Opportunities are there for the taking and that is certainly what Eli Lilly (NYSE:LLY) appears to be doing in the diabetes/obesity segment. Investors obviously think that too, having been leaning heavily into LLY shares over the past year, making the possibility it will be the first pharma company with a $1 trillion market cap very real indeed.
Investors are not the only ones liking how the LLY story is developing. After recent meetings with management, J.P. Morgan analyst Chris Schott also thinks the company’s prospects are sound.
“Overall, LLY remains optimally positioned in the diabetes/obesity market,” says the analyst. “Zepbound (obesity injection FDA-approved in November) is off to a strong start with greater than expected cash pay demand for the drug. And despite significant expected capacity expansion, LLY continues to expect demand for incretins to outstrip supply for the foreseeable future, which should translate to more stable pricing in the obesity space over the next several years.”
In fact, looking at the bigger picture, as type 2 diabetes treatment Mounjaro continues to ramp, Zepbound gets a full year on the market in 2024 and the company continues to advance its incretin pipeline, Schott sees “further upside to Street estimates,” making the stock one of his “favorite names.”
Moreover, LLY has a possible ace up its sleeve in the shape of orforglipron, a weight loss pill the company is developing, which has displayed promising results so far in clinical testing. LLY views orforglipron as a “game changer,” which could enable expansion into sizable yet underdeveloped markets such as India, China, and Brazil.
Moreover, an orally administered agent could meet the demand in developed markets, potentially serving as a more affordable option for patients and catering to the approximately 20-25% of type 2 diabetes patients who favor oral treatments. Regarding safety, in line with previous statements, LLY maintains confidence in the drug’s liver safety profile.
If phase 3 data in 2025 confirms a “clean profile for the drug,” Schott thinks there could be “further upside” to Street estimates for this asset. “We see orforglipron as well positioned to take substantial share of the market and think an oral GLP-1 would help resolve the auto-injector capacity constraints currently facing the class (and drive potentially further upside to 2027+ estimates),” Schott summed up. “And more broadly, Lilly’s broad incretin/obesity pipeline should enable the company to sustain its leadership position in the space.”
All the above results in Schott maintaining an Overweight (i.e., Buy) rating for LLY shares, while he ups his price target from $775 to $850, suggesting the stock will climb 13% higher by the end of the year. (To watch Schott’s track record, click here)
Amongst Schott’s colleagues, 15 others join him in the bull camp and the addition of 3 Holds can’t detract from a Strong Buy consensus rating. At $830.67, the average target makes room for 12-month returns of 7.5%. (See Eli Lilly 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.
