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Eli Lilly's Pipeline Strength Paints a Promising Outlook

Eli Lilly & Company (NYSE:LLY) is a pharmaceutical giant based in the United States that specializes in the discovery, development, manufacture and sale of various pharmaceutical products. Lilly was the company that introduced Iletin, the world's first commercially available insulin medication for the treatment of diabetes, and it was also the first company to manufacture and distribute Jonas Salk's polio vaccine. Today, the company is known for many other groundbreaking drugs as well, including clinical depression medications Prozac and Cymbalta as well as antipsychotic medication Zyprexa.


The company is based in Indianapolis, Indiana and has offices in 18 countries. It sells its products in over 125 countries worldwide. Eli Lilly is one of the largest pharmaceutical companies in the world with a strong pipeline and a revenue-generating diabetes-focused portfolio, and the strength of its pipeline paints a very promising picture of what the future holds for the company.

Earnings recap

On Oct. 26, Eli Lilly reported strong third-quarter financial results, but the company missed Wall Street analysts' estimates for both revenue and earnings. The company reported revenue of $6.77 billion, up 18% year over year, and earnings of $1.94 per share, up 38% from the prior-year quarter. Trulicity, Taltz, Verzenio, Jardiance, Emgality, Olumiant, Tyvyt, Retevmo and Cyramza accounted for about 58% of total revenue in the third quarter. The company generated $423.5 million in worldwide revenue from pandemic-related medicines as well.

Revenue climbed 26% in the United States to $3.9 billion thanks to a 22% increase in volume and a 4% increase in realized prices. Outside the United States, revenue grew 8% to $2.78 billion, aided by an 11% rise in volume and a 1% increase in prices due to favorable foreign exchange rates, partially offset by a 4% decline due to lower realized prices.

Staying true to the companys long-standing commitment to reward shareholders, the company distributed nearly $800 million to shareholders via dividends in the third quarter.

Pipeline milestones and recent developments

In the third quarter, the company made noteworthy progress with some of its pipeline drugs. For the treatment of adults with type 2 diabetes, the company submitted a New Drug Application to the United States Food and Drug Administration and a Marketing Authorization Application to the European Medicines Agency. The company is expecting the success of these applications to fuel revenue growth in the coming years.

Eli Lilly also announced the FDA approval of Verzenio as the first and only CDK4/6 inhibitor for people with high-risk early breast cancer and started a rolling submission for Donanemab in early Alzheimer's disease, which recently received Breakthrough Therapy Designation by the FDA. Further, the FDA expanded the Emergency Use Authorization for Bamlanivimab and Etesevimab to prevent SARS-CoV-2 infection. The company also announced approval for Erbitux in combination with Braftovi for the treatment of select adult patients with metastatic colorectal cancer.

In the third quarter, Eli Lilly announced a research collaboration and licensing agreement with Lycia Therapeutics to utilize its patented protein degradation technology. The company also plans to reduce the list price of Insulin Lispro Injection in the United States by 40% effective from Jan. 1, 2022, bringing the price down to 2008 levels.

Eli Lilly has a very strong pipeline of products that are expected to hit the market in the next few years, and the recent progress the company has made from a licensing and approval perspective suggests the company is moving in the right direction to retain its competitive advantages and deliver handsome returns to long-term-oriented investors.

Takeaway

Eli Lilly has a history of innovation, a diverse product line-up and is investing millions of dollars for research and development purposes to remain at the top of the innovation curve. Eli Lilly stock has gained 66% in the last 12 months, and this stellar performance has pushed earnings multiples to the high end. Growth investors, however, are still likely to find Eli Lilly stock an attractive bet given that the strong pipeline could help the company report robust earnings growth in the next few years.

This article first appeared on GuruFocus.

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