Eli Lilly Stock Climbs on Strong Diabetes Drug Sales

by Warren Seah

Eli Lilly (ticker: LLY) saw a boost in its stock price on Wednesday following an upgrade from Jefferies analyst Akash Tewari. This upgrade comes after the pharmaceutical giant reported better-than-expected second-quarter earnings. One of the key drivers behind this positive performance was the significant increase in sales of Eli Lilly’s diabetes drug, Mounjaro.

In the second quarter, Eli Lilly generated a revenue of $8.32 billion, surpassing analysts’ estimates of $7.58 billion. Mounjaro played a major role in this achievement, as it gained immense popularity among adults with type 2 diabetes. Notably, even patients without diabetes who took Mounjaro experienced an average weight loss of 21.1% in a recent trial.

Moreover, Eli Lilly is awaiting a response from the Food and Drug Administration regarding its application for Mounjaro as a treatment for obesity. The company anticipates hearing back from the FDA by the end of the year. Such prospects have further contributed to the growing demand for Mounjaro.

In fact, the surge in demand for Mounjaro has been so significant that Eli Lilly has encountered delays in fulfilling orders. This heightened demand is clearly reflected in the drug’s sales, which amounted to a staggering $979.7 million in the second quarter. This figure is markedly higher compared to just $16 million in sales during the same period last year.

Given Eli Lilly’s strong performance and the remarkable growth of Mounjaro, Jefferies analyst Akash Tewari upgraded the stock from Hold to Buy. Tewari also raised his price target for Eli Lilly shares to $615 from $430. This upgrade is a testament to the pharmaceutical giant’s success and the promising future it holds in the diabetes and obesity treatment markets.

Obesity Medications Showing Promise for Health Benefits

In a recent research note, analyst Tewari emphasized that the obesity class of drugs should not be dismissed as mere short-term fixes for aesthetics. This perspective is reinforced by the positive results shown by Novo Nordisk’s weight-loss drug, Wegovy, in the SELECT trial.

Wegovy demonstrated a remarkable reduction of 20% in the risk of heart attack or stroke among obese and overweight patients, surpassing initial expectations. These findings provide solid evidence that these new weight-loss medications can offer significant health benefits beyond simply reducing weight.

Tewari admitted to being skeptical about the potential efficacy of NVO-SELECT, originally projecting a benefit range between 11% and 13%. However, the trial results exceeded even these cautious estimates, achieving a home-run outcome.

Furthermore, BMO Capital analysts raised Eli Lilly’s price target to $633 from $565, attributing their decision to the impressive performance of Mounjaro and the success observed in the SELECT trial.

As a result, Eli Lilly experienced a 1.3% surge in its stock price on Wednesday, reaching $528.48 per share. This constitutes an all-time high for the company’s stock. Remarkably, over the past four days alone, Eli Lilly’s stock has gained 18%, representing its most substantial four-day increase since July 2002. Additionally, shares of Eli Lilly have surged by an impressive 44% this year.

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