By Elsa Ohlen

Eli Lilly stock might still have a lot of upside to it, despite increasing competition among weight-loss drugs.

Rival Novo Nordisk on Thursday announced a deal to make its weight-loss treatment Wegovy the preferred GLP-1 drug on the biggest formularies run by CVS Health's pharmacy-benefit manager, in a blow to Lilly's Zepbound -- and its stock.

Still, Lilly only has one skeptic with a Sell-equivalent rating on shares, according to FactSet, and the stock was already rebounding in early trading Friday, up 2.1% at $812.44.

Other analysts were rushing to reiterate their conviction in the stock after shares plummeted more than 11% Thursday.

A preference for Wegovy by CVS will likely impact only a small portion of Lilly's business, J.P. Morgan analyst Chris Schott said. He expects Lilly "to continue to see share gains relative to Wegovy in the broader obesity space as well as growth for the obesity market to remain healthy as a whole."

David Risinger at Leerink Partners says not only was the market reaction overdone, but that the pullback creates a buying opportunity. While lowering his U.S. Zepbound sales estimates to be more conservative, he also raised estimates for Lilly's newer oral weight-loss drug orforglipron, which isn't yet on the market.

Given how many GLP-1 prescriptions are paid for with cash, Risinger says CVS' action "is not highly problematic for Zepbound." He rates shares Outperform with a target price of $944.

Investors would do well to watch Novo Nordisk's first-quarter results next week for clues on what material impact the CVS decision will have on sales in its biggest market -- the U.S.

Lilly's tirzepatide, sold under the brand name Mounjaro for diabetes and Zepbound for weight-loss, has been shown to result in more pronounced weight-loss than Novo's rival drugs. The two companies are the only drugmakers with medicines approved for weight-loss in the U.S., but competitors like Amgen, Viking Therapeutics and Danish-listed Zealand Pharma are coming for a slice of the market and all have experimental weight-loss drugs in the pipeline.

Increased competition from both emerging drugs and from compounding pharmacies like Hims & Hers have led investors to worry about prices coming down and significantly denting Lilly's and Novo's bottom lines.

CVS said patients on prescription drug plans run by CVS will have easier access to Wegovy at a "more-affordable price" from July 1 -- not helping to ease concerns for Lilly's weight-loss business.

The selloff Thursday was also partly driven by worries around broader pricing pressures for GLP-1s. But neither analysts nor Lilly itself seem overly concerned about that, either.

"This whole CVS issue probably got more attention than it deserved," Bank of America analysts led by Tim Anderson said.

Write to Elsa Ohlen at elsa.ohlen@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

May 02, 2025 11:53 ET (15:53 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.