Eli Lilly's blockbuster potential diabetes drug Mounjaro is "de-risked and transformative," an analyst said Thursday as he updated LLY stock.
UBS analyst Colin Bristow now expects Mounjaro to generate more than $25 billion in peak annual sales, up roughly $5 billion from his earlier estimate. The Food and Drug Administration has approved Mounjaro in Type 2 diabetes patients. Now, Lilly is working toward approval in obesity treatment.
Bristow expects the FDA to expedite Mounjaro's approval in obesity treatment. The agency is clearly comfortable with the drug, he says. Although Mounjaro was the first in its class to gain FDA approval, it didn't have to win favor with the FDA's expert panel and was still approved on time.
"Fundamentally, the filing/approval is a 'when,' not an 'if,' in our view," he said in a report to clients.
On today's stock market, LLY stock jumped 4.9% to 310.87.
LLY Stock: Mounjaro Rivals Come Out
Mounjaro blocks two hormones involved in blood sugar control. In diabetes patients, the injection led to more than 20% weight loss. More than 95% of patients at risk of becoming diabetic reached normal blood sugar levels, Bristow said.
Bristow's view comes after Pfizer unveiled less stellar midstage test results for its oral diabetes drug. On Wednesday, following the release, shares of Pfizer dipped 1.9%. LLY stock also fell 1.7%.
There are key differences between the drugs. Mounjaro blocks glucagon-like peptide-1, or GLP-1, and glucose-dependent insulinotropic polypeptide, 0r GIP. Pfizer's experimental danuglipron only blocks GLP-1. Danuglipron is an oral medicine.
Pfizer reported dose-responsive declines in HbA1c and fasting glucose over 12 weeks. Both are markers of health in diabetes patients. Patients also lost almost 12 pounds at the highest dose. Pfizer also tested danuglipron in six patients with obesity but not diabetes. They lost almost 16 pounds.
The majority of side effects were gastrointestinal and mild. Rates of nausea and vomiting rose with higher doses.
Evercore ISI analyst Umer Raffat says it's interesting Pfizer didn't bless danuglipron as the oral GLP-1 medicine it plans to send into final-phase testing. The company is also working on a backup. Further, Lilly has an oral GLP-1 drug in testing that's "looking quite intriguing," he said. He didn't note ratings for Pfizer and LLY stocks.
Playing Lilly Off Biogen
Outside of diabetes, Lilly's experimental Alzheimer's drug, donanemab, shines amid a risky backdrop for Biogen. Biogen is soon to unveil key results for its lecanemab, another possible Alzheimer's treatment. Biogen's first gained FDA approval, but the Centers for Medicare and Medicaid Services has largely declined to cover it.
"While risky and not critical for the buy thesis, donanemab is the highest potential late-stage Alzheimer's asset," UBS's Bristow said. Lilly is "the best risk-reward play into Biogen's upcoming lecanemab readout."
In addition to his update, Bristow raised his price target on LLY stock to 363 from 335.
"Valuation seems 'expensive' now, but with double-digit top- and bottom-line five-year growth compound annual growth rates from a diversified business and more than $20 earnings per share by 2026, we believe Lilly currently deserves a significant premium," he said.
LLY stock is currently forming a flat base with a buy point at 335.43, according to MarketSmith.com.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
