Eli Lilly (LLY) reported first-quarter financial results on Thursday morning that are, for the most part, quite impressive. Adjusted earnings of $1.75 per share was a significant beat of industry consensus and amounted to growth of 32%. Total revenue printed at $5.86 billion, also exceeding expectations, and was up 15.1% year over year.
There appeared to be a rush in demand for some of the company's products going into this social and economic lockdown created by the coronavirus pandemic. Namely, Eli Lilly experienced 40% growth in sales of the diabetes drug Trulicity. Sales of this treatment ended the quarter just below $1.23 billion, or more than 20% of the entire pie.
A little further down the line, comes the plaque psoriasis treatment Taltz. Taltz landed in fourth place, at $443 million, in terms of where they are in the company's "batting order." That $443 million was good enough for growth of 76%.
In between, Humalog, which is a fast-acting meal-time insulin that also targets diabetes, experienced a 5% decrease in sales at $695.8 million, and sales of Alimta, a treatment for cancer in or near the area of a person's lungs, rose 12% to $560.1 million.
What That Means
Lilly seems to understand that globally, there was a benefit to revenue of as much as $250 million due to the impacts of Covid-19, and that later in the year, the disease could negatively affect financial results. Many of the company's top-selling drugs are meant for the treatment of some of the underlying conditions that Covid-19 has been reported to inflict. On that note, CEO David Ricks said "Lilly is rising to meet the challenge of the Covid-19 pandemic, whether it be by supporting our employees, our communities, patients with chronic disease who are the most vulnerable to the virus, or directly attacking the disease with new and existing therapies."
As for that direct attack on the novel coronavirus, Ricks has been out and about in the financial media of late. The company is currently collaborating with Canadian biotech AbCellera to quickly develop an antibody therapy that will target the effective treatment of Covid-19.
Ricks acknowledges that the entire industry is working at "lightning speed" in order to come up with a way to combat this awful scourge. He is hopeful that this collaboration puts something into clinical trials by this summer, and then perhaps gets fast-tracked if early feedback is positive. Ricks speaks of condensing a process that from concept to market usually takes about 15 years, down to a six to nine-month period.
Lilly is one of the companies that felt confident enough to put numbers on its outlook for the full year. It expects revenue to land in between $23.7 billion and $24.2 billion, which confirms earlier guidance. Wall Street is looking for something close to $23.82 billion.
The company expects this revenue to produce adjusted EPS of $6.70 to $6.90, which actually lifts the high end of prior guidance of $6.70 to $6.80. The consensus view is for roughly $6.77.
I like what Lilly is doing and trying to do. I also like everything David Ricks is saying. What I don't like is that the shares have already had their breakout, and if you are not in the name, as I am not, then a few of the horses may have already left the barn. The question now, is what is risk worth?
In the chart, above, you can see the February-March double bottom that created the $144 pivot. Also note the three days of sideways action (orange circle) at the point of breakout in mid-April. That confirms to me that I am reading the chart correctly as there was at least a skirmish between the forces of both momentum and resistance where it should be.
If I were long LLY, based on how I am reading the chart, my price target would be $172, so still some decent dough potentially to be made. But if an investor goes with that thought and stays long, I would be inclined to pull my panic point up to $146 from $133.
If one were to enter into a long position at this level, my thought would be to write something against the long, such as maybe July $170 calls if you can get more than $5 in premium for them. Those calls are valued like that, but are terribly illiquid, so this would not be a cinch.