Earnings Preview: New drugs to propel Eli Lilly forward

Eli Lilly and Company (LLY) is scheduled to report earnings results for the fourth quarter of 2018 on February 6, 2019, before market open. Analysts expect the company to report earnings of $1.36 per share on revenue of $6.3 billion. These estimates reflect a sales growth of nearly 3% and earnings growth of 19% on a year-over-year basis.

The company has consistently topped earnings estimates over the past four quarters and can be expected to do so this time as well. While the topline can be expected to benefit from higher sales of new products like Trulicity and Jardiance, the loss of exclusivity for products like Cialis can hurt the overall sales performance.

Eli Lilly is facing tough generic competition for Cialis and this, combined with higher costs, are likely to put pressure on earnings during the fourth quarter. The performance of new products like Verzenio, which is used for the treatment of breast cancer, is a key point to watch during the earnings announcement.

The company has entered into a couple of partnerships for the development of new therapies in various conditions. One such partnership is the collaboration with Swiss company AC Immune for the treatment of Alzheimer’s disease, which Lilly announced in December.

Last month, Lilly announced the acquisition of biopharma startup, Loxo Oncology, for $8 billion. The deal, which is anticipated to close in the first quarter of 2019, is expected to help Lilly expand its oncology drug portfolio. The company expects to benefit from Loxo’s FDA-approved cancer drug Vitrakvi, which was developed and commercialized in partnership with Bayer.

In December, Lilly provided updated guidance for 2019 at an investor meeting. The company expects revenue to come between $25.3 billion and $25.8 billion in 2019, reflecting mid-single digit growth driven by volume from new products such as Trulicity, Taltz, Basaglar, Jardiance, Verzenio, Cyramza, Olumiant, Lartruvo, as well as Emgality.

Reported EPS is expected to be $5.52 to $5.62 and adjusted EPS is expected to be $5.90 to $6.00 in 2019, each excluding approx. $0.08 per share for the non-controlling interest in Elanco Animal Health.

The company revised its reported EPS guidance for 2018 to a range of $2.80 to $2.85 from the previous range of $3.04 to $3.09. The outlook for adjusted EPS stays unchanged at $5.55 to $5.60. Looking at the long term, Lilly expects at least 6% compound annual revenue growth from 2015 to 2020.

THIRD QUARTER RECAP

In the third quarter, Lilly reported better-than-expected revenue and earnings with a revenue growth of 7% and an adjusted earnings growth of 32%.

Over the past 52 weeks, Eli Lilly’s shares have gained over 46%.

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