Citi continue to see upside to Eli Lilly & Co.’s ‘already rich’ valuation

Analysts at Citi said in a note Thursday that the Mounjaro beat for Eli Lilly & Co. (NYSE:) goes on after the company’s solid third-quarter results, which were boosted by the drug.

They reiterated a Buy rating and $675 price target on the stock, stating that In the absence of safety concerns for its existing or future incretin portfolio and with accelerating momentum as Mounjaro capacity increases, they continue to see upside to Lilly’s already rich valuation. Mounjaro is a Type 2 diabetes drug that has also been used off-label for weight loss.

“We set aside LLY’s 2% top-line miss today (ex-Zyprexa). Separately, we note LLY’s notable uptick in shrewd business development,” the analysts wrote.

In oncology, the pivot to ADC (Emergence) and RLT (Point) should derisk Loxo’s IRA/price negotiation exposure and hopefully improve Loxo’s productivity. Similarly, DICE and Versanis acquisitions are very complementary to established I&I and incretin franchises, respectively,” they added.

Citi expects LLY’s R&D costs to increase as the company’s late-stage pipeline grows. The firm added that LLY is one of its preferred names among the US majors.