Shares of Indianapolis drugmaker Eli Lilly have fallen more than 7% since investment bank HSBC lowered its rating on the stock from “hold” to “downgrade” on Tuesday morning.
The uproar was sparked by a note from analyst Rajesh Kumar that cited pricing pressures and increased competition in the obesity market. Kumar also said in a television interview with Bloomberg that the market is “overly excited” about the company’s soon-to-be-launched obesity drug orforglipron.
Assuming the oral GLP-1 treatment launches in early summer, analysts expect sales of $1.1 billion to $1.3 billion this year.
“There is a possibility of disappointment,” Kumar said in an interview with Bloomberg. “Compliance and persistence with oral agents can potentially be lower than with injectables. That’s kind of the risk, and that’s the way the Street is thinking about this.”
The analyst said another problem facing Lilly stems from its main competitor in the obesity market, Novo Nordisk. While Lilly clearly has the lead in the battle for market share, Novo is lowering the price of its GLP-1 products.
“There is a slight risk that the price environment may not be supportive,” Kumar told Bloomberg.
He also cited long-term concerns that generic competition from Novo’s Ozempic and Wegoby could “collapse” the price structure of the obesity market. Generic drug companies have already begun launching cheaper copycat versions of Novo’s semaglutide product in India this month.
The impending launch of Orforglipron has boosted Lilly’s stock price, which is now “perfectly priced” with little margin for error, Kumar wrote in a note Tuesday.
HSBC also doubts analysts’ consensus forecast for the growth of the obesity market to be $150 billion by 2032. HSBC’s market size in the same year was between $80 billion and $120 billion.
Another troubling factor when analyzing the obesity market is the difference in guidance provided by Lilly and Novo regarding 2026 revenue. Lilly expects sales to rise 25% at the midpoint of its forecast, while Novo expects sales to decline between 5% and 13% this year.
“At this point, people seem to be penciling in something like a stairway to heaven, with growth at Lilly and complete collapse at Novo,” Kumar told Bloomberg. “But markets are connected at the ends, and that seems to be missing from the market mindset.”
