Eli Lilly and Company (NYSE:LLY) stock has increased 15.5% this year compared to an industry decline of 0.9%.
Here, we go over the elements pushing Eli Lilly’s stock higher, and that may continue the upward trend into the second halves of 2022 and 2023.
Medicines Are Driving Eli Lilly’s Revenue Growth
The rise in demand for medicines like Trulicity, Taltz, and others fuels Lilly’s revenue growth. When revenues from COVID-19 antibodies are excluded, its key growth products—like Trulicity, Taltz, etc.—grew 20% in the second quarter and contributed close to 67% of total revenues.
Importantly, Eli Lilly anticipates the introduction of five new drugs by the end of 2023, which might act as catalysts for the company’s top-line growth over the next ten years.
Mounjaro (tirzepatide), a dual GIP and GLP-1 receptor agonist (GIP/GLP-1 RA), was the only one of these five to receive FDA approval in May. In phase III tests, the medication significantly lowered blood sugar levels and caused individuals with type II diabetes to lose weight. Sales for Mounjaro totaled $16.0 million in the first quarter of 2022.
In Europe and Japan, regulatory applications for tirzepatide for type II diabetes are being considered. In June 2020, the business started a cardiovascular outcome trial for tirzepatide. In addition, tirizepatide is being studied in phase II for NASH and phase III for obesity, obstructive sleep apnea, and heart failure with maintained ejection fraction.
The first of up to five new medications Eli Lilly intends to introduce by the end of 2023 is called Mounjaro.
Donanemab and pirtobrutinib, approved for use in the treatment of Alzheimer’s disease and mantle cell lymphoma, respectively, are two other significant prospects for which Lilly has submitted regulatory applications to receive accelerated FDA clearance. The FDA has designated the submissions for priority consideration. Lebrikizumab’s new drug application for atopic dermatitis is anticipated to be submitted later this year. In contrast, regulatory applications for mirikizumab for ulcerative colitis are being reviewed in the U.S. and Europe.
Mounjaro and donanemab have the potential for multi-billion dollar sales out of the five contenders.
Bebtelovimab, a COVID-19 antibody drug that Lilly hopes would generate increased sales due to a new U.S. government supply agreement, was approved by the FDA in February 2022 to treat a subset of outpatients with mild-to-moderate COVID-19. This benefit, however, is likely to be outweighed by bigger than previously anticipated potential currency headwinds.
Eli Lilly Faces Several Challenges
Eli Lilly faces many challenges, including generic competition for several medications, increasing pricing pressure in the U.S., particularly on the core medication Trulicity, and price reductions in many other countries, including China, Japan, and Europe.
The vitamin regimen patent for its primary medicine Alimta ended globally in June 2021, and generic versions of the drug were introduced in Europe and Japan, severely affecting sales. Eagle Pharmaceuticals (NASDAQ:EGRX) debuted its generic in the U.S. in February 2022 on a limited basis, with unlimited entry beginning in April 2022, as a result of Lilly and Eagle Pharmaceuticals’ agreement. Since losing its patent exclusivity in the United States in the second quarter of 2022, multi-source generic competitors have significantly reduced Alimta sales. In the final three quarters of 2022, Alimta sales will probably rapidly decline.
Eli Lilly is optimistic that the stock will continue to rise in the second half of 2022 and in 2023, thanks to its main products, including Trulicity, Taltz, Jardiance, and others, as well as the new ones mentioned above.
Citi Raises Eli Lilly Price Target, Expects 16% Upside
Citi raises its price target for Eli Lilly from $285 to $370, representing a 16% increase over Wednesday’s closing. Citi is maintaining its buy recommendation on Eli Lilly.
After speaking with physicians and payers, analyst Andrew Baum increased his peak Mounjaro (tirzepatide) projection from $15 billion to more than $25 billion. Although the once-weekly injection for diabetes is permitted, Lilly is eyeing Mounjaro as a weight-loss medication since it would significantly boost income.
In 2035, Baum projects that sales of Mounjaro for weight loss alone will total $13 billion.
He also said there would be a chance to increase positions if impending data from Alzheimer’s prospects lecanemab from Eisai (OTCPK:ESALY) and gantenerumab from Roche (OTCQX:RHHBY) is not promising. For Alzheimer’s, Lilly is pursuing donanemab.
According to Baum, “Given the historic outperformance and the 2x sector average multiple, the tolerance for risk is low,”
He did warn that there are some risks, like those that can arise if pharmacy benefit managers utilise step therapy for Mounjaro and Novo Nordisk’s (NYSE:NVO) Wegovy (semaglutide), which is already approved for weight loss, gains “a significant market share advantage.”