Merrill Upgrades Lilly to Buy

Analyst David Risinger cites the drug maker's underappreciated pipeline

Merrill Lynch upgraded Eli Lilly (LLY ) to buy from neutral.

Analyst David Risinger says the upgrade is based on the company's underappreciated pipeline, and what he believes to be a reasonable valuation. He says Lilly has significant sales growth potential from a relatively low sales base, and no major patent expirations to contend with until 2011. It also has -- by far -- the best sales growth prospects among U.S. major pharmaceuticals.

Risinger notes he shifted to a higher risk rating to highlight that there's no guarantee that the Zyprexa patent will be upheld, and there could be significant downside if it's overturned. He sees $2.85 2004 earnings per share, and $3.31 in 2005. He set a $80 target.

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