Lilly is a global healthcare leader. The company develops, manufactures, and markets products in the pharmaceutical segment. It also had a business focusing on animal healthcare which it recently disposed of.
It has manufacturing and distribution facilities in the U.S., Puerto Rico, and 13 other countries. Eli Lilly products are sold in 125 countries, worldwide. The company has an extensive network of wholesalers and sales representatives in the U.S. that have connections with pharmacies, physicians, other healthcare professionals, and hospitals. Eli Lilly also sells it products through several online healthcare channels.
By therapeutic areas, endocrinology, neuroscience, oncology, cardiovascular, immunology, other, and animal health are Eli Lilly’s primary focus disciplines. Endocrinology products constitute the largest single group in the company’s consolidated revenue. Humalog U100 is the most broadly used Lilly insulin product. Taltz, Basaglar, Jardiance, Trulicity, and Verzenio are a few of its iconic drugs.Investment Data
- Opportunity Score: 68
- Ticker: NYSE:LLY
- Sector: Healthcare
- Industry: Drug Manufacturers
- Market Cap: 111.57B
- P/E: 14.15
- Dividend Yield: 2.22
- Dividend Payout Ratio: 31.43
- Chowder Score: Dividend Snapshot Members Only
- 3, 5, 10-year Revenue Growth: Dividend Snapshot Members Only
- 3, 5, 10-year Dividend Growth: Dividend Snapshot Members Only
Revenue Growth & Market Exposure
Eli Lilly has over 95 years of extensive healthcare experience under its belt. Customers trust Eli Lilly for the quality, safety, and affordability of its products. Customers should benefit from the recent launches of new medicines like Emgality, Olumiant, and Basaglar at lower prices. Lilly’s average net price after rebates and discounts has fallen from 59% of list price in 2014 to 46% in 2018.
Lilly is now focusing on its core products and as a result, it disposed of its Elanco Animal Health (business focusing on animal healthcare) subsidiary in the last year. The company successfully grew its revenue by 7% driven by volume growth, with new products accounting for 34% of Lilly’s 2018 pharmaceutical revenue. The company is expecting new products to account for nearly 45% of its pharmaceutical revenue by the end of 2019. The late-phase pipeline saw the addition of three highly promising molecules – tirzepatide in diabetes, mirikizumab in immunology and pegilodecakin in oncology in 2018. Eli Lilly is focusing on strengthening its R&D efforts towards generating more first-in-class molecules and has successfully launched 10 new medicines in the last five years. The company spends over 20% of its revenues on R&D activities.
The company continues to enter into new partnerships involving emerging technologies and innovations. Over the last year, Lilly has formed partnerships/ acquisitions focusing on RNA interference, cell encapsulation, immuno-oncology, and precision medicine. The company is also investing in digital technology to improve diagnosis and customer experiences. It is targeting 2019 revenues to grow in the mid-single-digit range.
Eli Lilly is a shareholder-friendly company returning capital to shareholders through dividends and share repurchase programs. It is a Dividend Starter. Over the past five years, Lilly’s annualized total shareholder return has averaged 21%. It has guided to increase the dividend by another 15% this year. The company sports an annual average dividend yield of 2.4% and has a payout ratio of 32%. Lilly raised its dividend by 15% in the last year. Eli Lilly has compounded its dividend growth at 4% annually in the last three years.
Earnings have also grown at a rate of 11% CAGR in the last three years. Eli Lilly is targeting 2019 EPS growth in the mid-to high-single digit range and a pharmaceutical operating margin of 31% in 2020. Over the past five years, the company has been successful in maintaining relatively flat operating expenses while growing revenues.
Eli Lilly is targeting to launch another 10 new molecules in the next five years through 2023. The company is in a good position to benefit from the growing healthcare industry. A strong pipeline of products and newly launched medicines position it well for volume-driven growth in the future.
Eli Lilly’s business has strong entry barriers. Ownership of patents, trademarks, and intellectual property rights and strict government regulations form a deep moat around Eli Lilly’s business. Moreover, human pharmaceutical development is time-consuming, expensive, and risky.
Eli Lilly’s pharmaceutical products compete with leading global medical companies. It faces competition from generic pharmaceuticals and biosimilars. Eli Lilly suffers from intense price competition from generic forms of the product. Some of the leading industry names are Abbott Laboratories, Pfizer, Roche Inc., Novartis, Merck & Co, AbbVie, AstraZeneca, etc. Lilly has the potential to launch more than 20 new molecules in 10 years (2014-2023).
|Ticker||Company||Sector||Industry||Score||Quote||Market Cap||PE||FPE||EPS||Yield||Payout Ratio||Payments||Dividend||Chowder||Ambassador||Achiever||Aristocrat||King||Graph|
|JNJ||Johnson & Johnson||Healthcare||Drug Manufacturers||68||138.07||363.38||26.33||28.31||5.24||2.75||72.52||4||3.80||9.02||NO||YES||YES||YES||1|
|MRK||Merck & Co., Inc.||Healthcare||Drug Manufacturers||54||85.45||217.55||23.84||28.31||3.58||2.57||61.45||4||2.20||5.31||NO||NO||NO||NO||1|
|PFE||Pfizer Inc.||Healthcare||Drug Manufacturers||56||38.33||212.12||13.42||28.31||2.86||3.76||50.35||4||1.44||4.36||NO||NO||NO||NO||1|
|AMGN||Amgen Inc.||Healthcare||Drug Manufacturers||47||230.74||137.10||17.71||28.31||13.03||2.51||44.51||4||5.80||21.18||NO||NO||NO||NO||1|
|BMY||Bristol Myers Squibb Co.||Healthcare||Drug Manufacturers||62||56.45||132.33||16.33||28.31||3.46||2.91||47.40||4||1.64||1.02||NO||NO||NO||NO||1|
|ABBV||AbbVie Inc||Healthcare||Drug Manufacturers||38||86.05||127.25||39.56||28.31||2.18||5.49||216.51||4||4.72||5.47||NO||NO||YES||NO||1|
|GILD||Gilead Sciences Inc.||Healthcare||Drug Manufacturers||30||65.26||82.56||31.16||28.31||2.09||3.86||120.57||4||2.52||3.86||NO||NO||NO||NO||1|
Eli Lilly continues to launch new medicines in some of the fastest growing therapeutic areas with significant patient need. Its continued investment in product pipeline in order to develop new medicine should drive growth in the future. The company’s revenue outlook remains strong and will be driven by volume growth for the medicines and good visibility to continued launches. Revenue and earnings growth should translate into meaningful dividend hikes in the future.
LLY is one of the better story but it also depends on new drugs getting approved. Be sure to know why you buy. The Stockchase comments are relatively positive from the analysts but not bullish.
DISCLOSURE: Please note that I may have a position in one or many of the holdings listed. For a complete list of my holdings, please see my Dividend Portfolio.