Eli Lilly is creating a fortress with its diabetes and anti-obesity medications that could position it to become the first pharmaceutical company to hit $1 trillion in market cap, according to Morgan Stanley analyst Terence Flynn. On Friday, Flynn raised his price target on Lilly shares to $950 from $805. With Lilly’s stock closing Thursday at $757.78, the target suggests 25% more upside ahead. Shares have already gained 33% so far this year, outpacing the S & P 500’s 5% year-to-dat gain and trading near all-time highs, which puts Lilly’s market value above $752 billion. “We have argued over the last ~2 years that obesity is ‘the new hypertension’ … and that the nascent stage of the obesity market is analogous to where treatment for chronic cardio-metabolic diseases (e.g., high blood pressure and cholesterol) were in the 1980s, before the advent of new therapies,” Flynn wrote in a research note Friday. LLY 1Y mountain Eli Lilly shares over the past year. With this assumption, Morgan Stanley said the market for these drugs could be closer to $200 billion, compared with the $100 billion peak market size many on Wall Street have predicted. Right now, the market is giving Lilly’s stock a rich multiple in the near term, but Flynn sees a strong likelihood that estimates in 2025 and beyond will need to rise significantly. Lilly’s pipeline in the “diabesity” category is robust. It includes the recently launched Zepbound for weight loss, as well as experimental drugs orforglipron , a next-generation oral GLP-1 therapy, and retatrutide , an injectable drug that includes incretin hormones GLP-1 and GIP as well as a glucagon receptor agonists. (Zepbound has both GLP-1 and GIP hormones.) “LLY is establishing high barriers to entry in the diabesity market,” Flynn said, adding that this is what contributes to its higher valuation. It would be very difficult for a rival to join Novo Nordisk and Lilly in this market segment as the two companies have already invested so much money, have rich data from their clinical trials and are very far ahead in developing more effective treatments for the future. Both companies are also investing in manufacturing capacity as supply of the weight loss drugs remains far below demand. “At current levels (~$700bn market cap), we believe LLY shares reflect $70-$80bn in diabesity/GLP-1 revenues in early 2030’s and ~$100-$110bn in total company revenue,” Flynn said. But the analyst’s base case foresees Lilly’s 2030 revenue rising to $96 billion for its diabetes and obesity drugs Mounjaro, Zepbound and Trulicity. Over a six-year period, the compound annual growth rate could hit 26%, he said. Then, layer in possible sales from yet-to-be-approved orforglipron and retatrutide, and those estimates could rise by another $13 billion or more, he said. Phase 3 data is expected on orforglipron in 2025, which Flynn sees as a catalyst for the stock to go higher. —CNBC’s Michael Bloom contributed to this report.
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