Citigroup Maintains Buy Rating for Eli Lilly Amid Policy Uncertainties

Citigroup has maintained its "buy" rating for Eli Lilly and Co. (LLY.US), with a target price of $1,190. The bank's analysts have assessed that despite the presence of policy factors such as tariffs, Eli Lilly has stated that their impact on the company's business is limited. This assessment comes from a recent report by Citigroup, which highlights the company's resilience in the face of external challenges.

In a conference call with Eli Lilly's CFO, Lucas Montalese, the company addressed market concerns regarding drug pricing policies, such as the Most Favored Nation (MFN) status. Eli Lilly clarified that Medicare and Medicaid represent a relatively small portion of its business. Additionally, key products like glucagon-like peptide-1 (GLP-1) receptor agonists and anti-obesity drugs are not covered by Medicare, making the impact of policy uncertainties more manageable for the company.

Eli Lilly's product line, particularly in the areas of obesity and type 2 diabetes, has shown strong performance. The company's drug tirzepatide, marketed as Mounjaro for diabetes and Zepbound for obesity, has seen robust market demand since its international launch. Early data indicates that tirzepatide is highly competitive compared to other drugs like Trulicity.

In terms of distribution, LillyDirect has performed well, with over 30% of new Zepbound prescriptions coming through this channel. This trend shows a steady increase, reflecting the effectiveness of Eli Lilly's distribution strategies. Despite supply constraints that affected the continuity of Zepbound use in the fourth quarter of 2023 and the first three quarters of 2024, initial feedback from patients and doctors has been positive.