Eli Lilly Shares Climb; Morgan Stanley Upgrades  Drugmaker to Overweight and Lifts Price Target

Analyst David Risinger expects the Indianapolis firm to post higher revenue and fatter profit margins. And he's optimistic about its diabetes- and psoriasis-treatment offerings.
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Eli Lilly (LLY) - Get Report shares were climbing Wednesday after a Morgan Stanley analyst, David Risinger, upgraded the drugmaker to overweight from equal weight and raised his price target to $150 a share from $116.

At last check Lilly shares were 3.5% higher at $129.70.

On Tuesday, Eli Lilly confirmed its 2019 earnings guidance and said revenue would continue to grow in the coming year. 

Lilly estimated 2020 revenue at $23.6 billion and affirmed its 2019 earnings guidance, which it had improved in October, at a range of $5.75 to $5.85 a share.

Sales of Trulicity, the company's diabetes treatment, have risen 28% to just under $3 billion, while its severe-plaque-psoriasis drug Talz has booked a 50% gain from 2018, reporting nine-month sales of $340 million.

Risinger said he was raising his long-term estimates, driven by higher revenue and wider profit margins. 

While Novo Nordisk (NVO) - Get Report appears poised to win market share in diabetes, Risinger said, "we still expect strong and durable Lilly franchise growth, including benefits from initial high-dose Trulicity sales in 2021 and tirzepatide in 2022."

"We like the direction of R&D leadership, and pipeline optionality (including Alzheimer's) should benefit (Lilly) shares," Risinger wrote.

Chief Scientific Officer Dan Skovronsky "is taking the right steps to further enhance R&D decision making, speed, and productivity," he said.

The analyst said Wall Street underappreciates Lilly's durable growth prospects.

"We are bullish on Lilly's diabetes-franchise prospects," he wrote. "[And] we model total diabetes growing from $11 billion to $15 billion (including pipeline candidates) in 2023."