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Jefferies Upgrades Eli Lilly Amid Growing Optimism for Weight-Loss Drugs
This article discusses the recent upgrade of pharmaceutical giant Eli Lilly by Jefferies, driven by promising results from a weight-loss drug study. It explores the factors behind the upgrade, the potential of weight-loss drugs, and the implications for Eli Lilly's future performance.
Jefferies Upgrades Eli Lilly to Buy
Jefferies, bolstered by recent positive results from a weight-loss drug study, has upgraded Eli Lilly from hold to buy. In addition to the upgrade, the firm also increased its price target for Eli Lilly from $430 to $615. This revised forecast suggests a nearly 18% upside from Tuesday's closing price of $521.60.
Impressive Results from Wegovy Study
Analyst Akash Tewari praised the strong results from a recent trial study involving Novo Nordisk's weight-loss drug Wegovy. The Select study demonstrated that Wegovy could reduce the risk of significant cardiovascular health events, including heart attack and stroke, by up to 20%. This study shifted the focus towards the potential heart health benefits of weight loss, beyond just enhancing physical appearance.
Success of Weight Loss Treatments
The results of the study, according to Tewari, could pave the way for the success of more weight loss treatments, including Eli Lilly's Glucagon-like peptide-1 (GLP-1) drug Mounjaro. Mounjaro is used to help improve blood sugar levels in adults. Tewari expressed the belief that the GLP-1 class could become "one of the biggest drug classes of all time."
Impact on Eli Lilly's Performance
The success of Mounjaro and other drugs under Eli Lilly's umbrella has significantly boosted the company's profits. The company reported an 85% increase in profits in the second quarter, with revenue of $1.76 billion. Eli Lilly also raised its full-year guidance on Tuesday.
Future Prospects for Weight Loss Treatments
Tewari argued that the obesity class should not be viewed merely as an aesthetic short-duration treatment market. If this is the case, he said, "we don't need meaningful penetration into the US/WW obesity market to see meaningful upside to numbers." As a result, Jefferies significantly increased its peak sales estimates for Mounjaro to around $70 billion and its estimates for orforglipron to approximately $8.5 billion.
Eli Lilly's Stock Performance
Despite the challenges, Eli Lilly's stock has performed well, adding more than 42% upside since the start of the year. As the company navigates the evolving landscape of weight-loss treatments, investors will be keenly watching its strategies and performance.
Implications for New Businesses: A Fresh Perspective
The recent upgrade of Eli Lilly by Jefferies, driven by promising results from a weight-loss drug study, offers valuable insights for new businesses, particularly those in the pharmaceutical sector. The success of the Wegovy study underscores the potential of weight-loss drugs, not just for aesthetic benefits, but also for significant health improvements.
New businesses should take note of the shift in focus towards the potential heart health benefits of weight loss. This could open up new avenues for research and development, creating opportunities for innovative solutions that address both weight management and cardiovascular health.
The success of Eli Lilly's GLP-1 drug Mounjaro also highlights the potential of this drug class. As Tewari suggests, the GLP-1 class could become "one of the biggest drug classes of all time." This prediction could inspire new businesses to explore this class of drugs and develop their own unique offerings.
Finally, the strong performance of Eli Lilly's stock, despite the challenges, is an encouraging sign. It suggests that with the right strategies and a strong product portfolio, businesses can weather difficult periods and deliver robust returns. However, as the market for weight-loss treatments evolves, new businesses must stay agile and responsive to seize emerging opportunities and navigate potential challenges.
Article First Published at: https://www.cnbc.com/2023/08/09/jefferies-upgrades-eli-lilly-as-enthusiasm-around-weight-loss-drugs-grows-following-wegovy-study.html
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