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Call of the Day: Pipeline Dreams

Wednesday, 4 Aug 2010 | 5:46 PM ET

Jefferies downgraded Lilly on Wednesday to Hold and cut the price target. What must you know about these developments?

Specifically, Jefferies analyst Jeffrey Holford lowered his investment recommendation on the stock to "Hold" from "Buy" and cut his price target to $38 from $39.20.

He said two patent lawsuit decisions are imminent with a third case set to start during the fourth quarter. Meanwhile, news from the late-stage pipeline isn't expected until the second half of 2011.

He also said a recent decision on its blockbuster cancer drug Gemzar could lead the company to temper its outlook. (In July, the U.S. Court of Appeals for the Federal Circuit upheld a lower court's ruling that a patent the drug is invalid. The drug is set to lose patent exclusivity on Nov. 15.)

"Although we had already anticipated this eventuality in our earnings model, management had assumed a positive outcome in their midterm guidance," Holford said.

Call of the Day
The best plays in the pharma sector right now, with Jeffrey Holford, Jefferies analyst.

Meanwhile, additional court decisions on osteoporosis drug Evista and attention deficit hyperactivity drug Strattera could be announced anytime, he said. Also, a patent trial on the cancer drug Alimta is set to start on Nov. 8.

Holford said negative outcomes on all three cases would likely prompt him to cut his short and long-term earnings outlook.

Meanwhile, he said investors are unlikely to see key results from late-stage studies before the second half of 2011.

Hear more from Jefferies analyst Jeffrey Holford. Watch the video now.




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Trader disclosure: On Aug 4, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Seymour owns (AAPL), (BAC), (BX), (GOOG), (INTC); Terranova owns (AMZN), (AKAM), (APA), (AGU), (ADBE), (BAX), (BBY), (BMO), (C), (COP), (CVS), (EMC), (FCX), (GOOG), (GS), (JNPR), (JOYG), (KOL), (KR), (MMM), (MOS), (MSFT), (PCP), (PEP), (PFE), (POT), (RIMM), (TER), (SKX), (SU), (UAUA), (WYNN), (XBI); Finerman owns (AAPL); Finerman's firm owns (ARM); Finerman's firm owns (LEA); Finerman & Finerman's firm owns (RIMM); Finerman's firm owns (WMT); Finerman's firm owns (DAN); Finerman's firm is short (IJR); Finerman's firm is short (MDY); Finerman's firm is short (SPY); Finerman's firm is short (IWM); Pete Najarian owns (C); Pete Najarian owns (CTRP); Pete Najarian owns (ALL); Pete Najarian owns (GS); Pete Najarian owns (MGM); Pete Najarian owns (PFE); Pete Najarian owns (RSH); Pete Najarian owns (ETFC)

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