Jefferies upgrades Eli Lilly as enthusiasm around weight-loss drugs grows following Wegovy study

Published Wed, Aug 9 20237:08 AM EDTUpdated Wed, Aug 9 202311:48 AM EDT

Jefferies is encouraged by recent results from a weight-loss drug study that could help lift Eli Lilly . The firm upgraded the pharmaceutical giant to buy from hold. It also raised its price target to $615 from $430. Jefferies' forecast implies nearly 18% upside from Tuesday's $521.60 close. Analyst Akash Tewari lauded the strong results from a recent trial study surrounding Novo Nordisk's weight loss drug Wegovy . The Select study showed Wegovy lowered the risk of major cardiovascular health events including heart attacks and strokes as much as 20%. The study also shifted the focus toward the potential benefits of weight loss to the heart, beyond simply improving one's appearance. The results, Tewari said, could also lead to the success of more weight-loss treatments including Eli Lilly's glucagon-like peptide-1 drug Mounjaro. "We think NVO opens the door to broader payer adoption & potential CMS coverage for the GLP-1 class," Tewari said. Mounjaro is used to help improve blood sugar levels in adults. Tewari added that GLP-1 could be "one of the biggest drug classes of all time." "What a day for the GLP-1 class. We were skeptical that NVO-SELECT would show 15% + benefit (our base case was 11-13%), but we were wrong," Tewari said. "SELECT had a home-run result." The drug and others under the Eli Lilly umbrella helped raise company profits 85% in the second quarter on revenue of $1.76 billion. Eli Lilly also raised its full-year guidance Tuesday. "At this point, it's hard to argue that the obesity class can simply be characterized as an aesthetic short-duration treatment market. If this is the case, we don't need meaningful penetration into the US/WW obesity market to see meaningful upside to numbers," Tewari said. "Thus, we meaningfully raise our Mounjaro peak sales estimates to ~$70B and our orforglipron estimates to ~$8.5B." Eli Lilly has added more than 42% upside from the start of the year. LLY YTD mountain Eli Lilly year to date — CNBC's Michael Bloom contributed to this report.