The coronavirus pandemic has created a great disruption in the global economy. The stock market has witnessed a massive sell-off and the drug/biotech sector has not been spared either. The Zacks Large Cap Pharmaceuticals industry, comprising some of the biggest drugmakers in the world, has declined 11% this year so far. Amid this crisis, Eli Lilly’s LLY stock stands tall.
Last month, Lilly announced that it is halting enrollment in most ongoing studies and will delay new study starts in order to allow doctors and healthcare facilities to focus on efforts to combat the coronavirus disease, COVID-19.
The coronavirus pandemic, which has killed more than 47,000 people globally, has compelled healthcare systems to prioritize caring for COVID-19 patients while limiting other activities. Along the same lines, Lilly’s laboratories have diverted resources to conduct diagnostic testing for COVID-19 patients and are researching potential treatments for the disease. Lilly has signed a deal with AbCellera to co-develop antibody products to treat COVID-19. Like Lilly, Pfizer and Biogen BIIB have also signed collaborations with smaller biotechs to co-develop antibody therapies to treat COVID-19.
On Wednesday, Lilly, along with other pharma giants Pfizer PFE and Merck MRK, announced medical service volunteer programs. The programs will enable their employees who are licensed medical professionals to offer their services in the fight against COVID-19 for a longer period of time than normally allowed.
However, delaying starts of studies and pausing enrollments in ongoing studies will delay the potential approval and launch of these candidates. Meanwhile, the medical service volunteer programs and coronavirus collaborations could also hurt Lilly’s future profits. Needless to say, there is a rising concern about the impact of the outbreak on first-quarter earnings due to supply-chain disruptions. Nonetheless, Lilly enjoys strong fundamentals, which can help it withstand the short-term impact of the pandemic.
Lilly currently carries a Zacks Rank #1 (Strong Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.
Its shares have risen 3.8% this year so far, outperforming the industry.
Interestingly, its estimates have remained stable in the past 30 days as it has been for most large drug companies. This is probably because drug/biotech is a relatively defensive sector. In other sectors, estimates have been coming down sharply as analysts are coming to terms with the pandemic’s impact on earnings.
Lilly was one of the few drug companies, which reported strong fourth-quarter results in January, beating estimates for both earnings and sales. The company had also slightly raised its 2020 revenue guidance back then and re-affirmed its outlook last month.
In 2020, Lilly’s revenue growth is expected to be driven by higher demand for key drugs like Trulicity, Jardiance, Taltz, Verzenio, Basaglar, Emgality as well as newly launched Baqsimi and Reyvow.
Lilly is making significant pipeline progress with several positive late-stage data readouts and multiple regulatory updates scheduled for 2020. Lilly expects to launch two medicines, selpercatinibfor RET-altered cancers and Ultra-rapid Lispro/ultra-rapid acting insulin for type I and type II diabetes in 2020. Meanwhile, relatively newer drugs are also being evaluated for additional indications/label expansions, which can drive sales in the future quarters
Lilly is also regularly adding promising new pipeline assets through business development deals. This year, Lilly bought dermatology company Dermira for approximately $1.1 billion. The deal added Dermira’s promising interleukin inhibitor for atopic dermatitis/eczema, lebrikizumab, thereby expanding Lilly’s immunology pipeline.
Lilly has its share of challenges lined up for 2020 like generic competition for several drugs, including the expected generic entry of Forteo; rising pricing pressure on its diabetes franchise in the United States due to rebates and legislated increases in Medicare Part D cost sharing; price cuts in some international markets; and the impact of the coronavirus pandemic. However, it seems the company’s strong pipeline, consistent outperformance of key drugs, cost cuts and regular strategic deals will keep the stock afloat through 2020 despite the coronavirus-led economic downturn.
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Biogen Inc. (BIIB): Free Stock Analysis Report
Pfizer Inc. (PFE): Free Stock Analysis Report
Merck & Co., Inc. (MRK): Free Stock Analysis Report
Eli Lilly and Company (LLY): Free Stock Analysis Report
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