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Why Lilly's Near-Term Prospects Aren't Looking That Great

By Keith Speights and Brian Orelli, PhD - May 4, 2021 at 7:31AM

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The big drugmaker is relying heavily on one new product that likely won't be able to keep up its momentum.

Eli Lilly (LLY 0.38%) reported its first-quarter results on April 27, 2021. The company missed analysts' top- and bottom-line estimates. In this Motley Fool Live video recorded on April 28, 2021, Motley Fool contributors Keith Speights and Brian Orelli discuss why Lilly's near-term prospects aren't looking that great.

Keith Speights: One other big company has already reported earnings this week as well. Eli Lilly reported its first-quarter results on Tuesday. Brian, what were the big takeaways from Lilly's update?

Brian Orelli: On the surface, it seemed like a solid quarter, but it certainly didn't live up to analysts' expectations. Revenue was up 16% year over year. But again, that fell short of analysts' estimates and adjusted earnings were also up to $1.87 per share. But that was substantially lower than analysts, which were expecting $2.14 per share.

I think part of the problem is the COVID-19 antibodies therapies, it contributed about $810 million. If you back that out, then revenue was up a modest 2.3%.

Eli Lilly has a lot of drugs that are just aren't growing well or even shrinking. The insulins, Humalog and Basaglar, are not -- I think fell year over year and then its autoimmune disease [drug] Taltz also had a rough quarter. They lowered revenue and earnings guidance. They blamed it on the prospects for the antibody therapy specifically. But it doesn't seem like the rest of Eli Lilly's drugs are really doing all that well, either.

Speights: Yeah, I was a little surprised that Taltz didn't perform better. Taltz has been a growth driver for Lilly in the past. But then when I dug into it a little bit, I saw that they offered a lot of rebates.

We saw the same thing with Amgen and Otezla. I think it's just rebates season and it's causing some lower sales for some of these autoimmune disease drugs.

But you're right there, Lilly's quarter just wasn't impressive. The company relied heavily on the COVID-19 antibody therapies and like you said that, that's probably not going to be as big of a factor for them going forward throughout the rest of the year. Things aren't looking as bright for Lilly as investors would like.

Orelli: These autoimmune diseases have really been a big growth story for a lot of companies. I think maybe the insurance companies are finally pushing back like they had with the insulins. A few years ago, all the insulin players ended up competing with each other to try to get on a formulary so maybe that's what the insurance companies are doing with these autoimmune diseases now.

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Eli Lilly and Company Stock Quote
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