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Lilly's Moat Still Intact After Halting Heart Drug Study

Given the stock's major pullback on the discontinuation announcement, we now see Lilly as fairly valued.

We plan to reduce our

Lilly ended the drug's pivotal Phase III study based on a data-monitoring committee's suggestion that the drug would not achieve a cardiovascular benefit. Despite the large potential for the drug, we had only modeled in $1 billion in peak sales potential (in line with consensus expectations) because of the high uncertainty of approval, as several similar drugs failed in late-stage development.

Nevertheless, we still view Lilly's moat as wide, buoyed by a strong late-stage pipeline and manageable patent losses over the next five years. Given the stock's major pullback on the discontinuation announcement, we now see Lilly as fairly valued.

Beyond the implications for Eli Lilly, the evacetrapib failure reduces odds of success for

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About the Author

Damien Conover

Sector Director
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Damien Conover, CFA, is the director of healthcare equity research for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. He is also director of equity strategy, responsible for helping to shape, package, and surface research based on Morningstar’s investment philosophy by working closely with the firm’s sector strategists and directors.

Before joining Morningstar in 2007, Conover was an equity research analyst covering the healthcare sector for Raymond James, Bank of Montreal, and Tucker Anthony.

Conover holds bachelor’s and master’s degrees in finance from the University of Wisconsin and was a member of its Applied Security Analysis Program. He also holds the Chartered Financial Analyst® designation.

Damien Conover, CFA, is the director of healthcare equity research for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. He is also director of equity strategy, responsible for helping to shape, package, and surface research based on Morningstar’s investment philosophy by working closely with the firm’s sector strategists and directors.

Before joining Morningstar in 2007, Conover was an equity research analyst covering the healthcare sector for Raymond James, Bank of Montreal, and Tucker Anthony.

Conover holds bachelor’s and master’s degrees in finance from the University of Wisconsin and was a member of its Applied Security Analysis Program. He also holds the Chartered Financial Analyst® designation.

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