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Pfizer or Eli Lilly: Which Company Has Better Margins?

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Jan. 8 2019, Updated 9:00 a.m. ET

Pricing changes for Pfizer and Eli Lilly

In November 2018, Pfizer (PFE) issued a press release announcing a hike in the list prices of 10% (or 41) of the medicines in its drug portfolio starting on January 15, 2019.

According to the press release, Pfizer expects no revenue impact from these prices increases in 2019 due to an increase in rebates to be paid to pharmacy benefit managers and health insurers. According to the release, the company has projected the net impact of price hikes on its revenue growth to be -1% in the US market in 2018 compared to 2017.

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According to its 2019 guidance and investment community meeting, Eli Lilly and Company (LLY) expects its 2019 revenue to be driven mainly by an increase in sales volumes and not by price hikes. The company has projected a single-digit decline in net prices in the US market in 2019, but it plans to determine its list prices in 2019 on a product-by-product basis.

Margin expectations

Wall Street analysts expect Pfizer’s gross margins to be 79.20%, 79.14%, and 79.09%, respectively, in 2018, 2019, and 2020. On the other hand, Eli Lilly is expected to report gross margins of 76.01%, 76.51%, and 76.97%, respectively, in 2018, 2019, and 2020.

Analysts expect Pfizer’s adjusted net income margins to be 33.51%, 32.92%, and 33.09%, respectively, in 2018, 2019, and 2020. On the other hand, Eli Lilly is expected to report adjusted net income margins of 23.61%, 23.39%, and 25.12%, respectively, in 2018, 2019, and 2020.

Pfizer is thus expected to report higher profit margins than Eli Lilly from 2018 to 2020. However, while Pfizer is expected to report a slight contraction in its profit margin from 2018 to 2020, Eli Lilly is expected to report a modest expansion in its margin in the same timeframe.

In the next article, we’ll compare the cost structures of Pfizer and Eli Lilly in greater detail.

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