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Eli Lilly Waits On Health Care Fix; Pipeline Watched

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For Eli Lilly (LLY), health care reform is an 800-pound gorilla.

The maker of branded pharmaceuticals — as well as the whole industry — is waiting to see what reforms come out of Congress.

Until then, Miller Tabak analyst Les Funtleyder says, investors won’t be rushing in.

But it’s not just one oncoming, potentially harmful force, he adds.

“You probably won’t see investors flocking until reform is over and Lilly proves (its) pipeline,” he said. “In other words, that’s good for dividend people.”

One of the drugmaker’s big sellers is zyprexa. The schizophrenia drug’s patent expires in 2011. That’ll leave a big hole in the company’s lineup.

“But it does have a good pipeline, and that’s one of the most important things,” Funtleyder said. “They’re moving forward in a number of areas such as oncology and diabetes.”

Investors will get insight on the firm’s pipeline on Dec. 10, when Eli Lilly has its Research & Development Day.

On Friday, Eli Lilly said that Jan Lundberg, AstraZeneca’s (AZN) head of drug discovery, will be its new head of research. Lundberg will replace research chief Steven Paul, who retires in February.

Eli Lilly’s dividend has a yield of 5.5%.

Funtleyder believes the dividend is safe from cuts. He cautions that Lilly’s ability to cover it could be drawn into question in 2012, depending on how the firm responds to its 2011 patent expirations.

Eli Lilly’s chart action has shown encouraging signs lately, and it has a rising Accumulation/Distribution Rating.

The stock also found support at its 10-week moving average recently as it recovers from a big decline.

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