Inflation woes squashed enthusiasm yesterday after a red-hot October CPI reading pushed up bond yields, causing stocks (especially tech stocks) to slide. This morning trading was muted as market participants took to the sidelines.
One area of the market that can provide substantial rewards regardless of what’s happening elsewhere is biotech. It’s not unheard of for a biotech stock to produce 5X, 10X, or even 20X returns in a very short period of time despite challenges that exist for the broader market.
The best biotech stocks to buy boast robust pipelines and already have winning drugs on the market. Today’s stock pick is an excellent candidate for those seeking to harness biotech’s potential.
Global healthcare leader Eli Lilly And Company (LLY) has created high-quality medicines for more than a century. The drug firm focuses on endocrinology, oncology, neuroscience, and immunology. Key products include Trulicity, Jardiance, Humalog, and Humulin for diabetes; and Taltz and Olumiant for immunology; and Verzenio and Alimta for cancer.
In September, Lilly’s immunology drug Olumiant received emergency use authorization from the FDA to treat hospitalized COVID-19 patients. What’s more, the drug has produced impressive results from phase 3 trials examining Olumiant’s efficacy as a hair loss treatment.
The mega-cap pharmaceutical giant’s pipeline is locked and loaded with promising advancements, which means plenty of potential upcoming opportunities for investors to benefit. In the first half of 2021, Lilly increased research and development spending for its up-and-coming treatment for diabetes Tirzepatide by 21% to $3.36 billion. The drug is currently in phase three trials and has already proven to be more effective than competitors.
Berenberg Analyst Herry Holford recently upgraded Eli Lilly to Buy from Hold and raised the price target from $240 to $270. “Pipeline progress has effectively locked in Eli Lilly’s long-term sales growth, which now stands at 10% annually through 2030 versus a peer average of 4%,” Holford tells investors in a research note. The analyst says a “confluence of catalysts, superior growth and superior returns” on Research and development, compounded by the recent pullback in the stock, prompts a revisit to the investment thesis.
The board of directors at Eli Lilly declared a fourth-quarter dividend of $0.85. The dividend will be payable on December 10th to shareholders of record as of November 15th. LLY’s dividend payout for the year is set for the low 40% range, which should allow for robust future dividend growth.
A strong pipeline and a stable dividend make Eli Lilly an attractive consideration. The pros on Wall Street also think so. Among 17 polled analysts, 12 say to Buy LLY, 4 call it a Hold, and only 1 rates the stock a Sell. A median 12-month price target of $279 represents a 12.6% increase from its current price.
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