Why Cholesterol and Alzheimer’s Could Drive Eli Lilly Shares Much Higher

Credit Suisse upgraded Eli Lilly to an Outperform rating from Neutral and raised its price target to $105 from $89, implying an upside of 22% from current prices. This valuation was driven by higher Jardiance estimates and higher probability-adjusted sales for several pipeline assets, most notably abemaciclib, anti-CGRP and baricitinib. Accordingly, Credit Suisse raised its EPS estimates to $3.30, $3.58 and $4.10 from $3.25, $3.49 and $3.89 for 2015 through 2017, respectively.

The brokerage firm’s proprietary doctor survey highlights how the impressive EMPA-REG OUTCOME results should boost Jardiance sales and how the high degree of awareness of the results already (especially among specialists) should allow for this upside to come sooner than expected.

The company’s diverse, relatively de-risked mid-late stage pipeline is encouraging. It also includes several attractive medium-large sized opportunities that Credit Suisse believes are underappreciated as investors focus more on the two potentially transformative but higher-risk options in solanezumab (Alzheimer’s) and evacetrapib (cholesterol).

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Ultimately, the survey showed most physicians (especially endocrinologists) are already well aware of the mortality benefit demonstrated by Jardiance in EMPA-REG OUTCOME. Credit Suisse believes this should allow for increased use of Jardiance (and other SGLT-2s) even in the near term, with further upside likely in 2017 and beyond once the data from the study are included in the Jardiance package insert.

Much of the investor focus on Eli Lilly is naturally on the two late-stage assets solanezumab and evacetrapib that could potentially transform the company. Credit Suisse is cautiously optimistic on both but believes investors are still underappreciating several other attractive assets that at this point are relatively de-risked, based on data Eli Lilly or competitors have released. These include baricitinib (rheumatoid arthritis), ixekizumab (psoriasis), anti-CGRP (migraine) and abemaciclib (oncology), all of which also have multi-billion-dollar potential, but where consensus expectations are generally well below that level.

Shares of Eli Lilly were up 2.7% at $86.01 on 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. The company has outperformed both the S&P and its peers, and Oppenheimer sees a high probability of further outperformance ahead.

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