Lilly Faces Challenges Ahead

Eli Lilly & Co. (LLY - Analyst Report) is entering a challenging period, brought about by recent pipeline disappointments, most notably uncertainty surrounding antiplatelet drug, prasugrel. Although we believe the underlying fundamentals of the company remain solid, the recent pipeline setbacks and the high price of the ImClone acquisition will likely limit the upside to the stock.

We also expect generic competition to key drugs to result in negative longer-term EPS growth. We see little movement in the stock due to these issues. We rate the shares a Hold with a $42 price target.

It is likely that Zyprexa sales are now near peak levels and will experience a slow decline beginning in the fourth quarter of 2008. Generic competition in Germany and Canada will continue to temper international growth and the June 2008 launch of generic Risperdal will shave domestic market share.

Jason Napodano, CFA contributed to this report.

Read the full analyst report on LLY.

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