A significant development in the medical and market spheres revolves around innovative drugs that could potentially combat the obesity epidemic in the United States. Citi analysts suggest that Eli Lilly (ticker: LLY) stands to benefit tremendously both in the near future and over the next decade.
Eli Lilly’s Potential Breakthrough with Mounjaro
Eli Lilly’s diabetes drug, Mounjaro, is expected to receive approval as a treatment for obesity in the coming months. This approval could pave the way for Mounjaro’s peak sales, which are projected to reach approximately $60 billion. Notably, around $37 billion of these sales will come from obesity treatments alone, according to Citi analyst Andrew Baum.
Short-Term Momentum and Future Prospects
Andrew Baum emphasizes that in the short term, increasing Mounjaro capacity and gaining impending obesity approval will play a crucial role in driving Eli Lilly’s share price momentum. As a result, Baum has raised his target price for Eli Lilly shares to $675 from $525, maintaining a Buy rating.
On Monday, prior to market opening, Lilly’s shares were down 0.2% at $583.50.
Competition in the Weight-Loss Drug Market
Lilly’s Mounjaro faces competition from Novo Nordisk’s (NVO) weight-loss drug, Ozempic. Both medications belong to the class of incretin-based drugs, which have demonstrated appetite suppression and reduced food intake. Additionally, Lilly is developing two more drug candidates in the same class: retatrutide and orforglipron.
Projections and Estimates
Baum has raised his sales estimates for Lilly’s incretin drugs, anticipating the sales to reach $71 billion by 2035, compared to the previous projection of $55 billion. He acknowledges the complexity in predicting the long-term potential of these drugs, primarily due to the fact that obesity affects over 42% of the U.S. population.
J.P. Morgan estimates that Lilly’s incretin portfolio sales will rise from $8 billion in 2020 to $50 billion by 2030. This would give Eli Lilly approximately half of the overall market alongside Novo Nordisk.
Future Outlook: Expired Patents and Competitive Landscape
Interestingly, Citigroup’s Andrew Baum does not anticipate Novo Nordisk’s U.S. patent expiration for the active ingredient in Ozempic (forecasted for 2032) to significantly impact the market’s growth rate. Baum suggests that the production of biosimilar drugs entails substantial capital expenditures, which will limit the competitive effect.