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Positive Data Boosts Outlook for Lilly

The wide-moat drugmaker's growth prospects are improving.

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We are increasing our fair value estimate for Eli Lilly (LLY) to $142 per share from $130 on the basis of positive adjuvant breast cancer data for Verzenio. The data positions Lilly’s drug to enter the large adjuvant breast cancer setting ahead of key competitors Ibrance (from Pfizer (PFE)) and Kisqali (from Novartis (NVS)). While Verzenio was the last major CDK 4/6 breast cancer drug to enter the metastatic (late-stage) breast cancer market, it looks poised to be first in the adjuvant (early-stage) setting.

The strong data should help support Lilly’s wide economic moat by significantly expanding the sales potential of a drug that had been relegated to likely gaining only a small slice of the late-stage market before this positive adjuvant data. Additionally, the recent setback for Ibrance in the adjuvant setting could mean that Lilly will have a first-mover advantage in the adjuvant setting for a long duration. However, Pfizer has another phase 3 study with Ibrance in a high-risk adjuvant patient group (similar to Lilly’s positive study) set to report in the second half of 2020, and if successful, this may limit the duration of Lilly’s first-mover advantage. Also, Novartis should complete an adjuvant study with Kisqali by 2022, opening up another potential competitor in the early-stage setting.

Damien Conover does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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