Next year will mark the 100th anniversary of the introduction of a groundbreaking drug. In 1923, the first active ingredient for the treatment of diabetes, "Iletin," was launched on the market. Until then, there had been no treatment for diabetes. Based on the discovery of two Canadian researchers, the Lilly company started mass production of bovine and calf insulin, the hormone that lowers blood sugar. The drug would turn out to be a milestone in the company's rise to become a global pharmaceutical leader. By the end of 2005, the company now known as Eli Lilly - the name of its founder - was producing "Iletin." The Indianapolis-based company employs more than 36,000 people around the globe. Nearly one in four of them works in research and development. In 2021, Eli Lilly achieved consolidated sales of more than USD 28 billion - 15% more than the year before. Covid-19 antibodies contributed 5 percentage points to this growth rate.
Which shows that Eli Lilly is not only dedicated to diabetes. Oncology, immunology, neuroscience as well as other therapeutic areas give the Group a broad foundation. Blockbusters include Trulicity, an active ingredient for the treatment of type 2 diabetes, as well as the gastric cancer drug Cyramza and Taltz, which is administered to patients with psoriatic arthritis. Eli Lilly generated just under 60% of Group sales in its home market in 2021 (see chart). While Europe is the second largest sales region, China is becoming increasingly important. Within two years, the pharmaceutical company has increased sales in the Middle Kingdom by more than three quarters. In terms of profit, however, the Group has recently had to make concessions. The bottom line in 2021 was a surplus of USD 5.6 billion, a tenth less than in the previous period. Nevertheless, Eli Lilly has remained true to its dividend policy. In 2021, a profit share was distributed for the 136th consecutive year.
On Wall Street, the outlined quality characteristics are very well received. The share price has been pointing upward for years. In 2022, Eli Lilly is up just under 13% to date. This makes the large cap one of the 50 strongest stocks in an S&P 500 index battered by geopolitics, inflation and the interest rate turnaround. Even the recent profit warning did little to hurt the stock. Eli Lilly had to adjust its earnings forecast for 2022 downward for the second time. CEO David A. Ricks now expects adjusted earnings per share of USD 7.90 to USD 8.05. He had previously set the forecast range USc 25 higher. In addition to competition for cancer drug Alimta, lower insulin prices slowed the company in Q2. In its diabetes division, Eli Lilly is feeling political headwinds. Recently, the US Congress passed a climate and social package. Among other things, it provides for a reduction in the price of insulin to a maximum of USD 35 from next year. The fact that analysts and investors nevertheless remain loyal to the industry giant also has to do with its research work. The pharmaceutical company has a pipeline with several promising product candidates.
Despite its strong performance and a market capitalization of more than USD 300 billion, Eli Lilly does not play too big a role in the Swiss structured products market. A new issue from Leonteq shows that attractive conditions can be presented with this underlying. Three softcallable barrier reverse convertibles (BRCs) are available. As a single-underlying, Eli Lilly offers a coupon of 10% p.a. in the product currency CHF. Those who wish to invest in USD can expect a 300 basis points higher annual payout. For another alternative, Eli Lilly forms the basis together with its competitors Abbvie and Bristol-Myers Squibb. The coupon on this CHF-denominated issue is 14% per annum. A barrier of 69% of the initial level is fixed for all three BRCs. As long as no underlying falls to or below this level, investors will get the nominal back in full at maturity. Otherwise, the partial protection expires. Due to the soft callable feature, early termination and redemption of the presented BRC is possible.
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