Eli Lilly has 'a good story': Deutsche Bank analyst on upgrade

Deutsche Bank is out with a bullish call on Eli Lilly (LLY), raising its rating on the pharma stock from Hold to Buy and lifting its price target by $300 to a total of $1,025 a share. Deutsche Bank Analyst James Shin joins Catalysts to break down the call and the pharmaceutical company's outlook.

Shin says the biggest driver behind the call is Eli Lilly's improved visibility. He explains, "they had outsized expectations and they beat them," pointing to GLP-1 weight-loss drug Mounjaro coming out of an FDA (Food and Drug Administration) shortage and meeting its benchmark goal of one and 1.5-times sellable doses.

"This is a great backdrop, right? Demand outstripping supply. You're selling everything you got. It's just a good story," he adds.

Shin explains that despite improving its supply, Eli Lilly has shown that "you can't walk into your pharmacy and get anything off the shelf right now." As it focuses on meeting real-time demand, the pharmaceutical giant is focused on building new facilities and investing in its production capabilities.

Morgan Stanley named Eli Lilly a top pick last week, citing it to have the "strongest growth profile" within its coverage universe.

For more expert insight and the latest market action, click here to watch this full episode of Catalysts.

This post was written by Melanie Riehl

Video Transcript

Bank getting bullish on Eli Lily lifting their price target on the stock by $300 to a total of $1025 a share.

This comes alongside a rating boost from a hold to buy De Bank noting the high growth outlook for Eli Lily in the call.

So here with more, we've got the analyst James, she joining us.

Thanks so much for being here.

So, so explain to me, talk to me about the biggest driver behind your call here.

Good morning.

Thanks for me on the biggest drivers.

Just improve visibility, you know, they had outsized expectations and they beat them and surprises such as X US strength from Monro, the coming out of FDA shortage, you know, and then our analysis and injector data for literally shows that they've already met their benchmark goals of meeting 1.5 times, sell doses.

And you know, this is a great backdrop, right?

Demand, outstripping supply you selling everything you got it.

It's just a good story and the growth like you said is outsized.

So James, what do you think that supply picture looks like?

And I bring that up because they are they are making or taking steps in order to better address the supply issues that they have had, seeing it or expecting it to improve here in the second half of the year.

How confident are you that they could quickly get these new operations online?

And also eventually, what does that timeline look like?

Are they ever going to be able to meet that demand?

So you know, the CEO on media saying that supply is going to improve and it did and it has the FDA website shows that all the doses are available.

But to, to and Lily has cautioned that like, look, you can't walk into your pharmacy and get anything off the shelf right now.

It's just they're bridging towards meeting real time demand.

It's still taking some time.

It's like an Olympic track race, right?

Them and Nova are trying to meet this demand as fast as they can.

They're building new facilities, they're putting billions of dollars into the ground.

So it is, it is improving.

And like I said earlier, we've looked into the injector data.

It looks like they've already met their in our view, their sellable doses goal of a 1.5 times increase versus last year.

So I think they're in a good position to meet the demand in the second half and guidance also implies acceleration backup.

So we feel pretty good James.

How are you thinking about any potential policy changes to come with the upcoming November election and how that could impact.

I know you cover a lot of uh stocks within the healthcare space, but specifically Eli Lilly.

So Eli Lilly as it relates to the election, it it's tough to say, I think more people will be looking towards the uh PB M and so forth for the election.

I think there's a bigger correlation there than there is the Pharma.

Look any price, anything that's on pricing is obviously a negative headwind.

But we already have inflation reduction act, whether that gets reversed or not.

Who knows?

I think both sides, whether you're red or green had some issues with um how medicine is done in the US.

But we'll see that's, that's a TBD James.

How are you looking at competition?

And is there one drug or one?

Um I guess in pill form or whatever it is that you view as the biggest threat here to Eli Lilly at this point.

So yes, competition is indeed coming, right?

This is a big market.

Lots of uh opportunity to go get in after.

Uh in my view, I think an oral that is non peptide based and the one that comes to mind as of late, that's making headlines I think is Roche Roche has a product called CT 996.

Roche is covered by my colleague Emmanuel.

Um They'll be presenting data at a medical conference coming up.

So all eyes on that and, and what is it specifically about Roche.

And uh the reason I ask is to kind of broaden it out because I, I think a lot about the kind of direct to consumer brands that are selling weight loss drugs that are compounded, that they are not coming from an FDA, they're, they're not FDA approved, but they're coming from an FDA approved pharmacy.

Uh for example, how do you think about competition in that context?

So the compounders are enabled, I think they get leeway, right?

Because there's a shortage from the branded products.

So as that improves that leeway starts entering into a gray legal banner.

Um But to your point like, you know, having these orals and so forth come to market, they don't have the manufacturing constraints, especially if they're non peptide.

So it'll help to better serve demand.

So eventually this uh I think the compounding business will have to see compounding isn't bad, right?

It serves a purpose, right?

They're trying to address patients that have specific needs that can't take a specific formulation.

So it's, it's really hard to say.

All right, James Shin.

Great to have you.

Thanks so much for your insight here this morning analyst with Deutsche Bank.

We appreciate it.

Thank you.