Eli Lilly Earnings: Strong Diabetes and Obesity Sales Continue

Key Morningstar Metrics for Eli Lilly

• Fair Value Estimate: $580.00
• Morningstar Rating: 2 stars
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: High

What We Thought of Eli Lilly’s Earnings

We are increasing our fair value estimate for Eli Lilly LLY to $580 per share from $540 following better-than-expected second-quarter results, largely driven by Mounjaro (its diabetes drug) and Zepbound (obesity). However, we believe the stock still looks overvalued. While we project significant sales for Mounjaro and Zepbound, the market seems too bullish on the drugs and is not likely fully accounting for expected price declines, high cost burdens for some patients, eventual competition beyond Novo Nordisk NVO, tolerability issues, and potential long-term safety issues.

Cardiometabolic-GLP-1-related sales (Mounjaro, Trulicity, and Zepbound) almost doubled in the quarter. While wholesaler stocking and reduced discounting significantly helped, the drugs remain well-positioned, and we project combined peak annual sales of over $65 billion, up from $12 billion in 2023. We expect additional indications for Mounjaro/Zepbound in sleep apnea and heart failure, following positive data already reported in 2024. Moreover, a head-to-head study of Zepbound versus Novo’s Wegovy in obesity patients should come out later this year, and we expect slightly more positive data for Zepbound, based on cross-trial comparisons of previously reported studies.

Lilly’s rapid ramp in manufacturing GLP-1 drugs is largely meeting current demand, but supply could be limited if demand significantly increases quickly. We remain most bullish on Lilly’s next-generation weight-loss drug orforglipron (pivotal data in 2025), which could offer the convenience of oral dosing versus current injectable drugs.

Lilly’s third-largest drug, Verzenio (for breast cancer), grew 44% as its adjuvant approval gained traction, but we expect deceleration as Novartis’ NVS Kisqali likely gains adjuvant approval later in the year. Also, the recent launch of the Alzheimer’s drug Kisunla should develop into a major blockbuster, but we expect a slower ramp-up.