Eli Lilly (LLY) to Report Q3 Earnings: What's in the Cards?

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Eli Lilly and CompanyLLY will report third-quarter 2018 results on Nov 6, before market open. In the last reported quarter, the company delivered a positive earnings surprise of 14.50%.

Lilly's shares have risen 28.4% this year so far compared with the industry 's increase of 4%.

Lilly's earnings performance has been pretty impressive with earnings beating expectations in each of the last four quarters, bringing the average positive surprise to 10.15%.

Eli Lilly and Company Price and EPS Surprise

Eli Lilly and Company Price and EPS Surprise | Eli Lilly and Company Quote

Let's see how things are shaping up for this quarter.

Factors to Consider

Like the previous couple of quarters, strong uptake trends of new products like Trulicity, Taltz, Basaglar, Cyramza, Jardiance and Lartruvo are likely to make up for the decline in sales of established products like Zyprexa, Alimta, Cialis, Strattera and Effient.

While Trulicity sales are driven by growth in the GLP-1 market and market share gains, Jardiance sales are likely to be backed by increased demand within the SGLT2 class of diabetes medicines in the United States and increased volume outside the United States. The Zacks Consensus Estimate for Trulicity and Jardiance's third-quarter revenues is $788 million and $175 million, respectively.

In the third quarter, Trulicity's label was updated to include data from the AWARD-7 study, which showed that the GLP-1 receptor agonist was effective and safe in type II diabetes patients with moderate-to-severe chronic kidney disease (CKD). The label update may bring in additional sales in the third quarter.

Continued strong uptake outside the United States will continue to drive sales of Cyramza while increased volumes will push sales of Taltz and Basaglar higher. Taltz was launched for the second indication of psoriatic arthritis in late 2017/early 2018 in both the United States and Europe, which contributed to sales in the second quarter, a trend we expect to continue in the third. The Zacks Consensus Estimate for Taltz and Cyramza's third-quarter revenues is $249 million and $220 million, respectively.

However, the loss of exclusivity in some countries for Effient, Strattera, Zyprexa, Cymbalta, Evista and Axiron and lower demand for Cialis will continue to hurt volumes. In September, Teva Pharmaceuticals TEVA announced the launch of a generic version of Cialis. The generic launch will not have much impact in the third quarter but should significantly hurt sales of the branded drug in the fourth quarter.

Also, competitive pressure and loss of exclusivity in certain countries are hurting Alimta sales, particularly international sales - a trend expected to continue in the third quarter. The Zacks Consensus Estimate for Alimta and Cialis sales in the third quarter is pegged at $539 million and $373 million, respectively.

Importantly, on the second quarter call, Lilly had said that earnings in the second half will be lower than the first due to the expected U.S. generic competition for Cialis in September, higher R&D costs in the latter half, potential launch costs for Emgality (galcanezumab) and lower U.S. Adcirca collaboration revenues than the first half.

Investors will be keen to know the sales numbers of new products like rheumatoid arthritis drug Olumiant (baricitinib) and advanced breast cancer treatment, Verzenio. Olumiant was launched in select European countries and in Japan in 2017 and in the United States, only for the lower dose, in June this year. Verzenio was launched in the Unites States in the fourth quarter of 2017.

Late last month, Lilly gained FDA approval for Emgality (galcanezumab), its CGRP antibody, for the preventive treatment of migraine in adults. Investor focus will be on management's comments on the launch plans for this key new product on the third-quarter call.

Earnings Whispers

Our proven model does not conclusively show that Lilly will beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.

Earnings ESP: Its Earnings ESP is -0.88% as the Zacks Consensus Estimate for earnings is $1.37 per share while the Most Accurate Estimate is pegged lower at $1.36. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank: Lilly's Zacks Rank #2 increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings beat.

We caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some drug/biotech stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat in their upcoming releases.

Regeneron Pharmaceuticals, Inc. REGN has an Earnings ESP of +4.65% and a Zacks Rank #3. The company is scheduled to release third-quarter results on Nov 6. You can see the complete list of today's Zacks #1 Rank stocks here .

Alnylam Pharmaceuticals, Inc. ALNY has an Earnings ESP of +12.54% and a Zacks Rank #3. The company is scheduled to release third-quarter results on Nov 7.

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Eli Lilly and Company (LLY): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Earnings , Stocks
Referenced Symbols: LLY , ALNY , REGN , TEVA

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