Eli Lilly (LLY) is riding the wave of fast-growing sales for metabolic drugs with obesity and diabetes indications, enjoying stronger than expected fourth quarter results released this past week—numbers that led investors to a new round of buying shares and no fewer than seven analysts to raise their 12-month price targets on the stock.
Lilly finished the fourth quarter with a 19% jump in net income, to $2.249 billion from $1.893 billion in Q4 2022, on revenue that soared 28% year-over-year, to $9.353 billion from $7.302 billion. Accounting for nearly one-quarter (24%) of that revenue was a single drug, the type 2 diabetes treatment Mounjaro® (tirzepatide), whose revenues multiplied nearly eight-fold year-over-year, to $2.206 billion from $279.2 million in Q4 2022.
Mounjaro’s leap, according to Lilly, reflects higher demand, a favorable one-time change in estimates for rebates and discounts—and higher prices due to the pharma giant reducing its use of savings card programs.
In November, Lilly won FDA approval to market Mounjaro’s active ingredient to treat adults with obesity or who are overweight under the name Zepbound®. During Q4, Zepbound racked up $175.8 million in revenue, 11th highest of the 14 products for which Lilly disclosed quarterly revenue.
Zepbound has been projected to reach $1 billion in annual sales as soon as this year. And Seamus Fernandez, who focuses on global pharmaceutical companies as a senior analyst and senior managing director with the healthcare research team of Gugenheim Partners, predicted to CNBC last November that Zepbound could be the biggest-selling drug of all time, surpassing blockbusters like Pfizer’s Lipitor® (atorvastatin calcium) and AbbVie’s Humira® (adalimumab).
“2023 was a year of tremendous achievement for Lilly, which delivered life-changing medicines to more patients than ever before resulting in strong revenue growth,” David A. Ricks, Lilly’s chair and CEO, said in a statement. “Entering 2024, we remain focused on the opportunity in front of us, to help solve some of the most challenging healthcare problems in the world and make life better for millions of patients.”
Leading GLP-1 developers
Lilly and Novo Nordisk are the leaders in diabetes and obesity drugs thanks to the success of their glucagon-like peptide receptor 1 (GLP-1) drugs. Novo Nordisk markets the obesity drug Wegovy® and diabetes drug Ozempic®, both of which contain the active ingredient semaglutide.
Late last month, Novo Nordisk reported that sales of Wegovy more than quintupled in 2023, to DKK 31.343 billion ($4.535 billion) from DKK 6.188 billion ($895.248 million) in 2022. Sales of Ozempic nearly doubled, rocketing 60% to DKK 95.718 billion ($13.848 billion) from DKK 59.75 billion ($8.644 billion).
The booming demand for the drugs explains why Novo Nordisk earlier this month agreed to buy three of Catalent’s fill-finish sites for $11 billion from Novo Holdings, the asset manager of the foundation that controls Novo Nordisk. Novo Holdings will gain control of those facilities and the rest of Catalent’s more than 50 sites worldwide when it completes its $16.5 billion acquisition of the contract development and manufacturing organization (CDMO).
Shares of Novo Nordisk traded on Nasdaq Copenhagen over the past year have nearly doubled, zooming 74% to DKK 831.90 ($120.36) at the closing bell Friday, from DKK 483.50 ($69.95) on February 9, 2023. Likewise, Lilly shares have more than doubled, rocketing 116% during the period, to $739.82 Friday from $341.79 a year earlier.
Lilly investors this past week responded to the company’s strong Q4 numbers with a buying spurt that sent Lilly shares rising 11% over the past six trading days, to $741.30 Friday as of 2:44 p.m. ET, from $667.65 at the close on February 2.
Even more encouraging to investors, Lilly offered initial guidance on 2024 revenues ranging from $40.4 billion to $41.6 billion—up 18% to 22% from 2023. The company is also projecting GAAP earnings per share (EPS) of between $11.80 and $12.30, about double this year’s full-year EPS of $6.32.
The 2023 EPS was down 20% from $7.94 in 2022 due to higher in-process research and development (IPR&D) charges. To date Lilly has not included IPR&D charges in its 2024 guidance but cautioned that it expected to add those later in the year as the charges were incurred.
Non-GAAP EPS, which includes one-time revenue boosters, is expected to range between $12.20 and $12.70 this year.
“Golden child in healthcare”
“Stepping back, LLY remains the golden child in healthcare (perhaps Magnificent 7 worthy?),” declared Akash Tewari, an equity analyst with Jefferies, and five colleagues in a February 6 research note.
Tewari and colleagues offered four reasons for their bullishness on Lilly:
- Lilly’s overall growth profile, which they consider attractive in a recessionary environment.
- The company’s specific potential to generate significant near-term revenue and EPS growth.
- Lilly’s next-gen oral GLP-1 drug candidate orforglipron, which they predict “could come close to Mounjaro-like efficacy [long-term].” Orforglipron is under study in a Phase III trial (NCT05051579) that began late last year after the drug showed an average of up to 14.7% weight reduction at 36 weeks of treatment in a Phase II
- The company’s overall presence in glucagon-like peptide receptor 1 (GLP-1) drugs, which the analysts label one of the biggest drug classes of all time.
“We think Mounjaro could show strong T2DM [type 2 diabetes] outcomes data,” according to Tewari and colleagues, while strong data shown by Novo Nordisk’s diabetes/obesity GLP-1 blockbuster semaglutide in the Phase III SELECT trial (NCT03574597) “opens the door for broader payer adoption” including Medicare and Medicaid coverage for GLP-1 drugs indicated for obesity.
Tewari and colleagues raised Jefferies’ price target on Lilly stock 15%, from $768 to $814, while keeping the firm’s “Overweight” rating.
Six other analysts expressed similar enthusiasm for Lilly shares in raising their firms’ price targets on the pharma giant. The biggest increase was the 29% hike set by Louise Chen of Cantor Fitzgerald, from $630 to $815.
Joining Chen and Tewari in raising their price target projections for Lilly were:
- Monit Bansal (Wells Fargo): Up 18%, from $700 to $825, while maintaining the firm’s “Overweight” rating.
- Evan Seigerman (BMO Capital): Up 22%, from $710 to $865, while maintaining the firm’s “Outperform” rating.
- Geoff Meacham (Barclays Capital): Up 19%, from $680 to $810, while maintaining the firm’s “Overweight” rating.
- David Phung (Morgan Stanley): Up 5.5%, from $763 to $805, while maintaining the firm’s “Overweight” rating.
- Robyn Karnauskas (Truist Securities): Up 31%, from $650 to $850, while maintaining the firm’s “Buy” rating.
Among the few proverbial clouds in Lilly’s sunny earnings results was a 16% decline in net income for all of 2023, to $5.24 billion from $6.245 billion, even as revenue climbed 20% year-over-year, to $34.124 billion from $28.541 billion.
IPOs: Kyverna gains as Metagenomi, Telomir sink
This year’s initial public offering (IPO) parade marched into a third week with three companies trading their first shares on Nasdaq, with results that suggested less enthusiasm by investors for companies whose lead candidates are in preclinical phases compared with companies that have reached the clinic.
Kyverna Therapeutics (KYTX) emerged as the week’s big IPO winner. Its shares gained 36% on their first trading day Thursday following an upsized IPO in which the company raised $319 million by selling 14.5 million shares at $22, above previous plans for a sale of 11.12 million shares at between $17 and $19. The momentum didn’t extend into Friday, however, as shares finished all but flat, rising 0.33% to $30.10.
Kyverna’s net proceeds will be approximately $292.8 million after deducting underwriting discounts and commissions and estimated offering expenses—rising to approximately $337.3 million if underwriters exercise in full their 30-day option to purchase up to an additional 2,175,000 shares at the IPO price.
J.P. Morgan, Morgan Stanley, Leerink Partners, and Wells Fargo Securities are joint book-running managers for the offering.
Based in Emeryville, CA, Kyverna focuses on developing cell therapies for patients suffering from autoimmune diseases. The company’s lead program, KYV-101, is an autologous CD19 chimeric antigen receptor T-cell (CAR T) candidate made from an underlying CAR the company has licensed from the NIH.
Kyverna plans to develop KYV-101 in rheumatology and neurology. The company’s initial rheumatology development focus is on lupus nephritis (LN) and systemic sclerosis (SSc). Kyverna is conducting two trials of KYV-101 in patients with LN, and has received IND clearance in October 2023 for a Phase I/II trial in SSc.
In neurology, Kyverna’s focus will be on myasthenia gravis (MG) and multiple sclerosis (MS). The company received IND clearance in November 2023 for a Phase II trial in MG, followed a month later by IND clearance for a Phase II study in MS.
By contrast, Metagenomi (MGX) shares tumbled 31%, from the IPO price of $15 to $10.31 on Friday, after an IPO in which the company raised $93.75 million in gross proceeds by selling 6.25 million shares at $15—the low end of its pricing range of $15 to $17.
Net proceeds to Metagenomi would be e approximately $86.9 million—rising to approximately $100.9 million if underwriters exercise in full their 30-day option to buy an additional 937,500 shares at the IPO price, less underwriting discounts and commissions. J.P. Morgan, Jefferies, TD Cowen, Wells Fargo Securities, and BMO Capital Markets are joint book-running managers, while Chardan is lead manager for the offering.
Metagenomics and telomere stimulation
Based in Emeryville, CA, Metagenomi is a developer of precision genetic medicines based on a company-developed metagenomics-derived genome editing toolbox that includes programmable nucleases, base editors, and RNA- and DNA-mediated integration systems—including prime editing systems and CRISPR-associated transposases (CASTs).
Using high-throughput screening, artificial intelligence (AI), and proprietary algorithms, Metagenomi mines through billions of novel proteins from its genome-resolved metagenomics database to create its genome editing tools. To date, the company said, it has analyzed more than 460 trillion base pairs and predicted more than 7.4 billion proteins—including over 322 million CRISPR-associated Cas proteins and over 1.75 million CRISPRs. That analysis has resulted in the identification of more than 20,000 novel genome editing systems, Metagenomi estimates.
Metagenomi’s pipeline consists of 13 preclinical candidates, the closest to the clinic being an ex vivo cell therapy partnered with Affini-T Therapeutics and indicated for immuno-oncology. That cell therapy is based on engineering the TCR of T cells to recognize mutant KRAS for the treatment of patients with solid tumors and uses an MG29-1 nuclease developed by Metagenomi.
Also in Metagenomi’s pipeline are programs partnered with Ionis Pharmaceuticals indicated for transthyretin amyloidosis (knocking down TTR gene) and cardiovascular disease (knocking down A1AT gene), and a program partnered with Moderna to treat primary hyperoxaluria, type 1 (PH1; knocking down HAO1 gene).
“We have achieved preclinical proof-of-concept in an AGXT knock-out mouse which is an accepted disease model of PH1. We are in the final stages of confirming the candidate to take into NHP studies and expect to have NHP data in 2024 to support final development candidate selection,” Metagenomi stated in an amended registration statement filed Wednesday.
Telomir Pharmaceuticals (TELO) shares didn’t fare much better, sinking 29% Friday from its IPO share price of $7 to $5 after the company grossed $7 million by selling one million shares.
Baltimore-based Telomir said it will raise approximately $5.9 million in net proceeds after subtracting underwriting discounts and commissions. Kingswood Investments, a division of Kingswood Capital Partners, is sole book-running manager. Kingswood has a 45-day option to buy up to an additional 150,000 shares at the IPO price.
Telomir is focused on developing Telomir-1, an oral in situ treatment for human stem cells, as the first novel small molecule to lengthen the DNA’s protective telomere caps in order to affect age reversal. Telomir-1 is designed to elongate and stimulate the telomeres to sustain self-renewal of stem cells, as well as selectively bind cellular metals that include iron, copper and zinc to homeostasis, in order to interrupt enzyme function.
By targeting specific classes of enzymes through its metal binding properties, Telomir reasons that Telomir-1 can selectively affect key processes that drive the concentration and accumulation of iron and copper in the serum that affects diseases like hemochromatosis and cancer.
Leaders and laggards
- Foghorn Therapeutics (FHTX) shares rocketed 91% over two days, from $3.12 on Wednesday to $4.85 on Thursday and $5.95 on Friday, after the company announced that collaboration partner Eli Lilly selected FHD-909, a first-in-class oral BRM selective inhibitor, for clinical development. Lilly plans to file an IND for FHD-909 in Q2 2024. The primary target patient population is BRG1 mutated non-small cell lung cancer (NSCLC). Foghorn and Lilly agreed in December 2021 to create novel oncology medicines by applying Foghorn’s Gene Traffic Control® platform, through a collaboration in which Lilly agreed to pay Foghorn $300 million upfront and an equity investment by Lilly of $80 million in Foghorn common shares at a price of $20 per share.
- Immunome (IMNM) shares leaped 48% over two days, from $16.88 on February 5 to $23.11 on February 6 to $24.92 on Wednesday, after the company said it would acquire AL102 and related drug candidate AL101 from Ayala Pharmaceuticals (ADXS). Immunome agreed to pay Ayala $20 million in cash and $30 million in Immunome common stock at the closing, plus up to an additional $37.5 million in payments tied to achieving development and commercial milestones. AL102 is a small molecule gamma secretase inhibitor candidate currently being evaluated in the Phase III portion of the Phase II/III RINGSIDE trial (NCT04871282) as a treatment for desmoid tumors. Ayala trades its shares on the over-the-counter market.
- Invitae (NVTA) shares cratered 95% this past week, from $0.39 on Monday to $0.02 on Friday, after The Wall Street Journal reported that the company was preparing to file for bankruptcy “within weeks,” citing unnamed sources. Invitae was exploring bankruptcy among strategic options to address $1.5 billion in debt, the Journal reported. The company’s biggest one-day drop occurred on February 5 when its shares nosedived 77% from $0.39 to $0.09. In November, Invitae’s board formed a “special committee” to improve its finances by exploring a number of options including but not limited to “raising capital, asset sales, business and R&D refocusing efforts, capital expenditure and operating expense reductions, and addressing its debt obligations.”
- Synlogic (SYBX) shares plunged 49% Friday, from $3.45 to $1.77, the first trading day after the company announced plans to end operations, wipe out more than 90% of its workforce, and assess strategic options that include selling the Cambridge, MA-based company. Among departing staffers is Aoife Brennan, MBChB, Synlogic’s president and CEO, who is also stepping down from the board. Only employees assisting in the strategic review and termination of the trial are being retained. The moves followed Synlogic’s decision to end its Phase III Synpheny-3 pivotal trial (NCT05764239) evaluating labafenogene marselecobac (SYNB1934) as a potential treatment for phenylketonuria (PKU). Synlogic cited an internal review in advance of an upcoming independent Data Monitoring Committee (DMC) assessment indicating that the trial was unlikely to meet its primary endpoint.
- Tenax Therapeutics (TENX) shares plummeted 64% on Thursday, from $14.26 to $5.07, after the company announced plans for a public offering intended to raise $9.04 million in gross proceeds (approximately $8 million in net proceeds) toward advancing the opening of sites and enrollment and treatment of patients in its Phase III LEVEL trial (NCT05983250) assessing oral levosimendan, as well as for working capital, capital expenditures, and other general corporate purposes. The public offering consists of 1.6 million shares of its common stock (or pre-funded warrants) and warrants to purchase up to 3.2 million shares of its common stock at $5.65 per share and associated Common Warrant. The Common Warrants will expire five years after their initial exercise date.
