Eli Lilly & Company (LLY - Free Report) is known for its drugs like Humalog, Alimta, Taltz, and many others. Here are three reasons to invest in the stock in 2020.
Good Rank & Rising Share Price and Earnings Estimates: Lilly currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Lilly’s shares have outperformed the large-cap pharma industry in the past year. The stock has returned 18% in the said timeframe against the industry’s increase of 14.8%. Lilly’s outperformance has been backed by higher demand for its newer drugs, accretive business development deals and rapid pipeline progress.
Lilly’s earnings estimates have risen 4.8% for 2020 over the past 60 days.
Its earnings surpassed expectations in three of the last four quarters, the average positive surprise being 1.2%.
The company is expected to record earnings and sales growth of 16.3% and 7.4%, respectively, in 2020.
Upbeat 2020 Outlook: In December, Lilly issued a better-than-expected financial guidance for 2020. It anticipates adjusted earnings of $6.70-$6.80 per share in 2020. Revenues in 2020 are expected in the range of $23.6-$24.1 billion.
It expects new products to help it achieve the sales growth target as headwinds from Cialis’ loss of exclusivity and Lartruvo will abate in 2020. Lilly lost exclusivity for key erectile dysfunction drug, Cialis, in 2019, which affected the top line in the year. Also, Lartruvo’s product withdrawal was a major setback in 2019. Lilly suspended the promotion of its advanced soft tissue sarcoma drug, Lartruvo, due to the failure of the ANNOUNCE confirmatory study.
The company said that if it achieves the aforementioned sales range for 2020, it will be able to exceed the 7% revenue CAGR target for the 2015-2020 period. The growth rate also exceeds Lilly’s initial guidance of a 6% increase for 2020, which it had communicated in October.
Pipeline Progress & Strategic Deals: Lilly has made significant pipeline progress in the past year with several positive late-stage data readouts, multiple approvals and regulatory submissions.
Key new drug approvals in the United States in 2019 were Baqsimi, Lilly’s glucagon nasal powder to treat severe hypoglycemia in diabetes patients in July and Reyvow (lasmiditan) oral tablets to treat acute migraine in October. Important line extension approvals were Taltz for axial spondyloarthritis in August, Cyramza for second-line liver cancer in May and Emgality for episodic cluster headache in June.
Importantly, in 2020, Lilly expects to come up with important data readouts for several key pipeline medicines. The company also expects approvals for two new drugs in 2020 and up to three new launches. Please note that regulatory applications for Lilly’s key pipeline candidate, an ultra-rapid acting insulin for type I and II diabetes, is under review in the United States and Europe. A new drug application (NDA) has already been filed for Alzheimer’s disease candidate, flortaucipir. NDAs for tanezumab for osteoarthritis pain, in partnership with Pfizer (PFE - Free Report) , and oral RET inhibitor, selpercatinib, for RET-altered thyroid cancers are expected to be filed in the next two to three months.
Lilly also added promising pipeline assets through business development deals in 2020. At the beginning of 2019, the company bought small cancer biotech, Loxo Oncology, Inc., for $8 billion in cash, which broadened the scope of its oncology portfolio into precision medicines. It also formed small immunology collaborations with small, private biotechs Avidity Biosciences and ImmuNext.
Lilly has its share of challenges lined up for 2020 like generic competition for several drugs, including the expected generic entry of Forteo; rising pricing pressure on its diabetes franchise in the United States due to rebates and legislated increases in Medicare Part D cost sharing; price cuts in some international markets like China, Japan and Europe; and currency headwinds. However, it seems the company’s strong pipeline, consistent outperformance of new drugs, cost cuts and regular strategic deals will keep the stock afloat through 2020.
Other Stocks to Consider
Other stocks worth considering are Bristol-Myers (BMY - Free Report) and Glaxo (GSK - Free Report) , both with a Zacks Rank #2 (Buy).
Bristol-Myers’ earnings estimates have increased 9% for 2020 over the past 60 days. The stock is up 42.3% in the past year.
Glaxo’s stock is up 24.2% in the past year. Its earnings estimates have increased 4% for 2020 over the past 60 days.
7 Best Stocks for the Next 30 Days
Just released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers “Most Likely for Early Price Pops.”
Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.6% per year. So be sure to give these hand-picked 7 your immediate attention.
See 7 handpicked stocks now >>