<<Bulls on the stock point to extraordinary growth rates for recently released drugs as well as a strong research pipeline, perhaps the strongest in the industry. Drugs that currently account for about 1/3 of the company's sales -- Zyprexa (schizophrenia), Gemzar (cancer), Evista (Oosteoporosis/breast cancer), Reopro (balloon angioplasty/unstable angina), and Humalog (diabetes) -- are expected to grow 35% annually for the next three years. In addition, LLY launched an adult-onset diabetes drug, Actos, late last year which could prove to be a blockbuster. The only complication is Prozac, which faces strong competition. The fourth quarter sales decline for Prozac -- 13% -- was worse than expected, although the company indicated this was complicated by a change in wholesale purchasing patterns -- actual demand was only off 2%.
Even including a continued Prozac slide, analysts estimate future growth at about 15% annually, only a little shy of the historical 18% record. Financially, the company is robust, with net margins last year of a record 27% and a return on beginning equity of 57%. Compared to your average company, these numbers are extraordinary -- which is why one might question whether this stock is worth a sub-market multiple of 24.8X this year's expected earnings.>> |
