Eli Lilly & Co. (LLY), Novartis AG (ADR) (NVS): Is This Company Getting Ahead of Itself?

Eli Lilly & Co. (NYSE:LLY)’s new drug if approved will be competing with Johnson & Johnson (NYSE:JNJ)’s Invokana (previously known as canagliflozin), which was approved in April by the Food and Drug Administration, or FDA.

Meanwhile, Pfizer Inc. (NYSE:PFE) and Merck announced in April their partnership in the development of a new type 2 diabetes drug ertugliflozin. This again will if approved by FDA will be in the market to compete with Eli Lilly & Co. (NYSE:LLY)’s insulin glargine.

Novartis AG (ADR) (NYSE:NVS) seems to have taken the lead in the development of Psoriasis drug which means, if anything, Eli Lilly could be playing catch up.

All these are massive opportunities for Eli Lilly & Co. (NYSE:LLY), but based on the competition and probability of failure in some of the drugs raises the stakes on risk versus benefits. All these products in the pipeline and massive amounts of risk attached raises questions over the company’s new guidance.

The bottom line

The new guidance is well above the consensus estimate of analysts, with its full year earnings now estimated at $3.91 per share. However, Eli Lilly & Co. (NYSE:LLY) believes that its earnings for the full year 2013 will be between $4.28 and $4.58 per share.

On average, that is 13.3% premium on the consensus estimate, which makes me think that based on the risks pointed in the analysis, the company could be getting ahead of itself.

Nicholas Kitonyi has no position in any stocks mentioned. The Motley Fool recommends Johnson & Johnson. The Motley Fool owns shares of Johnson & Johnson.

The article Is This Company Getting Ahead of Itself? originally appeared on Fool.com.

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