Eli Lilly and Company (LLY) and Sanofi (SNY) develop, manufacture, and market pharmaceuticals and therapeutic solutions worldwide. LLY offers Cyramza for metastatic gastric cancer, Baqsimi for severe hypoglycemia, Bamlanivimab and etesevimab for COVID-19, among other drugs. Based in Paris, SNY provides products for multiple sclerosis, neurology, and other inflammatory diseases. Also, it has a collaboration with GlaxoSmithKline to develop a recombinant COVID-19 vaccine.
The global pharmaceuticals market is expected to grow at a 1.8% CAGR--from $1228.45 billion in 2020 to $1250.24 billion in 2021. Rapid investment in drugs for customized treatment and therapies and personalized medicine have been driving the industry’s growth in recent years. But the COVID-19 pandemic has been a transformational moment for the industry, highlighting its ability to rapidly deliver solutions to fight the virus. And now that pharmaceutical companies are capitalizing on technologies to provide more holistic and patient-oriented products and services, it is poised to grow at an unprecedented pace. As such, we think SNY’s and LLY’s product portfolios should continue to improve with technological innovation, which should continue driving their growth.
LLY has gained 29.4% over the past year, while SNY has returned 3.9% over the same period. Also, in terms of year-to-date performance, LLY has surpassed SNY’s 6.7% gains with 17.9% gains. But which of these stocks is a better pick now? Let’s find out.
Click here to checkout our Healthcare Sector Report for 2021
Latest Movements
SNY and Merck’s jointly developed Vaxelis vaccine is now available in the United States for commercial sale. The vaccine is the first and only six-in-one pediatric combination vaccine to protect infants and children against diseases.
On May 27, SNY and GSK initiated the enrollment in their Phase 3 clinical study of COVID-19 vaccine candidates. The companies expect the vaccine to be approved and authorized by the fourth quarter of 2021. However, now that most developed countries have vaccinated most of their populations, SNY may face challenges when it comes to the commercialization prospects of the vaccine.
Last month, LLY and MiNA Therapeutics Limited announced a research collaboration to build novel drug candidates using MiNA's proprietary small activating RNA (saRNA) technology platform, with the goal of addressing diseases across LLY’s key therapeutic focus areas. This partnership is expected to accelerate the development of RNA-based medicines and allow LLY to cater to the unmet medical needs of patients.
Also, last month, LLY and Innovent Biologics, Inc. announced that the FDA accepted their regulatory submission for sintilimab injection, a PD-1 inhibitor, for the first-line treatment of people with nonsquamous non-small cell lung cancer. Once approved, this therapy will open new revenue streams for LLY.
Recent Financial Results
During the first quarter, ended March 31, 2021, SNY’s other revenues decreased 14% year-over-year to €295 million ($357.22 million), due primarily to lower VaxServe sales of non-Sanofi products. The company’s specialty care sales grew 15.3%, due to strong Dupixent performance. However, its gross profit decreased 4.1% year-over-year to €6.2 billion ($7.51 billion). And its net income decreased 7% year-over-year to €1.57 billion ($1.90 billion).
LLY’s total revenue increased 16% year-over-year to $6.81 billion in the first quarter ended March 31. The company’s non-GAAP net income was $1.7 billion, representing a 16% increase of 16% from its year-ago value. Its operating income rose 6% year-over-year to $1.87 billion, while non-GAAP EPS grew 16% from the prior-year quarter to $1.87.
Past and Expected Financial Performance
SNY’s revenue and EBITDA have increased at CAGRs of 1.4% and 1.7%, respectively, over the past three years. In comparison, LLY’s revenue and EBITDA grew at annualized rates of 4.1% and 8.3%, respectively, over this period.
SNY’ revenue is expected to rise 14.2% in the quarter ending June 30, 10.9% in the current year, and 5% next year. Consensus EPS estimates indicate a 24.3% improvement in the next quarter and 16.4% improvement in its fiscal year 2022. In comparison, analysts expect LLY’s revenue to increase 15.2% in the current quarter, 11% in the current year, and 2% in 2022. Also, the company’s EPS is estimated to increase 22.7% in the next quarter and 8.7% in the current year.
Profitability
SNY’ trailing-12-month revenue is 1.7 times LLY’s. But LLY is more profitable with a 75.9% gross profit margin versus SNY’ 67.7%.
In fact, LLY’s ROTC of 20.1% compares favorably with SNY’s 5.7%.
Valuation
In terms of non-GAAP forward PEG, LLY is currently trading at 2.01x, 66.1% higher than SNY, which is currently trading at 1.21x. Also, its 7.57x trailing-12-month EV/Sales is 131.5% higher than SNY’ 3.27x.
In terms of trailing-12-month Price/Sales, LLY’s 7.09x is 134.8% higher than SNY’s 3.02x.
Though LLY looks much expensive compared to SNY, it may be worth paying this premium considering LLY’s significantly higher growth potential.
POWR Ratings
LLY has an overall B rating, which equates to a Buy in our proprietary POWR Ratings system. However, SNY has an overall rating of C, which translates to Neutral. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
In terms of Quality Grade, LLY has a B, consistent with its higher-than-industry PEG. SNY’s Quality grade of C is in sync with its lower-than-industry P/E ratio.
In terms of Stability Grade, LLY has a B, indicating that it is more stable than its peers. In comparison, SNY has an A.
Of the 231 stocks in the F-rated Medical – Pharmaceuticals industry, LLY is ranked #13 while SNY is ranked #37.
Beyond what we’ve stated above, our POWR Ratings system has also rated both SNY and LLY for Value, Growth, Sentiment and Momentum. Get all LLY’s ratings here. Also, click here to see the additional POWR Ratings for SNY.
The Winner
Although SNY’s strong sales of Dupixent drug and its diverse portfolio of essential medicines have helped it generate impressive growth, the company’s adult booster vaccines sales decreased 8.7% and rare blood disorder franchise sales were down 0.7%. Furthermore, its COVID-19 vaccine candidate is still in its Phase 3 trial at a time when its peers have already started commercializing their vaccines, which could limit its sales.
In comparison, LLY is in a much better position to capitalize on the booming pharmaceutical market. With its increasing investment in R&D and growth in key therapeutic areas, LLY has plenty of room to grow. So, we believe LLY is a better investment currently.
Our research shows that the odds of success increase if one bets on stocks with an Overall POWR Rating of Buy or Strong Buy. Click here to learn about the top-rated stocks in the Medical – Pharmaceuticals industry.
Click here to checkout our Healthcare Sector Report for 2021
LLY shares were trading at $203.32 per share on Friday morning, up $0.62 (+0.31%). Year-to-date, LLY has gained 21.46%, versus a 13.11% rise in the benchmark S&P 500 index during the same period.
About the Author: Imon Ghosh
Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization.
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