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Lilly (LLY) Stock Riding on Pipeline Developments This Year

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Among the large drugmakers, Lilly’s (LLY - Free Report) stock is up 39.3% this year so far compared with 10.5% increase of the industry.

 

Zacks Investment Research
Image Source: Zacks Investment Research

 

Let us discuss the reasons behind this outperformance.

Positive Pipeline News

Lilly has some intriguing pipeline assets in its portfolio for cancer, diabetes and Alzheimer's.

A key pipeline candidate in Lilly’s portfolio is its investigational antibody for Alzheimer’s, donanemab. Per data announced this year, the candidate has led to significant slowing of decline in the composite measure of cognition and daily function in patients with early symptomatic Alzheimer's disease compared to placebo in a pivotal phase II study. Meanwhile, treatment with donanemab also resulted in substantial clearance of amyloid plaques and slowing of spread of tau pathology. In June, the FDA granted the medicine Breakthrough Therapy designation. Lilly plans to submit a biologics license application (BLA) seeking accelerated approval for the candidate for treating Alzheimer's disease later this year. In fact, FDA approval of Biogen’s (BIIB - Free Report) Alzheimer’s drug, Aduhelm last month increased the likelihood that Lilly may also gain approval for donanemab.

Another important drug in Lilly’s portfolio is its dual GIP and GLP-1 receptor agonist tirzepatide, which has shown impressive blood sugar reductions and weight loss in type II diabetes patients in phase III studies. Lilly has announced successful data from three studies on tirzepatide this year so far.

Lilly announced positive data from late-stage studies on baricitinib in severe alopecia areata, mirikizumab in moderate-to-severe ulcerative colitis and on its COVID-19 antibody cocktail comprising Lilly’s bamlanivimab plus Vir Biotech (VIR - Free Report) /GlaxoSmithKline’s (GSK - Free Report) VIR-7831.

Strategic Collaboration Deals

Lilly has already signed some strategic collaboration and licensing deals this year. In February, it signed a deal with Rigel Pharmaceuticals, in-licensing exclusive rights to the latter’s RIPK1 inhibitors, including R552, for all indications including autoimmune and inflammatory diseases. In January, Lilly in-licensed exclusive rights for chronic pain drug candidate, AK1780 from Japan’s Asahi Kasei Pharma and also signed a collaboration with Merus N.V. to discover up to three novel T-cell re-directing bispecific antibodies for cancer. In May, it announced a collaboration with MiNA Therapeutics Limited to develop novel drug candidates, leveraging the latter’s proprietary small activating RNA (saRNA) technology platform

Conclusion

It goes without saying that Lilly has its share of challenges. Generic competition for several drugs, rising pricing pressure in the United States mainly on key drug, Trulicity, and price cuts in some international markets like China, Japan and Europe are some top-line headwinds. It also reported lower-than-expected sales of its COVID-19 therapies in the first quarter.

Nonetheless, Lilly also boasts a solid portfolio of new drugs in diabetes, autoimmune diseases and cancer. Lilly’s revenue growth in 2021 is expected to be driven by higher demand for drugs like Trulicity, Taltz, and others.

It seems the company’s strong pipeline, consistent outperformance of key drugs, cost cuts and regular strategic deals will keep the stock afloat through 2021.

Lilly currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.