Eli Lilly & Co.

001. Eli Lilly & Co. ($LLY)
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Q1 2023 revenue decreased by 11% as we're winding down from the lucrative business the larger big pharma companies were able to take advantage of in the pandemic. LLY saw a 1.47B$ decrease in revenue due to COVID-19 antibody sales alone.

While their revenue YOY has taken an 11% hit (6.96B from 7.81B), excluding the decline in antibody sales, there has been a 10% increase in revenue as a result of their diverse range of approved products (seen in the attached image).

They've also been seeing some meaningful progress in their drug pipeline with positive results in their Mounjaro phase III study (obesity medication) showing a 15.7% average weight reduction when compared to a placebo. This drug is a GLP-1 receptor agonist which you may have been hearing in the media as the weight loss "hack" taken by celebrities, but this class of drugs really is a revolutionary tool to combat obesity across the globe. Please don't let supermodels taking this drug to lose some extra weight discredit the value of these drugs.

I'll be keeping an eye on how the Donanemab (Alzheimer's medication) preclinical trial results are going as there is a void in the marketplace for effective medication for this disease and the first companies to make them can expect billions in revenue from that drug alone. Early studies have seen that 47% of participants on this drug had no clinical progression by the end of the year 1 compared to 29% on a placebo. The medication is an antibody targeting the Tau protein, which in Alzheimer's is thought to be a contributing factor in disease progression as these proteins clump up and form neurofibrillary tangles responsible for a portion of the neurodegeneration seen in patients.
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Opinion:
Firstly, I will try to avoid giving definite buy/sell advice in the aims of facilitating discussions about particular companies and the effectiveness of their medications.
Looking at the price history of this company actually makes me nauseous thinking about how much money I could have made if I was conscious of this sector years earlier (I do not recommend going through it).
I also tend to focus on smaller market cap companies as a significant drug discovery from smaller companies have drastic effects on the stock price.
Companies that are well established and are consistently owning a significant share of the drug market are of the safer to own in this notoriously volatile sector. This company is a behemoth in the space with a 410 billion dollar market cap, tens of thousands of employees (much of them smarter and with more experience than me when it comes to the nuances of getting a medication through a drug trial) with a diversified pool of approved drugs and drugs in their pipeline. This is not the company you will see meteoric rise or fall, which is commonplace for the smaller market cap companies.

On another note, it would be stupid to not mention how the elections of the next US president might bring this sector under scrutiny. Candidates from both sides of the aisle have concerns with how this sector has profited from the pandemic and the main targets will be those who profited the most so please be careful when planning the timeframe of your investments (when to get in and for how long).

Please feel free to point out what I am missing that may make this a definite buy or sell in your eyes in the comments.

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  LB

  1 year, 2 months ago

  @optimus

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  Optimus Prime

  1 year, 2 months ago

  Absolutely incredible analysis and level of details. Really happy to have joined your flock! I dont have your degree of expertise regarding new drugs discoveries and pipelines, I will make two points thi:

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  Optimus Prime

  1 year, 2 months ago

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  Optimus Prime

  1 year, 2 months ago

  2 points:

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  Optimus Prime

  1 year, 2 months ago

  1- the bigger the better against politicians. If your fear going to elections is that it gets political you want to go for the best market cap that have a strong lobbying power rather than emerging companies. Ofc if you have a strong view on a discovery, but everything equal I would go for thr big ones. 2- i think your sector is amazing to invest at this moment of the economic cycle it shouldnt be too correlated to cyclicals. You could imagine a strategy where you go long a bunch of biotech vs short SPX. I think it makes a lot of sense ahead of potential government shutdown.

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  javadoc

  1 year, 2 months ago

  @optimus That definitely makes sense to me if you diversify across the top market cap pharma companies no question there!

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  javadoc

  1 year, 2 months ago

  @optimus When thinking about the big vaccine products coming from Pfizer and the like, I don't think it would be far-fetched to see politicians making it a staple part of their platform to investigate their business practices to accelerate the development of their products. Seeing how politicized the response to the pandemic has become, I just think there will be some impact on the stock price if companies fall under government investigation/scrutiny.

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  Optimus Prime

  1 year, 2 months ago

  @javadoc yea I think you right its the kind of headlines grabbing populist headlines politicians love.

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  Trader101

  1 year, 2 months ago

  @javadoc This is incredible thank you for the insight

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