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UBS upgraded Eli Lilly (NYSE:LLY) to Buy from Neutral on Thursday, classifying the U.S. pharma giant as the most attractive name in its large-cap coverage due to the potential in its weight loss therapy Mounjaro (tirzepatide) and prospects in Alzheimer's space.
Citing SURMOUNT-1 data for Mounjaro, which indicated over 20% weight loss in the late-stage study, the analysts led by Colin Bristow projected a $25B peak sales potential for the diabetes drug.
The team also argues that LLY is the best risk-reward play for upcoming late-stage data readout for lecanemab, an experimental Alzheimer's therapy developed by Biogen (BIIB) and Eisai (OTCPK:ESALY) (OTCPK:ESALF) (OTCPK:ESALY).
In October, LLY announced the start of rolling submissions of a marketing application for its rival medication donanemab. While calling the anti-amyloid antibody "risky and excluding it from the Buy thesis, the analysts named donanemab the "highest potential late-stage Alzheimer's asset."
Even as LLY looks "expensive," trading at ~32x of 2023 consensus EPS, UBS opts to raise its price target to $363 from $335 per share, arguing that the stock deserves a "significant premium" given forecasts for double-digit 5-year top and bottom line CAGRs and more than $20 in EPS by 2026.
Read: In July, Morgan Stanley projected Novo Nordisk (NVO) and LLY to dominate a global obesity market expected to generate $54B in sales in 2030.