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Lilly (LLY) Stock Up on Raised 2021 View, Upbeat 2022 Guidance

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Eli Lilly & Company (LLY - Free Report) raised its previously issued 2021 sales and earnings projections, which pushed its shares up more than 10% on Wednesday. The drug giant also issued its financial guidance for 2022 that exceeded expectations. The company also discussed its strong pipeline, which has the potential to drive future growth.

Year to date, Lilly’s shares have risen 66.2% compared with the industry’s increase of 20.3%.

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2021 Guidance Upped

Lilly raised its previous sales and earnings forecast for 2021 due to additional expected revenues from its COVID-19 antibody medicines.

Lilly expects adjusted earnings per share in the range of $8.15 to $8.20 in 2021, up from the prior expectation of $7.95 to $8.05. The new earnings range indicates growth in the range of 20%-21% (previously 17%-18%).

Revenues in 2021 are expected in the range of $28.0 billion and $28.3 billion compared with $27.2 billion-$27.6 billion expected previously.

Lilly expects revenues of $2.1 billion from COVID-19 therapies compared with the prior expectation of $1.3 billion based on a new U.S. government agreement in November to purchase 614,000 additional doses of bamlanivimab and etesevimab together. Lilly’s COVID-19 antibody cocktail, bamlanivimab plus etesevimab, was granted emergency approval by the FDA in February 2021 to treat mild-to-moderate COVID-19 in high-risk patients.

Lilly and partner Incyte’s (INCY - Free Report) rheumatoid arthritis drug,Olumiant is also authorized to treat COVID-19 in hospitalized patients. Lilly and Incyte’s Olumiant (baricitinib) generated sales of $406.9 million in the quarter, much higher than $208.4 million in the previous quarter, backed by increased use of the drug in the United States for treating COVID-19.

Lilly and Incyte have an exclusive worldwide license and collaboration agreement for the development and commercialization of baricitinib since 2009.

The gross margin is expected to be approximately 78% (previously 79%). The adjusted tax rate is expected to be approximately 13% (maintained). Adjusted operating margin is expected to be 30% (maintained).

Marketing, selling and administrative expense are expected to be in the range of $6.2 billion to $6.4 billion (maintained). Research and development expense is expected to be in the range of $6.9 billion to $7.1 billion (maintained).

Better-Than-Expected 2022 Guidance

Lilly expects 2022 revenues to be between $27.8 billion and $28.3 billion while earnings per share are expected to be between $8.50 and $8.65. Both earnings and revenue expectations are better than the respective Zacks Consensus Estimate of $27.75 billion and $8.11 per share.

Lilly expects its key growth products like Trulicity, Verzenio, Taltz, Jardiance and some other medicines to account for more than two-thirds of core revenues in 2022. This coupled with potential new product launches, primarily tirzepatide for type II diabetes and donanemab for early Alzheimer's disease, are expected to drive revenues in 2022. However, lower revenues from cancer drug, Alimta due to its loss of patent exclusivity and potentially lower revenues from COVID therapies are expected to offset some of the top-line gains.

Donanemab is expected to be a key competitor to Biogen’s (BIIB - Free Report) new Alzheimer’s drug Aduhelm (aducanumab). However, Aduhelm’s FDA approval faced a lot of criticism about its mixed efficacy results, the FDA selection of the accelerated approval path, and the regulatory process in general.

Biogen’s Aduhelm also comes with a hefty price tag of $56,000 a year, which was widely condemned. All these issues seem to have affected demand, patient access and reimbursement of this key new drug for Biogen, which has resulted in a slow launch.

Coming back to Lilly, its gross margin is expected to be approximately 80%. The adjusted operating margin is expected to be approximately 32%.

Marketing, selling and administrative expenses are expected to be in the range of $6.4 billion to $6.6 billion. Research and development expense is expected to be in the range of $7.0 billion to $7.2 billion.

Update on New Innovative Medicines

Lilly is fast closing in on its goal of launching 20 new medicines over the 10-year period from 2014 to 2023, having already launched 16 new medicines over the last eight years. Lilly plans to launch five more medicines — tirzepatide, donanemab, pirtobrutinib, lebrikizumab and mirikizumab — over the next two years, if they are approved.

While tirzepatide is under review in the United States and EU, for donanemab, a rolling submission to the FDA for accelerated approval in early Alzheimer's disease is ongoing. The submission is expected to be completed by the end of the first quarter of 2022. Lilly has also initiated a rolling FDA filing for pirtobrutinib, seeking accelerated approval in mantle cell lymphoma. Lebrikizumab (atopic dermatitis) and mirikizumab (ulcerative colitis and Crohn's disease) are in late-stage development.

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

A better-ranked stock from the same space is GlaxoSmithKline (GSK - Free Report) , which carries a Zacks Rank #2 (Buy).

Glaxo’s stock has risen 25.5% this year so far. Estimates for Glaxo’s 2021 earnings have risen 8.2% over the past 60 days while the same for 2022 has increased 5.5% over the same timeframe.

Glaxo’s earnings surpassed estimates in two of the trailing four quarters, missed the same once and matched it once, delivering a beat of 15.28%, on average.