Eli Lilly To Fly Higher? Fund Manager Gary Black Envisions Blockbuster Potential For Diabetes Drug Mounjaro

Eli Lilly & Co. LLY has been a high-flier among the mega-cap pharma stocks this year, as the company leverages the obesity drug craze. Prominent Tesla investor and Future Fund Manager Gary Black weighed in on the stock’s run-up and its future trajectory.

What Happened: Lilly stock continues to surge as more investors discount the upside potential for the company’s GLP-1 drug Mounjaro, which is currently indicated as a treatment for Type 2 diabetes. GLP-1, standing for glucagon-like peptide-1 agonists, is a class of drugs used to treat Type 2 diabetes and obesity.

Chart courtesy of Benzinga

Mounjaro is expected to receive FDA approval for treating obesity by the year-end, Black said.

Citing analysts, the fund manager said GLP-1 market potential is estimated at $100 billion per year, as 42% of American adults are considered obese. If Mounjaro takes 30% of the market, it could fetch revenue of $10 billion for Lilly in 2025, he said.

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Why It’s Important: The GLP-1 agonist mimics the GLP-1 hormone that is released in the gastrointestinal tract in response to eating. They perform the dual functions of prompting the body to produce more insulin, which reduces blood glucose and interacting with the parts of the brain that reduce appetite and signal a feeling of fullness.

Danish biotech Novo Nordisk A/S’ NVO blockbuster drug semaglutide belongs to this class and it is marketed with the brand name Ozempic as a diabetes treatment and Wegovy as an obesity drug. Ozempic is also used for obesity treatment as an off-label indication.

Morgan Stanley analyst Terence Flynn said in a note on Wednesday that Mounjaro would fetch Lilly sales of $1.5 billion in the third quarter compared to the $1.3 billion consensus estimate. The analyst also said he looked ahead to the FDA action on the potential obesity expansion by year-end and the contribution from the new North Carolina facility.

The analyst raised his Mounjaro estimates for out-years from 2024, citing recent GLP-1 script trends. He raised his price target for Lilly to $673.

Lilly is the fourth biggest holding in Black’s actively managed The Future Fund Active ETF FFND exchange-traded fund, accounting for about 4.20% of the portfolio weighting.

Lilly closed Wednesday’s session up 4.48% at $605.28, according to Benzinga Pro data.

Read Next: UK Authority Recommends Eli Lilly’s Famed Diabetes Drug Mounjaro As New Treatment Option For Type 2 Diabetes