by Ian Harvey
June 26, 2020
Shares of Eli Lilly have risen more than 35% in recent weeks. One of the major triggers has been its rheumatoid arthritis drug, Olumiant, which has entered phase 3 for possible Covid-19 treatment.
And, Stock Options Made Easy “Mentorship Program” Members were well-positioned to benefit; and made 527.5% potential profit based on a CALL OPTIONS trade so far. More could be likely!
Lilly’s stock has rallied 35% over recent weeks (vs. about a 40% gain in the S&P 500) to its current level of $160 after falling to a low of $119 in late March as a rapid increase in the number Covid-19 cases outside China resulted in heightened fears of an imminent global economic downturn.
With the current recovery, Eli Lilly stock is actually up 14% above the $140 peak it reached in mid-February.
Besides the rheumatoid arthritis drug, Olumiant, which has entered phase 3 for possible Covid-19 treatment, as mentioned above, there have been other catalysts helping the share price to rise.
On Tuesday last week, Eli Lilly's shares soared by more than 15% after the pharma giant reported positive results from a phase 3 clinical trial for Verzenio. This drug is already approved for metastatic breast cancer and advanced breast cancer, but based on data from the new study; Verzenio could be effective in treating early-stage breast cancer as well.
“Mentorship Program” Members executed a call options trade on Eli Lilly on Thursday, May 28, 2020, at a cost of $2.00; and the sell value of the option hit $12.55 yesterday – a potential profit of 527.5%.
More profit might be available for those traders that wish to continue to hold as there are still 55 days to go before expiry.
The recommended options trade for “Mentorship Program” Members.....
** OPTION TRADE: Buy LLY AUG 21 2020 155.000
CALL at approximately $2.00. (Max. $2.70).
The Recommended Trade…..
“Diabetes is a severe chronic health condition that affects about 34.2 million people in the U.S. alone, which represents approximately 10% of the country's population. Many more people -- an estimated one in three Americans -- are at risk of developing diabetes.
Fortunately, many companies develop products, like drugs and insulin pumps, which help meet the needs of diabetics. And drug manufacturer Eli Lilly and Co. (NYSE:LLY) is one such company.
The COVID-19 pandemic has spared few companies, but Eli Lilly is one pharma giant whose business is thriving amid the ongoing crisis. This drugmaker has also performed better than the broader market of late. Eli Lilly could continue to outperform the market moving forward.
Eli Lilly, earlier this month announced its partnership with Junshi Biosciences, a China-based biopharmaceutical company specializing in the discovery and development of novel therapies. Since the coronavirus outbreak, Junshi Biosciences has created multiple neutralizing antibodies to combat COVID-19.
Junshi Biosciences Co Ltd said on Tuesday that it is gearing up to initiate clinical trials to test its experimental COVID-19 antibodies together with Eli Lilly, in the U.S. and China by the second quarter of the year.
As part of the collaboration, Lilly will receive an exclusive license to conduct clinical development, manufacturing and distribution of products outside of Greater China. Junshi Biosciences will maintain all rights in Greater China.”
Eli Lilly's positive news regarding Verzenio prompted Guggenheim analyst Seamus Fernandez to upgrade the company's stock from neutral to buy. According to Fernandez Verzenio's success in the clinical trial "is likely a transformational event" for the pharma giant. The analyst set a $182 price target on Eli Lilly's stock -- about 12% above the $162 level where it's currently trading.
Over the past three months, the Consensus Estimate for LLY's full-year earnings has moved 0.66% higher. This means that analyst sentiment is stronger and the stock's earnings outlook is improving.
Why The Analyst Hype.....
Verzenio could enjoy an exciting opportunity in the early-stage breast cancer market. Worldwide, breast cancer is the most common cancer among women, and despite recent progress in the treatment of this disease, about 30% of patients with some forms of early-stage breast cancer are at risk of their cancers returning. Verzenio could be an answer to this problem.
As well, Eli Lilly remains one of the leaders in the market for diabetes drugs. Many of its diabetes products, especially Trulicity, continue to generate strong and growing revenue.
Also, on May 8, the FDA approved Eli Lilly and Company’s Retevmo, for the treatment of adults with metastatic rearranged during transfection (RET) fusion-positive non-small cell lung cancer. The company has priced Retevmo at $20,600 for a 30-day supply.
According to the 2019 annual report, the company’s recorded revenue during the year stood at $22,320 million, 4% higher compared to 2018, when this number was at $21,493 million. At the same time, in order to deliver better long term results, the management has boosted the spending on research by 11%, raising it from $5,051 million to $5,595 million.
Even with the extra cost for research Eli Lilly has been able to reconcile spending hikes with management deciding to reduce capital expenditures by 15%, from $1,211 million to $1,034 million. Despite those cuts, the firm still managed to increase its workforce by 2% by hiring more than 550 new employees during the year.
In a letter from Amana Mutual Funds Trust they wrote.....
“Lilly stood out as one, among a handful, of companies that registered a positive return for the first quarter. In January, Lilly reported excellent fourth quarter results, with revenue growing at a faster clip than over the first three quarters of the year. Lilly is also financially strong with debt equivalent to only two times EBITDA3 and 12% of market capitalization."
Despite the effects of COVID-19, Eli Lilly shares were quick to recover from this fall and during April 2020, have already erased all of their recent losses and exceeded the February prices.
And now, the recent positive news about the company has pushed its share prices much higher, enabling it to reach a new all-time high of $163.71.
Where Is Eli Lilly Stock Headed?
Is It Too Late To Jump On The Action?
Will Eli Lilly Shares Continue To Rise?
Will We Recommend Another Eli Lilly Options Trade?
What Other Trades Are We Anticipating?
Do You Wish To Be Part Of This Action?
Join us here at Stock Options Made Easy, and find out our trades moving forward.
An Important Note: That any suggestions for options trade considerations require investors/traders to use their own discretion as to when to enter or exit! As well, it is advisable to do further research and due diligence before executing your trade.
It is sometimes best to exit a trade, if there is already sufficient profit accrued, before an earnings report is presented. GREED can be the undoing of a nice profit!