On The Fly: What to watch in Eli Lilly earnings report
Eli Lilly (LLY) is scheduled to report results of its second fiscal quarter before the market open on Tuesday, July 25, with a conference call scheduled for 9:00 am EDT. What to watch for: 1. COMPANY BACKS EPS, REVENUE GROWTH VIEW. Along with its first quarter financial report, the drug giant backed its 2017 EPS view of $4.05-$4.15, and backed its revenue view of $21.8B-$22.3B. Analysts are currently expecting FY17 EPS of $4.12 on revenue of $22.14B. The company's 2017 revenue expectations is based on revenue growth from animal health products and a number of established pharmaceutical products including Trajenta, Forteo and Humalog, as well as higher revenue from new products including Trulicity, Taltz, Basaglar, Cyramza, Jardiance, and Lartruvo. 2. RHEUMATOID ARTHRITIS: According to Lilly's comments in its last quarterly report, the European Commission granted marketing authorization for 4 mg and 2 mg Olumiant or baricitinib, for the treatment of moderate-to-severe active rheumatoid arthritis, or RA, in adult patients who have responded inadequately to, or who are intolerant to, one or more disease-modifying antirheumatic drugs. Lilly added that Olumiant had been launched in select European countries. Eli Lilly says it hasn't contemplated a scenario to not pursue baricitinib in RA. On Eli Lilly's Q1 call, management stated that it has "not contemplated a scenario which we would not pursue baricitinib in rheumatoid arthritis." In terms of the bari timing, the company said it can't give an estimate until they meet with FDA, which "we are hoping we will do within the next 60 days." Furthering these comments and bari's impact on guidance, CEO David Ricks said that guidance for average annual revenue growth of 5% from 2015 through 2020 is "what we believe to be the minimum performance that we thought we could achieve. What we didn't do is provide what we thought was the maximum we could achieve even taking into account the impact of bari, we still believe we could stay above that 5% minimum goal that we've established...So again, our confidence is still very high in our ability to achieve that objective." 3. PATENT PROTECTION LOSS: On April 27, soon after its Q1 results, Argus downgraded Eli Lilly to Hold from Buy. Analysts Katelyn Bayone and John Eade downgraded the stock based on valuation, at the time. They said, at the time that the shares are fairly valued given the challenges faced by the company "including the loss of patent protection on key drugs over the next several years, and the recent late-stage pipeline setbacks for baricitinib, for rheumatoid arthritis, and solanezumab for Alzheimer's." When it reported Q1 earnings, Lilly noted revenue decreases for Cialis, Alimta, Forteo and Humulin.