Acrux
About the author:
- Author name:
- By Scott Power
- Job title:
- Senior Analyst
- Date posted:
- 28 July 2014, 3:01 PM
- Sectors Covered:
- Healthcare, Life Sciences
Eli Lilly reported 2QCY14 sales of Axiron™(ACR's lead product), well above our forecast. The market responded with a large increase in the share price. We have made no changes to valuations, but see possible room for an increase in the final dividend.
Axiron™ sales
The net sales result for Axiron™ for 2QCY14 of US$47.1m was well above our forecast of US$40-42m. Despite an overall decrease in volumes across the testosterone space, Eli Lilly has been able to maintain its market share around 14%, assisted by price rises and stable rebates. This was despite the FDA investigating the risk of stroke and heart attack in men taking FDA-approved testosterone products. No conclusions have been reached, although there is some commentary suggesting that the FDA may look to update its position in September 2014.
Market reaction
This was a solid result which the market has reacted positively to, gaining 30% upon announcement. The result brings the total FY14 sales of Axiron to US$181.1m, with a 19% increase in sales from the previous quarter.
What we think
We have made no changes to our forecasts. At this stage, we have not factored in any milestone payments for FY15 (US$50m), preferring to wait for greater clarity on market growth and market share gains. We expect ACR to maintain its market share and once more clarity from the FDA is provided, we see market share gains over the next few years.
ACR has already paid a 12c special dividend this year and we are expecting an 8c final dividend to be paid, although we believe this forecast is conservative. Final results and dividends are expected to be announced on 21st August.
Our share price target remains unchanged at A$1.44 and at current prices (A$1.60) we recommend that shareholders take some profits.
More information
Morgans clients can access our detailed research report on Acrux (ACR). If you are interested in finding out more, please contact your nearest Morgans office.
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