Eli Lilly’s performance in the second quarter indicates that the company is progressing well in the competition to develop obesity treatments.

Eli Lilly’s stock is climbing significantly after the company reported strong second-quarter earnings, driven by increased supply and improved pricing for its popular weight loss medications, Mounjaro and Zepbound. This performance indicates that Lilly may be gaining ground on its competitor, Novo Nordisk. Analyst Mohit Bansal from Wells Fargo noted that the results should ease investor concerns, leading to a more than 7% rise in Lilly’s shares. The two drugs, both containing tirzepatide, generated $4.33 billion in revenue, surpassing the expected $3.35 billion. Consequently, Lilly has raised its 2024 revenue forecast by $3 billion, now projecting between $45.4 billion and $46.6 billion, and increased its per-share earnings estimates to $16.10-$16.60 from the previous $13.50-$14. Barclays analyst Carter Gould believes this upward revision should alleviate doubts about the company’s short-term performance and reduce risks for 2025 projections.

Although Lilly has a broad pharmaceutical portfolio, the market’s focus has been on its GLP-1 drugs for diabetes and obesity, which help patients by curbing appetite and managing blood sugar levels. Despite a nearly 16% drop in Lilly’s shares in the month leading up to the earnings report, largely due to a broader market trend of selling high-performing stocks, the company’s shares have still risen over 46% this year. Two main concerns have been affecting Lilly: competition from other companies developing weight loss drugs and pricing pressures, particularly after Novo Nordisk’s recent weaker-than-expected results. Novo’s Ozempic and Wegovy are priced higher than Lilly’s drugs, which may have contributed to Novo’s pricing challenges. Clinical trials have shown that Lilly’s Zepbound outperforms Novo’s Wegovy, potentially making it a preferred choice for treating obesity.

Wells Fargo’s Bansal reported a 14% increase in Mounjaro prescriptions and a 59% rise in Zepbound prescriptions from the first to the second quarter, with sales for Mounjaro and Zepbound growing by 59% and 140%, respectively, due to better pricing. Lilly also noted that access to Zepbound is improving, with 86% of commercial insurance plans now covering the drug, up from 67% in April. BMO Capital Markets analyst Evan David Seigerman commented that Lilly is leading in the metabolic treatment market.

Looking ahead, several upcoming events could further boost Lilly’s stock. One significant event is the release of health outcomes data for tirzepatide, which could demonstrate additional benefits beyond weight loss and potentially expand its use among Medicare and Medicaid patients. Lilly has already submitted data to the FDA showing tirzepatide’s effectiveness in treating obstructive sleep apnea in obese adults. If approved, this could increase the drug’s usage. Additionally, the phase 3 results for orforglipron, an oral GLP-1 drug, are expected next year. JPMorgan analyst Chris Schott, who maintains an overweight rating on Lilly shares, predicts unprecedented growth for the company over the next decade, driven by its incretin drug portfolio. Schott estimates that Lilly’s incretin drugs could generate $68 billion or more in sales by 2030, with further growth potential. His $1,000 price target for Lilly shares suggests a nearly 30% increase from their current level, higher than the average Wall Street target of $941.55.