Eli Lilly is at the forefront of two of the pharmaceutical industry’s hottest fields, and it’s paying off for the Indianapolis company’s investors.
Over the past year, Lilly’s valuation has climbed nearly 50% to exceed $400 billion, a few percentage points’ swing away from eclipsing Johnson & Johnson as the world’s largest drugmaker by market capitalization. It’s worth nearly as much as Pfizer, Bristol Myers Squibb and Moderna combined, despite earning less than one-third as much revenue as J&J or Pfizer in 2022.
Lilly’s skyrocketing stock price is largely due to two drugs: the diabetes and weight loss treatment Mounjaro, and the experimental Alzheimer’s treatment donanemab. Investors and Wall Street analysts expect both to become blockbusters in large markets with few established competitors.
On Wednesday, results from a large clinical trial of donanemab in people with mild Alzheimer’s showed treatment slowed cognitive and physical decline by 35% versus a placebo, sending Lilly shares higher by nearly 7%. (Shares were down by 0.5% Thursday morning.)
The positive data followed one week after Mounjaro succeeded in a second study testing its potential as a treatment for weight loss, setting Lilly up to seek an expanded approval for the Type 2 diabetes drug in obesity.
“We're seeing the practical benefits of life science innovation and years of investment,” former FDA commissioner and current Pfizer board member Scott Gottlieb wrote in a Wednesday tweet. “Lilly stands at cusp of helping solve two of the most devastating chronic diseases: diabetes and obesity, and Alzheimer's.”
At least two investment banks have upgraded their price targets on Lilly shares in the past week, setting expectations the company’s valuation will continue to rise by up to 13%.
“We think the efficacy and safety of [donamenab] could support a best-in-class amyloid plaque-targeting therapy for the treatment of Alzheimer's and broad reimbursement,” wrote Cantor Fitzgerald analyst Louise Chen, who raised her price target on Lilly last week, describing the drug’s mechanism of action.
Lilly’s rise to the top of the industry’s ranks is an achievement more than a decade in the making. In the early 2010s, the company endured one of the industry’s biggest patent cliffs as it lost patent protection for psychiatric drugs like Zyprexa and Cymbalta.
Yet Lilly never strayed from its research roots in neurological and metabolic medicine. Notably, it persisted in pursuing the much-debated “amyloid hypothesis” for treating Alzheimer’s, which posits that sticky plaques of that protein cause the disease’s progression.
The drugmaker exhausted nearly every possibility with the amyloid-targeting drug solanezumab, which failed six different Phase 3 trials, including those run by academic centers. By the time Lilly finally ended efforts with solanezumab, donanemab had emerged as the company’s top Alzheimer’s prospect.
The two drugs target different forms of the amyloid protein, a distinction that Lilly thought would result in greater amyloid clearance and better efficacy. That proved to be the case, as the company’s Phase 3 trial results showed donanemab slowed clinical decline as well as cleared amyloid plaques from the brains of most participants.
Lilly has restocked its Alzheimer’s pipeline beyond donanemab, too. Another amyloid-blocking drug called remternetug is beginning late-stage clinical testing, while a new kind of treatment that targets a different toxic protein called tau is in Phase 2 trials.
In metabolic care, Lilly has long leaned on its insulin products, and partnered with Boehringer Ingelheim to bring non-insulin diabetes medicines like Jardiance and Tradjenta to market. But it lagged rival Novo Nordisk in launching a drug that stimulates an insulin-regulating hormone called GLP-1.
Lilly eventually launched Trulicity, a once-weekly GLP-1 shot, in 2014. But the company didn’t test whether the drug could help people who are obese lose weight, as Novo did with its GLP-1 drug Saxenda.
It’s an opportunity Lilly didn’t pass up with Mounjaro, which stimulates GLP-1 and another insulin-raising hormone called GIP. Data released to date suggest Mounjaro may help people lose more weight than Novo’s drug Wegovy (marketed as Ozempic in diabetes), prompting SVB Securities analyst David Risinger, who also upgraded Lilly’s shares last week, to forecast annual sales of $28 billion by 2030.
Earlier in its pipeline, Lilly is testing an oral GLP-1, as well as a triple-acting drug in both diabetes and obesity.