What to watch in Lilly earnings report

Eli Lilly (LLY) is scheduled to report the results of its first fiscal quarter before the market open on Tuesday, April 30, with a conference call scheduled for 9:00 am EDT. What to watch for 1. GUIDANCE: Along with its fourth quarter report in early February, the drug giant revised certain elements of its 2019 financial guidance on a reported basis and on a non-GAAP basis, primarily due to the anticipated impacts of both the pending acquisition of Loxo Oncology and the negative Phase 3 confirmatory trial for Lartruvo, partially offset by a more favorable underlying business outlook. On a reported basis, earnings per share for 2019 were expected to be in the range of $4.57-$4.67. On a non-GAAP basis, EPS were expected to be in the range of $5.55-$5.65. The company said, at the time, it anticipated 2019 revenue between $25.1B-$25.6B. Revenue growth was still expected to be driven by volume from newer medicines including Trulicity, Taltz, Basaglar, Jardiance, Verzenio, Cyramza and Olumiant. Revenue growth was also expected to benefit from the recent launch of Emgality and the anticipated inclusion of Vitrakvi, and could benefit from the potential approval and launch of other medicines is 2019. 2. RELAY STUDY MEETS PRIMARY ENDPOINT: On March 12, Eli Lilly announced that its Phase 3 RELAY study of Cyramza met its primary endpoint of progression-free survival, or PFS, demonstrating a statistically significant improvement in the time patients lived without their cancer growing or spreading after starting treatment. The Phase 3 global, randomized, double-blind trial is evaluating Cyramza in combination with erlotinib, compared to placebo in combination with erlotinib, as a first-line treatment in patients with metastatic non-small cell lung cancer, or NSCLC, whose tumors have activating EGFR mutations. On the same day in March, JPMorgan analyst Chris Schott reinstated coverage of Eli Lilly with an Overweight rating and $140 price target. Schott said he expects Eli Lilly to generate 6%-8% sales growth and mid-teens annual earnings growth through much of the decade. The stock represents a top pick in his coverage universe. 3.TANEZUMAB NEGATIVE: On April 22, BMO Capital analyst Alex Arfaei lowered his price target on Eli Lilly to $130, saying the stock has underperformed along with its peers, and the news around its Tanezumab announced last week was “obviously negative”. The week before on April 18, Pfizer (PFE), Lilly said tanezumab met 2/3 co-primary endpoints in Phase 3 study. The objective of the study was to compare the long-term joint safety and 16-week efficacy of tanezumab relative to nonsteroidal anti-inflammatory drugs in patients with moderate-to-severe osteoarthritis of the hip or knee. The tanezumab 5 mg treatment arm met two of the three co-primary efficacy endpoints, demonstrating a statistically significant improvement in pain and physical function compared to NSAIDs at the 16-week analysis, while patients’ overall assessment of their OA was not statistically different than NSAIDs.

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