”
That has resulted in a new forecast from the analyst. Baum has raised his orforglipron sales estimate from $6.5 billion to $14 billion in 2035E, driving a respective 13% and 17% increase to his 2035E revenue and Core EPS forecasts.
“Our previous orforglipron forecasts partly reflected our concerns over the risk of hepato-toxicity given two patients with elevated hepatic enzymes from the Phase II diabetes trial,” Baum explained. “While the continuation of the two Phase III trials does not preclude drug-related toxicity, it does partially de-risk the profile.”
LLY and peer/competitor Novo Nordisk are the two main forces that dominate the weight loss market but over the medium-term they are under threat from generic versions of semaglutide in China and further down the line face risks in Western markets post the 2032 patent expiry. Additionally, Baum also notes that he knows of two congressional bills and one senate working group suggesting the elimination of PBM (pharmacy benefit managers) rebates. This move would remove a significant “competitive barrier” for LLY and Novo’s rivals.
“Despite these underappreciated risks, LLY and Novo retain sufficient competitive advantages to preserve their dominant market position and grow into their current multiples,” says Baum.
All told, then, the Citigroup analyst rates LLY shares a Buy, while raising his price target from $675 to $895, making room for returns of 18% over the next 12 months. (To watch Baum’s track record, click here)
Elsewhere on the Street, LLY stock receives an additional 14 Buys and 3 Holds, all coalescing to a Strong Buy consensus rating. Going by the $846.43 average price target, a year from now, shares will be changing hands for ~11% premium. (See LLY stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
