A key decision from Eli Lilly — possibly next week — could light up the obesity treatment landscape again, an analyst said Friday as LLY stock lingers near a record high.
All eyes have been on Lilly's tirzepatide in obesity, but the company is also developing a next-generation approach to weight loss called retatrutide. While tirzepatide hits on two elements that can impact body weight, retatrutide loops in a third.
"We see a reasonable likelihood that Lilly will provide an update on retatrutide, its triple (obesity treatment regimen), on the 2023 guidance call," UBS analyst Colin Bristow said in a note to clients. Lilly has scheduled that call for Tuesday morning.
Representatives of Eli Lilly didn't immediately return a request for comment.
On today's stock market, LLY stock sank 2.9% to close at 360.99.
LLY Stock: Hitting On Three Weight-Loss Elements
Retatrutide works by stimulating three elements that could improve weight loss.
Lilly's tirzepatide is already approved in diabetes treatment and sells under the name Mounjaro. It's also in testing for obesity. It hits on the gastric inhibitory polypeptide receptor and the glucagon-like peptide-1 receptor — respectively, GIPR and GLP-1. In late-stage testing, tirzepatide recipients have lost up to 22.5% of their weight.
Retatrutide stimulates both GIPR and GLP-1, but it also adds in the glucagon receptor.
The company has said it expects to have midstage testing data for retatrutide before year end.
"We believe the update could come on Tuesday and if Lilly simply tells us it is moving forward to Phase 3, this is a major positive," UBS analyst Bristow said. "Lilly had previously stated it will only move (retatrutide) forward if it shows differentiated (effectiveness) vs. Mounjaro (which we take to mean about 25% weight loss)."
Bristow has a buy rating on LLY stock and raised his price target to 428 from 407.
Obesity Treatment Landscape Heats Up
The obesity treatment space is gaining steam in late 2022.
Novo Nordisk makes Wegovy, the only approved drug. But Wegovy is facing supply shortages. Lilly's tirzepatide is nearing potential Food and Drug Administration approval, with retatrutide waiting in the wings. Amgen is also years behind with an experimental drug that recently led to speedy weight loss in Phase 1 testing.
All three stocks have soared recently. LLY stock broke out of a flat base with a buy point at 335.43 in late September, MarketSmith.com shows. Amgen stock hit a fresh high in November and Novo stock broke out of a consolidation with an entry at 122.26 late last month. Both Lilly and Novo stocks are now above their 5% chase zones.
The three also have strong Relative Strength Ratings, according to IBD Digital. LLY stock is in the lead with an RS Rating of 96 out of a best-possible 99. This means the stock ranks in the top 4% of all stocks in terms of 12-month performance. Amgen and Novo are rated 95 and 93, respectively.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
