Morgan Stanley names Eli Lilly a top pick, says it has best product outlook in pharma

Published Wed, Apr 6 20226:01 AM EDTUpdated Wed, Apr 6 20228:31 AM EDT

A slate of upcoming product launches including an exciting drug for diabetes and weight loss makes Eli Lilly a top pick among pharmaceuticals, according to Morgan Stanley. Analyst Terence Flynn assumed coverage of Eli Lilly with an overweight rating, saying in a Wednesday note to clients that the drug company will get a boost over the next several years from a "robust" new line of products. "LLY has the most robust new product cycle (and hence growth) outlook in Pharma as over the next 2 years the company could launch five new drugs, including Tirzepatide for diabesity," Flynn wrote. Morgan Stanley has a price target of $364 per share on the pharmaceutical company, which implies about 24% upside from Tuesday's closing price. The company's new launches could lead to top-line growth of 40% by 2025, relative to 2022, according to the note. Morgan Stanley also said that earnings per share could grow to $16 in 2025 and $21 in 2030, up from $8.76 in 2022. Morgan Stanley's bullish outlook on the company hinges on the launch of diabetes treatment tirzepatide, which it expects to be approved by Food and Drug Administration in June. A survey of physicians by Morgan Stanley analysts showed that a majority of doctors have some familiarity with the its ability to be used for type 2 diabetes as well as weight loss, according to the note. Initial Phase 3 data on its use as an obesity treatment is expected mid-year. Tirzepatide combines two incretin hormones — glucagon-like peptide-1, or GLP-1, receptor agonist and glucose-dependent insulinotropic polypeptide, or GIP — that slow gastric emptying and lead patients to feel full longer. It is expected the drug will show a greater amount of weight loss than existing therapies . "We view LLY's Tirzepatide (injectable GLP-GIP) as the company's most important upcoming new product cycle as it has the potential to expand LLY's injectable franchise further into type 2 diabetes (T2D; currently ~$14bn market) and open up a new $20bn market in obesity," Flynn wrote. Shares of Eli Lilly were down less than 1% in Wednesday premarket trading. —CNBC's Michael Bloom contributed to this report. Correction: Morgan Stanley analysts expect the Food and Drug Adminstration to approve tirzepatide in June.

The Eli Lilly logo is shown on one of the company's offices in San Diego, California, September 17, 2020.

Mike Blake | Reuters

A slate of upcoming product launches including an exciting drug for diabetes and weight loss makes Eli Lilly a top pick among pharmaceuticals, according to Morgan Stanley.

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