Morgan Stanley Reiterates Overweight Rating on Eli Lilly (LLY)

Morgan Stanley analyst Terence Flynn reiterated an Overweight rating and $1,133.00 price target on Eli Lilly (NYSE: LLY).

The analyst comments "One of the side effects of the dramatic weight loss of GLP-1 based medications is that people also lose muscle/lean body mass. LLY, REGN, BHVN and other companies are developing drugs targeting the activin receptor pathway with the goal of preventing/slowing muscle mass loss. LLY's program broadly blocks the receptors (and hence activins, myostatin, and GDF11 ligands simultaneously), while REGN is focused on selectively blocking two ligands (myostatin and activin A) – see recent topline data HERE. Both approaches have led to increases in lean muscle mass, with decreases in fat mass. But based on our initial research, it's too early to determine which approach might have potential advantage(s) on efficacy and/or safety/tolerability. Investigators at ADA presented data from a Ph2 obesity trial of LLY’s Bimagrumab (Bima; anti-myostatin) + Novo’s semaglutide (Sema; GLP-1); see our ADA preview HERE and prior deep dive note HERE. For the Bima Ph2 data in addition to safety/tolerability (diarrhea and muscle spasms) we were focused on the degree of weight loss for the combo vs. Sema alone, and the composition of the weight loss (does combo with Bima improve the proportion of lean body mass relative to total body mass). At a high level we were encouraged by the efficacy data as it demonstrated that the combination leads to incremental weight loss of 17-20% vs. 15% for Sema (as well as benefits on a number of other cardiometabolic parameters), and more importantly a more favorable mix of weight loss from fat vs. muscle (92-96% fat for the combo vs. 72% for Sema alone) – see Exhibit 2 - Exhibit 5 . In our view safety/tolerability of the combo was better than expected given questions coming into the presentation, some audience Q&A focused on the rise in LDL cholesterol (which was expected given the mechanism and is thought to be transient) and a panelist noted could be treated with a statin. Muscle spasms were frequent (~60%), but were characterized as mild and did not generate significant complaints from patients in the trial per investigators. The rates of diarrhea and nausea were also slightly higher for the combo than Sema alone ( Exhibit 6 ). SAE's were minimal and included pancreatitis and skin cancer, but these were distributed across the arms of the trial ( Exhibit 7 ). Bima also led to early transient increases in ALT and lipase. Next steps: LLY is also running Ph2 trials in combo with Tirzepatide in obesity +/- T2D, though timing of readout has not yet been disclosed (PCD of Apr '26 in obesity alone and Oct '26 in obesity + T2D), as well as doing additional work on a SQ formulation. Commercial positioning: Prior physician feedback suggests these combos could be used in elderly patients on a GLP-1 who are at higher risk for muscle mass loss given age. During the ADA panel discussion the physicians noted that sarcopenic obesity is the most obvious setting for the combo, and expressed interest in MASH and knee osteoarthritis as well."

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 $762.73 yesterday.

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