Eli Lilly’s (NYSE:LLY) first-quarter adjusted earnings per share declined 38% to $1.62 and missed analysts’ estimates. Revenue beat expectations but fell 11% to $6.96 billion. However, shares rose 3.7% on Thursday as investors welcomed the pharma company’s improved 2023 revenue guidance and a favorable update about the obesity drug Tirzepatide, which is expected to disrupt the weight loss market.
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Eli Lilly’s Obesity Drug Candidate
Eli Lilly said that Tirzepatide (in a dosage of 10 mg and 15 mg) achieved “superior” weight loss compared to placebo at 72 weeks of treatment in results from the Surmount-2 phase 3 clinical trial that evaluated 938 adult participants with obesity or who are overweight and have type 2 diabetes.
In particular, a 15 mg dosage of Tirzepatide helped lose up to 15.7% (34.4 pounds or 15.6 kg) of body weight. Eli Lilly intends to complete its submission for the approval of Tirzepatide for weight loss in the coming weeks. The company said that it expects “regulatory action” in late 2023.
The U.S. Food and Drug Administration (FDA) approved Tirzepatide under the brand name Mounjaro in May 2022 to treat Type-2 diabetes. Mounjaro, launched in June 2022, generated sales worth $568.5 million in the first quarter. The potential approval of this drug for obesity could generate billions of dollars for Eli Lilly, given the rising number of people suffering from obesity.
Is LLY Stock a Good Buy?
Following the Q1 print and obesity drug update, Goldman Sachs analyst Chris Shibutani reiterated a Hold rating on LLY stock with a price target of $312. The analyst said that the Surmount-2 results support his base case that Tirzepatide has a stronger weight loss profile than rival Novo Nordisk’s Wegovy.
Shibutani sees “differentiated” peak sales of about $30 billion for Tirzepatide across Type-2 diabetes and obesity. However, the analyst remains on the sidelines as he believes that the obesity opportunity is fully reflected in the stock’s valuation.
Wall Street’s Moderate Buy consensus rating for Eli Lilly is based on 11 Buys, three Holds, and one Sell. The average price target of $377.62 implies shares could be range-bound over the near term. Shares have risen nearly 7% year-to-date.
