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5 Reasons Why You Should Add Lilly Stock to Your Portfolio
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Eli Lilly & Company (LLY - Free Report) is known for its drugs like Humalog, Alimta, Alimta, Taltz, and many others.
Indianapolis, IN based Lilly boasts of a wide range of products that serve a vast number of therapeutic areas. The company focuses primarily on central nervous system disorders, metabolic diseases, autoimmune diseases, cardiovascular diseases and cancer, which are all high growth areas and represent significant commercial potential.
Here are five reasons to invest in the stock this year.
Good Rank and Solid VGM Score: Lilly currently carries a Zacks Rank #2 (Buy) and has a favorable VGM Score of B. Back-tested results show that only stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best upside potential. You can see the complete list of today’s Zacks #1 Rank stocks here.
Rising Share Price and Earnings Estimates: Lilly’s shares have outperformed the large-cap pharma industry this year so far. The stock has returned 25.3% in the said timeframe compared with the industry’s gain of 5.6%.
Lilly’s outperformance was backed by decent quarterly results, positive news flow and regulatory updates.
Lilly’s earnings estimates have risen around 1% for 2018 and 1.2% for 2019 over the past 30 days.
Ithas been consistently beating earnings expectations. Earnings surpassed expectations in each of last four quarters, with an average positive surprise of 10.15%.
The company is expected to record earnings and sales growth of 26.64% and 6.92%, respectively, in 2018.
Pipeline Progressing Well This Year: Lilly is also on a strong footing in terms of its pipeline this year so far with several positive late-stage data readouts. These include positive top-line data from phase III studies on pain candidate, tanezumab and type I diabetes candidate, empagliflozin and phase III label expansion studies evaluating psoriatic arthritis drug, Taltz for another indication — ankylosing spondylitis — and cancer drug, Cyramza, for the second-line treatment of liver cancer.
Important regulatory approvals included FDA approval of JAK inhibitor, Olumiant (baricitinib), breast cancer drug Verzenio in first-line setting and Taltz for genital psoriasis. Several key regulatory and pipeline events are expected in the second half including potential approval of Emgality/galcanezumab, a calcitonin gene-related peptide (CGRP) antibody for migraine prevention. Talking about CGRP antibodies, Amgen (AMGN - Free Report) and partner Novartis’ (NVS - Free Report) Aimvog/erenumab was launched in May while Teva Pharmaceutical Industries Limited’s (TEVA - Free Report) fremanezumab is under review in the United States with a decision expected in September.
Lilly also added promising new assets through business development deals including pancreatic cancer candidate, pegilodecakin, which was added after the acquisition of California-based immuno-oncology biotech, ARMO Biosciences in June.
Spin-Off of Animal Health Unit: In July, Lilly announced that it will establish Elanco — its Animal Health unit — as an independent publicly traded company via an initial public offering (IPO) of a minority stake this year. Lilly’s remaining ownership in Elanco is expected to be divested through a “tax-efficient transaction” by 2019. Lilly had been exploring strategic alternatives for this business including a sale, merger or creating a separate company through an initial public offer (IPO). We believe Lilly’s decision to separate Elanco, which has been underperforming lately, is prudent.
Aggressive Cost-Cutting Initiatives: Lilly is also resorting to cost-cutting and headcount reduction to drive the bottom line. The headcount reductions announced in September 2017 are expected to amass annualized savings of approximately $500 million, beginning 2018. Lilly plans to invest the savings in new drugs and overall growth of the company.
Conclusion
Lilly has its share of challenges, which include rising competitive pressure on its drugs this year, generic competition for Strattera, Effient and Axiron and rising pricing pressure in the diabetes franchise. Also, key erectile dysfunction drug, Cialis will face generic competition this year, which will hurt sales.
However, it looks like Lilly’s strong pipeline, consistent outperformance of new drugs, cost cuts and regular strategic deals will keep the stock afloat through the rest of the year.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Image: Bigstock
5 Reasons Why You Should Add Lilly Stock to Your Portfolio
Eli Lilly & Company (LLY - Free Report) is known for its drugs like Humalog, Alimta, Alimta, Taltz, and many others.
Indianapolis, IN based Lilly boasts of a wide range of products that serve a vast number of therapeutic areas. The company focuses primarily on central nervous system disorders, metabolic diseases, autoimmune diseases, cardiovascular diseases and cancer, which are all high growth areas and represent significant commercial potential.
Here are five reasons to invest in the stock this year.
Good Rank and Solid VGM Score: Lilly currently carries a Zacks Rank #2 (Buy) and has a favorable VGM Score of B. Back-tested results show that only stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best upside potential. You can see the complete list of today’s Zacks #1 Rank stocks here.
Rising Share Price and Earnings Estimates: Lilly’s shares have outperformed the large-cap pharma industry this year so far. The stock has returned 25.3% in the said timeframe compared with the industry’s gain of 5.6%.
Lilly’s outperformance was backed by decent quarterly results, positive news flow and regulatory updates.
Lilly’s earnings estimates have risen around 1% for 2018 and 1.2% for 2019 over the past 30 days.
Ithas been consistently beating earnings expectations. Earnings surpassed expectations in each of last four quarters, with an average positive surprise of 10.15%.
The company is expected to record earnings and sales growth of 26.64% and 6.92%, respectively, in 2018.
Pipeline Progressing Well This Year: Lilly is also on a strong footing in terms of its pipeline this year so far with several positive late-stage data readouts. These include positive top-line data from phase III studies on pain candidate, tanezumab and type I diabetes candidate, empagliflozin and phase III label expansion studies evaluating psoriatic arthritis drug, Taltz for another indication — ankylosing spondylitis — and cancer drug, Cyramza, for the second-line treatment of liver cancer.
Important regulatory approvals included FDA approval of JAK inhibitor, Olumiant (baricitinib), breast cancer drug Verzenio in first-line setting and Taltz for genital psoriasis. Several key regulatory and pipeline events are expected in the second half including potential approval of Emgality/galcanezumab, a calcitonin gene-related peptide (CGRP) antibody for migraine prevention. Talking about CGRP antibodies, Amgen (AMGN - Free Report) and partner Novartis’ (NVS - Free Report) Aimvog/erenumab was launched in May while Teva Pharmaceutical Industries Limited’s (TEVA - Free Report) fremanezumab is under review in the United States with a decision expected in September.
Lilly also added promising new assets through business development deals including pancreatic cancer candidate, pegilodecakin, which was added after the acquisition of California-based immuno-oncology biotech, ARMO Biosciences in June.
Spin-Off of Animal Health Unit: In July, Lilly announced that it will establish Elanco — its Animal Health unit — as an independent publicly traded company via an initial public offering (IPO) of a minority stake this year. Lilly’s remaining ownership in Elanco is expected to be divested through a “tax-efficient transaction” by 2019. Lilly had been exploring strategic alternatives for this business including a sale, merger or creating a separate company through an initial public offer (IPO). We believe Lilly’s decision to separate Elanco, which has been underperforming lately, is prudent.
Aggressive Cost-Cutting Initiatives: Lilly is also resorting to cost-cutting and headcount reduction to drive the bottom line. The headcount reductions announced in September 2017 are expected to amass annualized savings of approximately $500 million, beginning 2018. Lilly plans to invest the savings in new drugs and overall growth of the company.
Conclusion
Lilly has its share of challenges, which include rising competitive pressure on its drugs this year, generic competition for Strattera, Effient and Axiron and rising pricing pressure in the diabetes franchise. Also, key erectile dysfunction drug, Cialis will face generic competition this year, which will hurt sales.
However, it looks like Lilly’s strong pipeline, consistent outperformance of new drugs, cost cuts and regular strategic deals will keep the stock afloat through the rest of the year.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Click for details >>