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Are Eli Lilly & Co. (LLY) Earnings Headed Down?

Eli Lilly & Co. (NYSE:LLY)Eli Lilly & Co. (NYSE:LLY) will release its quarterly report tomorrow, and recent share-price declines show that investors are somewhat nervous about the company’s prospects. Although Eli Lilly & Co. (NYSE:LLY) earnings are expected to have grown substantially in the past quarter, longer-term prospects for the drugmaker have raised doubt among shareholders about whether it can stay on the earnings-growth path.

The key to any drug company is its pipeline of future drug prospects, and with major drugs like Zyprexa, Cymbalta, and Humalog all presenting major patent-cliff issues, Eli Lilly & Co. (NYSE:LLY) badly needs some success with its best candidates. But with some recent failures in its pipeline, can Lilly overcome increasingly negative sentiment and sustain its business? Let’s take an early look at what’s been happening with Eli Lilly & Co. (NYSE:LLY) over the past quarter and what we’re likely to see in its quarterly report.

Stats on Eli Lilly

Analyst EPS Estimate $1.00
Change From Year-Ago EPS 20%
Revenue Estimate $5.82 billion
Change From Year-Ago Revenue 4%
Earnings Beats in Past 4 Quarters 3

Source: Yahoo! Finance.

Where will Lilly earnings get their growth?
In recent months, analysts have kept their near-term views on Eli Lilly & Co. (NYSE:LLY) earnings stable, but looking forward, they’ve posed bigger concerns about future results, cutting their estimates for 2014 by $0.10 per share. The stock has responded to those concerns, falling almost 10% since mid-April.

The biggest threat to Lilly’s long-term prospects comes from substantial pipeline problems. Some of the setbacks were fairly minor, such as the failure of its large b-cell lymphoma drug enzastaurin in a phase 3 trial. But Lilly was hoping for big things from Alzheimer’s drug candidate solanezumab, which failed to meet endpoints in two different phase 3 trials, as well as rheumatoid arthritis treatment tabalumab, which failed to meet efficacy goals. Lilly is planning one more solanezumab study for those who have mild symptoms of Alzheimer’s, but it’s far from certain whether it will pay off. Those problems put more pressure on Eli Lilly & Co. (NYSE:LLY)’s mid-stage drugs to advance and succeed through the clinical trial process.

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