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Aside From The Recent Drug Failure, What Else Is Happening With Eli Lilly?

Eli Lilly: Aside From The Recent Drug Failure, What Else Is Happening With LLY?

Marc Goodman of UBS lowered his EPS estimates for Eli Lilly and Co LLY 1.65% after the company announced that its Alzheimer's drug solanezumab failed to slow the cognitive decline in patients.

Goodman, who previously had modeled about $1.1 billion for 2020 solanezumab sales, has cut 2016 EPS view by $0.01 to $3.54 and 2017 EPS estimate by $0.15 to $4 to reflect the removal of solanezumab sales estimate.

Further, Goodman now sees only about 3.5 percent growth in top line annually through 2020 versus company’s forecast of 5 percent.

“We think we are different from management's forecast as we are likely more conservative in our sales assumptions for the key pipeline products including baricitinib, abemaciclib and CGRP. While the markets for these products are large opportunities, we expect these markets to be highly competitive, and Lilly will be a later comer in each of them,” Goodman wrote in a note.

Other Catalysts

According to Goodman, the upcoming catalysts for Lilly include the label update for Jardiance and the potential Appeals Court decision on the Alimta patent. The analyst believes the market assumes positive outcomes for both these catalysts.

Goodman has a Neutral rating on the stock, which he believes already prices in the low-to-mid-single-digit sales growth, and low double-digit earnings growth through 2020.

That said, the analyst slashed his price target to $70 from $82, saying that the shares should trade closer to the peer group given its lower growth prospect.

At last check, shares of Lilly were up 0.21 percent to $68.14.

DateFirmActionFromTo
Nov 2016BMO CapitalDowngradesOutperformMarket Perform
Nov 2016Atlantic EquitiesDowngradesOverweightNeutral
Sep 2016Goldman SachsUpgradesNeutralBuy

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