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After the big run last week, Eli Lilly (LLY) shares have retreated slightly to the $260 average due to a combination of investors booking profits as they take them in a volatile market and turnaround pressure from accepting attitudes. take the risk of Tuesday’s rally.
What sent Eli Lilly’s stock to new highs last week, including a nearly 10% gain in a single day, was the unimpressive Investment Day event. They boosted their 2021 revenue and consensus-guided earnings per share thanks to additional revenue from the sale of Covid antibodies. And their 2022 outlook is much better than everyone expected.
Seeing as the event, many analysts feared that 2022 would be a year of falling earnings for Lilly in part due to falling revenue from Covid antibodies and a step up in investment to fund programs. major stage 3 process and support their massive new product launch. But Eli Lilly ended that story last week.
- Their sales outlook was higher than estimated at the end of the range.
- The adjusted earnings per share guidance from $8.50 to $8.65 broke expectations of $8.13 thanks to operating margin expansion.
- If Eli Lilly offers a 32% operating margin as directed, that means the company has expanded its margin by more than 1,100 basis points since 2016.
- And by the way, if the FDA approved the use of Eli Lilly’s second-generation Covid antibody cocktail treatment, those sales would represent an outright growth over the numbers.
As for the tutorial, Eli Lilly introduced a system that we think is the most valuable in the industry. The two most important drugs in the pipeline with more than $10 billion in commercial opportunities are tirzepatide for the treatment of type 2 diabetes and obesity (an area where Lilly has focused more) and donanemab for Alzheimer’s disease. Both are expected to be approved by the FDA in 2022 and support Eli Lilly’s flagship development for many years. In addition to the amazing work Eli Lilly is doing in the fields of obesity and neuroscience, the leadership highlighted the opportunities that exist in their immunology and oncology pipelines.
The Investor Day event was everything we expected and affirms our belief that Eli Lilly has the strongest and clearest multi-year revenue and profit growth story of all. large-cap pharmaceuticals. Revenue growth is driven by recent and upcoming launches, with Lilly on track to deliver 20 new drugs over a 10-year period starting in 2014. And earnings growth coming from productivity superiority of management and the ability to expand profit margins to mid to high 30 in the medium term.
If you don’t arrive before Investor Day, we think this 6% to 7% drop from the high has given investors a second chance to initiate a position or add to a position if they want more.
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