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Sales of weight-loss drugs Mounjaro and Jardiance are fueling almost all of Eli Lilly’s growth right now.
Michael Nagle/Bloomberg
Eli Lilly
stock has ripped higher this year—and its earnings report could pump it up even more.
Yes, Eli Lilly shares (ticker: LLY) are up about 23% in 2023, driven in part by positive trial results for its Alzheimer’s drug, donanemab, and even more by the growth of the company’s weight-loss drugs, Mounjaro and Jardiance. The latter drugs’ success has prompted analysts to lift their 2023 earnings-per-share estimates by about 12% so far this year, according to FactSet.
The stock’s run seems to set up a perfect “sell the news” moment for Eli Lilly. Analysts expect sales of $7.58 billion, which would represent 17% year-over-year growth, while earnings, due on Tuesday, should come in at $1.98 a share, up 58%, as profit margins grow. Those are high expectations—ones that Lilly could have a tough time topping.
Tough, but not impossible. The Alzheimer’s drug won’t help earnings much right now. The total Alzheimer’s market, which Lilly would share with
Biogen
’s
(BIIB) Leqembi, could be about $14 billion in just under a decade, according to Grand View Research. But Lilly is still waiting for Food and Drug Administration approval for donanemab, which is expected by the end of the year.
That means Lilly is “probably not going to be able to say anything new about Alzheimer’s” on the earnings call, says Rhys Williams, chief strategist at Spouting Rock Asset Management.
That puts Lilly’s obesity drugs front and center this quarter. Sales of Mounjaro and Jardiance are fueling almost all of the growth right now. Combined, they are expected to grow 40% annually to reach almost $17 billion by the end of 2026. That will lead to total company sales growth of about 18% annually to $52 billion over the same period. For the quarter, Jardiance is expected to come in at $627 million, while Mounjaro is expected to hit $740 million.
“This quarter, it’s going to be more about the diabetes and weight-loss drugs,” says Williams. “There are pretty good expectations.”
But beatable. And if sales of those drugs do drive a solid earnings report, the stock should gain despite worries about valuation. While Lilly stock trades at about 42 times forward earnings estimates, it’s only 1.3 times expected annual earnings growth of about 31% over the next three years. That price-to-earnings-growth, or PEG, ratio is lower than Lilly’s five-year average of about 1.8 times.
So as long as the market remains confident—or grows more so—in the company’s profit growth, it will keep bidding the stock higher.
Write to Jacob Sonenshine at [email protected]
Source: https://www.barrons.com/articles/eli-lilly-stock-obesity-drugs-earnings-efd545b8?siteid=yhoof2&yptr=yahoo