Eli Lilly Drops 2.4% Despite Beating Q4 Expectations

American healthcare and drug manufacturer Eli Lilly and Co. (LLY) reported better-than-expected fourth-quarter and full-year Fiscal 2021 results. Despite exceeding both earnings and revenue expectations and providing upbeat guidance, shares fell 2.4% to close at $244.81 on February 3 as the company announced a delay in the timeline for its Alzheimer’s drug application.

In the conference call, management announced that it is delaying the regulatory application for accelerated approval of its promising Alzheimer drug donanemab, which was expected to be done in Q1FY22. The company expects to complete the filing by the end of 2022.

Better-Than-Expected Results

Lilly reported quarterly adjusted earnings of $2.49 per share, up 8% year-over-year and significantly higher than analyst estimates of $2.15 per share.

Similarly, Lilly’s quarterly revenue rose 8% year-over-year to $8 billion and also outpaced analyst estimates of $6.74 billion. The robust jump was attributed to an 11% growth in volume. Further, excluding revenue from COVID-19 antibodies of $1.06 billion, Q4 revenue grew 6%.

During the quarter, Lilly’s key growth products, namely Trulicity, Taltz, Verzenio, Jardiance, Olumiant, Emgality, Retevmo, Cyramza, and Tyvyt contributed 14% towards revenue growth and comprised 61% of total revenue.

For FY21, Lilly reported adjusted earnings of $8.16 per share, growing 20% annually. Full-year revenue came in at $28.32 billion, increasing 15% annually and backed by a 16% growth in volume. Excluding FY21 revenue from COVID-19 antibodies of $2.24 billion, FY21 revenue rose 10%.

CEO Comments

Noting that the company proved itself despite the pandemic hardships, Lilly’s chair, and CEO, David A. Ricks said, “We have tremendous momentum moving into 2022 and beyond with strong revenue expectations, limited patent exposure, and an exciting pipeline of potential new medicines, which we hope will give us the opportunity to positively impact millions more lives in meaningful ways. Lilly is committed to continuing to innovate as the primary way to create value for patients and shareholders alike.”

FY22 Guidance

Based on the current momentum, Lilly reaffirmed its previously provided Fiscal 2022 guidance.

Lilly forecasts FY22 revenue to fall in the range of $27.8 – $28.3 billion. FY22 adjusted earnings are projected between $8.50 – $8.65 per share, while the consensus estimate is pegged at $7.54 per share.

Analysts’ View

Responding to Lilly’s performance, analyst Vamil Divan of Mizuho Securities lowered the price target on the stock to $293 (19.7% upside potential) from $302 while maintaining a Buy rating.

Commenting on his optimistic view of the stock, Divan said, “We continue to recommend LLY shares given the company’s strong growth outlook, multiple attractive pipeline assets, and limited risk of patent expirations. We expect positive news in the coming months to be driven by continued progress with tirzepatide, as we expect positive top-line data in obesity from the SURMOUNT-1 trial in 1H22, FDA approval for tirzepatide in Type 2 diabetes by mid-2022, and then rapid commercial uptake for the product as we move into the back half of the year.”

Overall, the stock has a Moderate Buy consensus rating based on 11 Buys and 5 Holds. The average Eli Lilly & Co. price target of $291.25 implies 19% upside potential to current levels. Shares of one of the best healthcare stocks, according to TipRanks, have gained 49.4% over the past year.

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