We’re raising our price target on Eli Lilly as the GLP-1 leader delivers
Eli Lilly’s fourth-quarter results beat Wall Street’s forecasts on Wednesday; The key GLP-1 drugs, Mounjaro for diabetes and Zepbound for obesity treatment, have reached triple digits – and we still have a lot of growth ahead of us. Revenue in the fourth quarter ended Dec. 31 rose 43% from a year earlier to $19.3 billion, beating expectations of $17.96 billion, according to estimates compiled by data provider LSEG. Earnings per share (EPS) rose 42% year over year to $7.54, according to LSEG, beating estimates of $6.67. LLY 1Y mountain Eli Lilly 1 year return Bottom line talk about a monster quarter. Total sales of the company’s blockbuster GLP-1 drugs, Zepbound and Mounjaro, exceeded $1 billion, each showing triple-digit growth. Despite higher costs, management improved profitability, with adjusted operating margins increasing by nearly 300 basis points. Patients are demanding Eli Lilly’s weight-loss and diabetes medications because they cause significant weight loss and have fewer side effects than competing drugs, CEO David Ricks told CNBC. This led to further market share gains. On the post-earnings call with investors, CFO Lucas Montarce said Zepbound was getting about 70% of new GLP-1 prescriptions in the U.S., while Mounjaro was getting 55% of new prescriptions. Montarce said Eli is now a leader in the GLP-1 market both domestically and abroad. Why we have it Eli Lilly’s best-in-class medicines should deliver above-industry-average growth in the coming years. The portfolio is supported by the GLP-1 franchise, which currently includes Mounjaro for type 2 diabetes and Zepbound for obesity. The rapidly growing class of drugs has the potential to treat other conditions such as sleep apnea and reduce the risk of stroke. Lilly’s pipeline of Alzheimer’s treatments, including the recently approved Kisunla, adds to the stock’s long-term appeal. Competitors: Novo Nordisk, Biogen, Eisai, Merck and Pfizer Weight in portfolio: 2.72% Last purchase: November 25, 2024 Start: October 8, 2021 There is still a huge opportunity. Ricks said only 20 to 50 million people currently use GLP-1, but the addressable market is 1 billion and growing as doctors discover new use cases (plus weight loss could be a solution to other health problems). Despite tremendous growth, we are still in the early stages. Of course, how large a market a company can capture largely depends on patent expiration. These GLP-1 drugs are unique in that growth occurs so early in their patent lifecycle. The patent for tirzepatide, the active ingredient in Mounjaro and Zepbound, dates back to the back half of the 2030s. A key growth catalyst is Eli Lilly’s oral GLP-1, called orforglipron, which the company expects to launch in the U.S. in the second quarter and internationally in 2027. Ricks dismissed concerns that the pill would undermine sales of injectable drugs, saying it would instead expand the market to needle-shy consumers. Another big growth driver is price. Demand for GLP-1 is elastic, meaning it is sensitive to price adjustments, Ricks said. As a result, Ricks said, adoption will increase as prices come down, and of course, once you get these drugs, you tend to keep using them. Finally, world demand doesn’t matter if a company can’t keep up with supply. Fortunately, Eli Lilly really shines in its production capacity. The company exceeded its goal of producing 1.8 times more GLP-1 doses in the back half of 2025 than in the prior-year period. Just last week, Eli Lilly announced plans to invest more than $3.5 billion in a new facility in Pennsylvania’s Lehigh Valley to further expand its manufacturing capacity for injectable drugs. The company expects demand to continue rising, with management’s updated guidance for the year significantly beating Street forecasts. As a result, we’re raising our price target from $1,100 to $1,250 but maintaining our 2 rating, meaning we’ll wait for the pullback to buy more shares. Guidance Management’s forecast for the full year: Revenue between $80 billion and $83 billion, according to LSEG, above the Street’s consensus estimate of $77.62 billion. “Performance margin” (management’s term for adjusted operating margin) is between 46% and 47.5%, compared to a forecast of 46.6%, according to FactSet. Earnings per share came in between $33.50 and $35, above expectations of $33.23, according to LSEG. (Jim Cramer’s Charitable Trust is a long LLY. See here for a full list of stocks.) 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