Eli Lilly and Company LLY boasts a solid portfolio of core drugs in diabetes, autoimmune diseases and cancer. Its revenue growth is being driven by higher demand for drugs like Trulicity, Taltz and others. However, its new and potential drug launches have been attracting investors to the stock.
Here we discuss the factors that are driving Lilly’s stock higher and can keep the positive momentum alive in 2023.
The stock has risen 18.7% this year so far compared with an increase of 3.1% for the industry.
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Mixed Q1 Results and Raised Outlook
Lilly announced mixed first-quarter 2023 results last month. It missed estimates for earnings but beat the same for sales. Its sales declined 11% year over year due to a significant fall in revenues from COVID-19 antibodies. However, excluding COVID-19 antibodies, revenue rose 10% on the back of volume growth from Mounjaro, Trulicity, Verzenio and Jardiance.
Importantly, however, Lilly raised the financial guidance for 2023, which it provided in February 2023. The company raised its revenue guidance to the range of $31.2 billion-$31.7 billion in 2023 from the previously expected range of $30.3 billion to $30.8 billion. Less onerous than previously expected currency headwinds coupled with improved underlying business performance led to the guidance increase.
Planned New Product Launches
Lilly expects to launch four new medicines by 2023 end, of which Mounjaro for type II diabetes and cancer drug Jaypirca have already been launched.
Mounjaro (tirzepatide) is already generating impressive sales, benefiting from strong demand trends. It is expected to be a key long-term top-line driver for Lilly as it has the potential to be approved for obesity and other diabetes-related diseases. Mounjaro showed superior weight-loss reduction in clinical studies for the obesity indication. Lilly has initiated a rolling submission in the United States for tirzepatide in obesity that is expected to be completed soon while a regulatory application has already been filed in the EU. Phase III studies are ongoing for obstructive sleep apnea and heart failure with preserved ejection fraction and phase II in NASH.
Lilly expects the launch of mirikizumab, lebrikizumab and tirzepatide for obesity later in 2023.
All Eyes on Alzheimer’s Disease Candidate Donanemab
Earlier this month, Eli Lilly announced positive top-line data from the confirmatory phase III TRAILBLAZER-ALZ 2 study on donanemab, its Alzheimer’s Disease candidate. The data showed that donanemab significantly slowed cognitive and functional decline in early symptomatic Alzheimer's disease patients.
The study met the primary endpoint and all secondary endpoints measuring cognitive and functional decline. The primary endpoint of the study was change from baseline until 18 months on the integrated Alzheimer's Disease Rating Scale, which measures cognition and activities of daily living such as managing finances, driving, engaging in hobbies, and conversing about current events.
Data from the study showed that 47% of the participants treated with donanemab had no clinical progression at 1 year (defined as no decline in CDR-SB, a key measure of disease severity) compared to 29% on placebo. Treatment with donanemab slowed clinical decline by 35% compared to placebo and led to a 40% less decline in the ability to perform daily activities.
In January, the FDA issued a complete response letter to Lilly’s biologics license application (BLA) seeking accelerated approval for donanemab. The BLA was based on data from the phase II TRAILBLAZER-ALZ study, which showed that donanemab led to amyloid plaque reduction.
The FDA rejected the BLA as it believed the accelerated approval submission included data for only a limited number of patients with 12-month drug exposure. The FDA has asked Lilly to include data from at least 100 patients who received a minimum of 12 months of continued treatment with donanemab.
The promising data from the TRAILBLAZER-ALZ 2 study will form the basis of Lilly’s BLA application for traditional regulatory approval. Lilly will submit a formal BLA to the FDA in the second quarter.
Lilly’s new product launches are expected to drive near-term growth for the company.
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.
Lilly expects lower COVID-19 antibody sales to hurt revenues significantly in 2023 compared to the 2022 levels. In addition, the loss of exclusivity of key drug, Alimta in the United States is expected to hurt the top line, However, the negative impact of high COVID-19 antibody revenues in the prior periods is expected to reduce as the year progresses, which coupled with contribution from new products is expected to drive top-line growth
Zacks Rank & Stocks to Consider
Lilly currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked large drugmakers are Novo Nordisk NVO Roche RHHBY and Novartis NVS. While Novo Nordisk has a Zacks Rank of 1, Roche and Novartis have a Zacks Rank #2 (Buy).
Estimates for Novo Nordisk’s 2023 earnings per share have increased from $4.43 to $4.95 over the past 30 days. Estimates for 2024 have jumped from $5.19 per share to $5.74 in the same timeframe. Novo Nordisk’s stock has surged 65.9% in the past year.
Novo Nordisk beat earnings expectations in three of the trailing four quarters. The company delivered a four-quarter earnings surprise of 0.35%, on average.
Estimates for Roche’s 2023 earnings per share have increased from $2.61 to $2.67. Estimates for 2024 have jumped from $2.83 per share to $2.89 in the past 60 days. Roche’s stock has declined 0.7% in the past year.
Estimates for Novartis’ earnings per share have increased from $6.55 to $6.67 over the past 60 days, while those for 2024 have gone up from $7.04 per share to $7.22 per share. Novartis’ stock has risen 17.5% in the past year.
Novartis beat earnings expectations in each of the trailing four quarters. The company delivered a four-quarter earnings surprise of 5.15%, on average.
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