why-morgan-stanley-is-buying-the-dip-in-eli-lilly

Why Morgan Stanley Is Buying The Dip In Eli Lilly

LLY) stock has pulled back in recent months, rendering its valuation more attractive, according to a Morgan Stanley analyst. ” data-reactid=”19″ type=”text”>Eli Lilly And Co (NYSE: LLY) stock has pulled back in recent months, rendering its valuation more attractive, according to a Morgan Stanley analyst. 

The Lilly Thesis: The 9% pullback in Lilly shares seen since June 30 was mainly due to disappointing second-quarter results, the management downplaying COVID-19 antibody opportunities and concern about an impending readout on high-dose Ozempic from rival Novo Nordisk A/S (NYSE: NVO), Risinger said in a Thursday note. ” data-reactid=”21″ type=”text”>The Lilly Thesis: The 9% pullback in Lilly shares seen since June 30 was mainly due to disappointing second-quarter results, the management downplaying COVID-19 antibody opportunities and concern about an impending readout on high-dose Ozempic from rival Novo Nordisk A/S (NYSE: NVO), Risinger said in a Thursday note. 

This has rendered the forward P/E in line with the five-year average, the analyst said. 

Fundamentally, Lilly is likely to outperform, driven by long-term growth prospects, positive Phase 3 tirzepatide results starting in the fourth quarter and rising enthusiasm for its Alzheimer’s pipeline, he said.

The consensus estimates underappreciate Lilly’s long-term revenue and EPS growth potential, Risinger said.

Morgan Stanley’s 2025 revenues and EPS estimates are both 7% above the consensus, the analyst said. 

Tirzepatide could be best-in-class for glucose lowering, weight loss and cardiovascular risk, he said. 

Risinger sees peak sales potential for the candidate as reaching $10 billion. Beyond diabetes, tirzepatide could become a leading prescription drug for obesity, the analyst said.

Among other catalysts, Lilly has four proof-of-concept results from its early stage diabetes pipeline coming in 2021, he said. 

“Lilly’s Alzheimer’s pipeline represents an inexpensive call option, in our view.”  

The analyst estimates only $725 million in risk-adjusted Alzheimer’s pipeline sales in 2025.

BIIB) highly controversial Alzheimer’s investigational drug aducanumab could be a perception positive for Lilly, as a regulatory nod could suggest a low regulatory bar for Alzheimer’s, he said.” data-reactid=”35″ type=”text”>An FDA approval for Biogen Inc’s (NASDAQ: BIIB) highly controversial Alzheimer’s investigational drug aducanumab could be a perception positive for Lilly, as a regulatory nod could suggest a low regulatory bar for Alzheimer’s, he said.

Lilly has two Alzheimer’s candidates — N3PG and tau antibody — set to report Phase 2 data in 2021, Risinger said.

With Morgan Stanley assuming only 5% odds of success for each, the risk-reward is skewed to the upside, the analyst said.

As such, Morgan Stanley increased its estimates for Lilly’s key franchises and extended its model.

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Latest Ratings for LLY

Date Firm Action From To
Sep 2020 Morgan Stanley Upgrades Equal-Weight Overweight
Aug 2020 Morgan Stanley Maintains Equal-Weight
Jun 2020 JP Morgan Maintains Overweight

See more from Benzinga” data-reactid=”47″ type=”text”>See more from Benzinga

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