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Will Lilly (LLY) Witness Recovery in Sales in Q3 Earnings?

Zacks Equity Research
·5 min read

Eli Lilly & Company LLY will report third-quarter 2020 results on Oct 27, before market open. In the last-reported quarter, the company delivered an earnings surprise of 19.62%.

The large drugmaker’s performance has been pretty impressive, with earnings beat in each of the trailing four quarters. The company delivered a four-quarter earnings surprise of 12.46%, on average.

Eli Lilly and Company Price and EPS Surprise

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

Lilly’s stock has risen 9.3% this year so far against a decrease of 2.5% for the industry.



Factors to Consider

Improvement in new prescription volume trends for its key products is likely to have boosted Lilly’s third-quarter sales. Though the number of patient visits to doctors declined significantly in late April and May, trends have been improving through a combination of Telehealth and in-person visits, which may have improved prescription trends of several products in the soon-to-be-quarter.

Higher demand for its growth drugs including Trulicity, Taltz, Basaglar, Jardiance, Verzenio, Cyramza, Olumiant, Emgality, Baqsimi as well as potential revenues from product launches is likely to have provided top-line support.

Meanwhile, sales of older products like Cialis and Forteo are expected to have been hurt by loss of exclusivity.

Generic competition for several drugs, rising pricing pressure in the United States due to rebates and legislated increases in Medicare Part D cost sharing, price reductions from increased utilization of patient affordability programs, and price cuts in some international markets like China, Japan and Europe are expected to have negatively impacted the top line in the third quarter of 2020.

Importantly, investors will also focus on whether Lilly provides an updated business outlook for 2020 in view of the impact of coronavirus.

Coronavirus Related Research Efforts

A major part of the third-quarter conference call may include a discussion on Lilly’s progress this quarter on its efforts to develop potential neutralizing antibodies for the treatment of COVID-19.

Lilly is developing an antibody therapy candidate LYCoV555 in collaboration with AbCellera.

Earlier this month, Lilly applied to the FDA for Emergency Use Authorization (EUA) of LYCoV555, as a monotherapy for the treatment of higher-risk patients who have been recently diagnosed with mild-to-moderate COVID-19. The company also released promising data from the combination cohort of the phase II BLAZE-1 study, which showed that an antibody combination, LYCoV555 and LY-CoV016, reduced viral load symptoms and COVID-related hospitalization and emergency room visits. The request for EUA was based on this dual therapy data as well positive data from the monotherapy cohort, which was released in September. Lilly will file a separate request for EUA for the combination therapy in November.

Meanwhile, the BLAZE-1 study includes another cohort evaluating the antibody combination in higher-risk patients recently diagnosed with mild-to-moderate COVID-19. Additionally, Lilly is conducting a separate phase III study on LYCoV555 for the prevention of COVID-19 at nursing homes, which began in August. LY-CoV555 is also being tested in the National Institutes of Health-led ACTIV-2 and ACTIV-3 studies of ambulatory and hospitalized COVID-19 patients. Reportedly, the ACTIV-3 study has been paused following potential safety concerns raised by the independent data safety monitoring board. 

Meanwhile, Lilly has completed a phase I study on LY-CoV016 for treating COVID-19. Lilly licensed LY-CoV016 from China-based Junshi Biosciences. Junshi leads the development of LY-CoV016 in Greater China, while Lilly is taking care of development in the rest of the world.

Lilly is also conducting a phase III study to evaluate its JAK inhibitor, Olumiant (baricitinib) as a potential treatment for hospitalized patients diagnosed with COVID-19. Another study evaluating a combination of Olumiant with Gilead’s GILD remdesivir is being conducted by the National Institute of Allergy and Infectious Diseases (NIAID), part of the National Institutes of Health (NIH) for hospitalized patients with COVID-19 infections. In September, Lilly announced that the study met the primary endpoint by showing that Olumiant plus remdesivir led to a reduction in time to recovery in comparison with remdesivir.

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: Earnings ESP is 0.00% as the Most Accurate Estimate as well as the Zacks Consensus Estimate stands at $1.78. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Lilly has 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:

GlaxoSmithKline GSK has an Earnings ESP of +7.23% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Merck MRK has an Earnings ESP of +2.60% and a Zacks Rank #3.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

Today, See These 5 Potential Home Runs >>

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Gilead Sciences, Inc. (GILD) : Free Stock Analysis Report
Merck Co., Inc. (MRK) : Free Stock Analysis Report
Eli Lilly and Company (LLY) : Free Stock Analysis Report
GlaxoSmithKline plc (GSK) : Free Stock Analysis Report
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