Eli Lilly Earnings: Solid Results Driven by Mounjaro

Eli Lilly Stock at a Glance

• Fair Value Estimate: $368.00
• Morningstar Rating: 2 stars
• Morningstar Uncertainty Rating: High
• Morningstar Economic Moat Rating: Wide

Eli Lilly Earnings Update

Eli Lilly LLY reported strong second-quarter results slightly ahead of our projections, but we don’t expect any major changes to our fair value estimate. We believe Lilly’s strong growth in the quarter reflects several recent innovative product launches that reinforce its wide moat. However, though the company projected above-consensus peak sales for its diabetes and weight-loss drug Mounjaro (its most important recent launch), we still view Lilly’s stock as overvalued, with the market showing signs of over-optimism.

In the quarter, total sales increased 22% operationally (excluding COVID-19 products and Baqsimi rights), driven by new product launches and a lack of major patent losses. We expect this growth rate will accelerate as more new drugs launch and Mounjaro gains the new indication in weight loss that’s likely later in the year. We project peak annual sales of Mounjaro of over $30 billion based on its leading efficacy in treating weight loss and diabetes.

Importantly, Lilly’s older GLP-1, Trulicity, appears to be maintaining market share, with sales down 5% largely due to a mix shift against a backdrop of strong demand. Additionally, a recent select study on Novo Nordisk’s weight-loss drug Wegovy showed a solid health outcome benefit. This bodes well for Mounjaro’s outcome study, given the similarity between their mechanisms of action.

Lilly’s remaining portfolio also looks well-positioned for growth. Diabetes drug Jardiance continues to expand indications, driving growth. Verzenio’s expansion into the adjuvant breast cancer market should propel further gains. But Novartis’ Kisqali also posted strong data in this area and will likely slow Verzenio’s gains in 2024.

Lilly’s pipeline continues to show remarkable strength. We are bullish on the oral GLP-1 orforglipron (phase 3 data likely in 2025), the Alzheimer’s drug donanemab (launch likely in early 2024), and the cardiometabolic drug retatrutide (phase 3 study starts in 2023).