Eli Lilly growth tied to nascent diabetes drug sales

At least five analysts have raised their price target on the stock in the run-up to earnings on hopes that Mounjaro, which is approved to improve blood sugar levels in diabetics, will get U.S. approval for treating obesity next year.

"We remain bullish on Mounjaro's sales potential because we anticipate additional U.S. payer coverage this winter," SVB Securities analyst David David Risinger said in a research note on Monday.

The company's sales could quickly jump once Lilly gets more insurers to cover its costs, according to Risinger.

Context

Obesity is the largest chronic health problem in the United States and also leads to many other illnesses such as liver disease and heart issues. Novo Nordisk's Wegovy is a rival treatment option for obesity.

Analysts expect Mounjaro sales of $81 million in the third quarter, months into its U.S. launch, according to Refinitiv data.

While that accounts for just a fraction of Lilly's total sales, revenue from the drug is expected to cross the $1 billion mark next year as it gains approval for obesity and other conditions.

Lilly's sales are expected to increase to $30.23 billion in 2023, versus reported sales of $24.54 billion in 2021, with Mounjaro expected to bring in $1.34 billion in sales and become the company's third-biggest selling drug, according to Refinitiv data.

The fundamentals

** Q3 sales expected to grow 1.8% to $6.89 billion.

** Analysts expect Q3 profit of $1.96 per share.

Wall Street Sentiment

** 18 of 24 brokerages rate the stock "buy" or higher, and six rate it at "hold"; their median PT is $351.50.

** The stock has risen about 30% this year, outperforming the S&P 500 healthcare index, which is down over 5%