More expensive than other pharmaceutical companies? Analyze the business model of Eli Lilly “LLY”.
Eli Lilly’s performance is stable and growing, but even more so than its earnings growth, its stock price is rising. A comparison with Pfizer https://www.tenq.cc/stocks/PFE shows the difference.
Pfizer’s most recent annual results (for the year ending December 31, 2021) have a PER of approximately 15x. On the other hand, Eli Lilly’s PER for its most recent annual earnings ( December 2021) is about 45x.
This is 3 times Pfizer’s level, so it can be said to be overvalued. However, I don’t think that being overvalued means that everything is bad.
So, all you need is a solid reason for growth potential.
An important basis for predicting the growth potential of a pharmaceutical company is the progress of drug development.
This is generally referred to as the pipeline, and is an important item in a pharmaceutical company’s earnings announcement.
The company’s pipeline is also published on its website. There are five phases: Phase 1–3, Regulatory Review, Regulatory Approval Achieved, and Regulatory Review.
https://www.lilly.com/discovery/clinical-development-pipeline
Expertise is needed to understand the extent to which these new drugs in development will contribute to the market and to business performance.
The following report by the Tokai Tokyo Research Center provides quite detailed information.
https://www.tokaitokyo.co.jp/inv_center/stock-f/pdf/0307_lly.pdf
（Sorry, It is written in Japanese）
Perhaps the most noteworthy part of this report is that “the possibility of a promising new drug in the diabetes field is increasing.”
The company was the first in the world to mass produce insulin, a drug used in the treatment of diabetes, and has a proven track record and credibility in this field.
It is only natural that there are high expectations for the new drug.
Incidentally, on a personal note, I sometimes feel a little sluggish after eating, so I was doing some research.
The possible cause was a possible blood sugar spike.
Subsequently, I started to pay attention to my diet.
Blood sugar spikes are a symptom of the risk of leading to diabetes and can be caused by the consumption of sweet foods (those containing sugar, glucose-fructose solution) and refined carbohydrates.
Since there is some concern about sensory perception alone, “FreeStyleLibre,” a device for measuring blood glucose levels, is available on the market for Several tens of dollars, and I considered using it, but decided against it because I was not comfortable with sticking needles into my body.
Hopefully in the future it will be possible to measure it with an AppleWatch or something similar.
I hope the company will continue to do its best in research and development, as I believe that diabetes drugs are indispensable for those who need them. Personally, if possible, I would like to take care of my daily diet, etc., so that I do not have to be indebted to the drugs.
I digress a bit, but the company’s operating cash flow margin has consistently exceeded 25%, a level considered favorable, for the past two years, and the company has a very good earnings base.
Eli Lilly “LLY” Stock Price and Quarterly EPS 15x Chart
https://www.tenq.cc/stocks/LLY
You can check the dividend yield, payout ratio, etc. for the past five years.
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・Investments should be made at your own discretion.
