Whatever you think about Donald Trump’s tariff policy, one fact stands out: companies seek to invest more in the United States. They want to avoid the negative impact of tariffs on their business. One company does it precisely Eli Lilly and the company NYSE: LlyThe field has announced that it would invest in the United States in $ 27 billion to expand its production capabilities.
Eli Lilly and the company today
Eli Lilly and Company
- 52-week range
- $ 711.40
▼
$ 972.53
- Dividend yield
- 0.69%
- P/e ratio.
- 74.17
- Value is valuable
- $ 1 007.50
Even before they entered into force on March 4, Trump’s tariffs have already influenced the markets. The S&P 500 index has now decreased by more than 3% since Trump took office from the closure of March 4. Some of them are associated with tariff fears, and also weaken economic indicators. The consumer mood index of the University of Michigan has significantly decreased to the lowest level from November 2023 in February.
The percentage interest rates for US bonds demonstrated largely a parallel shift for all repayment terms, more than two years. This means that investors require more bonds, signaling the flight to a safe place from risky assets to safe. The markets are worried that tariffs and less optimistic consumer can increase inflation and slow growth. This will lead to poor economic outcome. This explores how large investments in the United States and prevailing market problems affect Eli Lilly, the largest pharmaceutical company around the world.
Lilly for 27 billion US dollars Expansion: a strategic response to the uncertainty of tariffs
In his press release of February 26, Lilly spoke about the investment plan in the United States for an additional $ 27 billion over the next five years. This will lead to the production of investments in the United States up to $ 50 billion from 2020. Lilly will build four new production capacities. They will increase the production of Lilly drugs “in therapeutic areas”, not only thanks to the extremely popular loss of weight and drugs for diabetes. Three of these sites will be used to obtain more active ingredients in its drugs. It will be possible to focus on creating injection pens for medicines for Mounjaro and Zepbound.
In addition to the approved drugs, sites will help Lilly increase the throughput for pipelines that have not yet been approved. This step came a few days after the president met with leading pharmaceutical leaders. He warned that tariffs could soon hit these companies if they could not move their production to the United States. Trump considers a 25% tariff for imported pharmaceuticals, among other products.
Analysis of the market reaction and the consequences of the announcement of Lilly
On the day of announcements, the Lilly shares increased by about 2%. This signals that the markets were moderately supported by this step. This is a good sign, given that large investments often lead to a fall in shares. Investments in production are expensive and can damage profit in the medium term.
Eli Lilly and Marketrank ™ Analysis of Promotions
- General market ™
- 91st percentile
- Analyst rating
- Moderate purchase
- Breaking/disadvantage
- 16.0% growth
- Short level of interest
- Healthy
- The power of dividends
- Strong
- Environmental assessment
- -2,25
- Mood news
- 1.09
- Insider trade
- N/a
- Professe Earnings growth
- 32.54%
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However, from the point of view of Lilly, these investments make sense. The company recently decided the lack of Tyrzepatide. Tyrzepatide is the main ingredient in Maunjaro and Zepbound. Given the frantic demand for these drugs, investments in production only help to ensure a lack of lack. This prevents the oncoming wind in the growth of sales, because the offer may not lag behind demand.
Another reason why this announcement is that it does not represent a mass change from what Lilly has already done. Since 2020, having an investment of 23 billion US dollars, this new announcement is less than $ 1 billion. USA per year over the next five years. This indicates the threats of Trump, perhaps did not affect the company. Most likely, they were not the only factor behind the ad. It is possible that these threats simply influenced Lilly to make this announcement faster than another.
Built -in characteristics and price reduction can help maintain Lilly in a potential decline
It is still unclear whether the American economy is moving over a long period of lower stature and higher inflation. It would not be great for Lilly’s business; Nevertheless, he has some built -in protection. Since he sells drugs, insurance covers most of his sales. As part of commercial insurance, Zepbound has 87% coating.
This means that if American pocket books are compressed, most will not have to demand less medicine, because their insurance covers it. For people without lighting, Lilly also makes smart movements to expand access. The company has just reduced the cost of its payment program from pockets for Zepbound by 9% to 29%, depending on the dosage. This can help maintain demand within the pocket if economic conditions worsen.
Despite Lilly’s high rating, these factors support his investment attractiveness. Analysts in TD Cowen in particular, reached the target price of up to $ 1050, signaling 15% growth compared to the closing price of March 4.
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