No surprises
As we anticipated earnings season during COVID is falling into a predictable pattern and the results released by Lilly this morning are an example. During the first quarter patients stocked up on prescription medications such as insulin. This resulted in higher than anticipated sales during the quarter a trend which reversed itself in the second quarter as sales of Humalog declined by 18%.
As the company noted in the earnings press release;
“The company estimates that the COVID-19 pandemic negatively impacted worldwide revenue in the second quarter of 2020, including approximately $250 million of decreased customer buying that largely offset product stocking that occurred in the first quarter of 2020 and approximately $250 million resulting from delayed new patient prescription trends.”
As we move into the third quarter it’s difficult to model any sales patterns given the uncertain trajectory of COVID. As states began to reopen many anticipated that life would get back to some sense of normalcy with patients once again visiting their physician. However as we have seen as the COVID numbers continue to climb and some states have begun reinstating restrictions this is not happening. With no clear end in sight many patients remain cautious as they continue to worry about non-essential social interactions.
Given the depth of the Lilly diabetes portfolio noted by the continued strong performance of Trulicity these COVID induced sales pattern should not adversely impact the company over the long term. The fact is given the uncertain nature of COVID it’s time to throw any modeling out the window and chalk up 2020 as an outlier year. The more important question has become what 2021 will look like and that quite frankly is complete speculation given what we know today.
The good news for Lilly as we noted is the depth of their diabetes portfolio, their strong brand recognition combined with the fact that during these uncertain times physicians are unlikely to make any major changes to a patient’s therapy regimen. We anticipate when 2020 is over insulin sales fall in line with normal patterns while GLP-1 sales will continue to accelerate. Unlike their main competitor Novo Nordisk, Lilly is not launching any major new drugs during COVID.
During times like we are experiencing with so much uncertainty we fall back to buying good companies on dips and holding tight. Lilly is a very good company and should baring a major misstep come through these uncertain times just fine.
