Since investment bank HSBC downgraded the stock of Eli Lilly from “hold” to “reduce” on Tuesday morning, the share price of the Indianapolis drugmaker has dropped by more than 7%.
Creating the stir was a note from analyst Rajesh Kumar, which cited pricing pressures and increased competition in the obesity market. Kumar also noted in a TV interview with Bloomberg that the market is “overexcited” about the company’s oncoming launch of obesity pill orforglipron.
Assuming an early summer launch of the oral GLP-1 treatment, analysts have pegged it to generate sales this year of between $1.1 and $1.3 billion.
“There’s a potential for disappointment,” Kumar said during the Bloomberg interview. “Compliance and persistence on orals can be potentially lower than on injectables. It sort of is a risk, the way the Street is thinking about this.”
Another problem facing Lilly comes from its primary competitor in the obesity market, Novo Nordisk, according to the analyst. While Lilly clearly is in command in its market share battle, Novo is reducing the price of its GLP-1 products.
“There’s a slight risk that the pricing environment might not be supportive,” Kumar told Bloomberg.
He also citing the longer-term concern of generic competition for Novo’s Ozempic and Wegovy potentially “collapsing” the pricing structure of the obesity market. This month in India, generics companies are already kicking off the launch of their cheaper copycat versions of Novo’s semaglutide products.
Because of the oncoming launch of orforglipron, Lilly’s shares have rallied and are now “priced to perfection,” leaving little room for error, Kumar wrote in his Tuesday note.
HSBC also has doubts about the growth of the obesity market, which now carries an analyst consensus projection of $150 billion by 2032. HSBC has the market at between $80 billion and $120 billion that year.
Another troubling factor in analyzing the obesity market is the disparity in the guidance Lilly and Novo have provided for their 2026 revenues. While Lilly is estimating a 25% increase in revenue at the midpoint of its projection, Novo is estimating a decline in its sales of between 5% and 13% this year.
“At this juncture, people are sort of penciling in stairway to heaven kind of growth in Lilly and a complete collapse at Novo,” Kumar told Bloomberg. “But the market is joined at the hip and that seems to be missing from the market’s thinking.”
HSBC’s assessment of Lilly was contained within an overview of the industry and the prospects for companies the second quarter. Lilly was the only large company that HSBC changed its rating for.
Companies that retained a “reduce” rating were Biogen and Novartis. Those with a “buy” rating are AbbVie, Amgen, Bayer, Johnson & Johnson, Merck, Pfizer, Roche and Sanofi. Retaining their “hold” rating are Bristol Myers, Gilead and Novo Nordisk.
