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The Zacks Analyst Blog Highlights Pfizer, Johnson & Johnson and Eli Lilly

For Immediate Release

Chicago, IL – June 21, 2024 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Pfizer PFE, Johnson & Johnson JNJ and Eli Lilly and Co. LLY.

Here are highlights from Thursday’s Analyst Blog:

Here's Why Eli Lilly Is Probably the Best Drug Stock in the World Right Now

Stocks of pharma companies, particularly large ones, make excellent defensive investments in an uncertain economy. Some popular names in the pharma sector are Pfizer, Johnson & Johnson, Merck, AbbVie, Novartis and Eli Lilly and Co., among others. Of these, at present, Eli Lilly appears to be a great stock to have in one's portfolio based on its strong overall financial performance and robust drug pipeline.

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Lilly, with a market cap of more than $800 billion, boasts a diversified product profile, including a solid lineup of new successful drugs. The company focuses primarily on diabetes, neuroscience, oncology and immunology, which are all high-growth areas and represent significant commercial potential. In the past couple of years, the company has received approvals for several new drugs and witnessed pipeline and regulatory success. The company has consistently reported strong revenues and profits and dealt well with expiring patents and increasing competition.

New Drugs Hold Key to Top-Line Growth

Lilly hit the jackpot with tirzepatide, a dual GIP and GLP-1 receptor agonist (GIP/GLP-1 RA), which is marketed as Mounjaro for type II diabetes and Zepbound for obesity.

The GLP-1 segment is a very important class of drugs for multiple cardiometabolic diseases and is gaining significant popularity. GLP-1 drugs work by mimicking the hormone GLP-1, resulting in weight loss, lowering hemoglobin A1c (HbA1c) and reducing cardiovascular risks.

Mounjaro was launched in mid-2022 while Zepbound was launched in November 2023. Despite a short time on the market, Mounjaro and Zepbound have become key top-line drivers for Lilly, with demand for weight loss drugs rising rapidly. Tirzepatide is also being developed for other indications, including obstructive sleep apnea (OSA) and metabolic dysfunction-associated steatohepatitis (MASH). Data from phase III studies in OSA showed that tirzepatide has the potential to significantly improve the severity of OSA. Based on data from these studies, Lilly plans to file a regulatory application to the FDA and other regulatory bodies in mid-2024. Analysts expect tirzepatide to generate around $25 billion in peak sales.

Lilly gained approvals for some other new drugs in 2023. These included Omvoh for ulcerative colitis and BTK inhibitor Jaypirca for mantle cell lymphoma and chronic lymphocytic leukemia. Lilly expects its new drugs, Mounjaro, Omvoh, Zepbound, Ebglyss and Jaypirca, to contribute significantly to its top line in 2024.

Donanemab a Key Pipeline Asset

A key asset in Lilly's pipeline is donanemab for early Alzheimer's disease, which is under review with the FDA. Earlier this month, an FDA committee assessing the safety and effectiveness of donanemab voted 11-0 unanimously recommending its approval. The Peripheral and Central Nervous System Drugs Advisory Committee said that the benefits of donanemab outweighed the risks, despite some safety concerns. The FDA is expected to give its decision later this year. Donanemab will be the second drug on the market to treat Alzheimer's disease if approved. Lilly believes the drug can generate blockbuster sales.

Data from studies have shown that donanemab produced a significant reduction of amyloid buildup in the brain and plasma phosphorylated tau (P-tau) in the blood. Amyloid plaque and P-tau are key biomarkers of Alzheimer's disease and their reduction is likely to predict clinical benefit in the treatment of early Alzheimer's disease.

Stock Price & Rising Estimates

Lilly's stock has gone up by more than 650% in the past five years mainly due to its solid pipeline potential, particularly its obesity drugs.

In the past year, Lilly's stock has risen 96.8% compared with an increase of 27% for the industry.

Estimates for Lilly's 2024 earnings have moved up from $12.52 to $13.61 and from $18.50 to $19.28 for 2025 over the past 60 days. Its trailing 12-month price-to-sales ratio has more than doubled to 19.75 from around 9 in 2021. Its revenues have jumped from $28.3 billion in 2021 to $34.1 billion in 2023.

Conclusion

While other large drugmakers face continued challenges, Lilly has stayed strong. Pfizer and Moderna are grappling with declining sales of their COVID-19 vaccines and drugs. J&J faces the upcoming patent expiration of Stelara in 2025 and talc litigations. AbbVie, Merck, Biogen, Gilead and AstraZeneca are facing rising generic/biosimilar erosion of key drugs and competitive pressure. Some of these companies are also facing declining sales of key drugs.

On the other hand, Lilly's revenue growth is being driven by higher demand for drugs like Mounjaro, Verzenio, Jardiance, Taltz and others. Incremental contribution for new drugs, rapid pipeline progress in areas like obesity, diabetes and Alzheimer's and regular M&A activity will keep the stock afloat.

The only other large drugmaker to have generated such phenomenal returns is Novo Nordisk. The stock has risen 453% in the past five years, mainly on the success of its drug semaglutide, a direct competitor to Lilly's tirzepatide medicines. Semaglutide is approved as Ozempic pre-filled pen and Rybelsus oral tablet for type II diabetes and as Wegovy injection for weight management. Despite supply challenges, Wegovy is seeing strong prescription trends and is generating impressive revenues and profits for Novo Nordisk.

It is expected that Lilly's sales and profits will grow at a much higher rate than the average large drugmaker in the foreseeable future, supported by its new drugs and pipeline potential.

Lilly currently has a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.

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