close
close

Lilly lowers forecast due to unexpected disappointment in weight-loss drugs

Posted on by L. Dreeye
Lilly lowers forecast due to unexpected disappointment in weight-loss drugs

Madison Mueller
| Bloomberg

On Wednesday, Eli Lilly & Co. cut its full-year forecast due to weak sales of its weight-loss blockbuster, a shocking setback for a drugmaker that had been gaining strength from insatiable demand for the drugs.

The company’s shares fell 10% before markets opened in New York. The stock was up 55% this year through Tuesday’s close.

After doubling its forecast this year, Lilly now expects full-year sales to reach $46 billion, down $600 million from the previous high end of its forecast.

The biggest surprise of the quarter was weight-loss drug Zepbound, with sales of $1.26 billion falling short of the $1.63 billion expected by analysts. Sales of Mounjaro, another brand of the same drug used to treat diabetes, were $3.11 billion, which also missed analysts’ expectations of $3.62 billion.

The Indianapolis-based drugmaker blamed the misses on an inventory issue, saying wholesalers had a lot of drugs in stock at the end of the second quarter, causing them to sell fewer in the third quarter. This answer did not reassure analysts, who did not expect such a development.

“Few people expected such a miss,” said Mizuho’s Jared Holtz. “Given such high demand for these drugs, the stock reduction was a surprise.”

By inventory reduction, he refers to the idea that wholesalers sold off existing inventory in the third quarter rather than buying and selling more of the company’s drugs.

Competition

Lilly competes with Danish rival Novo Nordisk A/S, maker of Ozempic and Wegovy. Both have struggled to produce enough shots to satisfy a seemingly ever-growing market, and both have invested billions in increasing production capacity. Novo shares fell 5.7% on Wednesday in Copenhagen.

The idea that Lilly now appears to be facing demand problems has rattled analysts.

Lilly’s success story “is driven by demand for its Mounjaro/Zepbound franchise significantly outpacing supply, so a cumulative third-quarter sales miss of nearly $900 million as supply constraints begin to lift could lead to significant uncertainty about the outlook,” – says Bloomberg Intelligence analyst John Murphy. said.

Obesity is one of the largest and fastest growing areas of the pharmaceutical industry. Analysts estimate that the weight loss market will reach $130 billion by 2030. Lilly’s success in this category has made it the most valuable pharmaceutical company in the world.

Lilly reported adjusted earnings of $1.18 per share in the third quarter, the Indianapolis-based pharmaceutical company reported, missing analysts’ estimates of $1.51 per share. Revenue from all products was $11.4 billion in the third quarter, below analysts’ average estimate of $12.2 billion.

Lilly now projects full-year 2024 earnings of $13.02 to $13.52 per share, down from the previous estimate of $16.10 to $16.60 per share. The company attributed the reduction to a new accounting rule.

___

With assistance from Antonia Mufarech.