New Diabetes Drugs May Push Eli Lilly Higher By 2013

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 |  About: Eli Lilly and Company (LLY), Includes: AZN, BMY, INCY, JNJ, NVO
by: Mel Daris

When looking at the pharmaceutical industry, one can get an idea of a company's strength by looking at test results and how competitive a company's new drugs will be. Eli Lilly (NYSE:LLY) is doing particularly well with respect to progress and growth, especially in relation to diabetes treatments. It has established itself as a solid company and continues to move forward quickly. I believe recent news indicates that Eli Lilly stock will be going up in the near future, and at the moment, it appears that this good stock performance will continue in the long-term as well.

Eli Lilly is experiencing very positive press at the moment, as it was recently named to the Research Institute's list of the 100 most reputable companies in the world. The company did not place last year, but it has now ranked in 90th place. The Research Institute works with Forbes, so this is a fairly significant achievement that people will notice. This should increase confidence from investors and have a positive effect on the stock over time. It also indicates how well the company is doing, and other recent news speaks to that idea as well.

Positive test results are important for demonstrating how the company's research will help the company continue to grow and become an even greater force in the industry. Eli Lilly recently announced positive results with its partner Boehringer Ingelheim. The companies have shown that in combination with other therapies, linagliptin can significantly control blood glucose for patients with type 2 diabetes. Professor Baptist Gallwitz also added that

linagliptin is the only diabetes treatment that has been approved at the one-dose strength, making it easier for doctors to be certain the patients are on the correct dosage. Good results from the study will give it an even more respectable position in the area of diabetes.

In addition to the positive results on linagliptin, Eli Lilly and Boehringer Ingelheim have announced plans to seek approval for a new diabetes drug empagliflozin next year. The companies only began marketing linagliptin last year, so this shows the companies moving forward at a quick pace. It is not only in the news for the success of current treatments, therefore, but it is expecting to continue progressing in the area of diabetes.

Diabetes treatments are important because this is a growing part of the industry. Analyst Jeffrey Holford noted that major diabetes-treatment companies should see sustainable growth as a result of "an aging Western population, more health care use and adoption of Western diets in emerging countries, and increased use of new treatments and combination therapies." He also expects Novo Nordisk (NYSE:NVO) to remain the top diabetes company, but believes that Eli Lilly will eventually pass Sanofi (NYSE:SNY) to become the second-biggest company in relation to diabetes treatment. In an expanding portion of the industry, therefore, Eli Lilly is continuing to increase its strength. This promises good results over time, which should make the stock attractive to long-term investors.

Eli Lilly is not becoming too focused on a single aspect of the industry, however, as it also recently announced positive results for its Baricitinib, which treats rheumatoid arthritis. This is a treatment created by Eli Lilly and Incyte (NASDAQ:INCY), so the positive results will have positive effects on both stocks. In the study, the companies met both primary and secondary endpoints. While Eli Lilly's success in the area of diabetes may be more significant for the future of the company, this shows that it continues to be strong in other areas of the pharmaceutical industry as well.

Other competitors in the field are continuing to succeed as well though. It has already been noted that Novo Nordisk has become a major player in the area of diabetes, and recent news continues to show this. Most recently, it has demonstrated positive results for Victoza in a "real world" study. This is another drug for type 2 diabetes, and the drug was better with cost-effectiveness and weight loss than the other treatments in the study. This may not be the most significant development, but it continues to show how Novo Nordisk maintains its top position in the diabetes treatment industry. As a result, I expect the stock to go up, even if this is just a slight increase.

Bristol-Myers Squibb (NYSE:BMY) and AstraZeneca (NYSE:AZN) are also staying competitive in this field, as the two companies have recently shown good results in a study on dapagliflozin, their own type 2 diabetes treatment. The companies demonstrated that it is effective at lowering blood sugar levels, and there is positive sentiment regarding its future approval. This demonstrates how these two companies will also continue to be players in the growing field of diabetes treatments. The positive results from this study should translate to the stocks and lead to increases in Bristol Myers Squibb stock and AstraZeneca stock.

Johnson & Johnson (NYSE:JNJ) is unlike the other succeeding companies, as it is currently bogged down by legal complications relating to its antipsychotic drug Risperdal. The U.S. government has been probing marketing strategies around the drug since 2004, and Johnson & Johnson has even been accused of marketing the drug for unapproved purposes. The company has supposedly agreed to pay $2.2 billion dollars to these probes into the marketing of the drug. This is the second-largest settlement between the government and a pharmaceutical company, so it will certainly have a major impact on the company and the stock. This will not even eliminate all legal difficulties surrounding the issue, as some state lawsuits will remain. As a result of this, I would be quite surprised if Johnson & Johnson stock does not go down in the near future.

Johnson & Johnson is an exception, as the industry is doing well as a whole. I continue to believe that Eli Lilly, furthermore, is a particularly good pharmaceutical stock. It has been applauded as a reputable company, and some believe it will become an even bigger player in the diabetes treatment field in the future. It has shown positive test results and expects to begin marketing a new diabetes treatment by next year already. Eli Lilly certainly seems to have earned its position as a reputable company, and I anticipate the stock to be increasing both in the short-term and in the long-term.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.