Eli Lilly & Co. (LLY) shares rose more than 6 percent this morning after the pharmaceutical company increased its financial outlook for the current year and fiscal year 2021 mainly due to improved demand for key drugs.
The company projected adjusted earnings in the range of $7.45 per share to $7.65 per share for 2020, as compared to its previous outlook between $7.20 per share to $7.40 per share. The revised guidance was better than analysts’ average estimate of $7.24 per share.
Revenue is expected to come between $24.2 billion and $24.7 billion for 2020, above the consensus forecast of $23.95 billion.
Prevail shares skyrocketed more than 81 percent in the mid-day trading Tuesday following the news.
Growth Prospects and Risks
The company faces tough competition from rivals in the highly competitive pharmaceutical market where the success of any entity depends on several factors such as effectiveness, innovation, pricing, ease of use, and safety.
Lilly’s new products also face competition from the existing alternatives in the market developed by other brands, as well as from generic products. Its sales are always at risk. For instance, if rival companies roll out a new product at a lower price, Lilly’s sales can decline. So, it consistently needs to come up with innovative and affordable products with improved results to better compete against rivals.
Another key challenge for Lilly
Moreover, most public and private payers usually prefer generic drugs over their alternative brand-name products in their healthcare plans. Therefore, brand companies, like Lilly, must compete with generic substitutes of their products.
The company earned $1.54 per share for the third quarter, missing the consensus forecast of $17.1 per share. Revenue came in at $5.74 billion, up 5 percent from the comparable period of 2019, but missed analysts’ average estimate of $5.88 billion
The consensus price target for Lilly stock is $180 per share, with a high price target estimate of $200, and a low price target estimate of $157.89. when it comes to recommendations, most analysts have a “Buy” rating for the stock.