Eli Lilly's (LLY -0.64%) shares have grown by more than 20% in the last 12 months -- but will this stock continue to exceed expectations in 2013? What do investors need to watch before they decide on their next move with this big pharma stock?
In order to help you answer this question, our senior biotech analyst has composed a brand-new premium research report that explains Eli Lilly's market opportunity, risks, and reasons to both buy and sell today. The following excerpt from the report takes an in-depth look at just one area investors must pay attention to.
The opportunity
As of its update in mid-October, the company has 12 molecules in phase 3 development, 22 in phase 2, and 27 in phase 1.
Once the patent expirations subside and the drugs work their way through the clinic, Eli Lilly should be on its way to recovery.
Eli Lilly's pipeline is building on its current strength in diabetes and oncology. There are four phase 3 molecules to treat diabetes and three to treat cancer.
Its GLP-1 drug, dulaglutide, passed three phase 3 trials in diabetics. We need to wait for the full details from the trials, and perhaps a head-to-head trial against Bristol-Myers Squibb and AstraZeneca's Bydureon to know how well it can compete, but the top-line results looked good.
On the oncology front, ramucirumab proved successful in a phase 3 trial in metastatic stomach cancer. Full details are being held for an upcoming scientific conference, but the company said the drug improved overall survival compared to placebo. Considering that these are patients who have already failed chemotherapy, the data seems solid enough to gain regulatory approval.
Paid while you wait
Given the patent situation, it seems likely that it'll be years before Eli Lilly has consistent revenue growth. Investors who want to buy now will have to be content with a dividend while they wait for capital appreciation caused by earnings growth.
Eli Lilly had consistently increased its dividend for years, but that practice stopped in 2009, and the dividend has been stuck at that level ever since. As the cash flow has slipped this year, the fraction of cash paid out through dividends has increased, but it's still a relatively small fraction of the cash Eli Lilly is bringing in.
