Riding high on new launches, Lilly delivers 'solid' guidance for 2017 and beyond

Eli Lilly
Eli Lilly's financial guidance for 2017 surpassed Wall Street's expectations.

Eli Lilly is out with its financial predictions for next year, and for the first time in years, the numbers are higher than Wall Street predicted.

The Indianapolis drugmaker expects next year’s revenue to tally between $21.8 billion and $22.3 billion, a range whose midpoint is about $370 million above consensus, Evercore ISI analyst John Scotti wrote to clients. Non-GAAP EPS will check in between $4.05 and $4.15, Lilly said Thursday, helped by that revenue haul.

And the pharma giant expects the good times to keep rolling after that. It reaffirmed its expectations for the rest of the decade, including at least 5% average annual revenue growth, driven by volume.

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The numbers will cheer Lilly investors, who have suffered through some lean years of late, those worried about diabetes market pressures in particular. The company says it's gaining share with all its new meds in that field, and though U.S. pricing pressures are intense, executives don't see the squeeze tightening further in 2017.

Longer-term, Lilly's expecting numerous new meds to fuel its growth, despite a recent failure for solanezumab, an Alzheimer's drug that might have been a megablockbuster if approved. “We remain confident that we could launch at least 20 new products in 10 years from 2014 through 2023, creating value for all stakeholders in the company," incoming CEO David Ricks—set to inherit the baton from John Lechleither on Jan. 1—said in a statement.

According to Scotti, it’s the first time Lilly has doled out initial guidance above consensus on both its top and bottom lines in at least four years. Analysts responded favorably, predicting that investors would, too.

“We believe the outlook the company is providing today should be well received and should allow for investor interest to return to what we see as an industry-leading longer-term growth story,” Credit Suisse’s Vamil Divan wrote in his own research note. “Overall, solid guidance, nothing negative,” Bernstein’s Tim Anderson added.

The way Lilly sees it, it has strong starts for diabetes med Trulicity and cancer-fighter Cyramza to thank, in part, for the beefed-up expectations; they’ve already generated “substantial revenue” for the company, Ricks said. Lilly is “pleased” with early uptake for next-gen psoriasis product Taltz, too.

Other drivers of next year’s success will include SGLT2 diabetes med Jardiance, he said, a med that earlier this month nabbed a new FDA indication for reducing CV death among high-risk Type 2 patients.

The rosy outlook for diabetes specifically should cheer investors, who have had “concerns about Lilly’s heavy exposure” to the price-battered therapy area, Anderson noted. With diabetes meds accounting for about a quarter of Lilly’s sales, a poor outlook there could have meant a “drag on numbers.”

"We are gaining share with every single brand in the key regions where we compete," Lilly diabetes head Enrique Conterno told investors on a Thursday conference call. "Clearly, we do see pricing pressure when it comes to diabetes everywhere, and we know how pronounced those pressures are in the U.S. ... but all in all, we don’t see a step change when it comes to pricing in diabetes as we look at 2017."

Editor's note: This story has been updated with comments from a company conference call.

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