On Wednesday, TD Cowen reaffirmed its Buy rating and $850.00 price target for Eli Lilly and Company (NYSE:LLY) shares. The endorsement follows the pharmaceutical giant's announcement regarding its obesity drug, tirzepatide, which demonstrated a 50-60% reduction in obesity-related sleep apnea events during the SURMOUNT-OSA study. E
Eli Lilly intends to submit a filing for this new indication by mid-year, with a comprehensive presentation scheduled for the American Diabetes Association (ADA) meeting in June.
The SURMOUNT-OSA study's findings are expected to exert additional pressure on healthcare payors and further distinguish tirzepatide from its competitors. However, the data is perceived as a modest enhancement to the drug's clinical profile.
Obesity-related sleep apnea is primarily a mechanical problem caused by excess weight on the upper airway, which is known to improve with weight loss. Tirzepatide, which is already associated with significant weight reduction, seems to confirm existing assumptions regarding treatment efficacy.
The potential addition of a sleep apnea claim to tirzepatide's uses is not anticipated to significantly extend the drug's target market, as obese individuals with sleep apnea are already covered for Eli Lilly's Mounjaro and Zepbound treatments. Similarly, the new data may not lead to a substantial increase in drug adoption since weight loss is already a key treatment goal for sleep apnea in obese patients.
The primary advantage of the SURMOUNT-OSA trial's outcomes may lie with insurance payors, particularly those who assess the cost-effectiveness of weight loss medications. With definitive evidence of tirzepatide's impact on sleep apnea, payors can potentially justify excluding the expenses of Positive Airway Pressure (PAP) machines from their cost analyses.
Moreover, the indication for sleep apnea could pave the way for Medicare coverage for Zepbound, mirroring the coverage expansion that Novo Nordisk (NYSE:NVO)'s Wegovy experienced following cardiovascular data from the SELECT study.
InvestingPro Insights
As Eli Lilly (NYSE:LLY) aims to expand the indications for its obesity drug tirzepatide, investors are closely monitoring the company's financial health and stock performance. According to InvestingPro data, Eli Lilly boasts a robust market capitalization of $676.94 billion and has experienced a revenue growth of 19.56% in the last twelve months as of Q1 2023.
This financial strength is further underscored by a significant gross profit margin of 79.25%, reflecting the company's efficiency in managing its production costs.
InvestingPro Tips highlight that Eli Lilly has not only raised its dividend for 9 consecutive years but has also maintained dividend payments for 54 consecutive years. This consistent return to shareholders is a testament to the company's financial stability and commitment to its investors. Moreover, analysts predict that Eli Lilly will continue to be profitable this year, which may reassure investors looking for sustained performance.
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