UBS recently issued a report upgrading Eli Lilly (NYSE:LLY) to a “Buy” rating as its diabetes and Alzheimer’s drugs present lucrative opportunities.
According to the report, the pharmaceutical giant’s Mounjaro (tirzepatide) “could be the biggest drug ever.” The type 2 diabetes treatment received FDA approval in May. GlobalData said at the time that tirzepatide could quickly become a mega-blockbuster. Annual sales of the drug could approach $14 billion by 2030, according to Mizuho Securities.
UBS analysts agree, tossing aside previous concerns around data and approval for the drug. Results for the Surmount-1 trial represented a “best-in-class” dataset that included greater than 20% weight loss and other “underappreciated metrics.”
According to UBS, Eli Lilly could hit heights of $25 billion in peak sales for Mounjaro.
The company is investigating tirzepatide for potential indications including heart failure, obesity and non-alcoholic steatohepatitis. It is the first glucose-dependent insulinotropic polypeptide (GIP) and glucagon-like peptide-1 (GLP-1) for treating adults with type 2 diabetes.
Additionally, the risky donanemab Alzheimer’s drug, while not critical for UBS’ “Buy” thesis, has high potential, the analysts said.
“With these events in the rear-view mirror, we now view LLY as being the most attractive name in our large cap coverage, with the greatest potential upside to numbers,” the report reads.
Valuations for Eli Lilly seem “expensive,” the analysts said, but growth from its diversified business rationalizes the significant premium, UBS said. However, the analysts cautioned for near-term downside risk associated with failure to file tirzepatide in obesity. They did caveat that warning with the notion that the filing/approval is really a “when,” not “if,” in their view.
The analysts do expect Eli Lilly to continue executing on its launch of Mounjaro. Additionally — and critically — they say an expedited path for filing on obesity is likely, given the FDA’s “clear comfort with the drug.” That stems from on-time approval, no panel and a clean label for the drug. One UBS expert, an ex-FDA regulatory expert, did express caution on the approvability of Mounjaro based on a single trial.