TD Cowen Reiterates Buy Rating on Eli Lilly (LLY) Post US Government Deal

TD Cowen analyst Steve Scala reiterated a Buy rating and $960.00 price target on Eli Lilly (NYSE: LLY).

The analyst commented: "US Government Deal Accelerates GLP-1 Price Declines But Could Boost Volumes; LLY announced a US government agreement on incretin pricing and MFN. Weight loss drugs will be covered by Medicare through a pilot program beginning 2026. Mounjaro and Zepbound Part D price will be $245, the former probably starting 2027. Zepbound DTC price lowered to max $449. Orfo max DTC price of $399 and gets review voucher. Overall, not a positive update, but there could be offsets.

Our Take - These agreements accelerate the downward trend in incretin pricing but could boost volumes/adherence, and go a long way to removing an investor overhang. Investors have been worried about a race to the bottom on incretin pricing, and while these developments would seem to confirm those fears, they also help to bracket the risk. The current state of US GLP-1 pricing is laid out below. Some of the provisions of the agreement are likely to have negligible effects. Others, like the price cut to Mounjaro through Medicare - which Lilly states will not kick in until 2027 - could be meaningful headwinds. In exchange, Lilly's products could enjoy greater uptake. Medicare coverage of Zepbound is clearly a positive. According to Lilly, while the Medicare weight loss coverage pilot program is not permanent policy, it has a better chance than history would suggest of becoming permanent policy. It was not clear if the $50 co-pay cap through Medicare applied to Mounjaro as well as Zepbound, but it could boost both volumes and adherence. An important point to keep in mind is that, especially for orforglipron, it was possible Lilly was planning to make these pricing decisions anyway. Optimum pricing for a class of drugs that could reach tens of millions of patients could very well be in the range of what was just announced or lower. Overall, much uncertainty remains, but the net effect of this agreement could be relatively modest in the long run."

For an analyst ratings summary and ratings history on Eli Lilly click here. For more ratings news on Eli Lilly click here.

Shares of Eli Lilly closed at $937.44 yesterday.

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