Analyst Confidence in Eli Lilly Boosted by Product Pipeline

Key Points

• Eli Lilly is already one of the top pharmaceutical companies in the world
• LLY stock is currently performing well, beating earnings 3 of the last 4 quarters
• Strong product pipeline could accelerate growth the next few years
• Analysts give LLY a Moderate Buy rating

Eli Lilly and Company NYSE: LLY is one of the most recognized names in the pharmaceutical industry. Indeed, they are the 12th-largest pharmaceutical company in the world by revenue ($5.5 billion in 2021), and its balance sheet reads as such. But even though LLY has long been a good healthcare stock to hold, analysts anticipate Eli Lilly’s product pipeline could accelerate growth, making it an even better investment than it has been.

Stable Earnings Strengthens Opportunities  

With $314.15 billion in market capitalization, the US-based multinational pharmaceutical company is doing quite well, especially after persistent earnings growth over the past few years. On average, earnings significantly beat the estimate 3 out of the last 4 quarters. February earnings report $2.09 EPS beat the estimate by $0.26.  That said, earnings have been up and down over the past several years. 

LLY’s success in 2022 was mostly due to its type-2 diabetes drug, Mounjaro (tirzepatide). Revenue for this drug came in just north of $480 million by the end of 2022, despite having only been on the market since its approval in May. We can expect more of the same from the drug.

In addition, Eli Lilly is now looking to launch the drug again, with a second indication for obesity, perhaps late in the year. Furthermore, Lilly expects the manufacturing capacity for this drug to double in 2023. 

Product Pipeline Could Accelerate Broad Growth

On the other hand, Eli Lilly failed to get accelerated approval for its early-onset Alzheimer’s disease drug, Donanemab. Fortunately, this drug is still on track to receive traditional FDA approval after completing its current phase 3 study. If this pursuit remains on schedule, we can expect to see (US and Japan) approval in Q2 of 2023; and when we do, analysts project Donanemab could reach $32.7 billion in revenue by 2038. 

Lebrikizumab is another drug in the Eli Lilly pipeline. The atopic dermatitis drug will likely be a competitor for Dupixent (dupilumab), manufactured by a partnership between Sanofi NASDAQ: SNY and Regeneron Pharmaceuticals, inc. NASDAQ: REGN. Sales forecast for lebrikizumab could reach $990 million by 2026, and while this still trails behind Dupixent and Rinvoq from AbbVie, Inc. (ABBV), Lilly hopes phase 3 trials demonstrate better patient tolerance. 

Clinical testing found that Mirikizumab showed better results in patients with moderate-to-severe ulcerative colitis who did not respond to conventional therapies. Eli Lilly is waiting on about half a dozen trials before moving forward with this Monoclonal Antibody. If all goes according to plan, the drug could generate $14.6 billion in revenue by the end of 2023. 

Finally, we have Jaypirca (pirtobrutinib). This is a BTK inhibitor for treating relapsed/ refractor mantle cell lymphoma. The drug is forecast to generate $1.1 billion in revenue by 2028. Surely this is a smaller payout over a longer period than other drugs in Eli Lilly’s pipeline, but the amount significantly impacts the impressive growth expectations. 

Eli Lilly expects the development and sale of these drugs to help bolster revenue between $30.3 and $30.8 billion in 2023 alone. The excitement of new drugs hitting the market and volume increases for existing products will help drive these sales. Hopefully, this momentum will help to offset the loss of COVID-19 antibody revenue and the slowing sales of the cancer drug Alimta, which will lose its patent exclusivity. 

Analysts Confident in LLY’s Momentum

When all is said and done, analysts project LLY earnings could grow by 38.88% this year, which might be modest. For one, LLY’s $378.80 price target represents a 15.3% upside on the current share value of $330.70. This aligns with the incremental growth they have seen over the past few years.  It has been a slow but steady climb for LLY, even though they typically register at the low end of the estimate range. Finally, the current share value is up 36.66% and now sitting in the top third of–the 52-week range. 

With a 0.64 beta, the stock is quite stable, but its payout is pretty impressive, too.  LLY has an annual dividend of $4.52 with a dividend yield of 1.38% and an impressive 65.51% dividend payout ratio. In addition, LLY continues to promise consistent ROI with dividend increases for at least the last nine years at an annualized 3-year dividend growth rate of 15.02%. That said, the 47.58 P/E suggests strong investor faith in this growth stock, though a high P/E could intimate the stock is overvalued for its Moderate Buy rating.