Eli Lilly Is Entering A Period Of Accelerated Growth; Goldman Upgrades Stock To Buy

Eli Lilly and Co (NYSE: LLY) seems to be entering “a long lasting period of accelerating revenue and EPS growth driven by a diversified late stage pipeline propelling many years of margin expansion,” Goldman Sachs’ Jami Rubin said in a report.

He upgraded the rating on the company from Neutral to Buy, while raising the price target from $89 to $95.

Although Solanezumab for Alzheimer’s is high risk, it would be a “very valuable asset if it works,” Rubin commented. Even without this compound, Eli Lilly would likely be able to generate double-digit earnings growth over the next five years and high single-digit earnings growth to 2025, backed by one of the industry’s “most durable franchises.”

Moreover, Eli Lilly has the least exposure to above-CPI price hikes, leaving the company “less vulnerable to potential future pressure,” Rubin mentioned.

Catalysts

Excluding Sola, new product sales are projected at $12.5 billion by 2020, representing almost 50 billion of total sales.

“While LLY’s operational performance started to show improvements in 2015, we expect the magnitude of improvement to accelerate with the launch of Bari, Taltz, Basaglar, Jardiance, and Trulicity,” the analyst wrote.

Moreover, Rubin raised the probability of Sola’s success from 25 percent to 35 percent, with an improved chance of approval.

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