AMLN Amylin Pharmaceuticals, Inc. (MM)

Eli Lilly & Company (LLY) is all set to announce its second quarter 2011 results on July 21, 2011 before the opening bell. The Zacks Consensus Estimate for the second quarter is $1.17, representing a year-over-year decrease of 5.6%.

Eli Lilly has surpassed earnings estimates consistently in the last four quarters with a trailing average of 5.96%.

First Quarter 2011 Recap

Eli Lilly reported first quarter earnings per share of $1.24, seven cents more than the Zacks Consensus Estimate and 5% above last year's $1.18. First quarter results were driven by higher revenues and a lower tax rate.

First quarter revenues increased 6% to $5.8 billion, slightly above the Zacks Consensus Estimate of $5.7 billion. Revenues were helped by strong performances in international markets.

Reported earnings, however, declined 16% to $0.95, including the impact of restructuring charges and costs associated with the company’s agreement with Boehringer Ingelheim.

(Read our full coverage of the first quarter 2011 earnings report at Eli Lilly Tops, Maintains Outlook ) .

Agreement of Analysts

Estimate revisions for Eli Lilly have been scarce for the past month. In that time, only 1 of the 14 analysts covering Eli Lilly for the second quarter of 2011 has revised his/her earnings estimate. The analyst moved lower..

Estimates for 2011 have been revised by only 2 analysts over the last 30 days. There has been a movement in both directions. We expect the top-and bottom-lines to remain under pressure from late 2011 as the contraction in lead product Zyprexa’s (a treatment for schizophrenia and bipolar disorder) sales more than offsets growth in Cymbalta (approved for treating depression), the diabetes franchise and sales of new products.

Magnitude of Estimate Revisions

Estimates for the second quarter of 2011 have remained static at $1.17 over the last 30 days due to the lack of significant estimate revisions by analysts following the stock. Estimates for 2011 have gone up by only a penny to $4.28 over a similar time period due to the lack of significant estimate revisions.

Neutral on Eli Lilly

We currently have a Neutral recommendation on Eli Lilly. The stock carries a Zacks #3 Rank (Hold rating) in the short run.

Even though we are concerned about the generic threat to key products and the lack of a significant enough pipeline to offset key patent expirations at Eli Lilly, a strong performance of the diabetes business should offer some downside support.

The primary pipeline candidate at Eli Lilly’s diabetes pipeline is Bydureon. Eli Lilly has co-developed the candidate with Alkermes, Inc. (ALKS) and Amylin Pharmaceuticals, Inc. (AMLN). Bydureon is approved in the European Union and a response to the US Food and Drug Administration’s complete response letter is slated for the third quarter of 2011.

The other diabetes candidates at Eli Lilly include empagliflozin (potential to launch in 2014), dulaglutide (regulatory submission potentially in 2013) and basal insulins (phase III studies scheduled to commence in the second half of 2011).

The ramp of blood thinner Effient, upside from the ImClone deal and Eli Lilly’s focus on emerging markets should provide a boost to revenues. We are also pleased to see Lilly pursuing small acquisitions and in-licensing deals to boost its pipeline.

 
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