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Eli Lilly Gains on Upgrade

Citigroup Smith Barney says the drugmaker's pipeline has been discounted by the market.

Updated from 10:39 a.m. EDT

Shares of

Eli Lilly

(LLY) - Get Eli Lilly and Company Report

rose Wednesday following an upgrade by Citigroup Smith Barney to buy from hold, based on the drugmaker's pipeline of new drugs.

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This is the second time in less than two months that George Grofik, Citigroup Smith Barney analyst, has raised his rating on the stock. Grofik upgraded the stock's rating to hold from sell on March 31.

Grofik said the Indianapolis-based drug giant "is the most exciting new product story" among the companies that he covers. "While the strength of several near-term pipeline opportunities is increasingly discounted

by analysts, we believe Lilly's second wave of product launches may be underappreciated by the market and offers significant upside potential," Grofik said in a research note Wednesday. (Grofik doesn't own shares; his firm has had an investment banking relationship with Lilly within the last 12 months.)

Recently, the stock was up $1.33, or 1.8%, to $73.40. The stock hit a 52-week high of $76.95 in early May; the 52-week low is $56.70.

Lilly has been the best performer among big drugmaker stocks. For the 12 months ended May 25, Lilly recorded a total return -- stock price appreciation plus reinvestment of dividends -- of 26.5%. The Amex Pharmaceutical Index had a total return of 5.8% during the same period.