Shares of Eli Lilly and Co. slipped only slightly Friday in premarket trading after an analyst lowered his rating on the shares, calling them "our least preferred US stock."
The Indianapolis-based drugmaker has become too reliant on its remaining pipeline of drugs under development for growth as it deals with patent expirations to big sellers and some drug-development setbacks, Jefferies analyst Jeffrey Holford said in a Friday morning research report.
"We are also skeptical of many of the remaining pipeline assets," he wrote.
Holford lowered his rating on the stock to "underperform" from "hold" and dropped his price target on the shares to $40 from $49.
He also said he expects increasing competition and slower sales volume from the U.S. diabetes market, which is a big source of revenue for Lilly, and he noted that drug companies in general face challenges from unfavorable foreign exchange rates and pricing pressure in Europe.
Lilly shares fell 45 cents, to $48.70 each, in premarket trading about 30 minutes ahead of the market opening. The stock has traded between $44.88 and $58.40 over the past year. It hovered around the same mark in early trading after the market opened.
An Eli Lilly spokesman declined to comment on the report.
Lilly will lose the patent protecting its top-selling drug, the antidepressant Cymbalta, from cheaper generic competition at the end of this year. It's already dealing with a revenue hit from the 2011 U.S. patent expiration for the anti-psychotic Zyprexa, the company's all-time best-selling drug.
The company said late last month that it no longer plans to seek regulatory approval for the drug ramucirumab to treat patients with a form of breast cancer that has spread. However, Lilly is studying the drug in other uses and will seek approval to use the treatment in combination with chemotherapy in stomach cancer patients.
The drugmaker said last week that it has 13 potential drugs in late-stage clinical development, or the final phase before a company seeks regulatory approval. Next year, it could launch a couple diabetes treatments and ramucirumab.
But Lilly also told investors and analysts that foreign exchange rates and slower growth in some markets will make it challenging for the company to meet its 2014 revenue goal.