Lilly (LLY) Shows Incremental Growth Opportunities - Piper Jaffray

Piper Jaffray analyst, Richard Purkiss, attended a Eli Lilly (NYSE: LLY) investor day specifically addressing Elanco, its animal heath business, and its Alzheimer's disease portfolio. He came away with a deeper understanding of Elanco's growth drivers and believes this business could spur upgrades from other banks. Also, the depth and breadth of LLY's Alzheimer's portfolio beyond solanezumab was a clear upside surprise.

The wider animal health industry is projected to grow at +4-5% CAGR over the next 10 years but Elanco expects to out-grow the market. The pipeline expected to contribute 2-4+ percentage points to its growth through 2020. On the cost front, Elanco raised its expected 3-year integration savings from the Novartis Animal Health acquisition to $300M (from $200M previously) and set new operating margin goals for the business for 2016 in the low to mid-20s percent range. Longer term the targets are in the high 20s to 30 percent range, which compares with 19% for the business YTD.

On the Alzheimer front, the analyst was surprised by the breadth and depth of the portfolio. By the time solanezumab’s EXPEDITION 3 study reads out, LLY could have six other potentially diseasemodifying assets in clinical development, with three that also target soluble Aβ including AZD3293 (BACE Inhibitor potentially in Phase 3, AMARANTH study), LY3202626 (Low dose BACE Inhibitor, likely Phase 2) and Aβ mAb Fab-PEG (Phase 1), one asset that targets deposited β-amyloid, Anti-N3pG mAb (Phase 1) and two assets that target Tau, a Tau mAb (Phase 1) and an anti-Tau small molecule (Phase 1). LLY also expect to have a symptomatic Alzheimer’s asset in Phase 1, a Dopamine D1 potentiator.

The PT increases by 2% to $123 (up from $121) but no change to the Overweight rating.

For an analyst ratings summary and ratings history on Eli Lilly click here. For more ratings news on Eli Lilly click here.

Shares of Eli Lilly closed at $86.41 yesterday.

You May Also Be Interested In

• Fiserv (FISV) PT Lowered to $60 at Freedom Broker
• Honasa Consumer Ltd (HONASA:IN) PT Raised to INR720 at ICICI Securities
• Petronet LNG Ltd. (PLNG:IN) PT Raised to INR310 at ICICI Securities