Eli Lilly's Commercial Moat, Competitor Landscape: BofA Emphasizes Strength in Incretin Space, Undervalued Assets

BofA Securities says Eli Lilly and Company LLY remains a top choice in Biopharma analysis, boasting a remarkable year-to-date performance of +29% (compared to the DRG index’s +10%). 

The U.S. pharma giant continues to shine in the biopharma sector, which is attributable to outstanding revenue growth, expanding margins, and a promising pipeline compared to peers. 

Also Read: Large US Drug Makers Highlight Indian Market For Their Blockbuster Drugs Including For Weight Loss.

While the market acknowledges the potential of Mounjaro (diabetes) and Zepbound (obesity), BofA asserts that opportunities in heart disease, obstructive sleep apnea, and liver disease are significantly undervalued. 

BofA Securities has increased its price target to $1000 from $800, incorporating undervalued opportunities and the next-gen GLP-1 oral (orforglipron).

The analyst maintains a Buy rating, anticipating sustained share strength due to a scarcity of high-growth stories.

Addressing competition, the analyst highlights a substantial commercial moat for Eli Lilly, asserting that the company and Novo Nordisk A/S NVO possess considerable expertise in the incretin space. Analysts note a lack of available manufacturing capacity as a key factor creating high competitive hurdles.

With the recent addition of label expansions for tirzepatide into weight loss, sales are projected to surpass $60 billion by 2030, a significant increase from $15 billion in 2024. 

Additionally, factoring in upcoming assets like the oral orforglipron (in phase 3) and the GGG agonist retatrutide (in phase 3), the global sales estimate for these assets is expected to exceed $80 billion by 2030. 

Novo Nordisk and Eli Lilly are actively working to increase supply to meet the demand spikes. Both companies have recently provided updates on their positive supply developments, assuring investors and patients.

Eli Lilly, facing challenges with the limited availability of certain doses of its diabetes drug Mounjaro, has doubled its production capacity for incretin drugs. 

The company plans to expand production further in the second half of the year, ensuring at least a 1.5-fold increase compared to the second half of 2023.

Price Action: LLY shares are up 3.66% at $781.29 on the last check Friday.

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