By Michael Elkins
JPMorgan reiterated an Overweight rating and a $400.00 price target on Eli Lilly and Company (NYSE:LLY) ahead of the upcoming release of the donanemab ph3 data.
Analysts there wrote in a note, “Following recent LLY weakness, we have been receiving a number of questions on the story and wanted to provide our updated thoughts on upcoming donanemab ph3 data as well as Mounjaro & the broader incretin portfolio. Overall, we see the LLY story as very much on track and LLY remains one of our favorite names in the group. With shares now trading at ~25.5x our 2024 EPS (despite a 20%+ EPS CAGR over the next decade), we would take advantage of volatility ahead of donanemab data to build positions.”
The analysts see a favorable risk-reward into the upcoming donanemab Ph3 data, with shares reflecting only marginal value for the asset. Heading into TB-2, they see three broad potential outcomes. First, JPMorgan’s base case, donanemab shows data comparable to lecanemab. With mid-to-high 20’s cognitive benefit and manageable symptomatic ARIA-e rates. In this case, they see the stock up 15% or more. In the event of mixed results, LLY is expected to be down slightly to up 5-10%. If donanemab fails, they expect shares to trade down ~8-10% and quickly rebound with the story shifting to a pure play diabetes/obesity stock.
JPMorgan sees donanemab as a ~$10-15 billion opportunity in Alzheimer’s. They see the Alzheimer’s market as reaching ~$25B in annual sales and (assuming positive results) expect donanemab to take ~60% of the market equating to a ~$100/share of value for LLY.
Shares of LLY are up 1.60% in mid-day trading on Thursday.