A Lot to Like at Lilly

07/07/2020 5:00 am EST

Focus: HEALTHCARE

Tom Hutchinson

Editor, Cabot Dividend Investor

Eli Lilly (LLY) is a global pharmaceutical company with over $23 billion in annual revenues, asserts income specialist Tom Hutchinson, editor of Cabot Dividend Investor.

The company focuses on developing drugs for unmet needs in neurology and oncology and also significant drugs for diabetes and immunology, as well as Cialis for erectile dysfunction.

I like this company for two primary reasons; it is very well run and has one of the best drug pipelines and newly launched drugs in the industry.

It’s financially sound with low debt levels and high profitability margins. Lilly also invests over 25% of sales into research and development. That’s significantly higher than any of its big pharma peers. And it shows.

The company estimates that newly launched drugs will account of 60% of sales by 2022. Recently, the stock shot up on very positive phase III (the step before FDA approval) results for cancer drug Retevmo.

The drug already treats lung cancer but has also proven to significantly reduce the recurrence of breast cancer, too. That’s a huge development and the stock moved 15% higher on the day of the announcement. Lilly also has three Covid-19 drugs in the trial phase.

Analysts expect average earnings growth of over 13% per year for the next five years. But earnings may well be higher considering the new developments.

In this tumultuous year, LLY is up over 20%. It was also one of the steadiest stocks out there during the March selloff. This is a great company at the right place at the right time. It’s a solid stock to own through these uncertain times.

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