Obesity-drug power couple Novo Nordisk and Eli Lilly still have room to run, analysts say

By Eleanor Laise

BMO analysts cut price target for Amgen, another contender in the weight-loss drug race

Novo Nordisk and Eli Lilly & Co., the dynamic duo of the weight-loss drug world, still have plenty of upside even after their shares have surged over the past 12 months, BMO Capital Markets analysts said Friday.

The BMO analysts initiated coverage of Novo Nordisk's American depositary receipts (NVO) Friday with a $163 price target, representing roughly 30% upside to Thursday's closing price. On top of strong efficacy data for its GLP-1 drugs already on the market, including Ozempic and Wegovy, Novo has next-generation treatments in the works that can improve on the profiles of currently available drugs and bolster the longer-term strength of the Danish drugmaker's obesity business, the analysts said in a presentation.

What's more, the analysts noted, Novo is "amassing a wall of secondary outcomes data" that will help drive Medicare coverage of its drugs and differentiate them from competitors. Earlier this month, new research showed that people with obesity-related heart failure and diabetes can get substantial heart-health benefits from Wegovy, even if they don't lose a lot of weight on the medication.

The analysts also boosted their price target for Eli Lilly shares (LLY) Friday to $900, from $865 previously. The company's development of experimental treatments like orforglipron, a GLP-1 pill, and retatrutide, an even more potent weight-loss drug, will pay off later this decade, the analysts wrote, as they generate revenue growth without proportionate increases in operating costs.

Both drugmakers have also invested heavily in expanding their manufacturing capacity, so that even if new competitors enter the market, they'll be hard-pressed to match the pair's manufacturing scale, the BMO analysts said. Beyond 2030, Lilly and Novo are set to command nearly 70% of the total GLP-1 market, the analysts said.

Some potential competitors are also falling behind with underwhelming clinical-trial results, in the analysts' view. The analysts cut their rating on Amgen Inc. shares (AMGN) to $336, from $343 previously, after early-stage data on its experimental obesity drug MariTide showed less blood-pressure benefit than some competitors, with implications for the drug's overall cardiovascular benefit, the analysts wrote in the report.

The analysts maintained their $33 price target for Pfizer Inc. shares (PFE), as the market awaits data on a once-daily formulation of the company's experimental GLP-1 pill danuglipron. Pfizer said late last year that it would not move forward with a late-stage trial of twice-daily danuglipron after participants in an earlier trial experienced side effects with the drug.

Novo Nordisk's ADR gained 1.2% premarket Friday, while Lilly shares gained 0.3%. Amgen shares dropped 0.5% early Friday, and Pfizer's stock was unchanged.

-Eleanor Laise

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04-12-24 0911ET

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