Eli Lilly (LLY) Stock Slides on Drug Pricing Investigation
NEW YORK (TheStreet) -- Shares of Eli Lilly (LLY) - Get Report are falling 0.89% to $79.91 in afternoon trading on Friday, after the drug maker received a request from the Justice Department for information about its drug pricing practices.
The Justice Department's civil division and the U.S. attorney's Philadelphia office are investigating Eli Lilly's "treatment of certain distribution service agreements with wholesalers" regarding manufacturer prices for the drug-rebate program for Medicaid, according to a report filed with the SEC, the Wall Street Journal reports.
Medicaid rebates, which are paid by drug companies, are determined based on the average price wholesalers pay to drug manufacturers, the Journal adds.
The investigation comes as pharmaceutical companies are facing heightened scrutiny about their drug prices, amid pressure from presidential candidates and recent allegations of price inflation.
Separately, TheStreet Ratings team rates LILLY (ELI) & CO as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
We rate LILLY (ELI) & CO (LLY) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income, solid stock price performance, growth in earnings per share and expanding profit margins. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- LLY's revenue growth has slightly outpaced the industry average of 3.4%. Since the same quarter one year prior, revenues slightly increased by 1.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Pharmaceuticals industry. The net income increased by 59.7% when compared to the same quarter one year prior, rising from $500.60 million to $799.70 million.
- Powered by its strong earnings growth of 59.57% and other important driving factors, this stock has surged by 25.20% over the past year, outperforming the rise in the S&P 500 Index during the same period. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- LILLY (ELI) & CO reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, LILLY (ELI) & CO reported lower earnings of $2.23 versus $4.31 in the prior year. This year, the market expects an improvement in earnings ($3.44 versus $2.23).
- The gross profit margin for LILLY (ELI) & CO is currently very high, coming in at 75.49%. Regardless of LLY's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, LLY's net profit margin of 16.12% compares favorably to the industry average.
- You can view the full analysis from the report here: LLY
Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.