In light of the recent Eli Lilly and Co. (NYSE: LLY) study surrounding Jardiance (empagliflozin), analysts are pouring in to the stock after it announced that Jardiance showed a sharp reduction in cardiovascular (CV) risk and death in its trial.

Merrill Lynch reiterated a Buy rating with a $108 price objective. The firm also raised its Jardiance WW peak sales estimate to $3.5 billion, from $950 million in 2020. At the same time, Eli Lilly also remains the top pick for Merrill Lynch within its major pharmaceuticals group, based on an underappreciated pipeline and catalyst-rich 12 months.

In the report, Merrill Lynch said:

Data presented at the EASD conference in Stockholm showed that treatment with LLY’s SGLT2 inhibitor, Jardiance, resulted in a 14% reduction in CV risk (3-point MACE; primary endpoint) in the EMPA-REG OUTCOME trial. We note the magnitude of this benefit is above the ~10% minimum KOLs believed is necessary to be clinically significant (see note). More importantly, the 14% CV risk reduction was driven by a highly impressive 38% reduction in CV death. Equally as impressive were the reductions in all-cause mortality, and hospitalization due to heart failure, all of which KOLs viewed as paradigm changing (see below). Overall, the data exceeded our bullish expectations and are a major positive for Eli Lilly. We expect the results to lead to meaningful class growth, with Jardiance benefitting significantly more than competitors given the next SGLT2 to show CV data will be Invokana in the second half of 2017.

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In addition to the 14% CV risk reduction, Jardiance demonstrated a highly impressive 32% risk reduction in all-cause mortality. This is arguably the most important outcome for patients. A 35% risk reduction in hospitalization for heart failure was also observed with Jardiance. This result is particularly meaningful given two DPP-4s have been associated with an increase in hospitalization due to heart failure.

Another important and potentially differentiating component of the data was in the safety results, with Jardiance showing no statistically significant increases in diabetic ketoacidosis or bone fractures, which is meaningful in light of recent FDA warnings on all SGLT2s being associated with DKA and a recent warning associating Invokana with bone fractures and decreased bone mineral density.

Merrill Lynch gave its investment thesis as:

Eli Lilly offers a good mix of compelling valuation, solid div yield and a track record of returning cash to shareholders, and pipeline optionality. Eli Lilly’s robust pipeline of late-stage assets, coupled with the strong core diabetes business should facilitate continued top and bottom line growth. We expect upward revisions of estimates for these pipeline assets to be catalyzed by the multiple data readouts expected over the next 12-18 mos. Two pipeline assets, eva and sola have transformative potential.

Shares of Eli Lilly were down 0.7% to $89.37 Friday morning. The stock has a consensus analyst price target of $93.61 and a 52-week trading range of $60.58 to $92.85.

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