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Investing.com - Leerink Partners downgraded Eli Lilly (NYSE:LLY), a pharmaceutical giant with a market capitalization of $574 billion and strong financial health according to InvestingPro data, from Outperform to Market Perform and slashed its price target to $715 from $944 on Thursday.
The research firm cited disappointing initial results for Eli Lilly’s oral GLP-1 drug orforglipron as a key factor in the downgrade. Leerink reduced its 2030 revenue projection for the drug by 38% to $13.5 billion from $21.6 billion. Despite this setback, InvestingPro data shows the company maintains impressive revenue growth of 36% in the last twelve months, with 8 analysts recently revising earnings estimates upward.
Leerink also lowered its five-year compound annual growth rate for Eli Lilly’s earnings per share from 22% to 18%, reflecting reduced long-term expectations for the pharmaceutical giant.
Rising competitive threats were identified as another concern, with Leerink noting that Eli Lilly’s major competitor Novo Nordisk (NYSE:NVO) "may need to continue to use price to compete in its duopoly with LLY." The firm also expects increased competition from various competitors starting in the late decade.
Leerink further highlighted limited market expansion for anti-obesity medicines due to cost concerns among U.S. employers and governments outside the United States, which "may limit long-term obesity market growth to cash pay" despite Eli Lilly’s strong second-quarter performance that exceeded consensus estimates by 12%.
In other recent news, Eli Lilly announced that its investigational oral GLP-1 receptor agonist, orforglipron, achieved significant weight reduction in a Phase 3 trial. The study involved 3,127 participants and showed an average weight loss of 12.4% with the highest dose after 72 weeks. Despite these results, the weight loss fell slightly short of investor expectations, which had hoped for outcomes similar to Novo Nordisk’s Wegovy. Meanwhile, Eli Lilly’s stock received a boost amid reports that Medicare may soon cover weight-loss medications, potentially expanding the market for its GLP-1 drugs. Bernstein SocGen Group reiterated an Outperform rating on Eli Lilly, citing this potential Medicare coverage. Additionally, Eli Lilly’s diabetes drug Mounjaro demonstrated non-inferior cardiovascular outcomes in a recent study, showing an 8% lower rate of major adverse cardiovascular events compared to Trulicity. In response to Eli Lilly’s trial results, BofA Securities maintained a Neutral rating on Novo Nordisk, noting the comparison to Eli Lilly’s data. Viking Therapeutics (NASDAQ:VKTX) also saw a stock increase following Eli Lilly’s obesity drug data, which did not meet the high expectations of investors.
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