Lilly gets rare downgrade as analysts question hype over GLP-1 pills and Zepbound's cash sales

If middle-class Americans lose their jobs to AI, that could mean fewer cash sales of weight-loss drugs like Zepbound Eli Lilly's stock was downgraded over concerns about the scale and staying power of the weight-loss-drug market. In a surprising move, Eli Lilly's stock has been downgraded by HSBC analysts who argue that the heavily hyped weight-loss-drug market is due for a correction - and that the middle-class Americans who pay out of pocket for these drugs could struggle to do so in the future. The drugmaker's stock (LLY) was down 4% on Tuesday afternoon, making it the lowest performer in the S&P 500 SPX. There are several issues that could pressure Lilly's shares, according to the analysts. Novo Nordisk (NVO) (DK:NOVO.B), its main competitor, has had well-documented struggles meeting investor and patient demand for its own GLP-1 medications, which may portend trouble for Lilly's own weight-loss drugs. What's more, they say the $150 billion forecast for the global obesity-drug market is overblown, and that the middle-class Americans paying cash for weight-loss medications are at risk of a market downturn or the loss of their white-collar jobs due to artificial intelligence. "Whilst the execution at Lilly has been good so far, we think the risk of paying up for its bullish worldview embedded in the guidance is unattractive," the HSBC analysts wrote. They downgraded Lilly's stock to reduce, from hold, after revising its price target to $850, from $1,070 previously. The analysts also lowered their peak sales expectations for the obesity-drug market to between $80 billion and $120 billion in 2032, down from $150 billion. Investors have paid close attention to Lilly and Novo's diverging performance over the last year or so. As Novo laid off thousands of workers, fired its CEO and saw its stock tumble 72% last year, Lilly's shares soared 28%, and it briefly became the only pharmaceutical company ever to have a $1 trillion market capitalization. But Novo's struggles may be an indicator of challenges to come for Lilly. The Danish drugmaker, which launched the first GLP-1 injection and pill for weight loss in the U.S. but has struggled to keep up with Lilly, recently modeled sales guidance for 2026 that was far lower than expected. "Is Novo's bearish read of the market more accurate?" asked the HSBC analysts. One of the dynamics unique to the obesity-drug market is the role of patients paying cash for heavily discounted medicines. They pay directly to either bypass complicated or lengthy preauthorization processes, or because their health-insurance plans don't cover GLP-1 medications for weight loss. Lilly runs its own direct-pay platform called LillyDirect, and Zepbound is also available on TrumpRx, through telehealth companies like Ro and Hims & Hers Health (HIMS), and on a new platform for employers. It costs $299 per month to get started and up to $449 per month for the highest doses. That's down from $1,059, the drug's launch price in 2023. "The price cuts in 2026 are a headwind," the HSBC analysts wrote. "The company's guidance implies that it can continue to defy gravity with volume growth." They are also concerned about overblown expectations for GLP-1 pills, which are not as effective as the injections. Novo launched an oral version of Wegovy in January to much fanfare, yet physicians say they don't expect patients to lose as much weight as they would on the shots. "It's not an easy pill to take," one physician told MarketWatch about the strict rules required to take the Wegovy pill. Lilly has a new GLP-1 pill called orforglipron that's under review at the Food and Drug Administration. A decision is expected in early April. About 80% of the prescriptions for the Wegovy pill were paid for in cash as of March 13, according to IQVIA data cited by Jefferies. That's a precarious model if middle-class Americans have to tighten their purse strings. "This cash-pay channel might be more sensitive to economic cycle, especially to middle-class U.S. households, and might be sensitive to AI-led labor-market disruptions in white-collar jobs," the analysts wrote. Lilly's stock has tumbled 14% since the start of the year, while the S&P 500 is down 2%. -Jaimy Lee This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

Lilly gets rare downgrade as analysts question hype over GLP-1 pills and Zepbound's cash sales

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