Eli Lilly (LLY:US)

Last update - 3 November 2023 By James Woods

Eli Lilly (LLY), a current holding within the momentum component of the US Growth portfolio, and a prominent player in the pharmaceutical industry, has reported third-quarter results overnight.

The updated financials show an impressive 37% year-over-year surge in third-quarter sales, outpacing expectations with revenue of $9.50 billion. This surge was bolstered by the remarkable performance of Mounjaro, a diabetes medication with promising potential as an obesity treatment. Yet, amidst this success, the company’s share price exhibited a remarkable uptick of 7.8% in the wake of the earnings report, underscoring investor optimism.

The standout story for Eli Lilly this quarter is Mounjaro, whose sales skyrocketed beyond analyst forecasts to $1.41 billion. This is a significant leap from last year and a testament to its potential in the burgeoning obesity drug market. Meanwhile, other key products like Trulicity and Humalog saw declines in revenue, indicating a shift in the company’s revenue streams.

Despite the revenue boost, the firm cautiously adjusted its full-year profit outlook, acknowledging charges from in-process research and development that affected third-quarter earnings. This adjustment has set the mid-point of the firm’s profit forecast below the average analyst estimate, with adjusted EPS projected between $6.50 to $6.70.

Eli Lilly’s robust 80.4% gross margin reflects strategic business moves, such as the sale of rights for the olanzapine portfolio. Research and development expenses increased by 34%, showing the company’s dedication to innovation despite the financial pressures.

The pharmaceutical landscape has been particularly dynamic with the introduction of weight-loss drugs. Eli Lilly’s Mounjaro and Novo Nordisk’s Wegovy have both experienced soaring demand, leading to shortages and a scramble to maintain supply. With obesity drugs taking centre stage, rivals like Pfizer and Amgen are also venturing into the market.

While Eli Lilly has faced some headwinds with downgraded profit forecasts, the company’s revenue growth and the exceptional performance of Mounjaro paint an optimistic picture. The future holds promise with ongoing research and the potential for obesity and diabetes treatments, positioning Eli Lilly as a key figure in a transformative era for pharmaceuticals and healthcare. As a reminder, Eli Lilly’s inclusion is based on the relative performance of its share price and remains an active buy/hold recommendation, having returned 8.26% since its inclusion at the start of October 2023.

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