Eli Lilly earnings: Weak Orforglipron obesity data weighs down a strong quarter
With today’s share drop, we think Lilly stock looks fairly valued.
Mentioned: Eli Lilly and Co (LLY)
Key Morningstar metrics for Eli Lilly
- Fair Value Estimate: $650.00
- Morningstar Rating: ★★★
- Morningstar Economic Moat Rating: Wide
- Morningstar Uncertainty Rating: High
What we thought of Eli Lilly’s Earnings
Eli Lilly’s LLY 38% revenue growth and 61% non-GAAP EPS growth in the second quarter were above consensus expectations. Management raised 2025 guidance to ranges of $60 billion-$62 billion in revenue and $21.75-$23.00 in non-GAAP EPS. Lilly also announced Attain-1 obesity data for oral GLP-1 orforglipron.
Why it matters: Lilly saw strong growth as it gained share over Novo Nordisk in the GLP-1 market and was less affected by compounded drugs. However, weak orforglipron obesity data led shares to fall 15% in intraday trading, as investors compared the data with Novo’s oral semaglutide.
- Orforglipron led to 11.5% placebo-adjusted weight loss at 72 weeks (among those who adhered to high-dose treatment) in Attain-1, versus 13.9% at 64 weeks in Oasis 4 for the 25-mg dose of oral semaglutide, which is on track for Food and Drug Administration approval in late 2025.
- Data on orforglipron discontinuations due to adverse events look like a red flag at first glance (7.7% placebo-adjusted rate, versus only 1% in Oasis 4), although this statistic hasn’t been informative in past Novo and Lilly trials, and gastrointestinal tolerability measures looked more similar.
The bottom line: We’re maintaining our $650 fair value estimate for wide-moat Eli Lilly, including our assumptions for more than $60 billion in peak tirzepatide sales and $20 billion in orforglipron sales, despite raising our 2025 forecast. With today’s share drop, we think Lilly looks fairly valued.
- We think recent positive cardiovascular outcomes lend further support to tirzepatide’s strong profile, which should mean continued share gains, despite a near-term headwind from the CVS formulary exclusion for Zepbound that began July 1.
- We’re closely watching the LillyDirect (cash payment for vials) channel for any signs of plateauing, as it grew to 35% of new Zepbound prescriptions in the second quarter from 25% in the first quarter. We see room to grow, as only about half of employers opt to cover the obesity drug.
