Eli Lilly Earnings: Robust Growth Lifted by Broad Portfolio Strength, Especially Mounjaro

Key Morningstar Metrics for Eli Lilly

• Fair Value Estimate: $368.00
• Morningstar Rating: 2 stars
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: High

What We Thought of Eli Lilly’s Earnings

Eli Lilly LLY reported strong third-quarter results that were largely in line with our net expectations, and we are holding firm to our fair value estimate of its stock. While the firm remains very well-positioned for growth with its cardiometabolic drug Mounjaro, we believe the market is overly optimistic about the company’s outlook.

Excluding coronavirus products and a Zyprexa product sale, total sales increased 24%—a rate that will likely continue over the next couple of years. Mounjaro posted $1.4 billion in the quarter and remains key to the firm’s growth potential. We expect the drug will gain a weight loss indication later in the year, adding to the current diabetes indication. With leading efficacy data, we expect the drug to post peak annual sales of over $30 billion. Lilly’s decision to start a phase 2 study with high-dose Mounjaro holds the potential to increase the drug’s established efficacy. Lilly has also made strides in increasing its supply of Mounjaro, removing it from the FDA’s drug shortage list. However, we expect supply constraints may limit Mounjaro (and similar drug Trulicity) internationally in 2024.

Beyond Mounjaro, the remaining portfolio and pipeline continue to perform well, reinforcing the firm’s wide moat. Despite a decline in top drug Trulicity (down 10%) because of pricing and rebate pressure in the United States and supply constraints internationally, this concern is partly mitigated by strong underlying demand and our expectation that supply constraints will be temporary.

Concerning the pipeline, we remain most bullish on oral GLP1 drug orforglipron (phase 3 data in 2025), next-generation weight loss drug retatrutide (phase 3 data in 2025-26), Alzheimer’s disease drug donanemab (likely approval in early 2024), ulcerative colitis drug Omvoh (recently approved), and atopic dermatitis drug lebrikizumab (likely approval in early 2024). The strong breadth of late-stage assets increases our confidence in Lilly’s long-term growth.