The 144-year-old American pharmaceutical house Ely Lilly and Co (NYSE: LLY) is attracting attention with an experimental coronavirus treatment.
Ely Lilly is conducting a Phase 3 trial of an experimental antibody drug for COVID-19 in nursing homes. Yahoo! News reports Ely Lilly is testing LY-CoV555 in volunteers in coronavirus-infected nursing homes, care homes for our British friends.
Ely Lilly claims it could seek government approval for LY-CoV555 by the end of 2020. Ely Lilly researchers created LY-CoV555 by cloning antibodies from people who recovered from coronavirus infections. The hope is that LY-CoV555 will make people immune to COVID-19.
The US National Institutes of Health (NIH) is conducting two trials of LY-CoV555, CNBC reports. One trial will test LY-CoV555 on people with mild-to-moderate coronavirus symptoms. The other will test people hospitalized by coronavirus. The goal of the Phase 3 trials is to see if LY-CoV555 patients can go home to recover.
Can Ely Lilly make money from Coronavirus?
Coronavirus treatment is a growth industry. Worldometers recorded 40,964 fresh coronavirus cases and 1,057 COVID-19 deaths in the USA on 5 August 2020.
Globally, there have been 18.874 million coronavirus cases and 702,139 coronavirus deaths so far, Worldometers estimates. In detail, there were 6.105 million coronavirus cases worldwide on 3 August 2020. Of those cases, 65,482 roughly 1% were critical, Worldometers estimates.
Hence, there were 65,750 potential users for LY-CoV555 on 3 August 2020. Thus, there is a growing need for LY-CoV555 or something similar.
Moreover, governments will pay for most coronavirus treatments. Hence, Ely Lilly will get paid for LY-CoV555. For example, the conservative Trump administration in the United States will pay for the treatment of uninsured COVID-19 patients, The Washington Post claims.
Is Ely Lilly Making Money?
Ely Lilly (NYSE: LLY) is making money. Ely Lily reported a quarterly gross profit of $4.277 billion on revenues of $5.499 billion on 30 June 2020.
However, those numbers fell from $5.86 billion in quarterly revenues and $4.645 billion in quarterly gross profit on 31 March 2020. In addition, Ely Lilly’s quarterly operating income fell from $1.59 billion on 31 March 2020 to $1.97 billion on 30 June 2020. Finally, Ely Lilly’s quarterly common net income fell from $1.457 billion on 31 March 2020 to $1.412 billion on 30 June 2020.
In contrast, Ely Lilly is generating more cash. For instance, Ely Lilly’s quarterly operating cash flow grew from $382 million on 31 March 2020 to $2.495 billion on 30 June 2020. However, Ely Lilly’s quarterly ending cash flow fell from $1.699 billion on 31 March 2020 to $666.1 million on 30 June 2020.
I think the ending cash flow fell because Ely Lilly’s quarterly financing cash flow fell from $106.7 million on 31 March 2020 to -$1.673 million on 30 June 2020. Hence, Lilly was spending its cash to pay the debt, which is responsible.
What Value Does Ely Lilly Have?
Lilly (NYSE: LLY) has value in the form of $2.388 billion in cash and short-term investments and total assets of $41.967 billion on 30 June 2020.
Importantly, LY-CoV555 shows Ely Lilly has impressive research and development capabilities. To explain, I think Lilly could develop more coronavirus drugs for which demand is increasing.
Beyond LY-CoV555, Ely Lilly is a large manufacturer of insulin, the usual treatment for diabetes. Diabetes is a growing problem in the United States.
For instance, the American Diabetes Association (ADA) estimates 34.2 million Americans or 10.5% of the US population had diabetes in 2018. Additionally, the ADA estimates that 1.5 million Americans receive diabetes diagnoses each year.
Moreover, the United States spent $217 billion on diabetes treatment in 2017, the ADA estimates. Hence, diabetes is a growing market for which Lilly offers a treatment.
Is Ely Lilly a Good Stock?
Ely Lilly (NYSE: LLY) is a growth stock. Mr. Market paid $132.12 for Lilly shares on 2 January 2020. That share value grew to $154.34 on 5 August 2020.
Thus, Ely Lilly’s share price is growing with the coronavirus pandemic. Hence, Lilly could be a growth stock for our age.
Ely Lilly will pay a 74₵ quarterly dividend on 13 August 2020. That dividend grew from 64.5₵ on 14 November 2019. Thus, Ely Lilly’s dividend grew by 9.5₵ in the past year.
Overall, Eli Lilly offered a $2.96 annual dividend and a 1.94% annualized dividend. In addition, Dividend.com credits LLY with a 41.66% payout ratio on 5 August 2020.
If you are looking for growth and dividend stock suited to the terrible time in which we are living, Eli Lilly is an interesting choice. In conclusion, I think a company with a proven coronavirus treatment could make money. However, Eli Lilly’s coronavirus treatment LY-CoV555 is unproven.
Originally published at https://marketmadhouse.com on August 5, 2020.
