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Can New Drugs Help Lilly (LLY) to Deliver Solid Q3 Earnings?

Zacks Equity Research

Eli Lilly and Company LLY will report third-quarter 2019 results on Oct 23, before market open. In the last reported quarter, the company delivered a positive earnings surprise of 2.74%.

Lilly’s shares have declined 6.7% this year so far against the industry’s increase of 0.2%.

 

 

Lilly’s earnings performance has been mixed. Its earnings beat expectations in three of the last four quarters, with the average positive surprise being 0.69%.

Eli Lilly and Company Price and EPS Surprise

 

Eli Lilly and Company Price and EPS Surprise

 

Eli Lilly and Company price-eps-surprise | Eli Lilly and Company Quote

Let’s see how things are shaping up for this announcement.

Factors to Consider

Like the previous few quarters, strong demand for new products namely Trulicity, Taltz, Jardiance, Basaglar, Olumiant and Verzenio as well as new migraine drug, Emgality are likely to have driven sales in the third quarter, making up for the decline in sales of established products like Cialis due to loss of exclusivity and the impact of Lartruvo’s impending product withdrawal. Lilly has suspended promotion of its advanced soft tissue sarcoma drug, Lartruvo due to the failure of the ANNOUNCE confirmatory study.

Among the new drugs, in August, Taltz gained FDA approval for its third indication — active ankylosing spondylitis, which expanded the drug’s eligible patient population and might have driven sales higher in the third quarter.

However, rising pricing pressure in the United States due to rebates and legislated increases in Medicare Part D cost sharing, price cuts in some international markets, currency headwinds are expected to have negatively impacted the top line in the third quarter of 2019.

Also, competitive pressure and loss of exclusivity in certain countries are hurting Alimta sales particularly international sales – a trend that most likely continued in the third quarter.

Investors will be keen to know the sales numbers of Lilly’s new CGRP antibody Emgality. Emgality generated sales of $34.3 million in the second quarter. We expect sales to have been much higher in the third quarter.

In July 2019, Lilly gained FDA approval for Baqsimi, its glucagon nasal powder to treat severe hypoglycemia in diabetes patients. Baqsim is the first and only nasally administered glucagon to be approved by the FDA. Investors will be keen to know about the initial sales uptake of this product on the third-quarter conference call.

Key Recent Developments

Earlier this week, Lilly announced that a late-stage study (SEQUOIA) evaluating its pipeline candidate, pegilodecakin plus Folfox, to treat patients with metastatic pancreatic cancer did not meet primary endpoint of overall survival. Pegilodecakin, a PEGylated IL-10, was added to Lilly’s portfolio with the June 2018 acquisition of ARMO BioSciences.

Last week, the FDA granted approval to Lilly’s lasmiditan oral tablets to treat acute migraine, with or without aura, in adults. Lasmiditan will be marketed by the trade name of Reyvow and will be available in doses of 50 mg, 100 mg, and 200 mg, once launched.

Earnings Whispers

Our proven model does not conclusively predict an earnings beat for Lilly this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that is not the case here.

Earnings ESP:  Its Earnings ESP is -1.61% as the Zacks Consensus Estimate of $1.44 is higher than the Most Accurate Estimate of $1.42. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Lilly carries a Zacks Rank #3.

Stocks to Consider

Here are some large drug/biotech stocks that have the right combination of elements to beat on earnings this time around:

Pfizer, Inc. PFE has an Earnings ESP of +0.26% and a Zacks Rank #2. The company is scheduled to release results on Oct 29.

Gilead Sciences, Inc. GILD has an Earnings ESP of +1.04% and a Zacks Rank #3. The company is scheduled to release results on Oct 24. You can see the complete list of today’s Zacks #1 Rank stocks here.

Amgen, Inc. AMGN has an Earnings ESP of +1.31% and a Zacks Rank #3. The company is scheduled to release results on Oct 29.

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