Royal Bank of Canada Capital Markets ( RBC Capital Markets ) maintains a ‘outperform the market’ rating for the American pharmaceutical giant Eli Lilly ( Eli Lilly ), with a target price of $1,500. The bank believes that despite certain pricing pressures on weight loss drugs and diabetes medications, the continuous growth in sales of Zepbound and Mounjaro, especially the strong demand from markets outside the United States, will be sufficient to offset the negative impact of price reductions.

RBC It is expected that Eli Lilly may raise its full-year revenue guidance by about $2 billion, with its own revenue forecast reaching $89.8 billion, which is higher than the company's current guidance range of $85 billion to $87 billion.

Sales of Zepbound and Mounjaro continue to grow, with revenue forecasts for RBC exceeding market expectations.

RBC believes that Eli Lilly's glucagon-like peptide-1 (GLP-1) drugs (Incretin) remain the main driving force behind the company's performance growth.

Currently, RBC's overall sales forecast for Eli Lilly is about 2% higher than the general market expectations, with the sales forecast for the weight loss drug Zepbound being about 4% higher, and the sales forecast for the diabetes drug Mounjaro being about 6% higher.

This judgment is mainly based on Eli Lilly's strong sales growth in markets outside the United States. Despite moderate downward pressure on drug prices and relatively weak sales performance of other drugs (not GLP-1), RBC believes that the growth in sales of its core products will still support the company's overall revenue.

In the past 12 months, Eli Lilly's revenue has increased by 50% year-on-year, mainly driven by the successful commercialization of the GLP-1 series of drugs. The company currently has a market value of about $1.05 trillion and has become one of the largest pharmaceutical companies in the world.

RBC It is expected that as the sales momentum of glucagon-like peptide-1 (GLP-1) drugs continues, Eli Lilly is likely to further raise its full-year performance guidance.

The stock price has fallen by about 9% from its August high. RBC believes that the market has overestimated the impact of price cuts.

Despite the company's fundamentals remaining strong, Eli Lilly's stock price has fallen by approximately 9% since its peak in mid-August. RBC believes that the stock price adjustment is mainly due to investors' concerns regarding the pricing of Bridge Program drugs, but the market may have overestimated the actual impact of these price cuts on Eli Lilly's revenue.

According to RBC, Bridge Program currently accounts for only about 10% of the total prescriptions ( TRx ) in Eli Lilly's US market, and its impact on overall drug pricing is approximately 200 basis points, which is about 2 percentage points.

Therefore, RBC believes that although there is certain pressure on drug prices in the United States, the related impact is relatively limited and is not sufficient to offset the continuously growing sales volumes of Zepbound and Mounjaro.

Based on this judgment, the target price of $1,500 for Eli Lilly is maintained.

Based on the prediction of RBC that Eli Lilly's earnings per share will be $48.29 in 2027, a target price of $1,500 corresponds to an expected price-earnings ratio of approximately 31 times.

Expected annual revenue to reach $89.8 billion, with the December R&D day becoming the next key catalyst.

RBC It is expected that Eli Lilly's annual revenue will reach $89.8 billion, which is higher than the company's current guidance range of $85 billion to $87 billion. The bank believes that with the continued growth in sales of Zepbound and Mounjaro, Eli Lilly is likely to raise its annual revenue guidance by about $2 billion in subsequent performance updates.

In addition to the sale of existing products, RBC also regards Eli Lilly's R&D day (R& D Day) scheduled for December 7th as the next important catalyst for stock price growth.

This line particularly focuses on the potential applications of the drug under development, brenipatide, in the fields of central nervous system ( CNS ) and respiratory system diseases, suggesting that the market has not yet fully recognized the value of its research and development pipeline.

If the related research and development projects make positive progress, Eli Lilly's future sources of growth are expected to expand from diabetes and obesity treatment to other areas of disease.

New type of insulin approved by FDA; several investment banks continue to raise their target prices for Eli Lilly

In addition to its GLP-1 pharmaceutical business, Eli Lilly has also made recent regulatory progress in the field of diabetes treatment. The U.S. Food and Drug Administration (FDA) has approved Onswik developed by Eli Lilly, which is a once-weekly basal insulin product for adult patients with type 2 diabetes.

Eli Lilly plans to launch the Onswik KwikPen syringe in the United States in the near future, offering two concentrations: 500 units per milliliter and 1000 units per milliliter.

Meanwhile, several Wall Street institutions have continued to be optimistic about Eli Lilly's growth prospects recently.

JPMorgan Chase has raised its target price for Eli Lilly to $1,500, maintaining a 'overweight' rating, mainly due to the strong demand for incretins in the US and international markets.

Cantor Fitzgerald has raised the target price to $1,440, and it is expected that Zepbound's U.S. sales this quarter may be slightly higher than market expectations. However, investors are also reminded to pay attention to the pressure of drug price cuts.

BMO Capital maintains Eli Lilly's 'outperforming the market' rating, believing that the TRIUMPH-2 trial data of the new drug retatrutide ( Reta ) provides support for the company's long-term R&D prospects.

In addition, a recent survey by BTIG has found that GLP-1 weight loss pills are being adopted by more young consumers and those with lower incomes. Many users have reduced their daily calorie intake by about 500 kilocalories, indicating that the user base for these medications is expanding.

Overall, RBC believes that the main pressure Eli Lilly is currently facing comes from drug prices, while sales growth remains the core driving force for revenue expansion. With the continued growth of international market sales in Zepbound and Mounjaro, as well as the advancement of new drug development projects, Eli Lilly is expected to further improve its annual performance expectations.