Wall Street Continues to See Opportunity in Eli Lilly

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Wall Street Continues to See Opportunity in Eli Lilly
LLY’s stock slide after earnings might present a buying opportunity.


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Shares of Eli Lilly   (LLY)  declined after reporting third quarter earnings before the open Tuesday morning. The slide could present an attractive opportunity to bullish investors.

The pharmaceutical giant is giving back all of its early week gains, and then some, as morning selling volume picks up. The earnings release that provided a stock pop in early morning hours has turned into a slide that took the stock down as much 5% directly after the call.

Still, the company’s long-term value proposition presents opportunities, according to analysts.

“The growth prospects for LLY’s key drugs – Trulicity, Jardiance, Taltz and Verzenio– as well as its pipeline assets, especially in pain, are underappreciated, in our view,” Credit Suisse analyst Louise Chen wrote in her take on the earnings release.

Chen added that recent efficacy studies and pursuit of yet more drug approvals as well as the profitable spinoff of Elanco Animal Health Sciences support an undervalued thesis for the pharmaceutical stock.

She set a $128 per share price target and a “Overweight” rating for the stock.

Not all analysts were as enthusiastic on the growth statistics of many key drugs.

Credit Suisse analyst Vamil Divan homed in on the laggard products as he elucidated his mixed review.

“Performance of key products that are part of the new product story were mixed,” he said. “Olumiant US sales of $800K were surprisingly light in its first full quarter on the US market, while Humalog sales came in below expectations.”

Olumiant, a drug to treat rheumatoid arthritis, was the smallest part of the “New Medicines” revenue segment with just $55.6 million in global revenues as compared to Trulicity’s $816.2 million in revenue.

Humalog, an insulin drug and the most profitable established drug for the company, meanwhile saw a 5% decline in revenue globally and a 12% drop in domestic sales.

There also remains the worry over generic drug competition cutting further into these traditional cash cow offerings.

Even still, Divan was not ready to sell Eli Lilly, issuing a “Neutral” rating and a $112 price target, still above Tuesday’s midday price.

According to FactSet data, the sentiment on the Street is largely bullish.

Six of eight analysts surveyed in the last month are issuing “Buy” rating for the drug maker, with all six raising price targets amidst regulatory and efficacy tailwinds.

Volume charts suggest the slide might be due to some profit taking from traders after the stock’s nearly 40% run over the past six months.

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