It's easy to find yourself paralyzed like a deer in headlights when deciding which stock(s) to buy. There's the fabled "paralysis by analysis," where you spend all of your time looking for just one more detail and you never end up doing anything. There's also what I call paralysis by abundance -- that is, freezing up when you know you want to get into a sector, but there are several potentially promising candidates.
I can see how that would be true these days in the big-cap drug sector. Particularly because you have a mix of depressed stories like Merck
In many respects, this quarter was similar to the one that immediately preceded it. Sales were up 6%, new drugs continued to make up a larger part of the pie, and net income was up in the mid-teens. It should be noted, though, that operating income was up rather strongly in this quarter (up 21%) and margins improved rather meaningfully.
There weren't too many big surprises to me on how Lilly's top drugs performed. Zyprexa and Evista were weak, and Cymbalta, Strattera, Alimta, and Foreto were quite strong. I was a little disappointed with 5% growth in the diabetes business, but this sort of performance is probably more realistic for now than the double-digit increase experienced in the fourth quarter.
There were also a few bits of news this quarter pertaining to the pipeline and possible generic competition. It looks as though Teva
On the pipeline, the company is getting a priority review for Arxxant, which treats diabetic retinopathy, eye problems caused by diabetes. There was also news from a study that Evista may help prevent breast cancer, but this will be a tough opportunity to realize -- oncologists don't generally deal in cancer prevention, and the OB/gyn community might not be prepared to prescribe a potentially preventative drug that has real side effects.
At the end, I'm just not a huge fan of Lilly right now. The late-stage pipeline isn't that spectacular, and there are better values in the space on both absolute and relative-to-growth bases.
For more Foolish pharmaceutical findings:
Merck is a Motley Fool Income Investor recommendation; Pfizer is an Inside Value recommendation. The Fool has a newsletter for almost every style of investing.
Our Foolish international team has identified two top-notch drug company investment ideas. Learn about these and many more great ideas with Around the World in 80 Minutes .
Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
