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Lilly shares hit highest point in 18 years after Elanco decision

July 24, 2018

Shares of Eli Lilly & Co. hit their highest price in nearly two decades Tuesday morning, after the drugmaker announced the spin-off of its Elanco animal-health business.and posted a quarterly profit that handily beat Wall Street’s expectations.

The climbing stock price seems to mark investors' confidence that Lilly has turned the corner after years of struggling to launch new products to replace blockbuster medicines that have lost their patent exclusivity.

The Indianapolis-based drugmaker said earnings for the second quarter before special charges were $1.55 billion, up 31 percent from a year ago.

Earnings per share were $1.50, clobbering Wall Street’s consensus estimates of $1.30, according to analysts polled by Thomson Reuters. It marked the fifth consecutive quarter that Lilly beat the earnings estimates.

After one-time charges, Lilly reported a loss of $259.9 million for the quarter. Much of that was related to charges of $1.62 billion related to its acquisitions of ARMO BioSciences and AurKa Pharma, as well as a collaboration with Sigilon Therapeutics.

Lilly said it now expects full-year earnings in the range of $5.40 to $5.50 per share (up from $5.10 to $5.20), with revenue in the range of $24 billion to $24.5 billion (up from $23.7 billion to $24.2 billion).

Investors cheered the financial performance, pushing up the company’s stock as high as $91.15 per share in early-morning trading, before it settled a bit to $90.97 in midday trading, up 2.1 percent.

Lilly’s shares have not closed above $90 a share since December 2000. They had previously hit an all-time high of $108 on August 8, 2000 but fell by $31 the very next day after a federal appeals court invalidated patent protection for the blockbuster antidepressant Prozac.

That court decision would have huge ramifications, sending the shares on a prolonged slide as the company struggled to produce new medicines to replace the revenue and profit lost from Prozac. The shares bottomed out at $29 at the depths of the financial crisis in 2008.

In the meantime, Lilly’s labs have been scrambling to bring new drugs to market as a series of other blockbuster drugs lost their patents, including antipsychotic Zyprexa, antidepressant Cymbalta and osteoporosis drug Evista.

But since 2014, Lilly has launched nine new drugs, and has watched many of them gain strong traction in the market. In the second quarter, many of those new medicines continued to perform well, including diabetes drugs Trulicity (sales up 62 percent) and Basaglar (up 133 percent), psoriasis drug Taltz (up 59 percent) and cancer drug Lartruvo (up 69 percent).

Altogether, Lilly rang up sales of $6.35 billion in the second quarter, an increase of 9 percent from a year ago. New products represented 28 percent of total revenue.

“The increase in our worldwide revenue was fueled by volume growth of our new medicines, while we also maintained a key focus on containing costs and improving productivity,” said David Ricks, Lilly’s chairman and CEO.

And Lilly's top executive for research and development has said the company plans to launch at least 11 more medicines by 2023. If that happens, it would be among the most fruitful periods for Lilly laboratories.

Investors also welcomed Lilly's decision to spin off its Elanco animal-health business into a separate, publicly traded company. The company plans to file a registration statement in the coming weeks with the U.S. Securities and Exchange Commission for a potential initial public offering for Elanco.

Lilly said Elanco's headquarters would remain in Greenfield following the spinoff and that no job reductions are planned.

The decision should ease concern for officials in Greenfield who were concerned about losing a corporate citizen that employs about 775 workers in the city.
 

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