Eli Lilly and Company ( LLY Quick Quote LLY - Free Report) stock has risen 15.5% this year so far against a decrease of 0.9% for the industry.
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Here we discuss the factors that are driving Lilly’s stock higher and can keep the positive momentum alive in the second half of 2022 and 2023.
Lilly’s revenue growth is being driven by higher demand for drugs like Trulicity, Taltz, and others. Its key growth products (like Trulicity, Taltz etc.) grew 20% in the second quarter and contributed nearly 67% to total revenues, excluding revenues from COVID-19 antibodies.
Importantly, Lilly expects to launch five new medicines by 2023 end, which could serve as catalysts to driving its top-line growth through the decade.
Of these five, Mounjaro (tirzepatide), a dual GIP and GLP-1 receptor agonist (GIP/GLP-1 RA), was approved by the FDA in May. The drug showed impressive blood sugar reductions and weight loss in type II diabetes patients in phase III studies. Mounjaro recorded $16.0 million in sales in the first quarter of 2022.
Regulatory applications for tirzepatide for type II diabetes are under review in Europe and Japan. The company also initiated a cardiovascular outcome study for tirzepatide in June 2020. Tirzepatide is also in phase III studies for obesity, obstructive sleep apnea and heart failure with preserved ejection fraction and phase II in NASH.
Mounjaro is Lilly’s first of potentially five new medicines it plans to launch by the end of 2023.
Other two important candidates for which Lilly has filed regulatory applications seeking accelerated approval from the FDA are donanemab and pirtobrutinib for Alzheimer's disease and mantle cell lymphoma indications, respectively. The filings have been granted priority review designation by the FDA. Regulatory applications seeking approval of mirikizumab for ulcerative colitis are under review in the United States and Europe while a new drug application for lebrikizumab for atopic dermatitis is expected to be filed later this year.
Of all the five candidates, Mounjaro and donanemab have multi-billion dollar sales potential.
Meanwhile, Lilly expects higher revenues from a new U.S. government supply deal for bebtelovimab, its COVID-19 antibody medicine, which was authorized by the FDA to treat certain non-hospitalized patients with mild-to-moderate COVID-19 in February 2022. However, greater-than-previously expected potential currency headwinds are likely to offset this benefit.
Lilly has its share of issues like 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.
Its key drug Alimta’s vitamin regimen patent expired worldwide in June 2021 and generics were launched in Europe and Japan, hurting sales significantly. In the United States, following Lilly’s settlement with
Eagle Pharmaceuticals ( EGRX Quick Quote EGRX - Free Report) , the latter launched its generic on a limited basis in February 2022 with an unlimited entry starting in April 2022. From second-quarter 2022 onward, Alimta sales have declined rapidly with multi-source generic entrants following the loss of patent exclusivity in the United States. Alimta sales are likely to erode rapidly in the remaining quarters of 2022.
However, Lilly is hopeful that its key products like Trulicity, Taltz, Jardiance and others and thereafter the new products discussed above will keep driving the stock in the second half of 2022 and in 2023.
Zacks Rank & Stocks to Consider
Lilly currently has a Zacks Rank #3 (Hold).
Some better-ranked stocks in the drugs/biotech sector are
Bolt Biotherapeutics ( BOLT Quick Quote BOLT - Free Report) , and Merck ( MRK Quick Quote MRK - Free Report) , both carrying a Zacks Rank #2 (Buy) at present. You can see . the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
Estimates for Bolt Biotherapeutics’ 2022 loss have narrowed from $2.87 per share to $2.25 per share over the past 30 days. Loss estimates for 2023 have narrowed from $2.76 per share to $2.14 per share over the same time frame. Shares of Bolt Biotherapeutics have declined 60% this year so far.
Earnings of Bolt Biotherapeutics beat estimates in two of the last four quarters, while missing in one and matching estimates in one quarter. The stock delivered a four-quarter surprise of 2.39%, on average.
Merck’s earnings per share estimates for 2023 have increased from $7.16 per share to $7.17 per share in the past 30 days. Merck’s stock is up 17.4% in the year-to-date period.
Merck beat earnings expectations in all the trailing four quarters. The company delivered a four-quarter earnings surprise of 16.79%, on average.