Eli Lilly: Well Poised for Long Term Growth

Eli Lilly (LLY), a US$36.47B firm, founded in 1876, manufactures and sells products in two business segment – Pharmaceutical Products and Animal Health Business Segment. It sells its products in US and in 135 other countries. Total global market size for pharmaceutical products alone is about US$650BN, in which US accounts for 43% -approximately about US$279.5BN market. This market is expected to grow at 6-7% and offers excellent revenue generating opportunities for firms such as Eli Lilly and pharmaceutical firms.

At present, Eli Lilly has seventeen market products including drugs such as Zyprexa, Cymbalta, and Cialis. Eight market products are waiting for approval from the US Food and Drug Administration and twenty three products are in late stage of investigations for disease such as diabetes and chronic pain, which should help Eli Lilly sustain its growth trajectory.

In 2007, net revenue stood at US18.63BN, a 19% increase over FY06 revenue. Worldwide sales volume increased by 12% while sales in US increased by 18% to US$10.15B, sales outside US increased by 20% to US$8.49B.

Eli Lilly’s ROE averages to 20% in last four years including a slight 2% dip in Fy07.

Eli Lilly is a good dividend paying stock with dividend yield at 5.84%; this stock should interest those investors who are keen on having good dividend flow YOY.

I believe Eli Lilly is well positioned to face current economic challenges. In FY07 it had US$4.83 cash and short term investments, and cash flow from operation was US$5.15B. This alone should be sufficient to fund its normal operating needs going forward. Some of the key risk parameters are summarized below.

Disclosure: I do not have any position in Eli Lilly.

Comments

[Daniel Haszard:]

Very good,Lilly can now feel confident over payouts for their Zyprexa damage claims.

Happy holidays

2008 Nov 26 07:07 AM

[nova:]

LLY has many problems:
- It rewards its management for failures and criminal behavior
- LLY dealing with biotech is another big failure area
-- Its relationships with AMLN and specifically byetta development and marketing are appalling
-- Now, LLY just put $6.5B into ImClone. ImClone clinical oncology pipeline is outstanding but, outside of R&D, ImClone management is very incompetent, i.e., there is no marketing and clinical trial expertise.

The bottom line: LLY has a great potential but it also has too many weaknesses.

2008 Nov 30 12:33 PM