Eli Lilly Remains Well Positioned for Industry-Leading Growth, Buoyed by Cardiometabolic Drugs

Sector Director

Damien Conover

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Diabetes

Oncology

Immunology

Neuroscience

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Eli Lilly's innovative culture and strong financial commitment to developing the next generation of drugs set the company apart from its peers and fuel its long-term growth. Following a very steep patent cliff in 2014, Lilly's growth prospects have improved as the company is launching several new blockbusters and patent losses are fading.

Lilly's internal pipeline is well positioned to mitigate the patent losses during the next decade. The company tends to spend a low- to mid-20s percentage of its sales on financing the development efforts of new drugs, much higher than the high-teens industry average. The robust pipeline is a result of Lilly's strong commitment to research. We believe cardiometabolic drugs Mounjaro, Trulicity, and Jardiance and immunology drug Taltz along with cancer drug Verzenio hold the highest sales potential of Lilly's currently launched drugs. Further, pipeline drugs lebrikizumab (atopic dermatitis), mirikizumab (immunology), and donanemab (Alzheimer's) hold major blockbuster potential. 

Lilly's strong entrenchment in insulin production should also help the company deal with patent losses. Unlike traditional drugs, Lilly's insulin drugs are very hard to copy by generics and create barriers to entry for noninsulin producers because of the large up-front investments needed to create scale efficiencies. A new weekly insulin in late-stage development offers another avenue of growth in this mature market.

The company is taking a hard look at its bottom line. Through a combination of cost savings and expected top-line growth, Lilly aims to expand operating margins over the next several years, which we believe is achievable. Lilly expects to increase gross margins through productivity initiatives and greater capacity utilization. Overall, we view the strong traction of recently launched high-margin drugs in several indications as supporting the overall profitability gains.

Business Strategy & Outlook

Patents, economies of scale, and a powerful distribution network support Eli Lilly’s wide moat. Lilly's patent-protected drugs carry strong pricing power, which enables the firm to generate returns on invested capital in excess of its cost of capital. Further, the patents give the company time to develop the next generation of drugs before generic competition arises. Lilly’s diversified product portfolio means the company’s top drugs represent only a moderate amount of total sales, with the largest drug, Trulicity, representing almost 20% of total sales, which sets up manageable cash flow declines as new products mitigate the generic competition. Also, Lilly’s operating structure allows for cost-cutting after patent losses to reduce the margin pressure from lost high-margin drug sales. Overall, Lilly's established product line creates the enormous cash flows needed to fund the average $800 million in development costs per new drug. In addition, the company's powerful distribution network sets up the company as a strong partner for smaller drug companies that lack Lilly's resources. Lilly's entrenched insulin franchise creates an added layer of competitive advantage, as interchangeable insulin competition seems many years away due to the complexity of gaining generic approval for insulin and the high cost to build the needed economy of scale for insulin production. Also, Lilly's recently launched biologic drugs create higher hurdles over traditional small molecule for biosimilars to gain market share following the eventual patent expirations.

We think the firm does face environmental, social, and governance risks, particularly related to potential U.S. drug price-related policy reform (close to 60% of total sales are generated by prescription drugs sales in the U.S.) to increase access by lowering drug prices. Ongoing product governance issues (including litigation related to side effects and patents) also weigh on the company. While we have factored these threats into our analysis, we don't see them as material to our moat rating for Eli Lilly.

Wide

Economic Moat

Eli Lilly

Cialis, ia a competitor to Pfizer's blockbuster Viagra for erectile dysfunction. Cialis maintains an active period of 36 hours.

Cialis

Cymbalta is a serotonin-norepinephrine reuptake inhibitor used predominantly in the treatment of major depressive disorders and generalized anxiety disorder, ranks with Prozac as one of the most financially successful pharmaceuticals in industry history. It is also used in the treatment of fibromyalgia, neuropathy, chronic pain and osteoarthritis.

Cymbalta

Gemzar is a treatment of pancreatic cancer. Gemzar is commonly used in the treatment of pancreatic cancer, usually in coordination with 5-FU chemotherapy and radiology. Gemzar also is routinely used in the treatment of non-small cell lung cancer.

Gemzar

Methadone is an analgesic used frequently in the treatment of heroin, opium and other opioid and narcotic drug addictions.

Methadone

Prozac was one of the first therapies in its class to treat clinical depression by blocking the uptake of serotonin within the human brain. It is prescribed to more than fifty-four million people worldwide.

Prozac

Eli Lilly & Co. engages in the discovery, development, manufacture, and sale of pharmaceutical products. The firm's products consist of diabetes, oncology, immunology, neuroscience, and other products and therapies. The company was founded by Eli Lilly in May 1876 and is headquartered in Indianapolis, IN.

Earnings data Q3 2023

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A Phase 3 trial shows that Eli Lilly's investigational Alzheimer's treatment donanemab significantly slowed cognitive and functional decline in people in the early stages of the disease.

Eli Lilly Says Alzheimer's Treatment Slows Cognitive Decline

For the purchase of Versanis, Lilly (LLY) agrees to pay up to $1.93 billion in cash.

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Eli Lilly is racing to market donanemab for Alzheimer's after Eisai and Biogen's drug for the disease, Leqembi, won FDA approval this month.

Eli Lilly expects FDA decision on Alzheimer's treatment donanemab by the end of the year

The Eli Lilly and Co. LLY, -0.47% investigational Alzheimer's treatment donanemab has shown particular promise in treating patients at younger ages and in the earliest stage of disease, according to new late-stage trial results released Monday.

Eli Lilly's Alzheimer's treatment shows promise in early stages of disease — but safety concerns remain

Donanemab significantly slowed cognitive and functional decline for amyloid-positive early symptomatic Alzheimer's disease patients, lowering their risk of disease progression; nearly half of participants at earlier stage of disease on donanemab had no clinical progression at 1 year Additional subpopulation analyses presented live showed that those study participants at earliest stage of disease had even greater benefit, with 60% slowing of decline compared to placebo Furthermore, treatment effect continued to increase relative to placebo over the course of the trial, even though many participants completed their course of therapy at 6 or 12 months, supporting limited duration dosing FDA submission completed in Q2; regulatory action expected by end of year INDIANAPOLIS , July 17, 2023 /PRNewswire/ -- Eli Lilly and Company (NYSE: LLY) presented full results from the Phase 3 TRAILBLAZER-ALZ 2 study showing that donanemab significantly slowed cognitive and functional decline in people with early symptomatic Alzheimer's disease (AD). The data were shared at the 2023 Alzheimer's Association International Conference (AAIC) as a featured symposium and simultaneously published in the Journal of the American Medical Association (JAMA).

Results from Lilly's Landmark Phase 3 Trial of Donanemab Presented at Alzheimer's Association Conference and Published in JAMA

Eli Lilly's experimental drug donanemab slowed the progression of Alzheimer's by 60% for patients in the earliest stages of the brain-wasting disease, the Alzheimer's Association said in a press release on Monday.

Lilly drug slows Alzheimer's by 60% for mildly impaired patients, Alzheimer's group says

Eli Lilly is adept at discovering and developing new medicines. The company's potential for innovation is bearing fruit.

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A promising new Alzheimer's drug could spell "the beginning of the end" for the neurodegenerative disease.

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Eli Lilly agreed to buy biopharma firm Versanis for up to $1.93 billion, boosting Lilly's reach into the obesity drug market.

Eli Lilly Buys Versanis to Boost Its Obesity Drug Portfolio

Shares of Eli Lilly & Co (NYSE: LLY) gained nearly 4.0% today after the pharmaceutical behemoth said it will buy Versanis Bio for up to $1.925 billion. Other financial details are yet to be disclosed The aforementioned consideration includes both upfront payment and future instalments based on achieving certain milestones, as per the press release.

Eli Lilly to expand in obesity drugs with $1.925 billion acquisition of Versanis Bio

Eli Lilly has agreed to buy privately owned Versanis Bio in a deal that could be worth up to $1.93 billion. Through this deal, Lilly will gain a novel mid-stage weight loss candidate known as bimagrumab.

Why Eli Lilly Stock Is Rising Today

Eli Lilly stock jumped Friday after unveiling a nearly $2 billion takeover that could bolster its efforts among weight-loss drugs.

Eli Lilly Unveils A Nearly $2 Billion Deal To Leap Ahead In Weight Loss

The deal is Eli Lilly's latest attempt to capitalize on the weight loss industry gold rush, which was sparked by demand for Novo Nordisk's Wegovy and Ozempic.

Eli Lilly to acquire obesity drug maker Versanis for $1.9 billion

Eli Lilly (NYSE: LLY ) stock is a hot topic among traders on Friday after the company announced its acquisition of Versanis Bio . Versanis Bio is a clinical-stage biopharmaceutical company developing treatments for cardiometabolic diseases.

LLY Stock Alert: What to Know as Eli Lilly Acquires Versanis Bio

Eli Lilly and Co (NYSE:LLY) announced on Friday that it will buy privately held drug developer Versanis for up to $1.93 billion, in a bid to improve its portfolio of obesity drugs. Under the terms of the deal, Versanis shareholders could receive $1.93 billion in cash, which includes an upfront payment and subsequent payments upon achieving certain development and sales milestones.

Eli Lilly spends up to $1.93B to acquire obesity drug developer Versanis

Versanis shareholders could receive as much as $1.925 billion in cash, which will consist of an upfront payment and additional payments if certain milestones are reached.

Eli Lilly to Acquire Versanis Bio, Maker of Obesity Treatment

Eli Lilly and Co said on Friday it will acquire privately held drug developer Versanis for up to $1.93 billion, in a bid to boost its portfolio of obesity drugs.

Lilly to buy Versanis for up to $1.93 bln to boost obesity drug portfolio

Eli Lilly and Co. LLY, -1.34% will acquire Versanis Bio, a private clinical-stage biopharma company focused on new treatments for cardiometabolic diseases, the companies said in a release Friday. Versanis is developing a monoclonal antibody called bimagrumab that is being studied alone and in combination with the popular weight-loss drug semaglutide to potentially further reduce fat mass while preserving muscle.

Eli Lilly to acquire Versanis Bio, expanding obesity-treatment pipeline

Medicxi co-led Company's US$70 million Series A less than 2 years ago Third Medicxi portfolio exit to US biopharma in last 12 months LONDON, GENEVA and JERSEY, British Isles, July 14, 2023 /PRNewswire/ -- Medicxi, a leading European life sciences investment firm, announces that its portfolio company, Versanis Bio, a private clinical-stage biopharmaceutical company focused on the development of new medicines for the treatment of cardiometabolic diseases, has entered into a definitive agreement to be acquired by Eli Lilly and Company (NYSE: LLY). Under the terms of the agreement, which is subject to customary conditions, Versanis shareholders would receive up to $1.925 billion USD in cash, inclusive of an upfront payment and subsequent payments upon achievement of certain development and sales milestones.

Medicxi asset-centric portfolio company Versanis Bio to be acquired by Lilly to improve patient outcomes in cardiometabolic diseases

INDIANAPOLIS and NEW YORK , July 14, 2023 /PRNewswire/ -- Eli Lilly and Company (NYSE: LLY) and Versanis Bio today announced a definitive agreement for Lilly to acquire Versanis, a private clinical-stage biopharmaceutical company focused on the development of new medicines for the treatment of cardiometabolic diseases. Versanis' lead asset is bimagrumab, a monoclonal antibody that binds activin type II A and B receptors to block activin and myostatin signaling.

Lilly to Acquire Versanis to Improve Patient Outcomes in Cardiometabolic Diseases

Warren said the report shows that Congress needs to take additional steps to reduce the excessive prices of insulin from Eli Lilly, Sanofi and Novo Nordisk.

Uninsured Americans pay high costs for an insulin Eli Lilly vowed to price at $25, Sen. Warren says

Novo Nordisk

An overweight world is hungry for obesity treatments, driving big forecasts for weight loss drugs. For now, two pharmaceutical stocks own the market.

The Blazing Weight-Loss Drug Battle: Can Anyone Unseat Undisputed Leaders Novo Nordisk And Lilly?

Americans without health insurance pay an average of $98 for Eli Lilly's generic insulin despite the company's May 1 pledge to cut its list price to $25 per vial, according to a survey of more than 300 U.S. pharmacies by U.S. Senator Elizabeth Warren's office released on Thursday.

Uninsured US patients pay up to $330 for Eli Lilly's $25 insulin, Senator Warren says

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The brisk pace of biopharmaceutical deal making seen in the first half of this year may only accelerate in the months ahead, even as regulators take a hard look at some of the bigger deals, analysts say.

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The European Medicines Agency said Tuesday it's reviewing data on the risk of suicidal thoughts and self-harm stemming from the use of the new medicines called GLP-1 receptor agonists, that are used to treat Type 2 diabetes and obesity. The review comes after Iceland's medical regulator reported self-injury and suicidal thoughts in people using Ozempic, Saxenda and Wegovy.

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