Eli Lilly’s stock plummets over missed sales forecasts for Mounjaro, Zepbound – what’s next for the pharma giant?

Eli Lilly & Co. has faced a dramatic drop in its stock price, tumbling over 10% following a critical earnings report that highlighted missed revenue targets for two of its most anticipated drugs: Mounjaro, a diabetes medication, and Zepbound, a high-profile weight-loss drug. Investors, who had anticipated a robust sales report amid growing demand for these medications, were taken aback when both drugs failed to meet Wall Street’s projections, prompting concerns over the pharmaceutical giant’s ability to keep up with market demand and address lingering supply issues.

Sales Forecast Miss Raises Alarm

In its Q3 financial report, Eli Lilly disclosed that Mounjaro, widely recognized for its effectiveness in diabetes management, brought in $3.11 billion, short of the projected $3.77 billion. Meanwhile, Zepbound, anticipated to be a blockbuster weight-loss drug, only managed to generate $1.26 billion, significantly lower than the $1.76 billion analysts had expected. This stark gap between projections and actual sales is attributed to delayed advertising efforts and distribution challenges. The company’s CEO, David Ricks, shared that Zepbound’s promotional campaign had been postponed to November to allow for a smoother supply chain, an effort to avoid service disruptions to customers.

Expert Insights: Supply Chain and Strategic Challenges

Industry experts have noted that the recent decline in Eli Lilly’s stock underscores a growing challenge for pharmaceutical companies managing the production and distribution of incretin-based drugs like Mounjaro and Zepbound. Analysts have pointed out that while demand remains high, Eli Lilly’s supply chain adjustments have not fully caught up to expectations. Compounding pharmacies, offering lower-cost alternatives, have also begun to challenge the drug’s availability, adding to the pressure on Eli Lilly to maintain market dominance.

Further exacerbating investor concerns was the $2.8 billion charge linked to Eli Lilly’s recent acquisition of Morphic Holding, a biotech acquisition intended to bolster its treatment pipeline. This charge, compounded by lower-than-expected quarterly sales, forced Eli Lilly to reduce its profit guidance for the full year, trimming its revenue forecast from an estimated $46.6 billion to $46 billion. For the fiscal year, the company now projects adjusted earnings per share between $13.02 and $13.52, a notable drop from the prior forecast of $16.10 to $16.60.

Pharma Giant’s Response and Future Outlook

Despite these setbacks, Eli Lilly has taken steps to meet demand more effectively, pledging to expand its production of incretin drugs by 50% in the latter half of 2024 and targeting additional increases by 2025. Ricks reassured investors that these adjustments are aimed at mitigating future shortages and capitalizing on the surging market for diabetes and weight loss treatments. However, the earnings miss has cast doubt on Eli Lilly’s ability to fully tap into the potential of Mounjaro and Zepbound, with investors closely monitoring how the company navigates the regulatory landscape and its planned promotional campaign.

Bright Spots and Challenges in Other Drug Portfolios

While the underperformance of Mounjaro and Zepbound captured most headlines, other drugs within Eli Lilly’s extensive portfolio demonstrated varying results. Verzenio, a prominent breast cancer medication, saw a 32% rise in sales to reach $1.37 billion, highlighting some resilience within the company’s broader treatment offerings. However, sales for other diabetes drugs like Jardiance and Trulicity faced setbacks, dipping by 2% and 22% respectively, indicating challenges across Eli Lilly’s diabetes care segment.

Investor Sentiment and Market Response

The sharp stock decline represents a critical juncture for Eli Lilly, which has heavily invested in advancing its presence in weight-loss and diabetes treatment. With Wall Street analysts expressing concerns over the company’s operational efficacy and mounting competition, it remains to be seen how effectively Eli Lilly will navigate these challenges in the coming quarters. Ricks emphasized that the company’s plans to expand manufacturing capacity are well underway, and promotional efforts for Zepbound are expected to boost Q4 performance. However, given the intensifying scrutiny over its production capabilities and the missed Q3 sales targets, Eli Lilly’s stock will likely experience continued volatility as investors await concrete improvements.