Eli Lilly shares tumble as company’s weight-loss drug misses Wall Street sales expectations

Eli Lilly’s LLY-N high profile weight-loss and diabetes drugs fell short of Wall Street sales estimates on Wednesday as supplies sat in warehouses, a 180-degree turn for the company after long struggling to meet outsized demand.

Lilly shares fell nearly 12 per cent, wiping out more than $100-billion from the Indianapolis-based drugmaker’s market value.

Both its weight-loss drug Zepbound and diabetes treatment Mounjaro have been contending with high demand that has led to shortages, but last quarter Lilly said it had ramped up manufacturing and was able to fill back orders at wholesalers. Now Lilly’s drugs are no longer in shortage and distributors are working through the supplies, it said.

Drug wholesalers, or distributors, purchase medicines like Zepbound from manufacturers and sell them to hospitals, clinics, pharmacies and other healthcare providers.

Lilly CEO David Ricks told CNBC there was excess supply of the drugs but that the company had not yet started advertising Zepbound and had held back on international launches to focus on increasing U.S. inventory.

“We haven’t been stimulating demand the way we had originally planned,” Ricks said.

Sales of Mounjaro were $3.11-billion, while Zepbound brought in $1.26-billion, which Lilly said reflected continued strong demand.

Analysts were looking for sales of $4.20-billion for Mounjaro and $1.69-billion for Zepbound for the quarter, according to LSEG data. They expect the drugs to make a combined $19-billion this year.

The miss comes despite prescriptions of Zepbound and Mounjaro continuing to increase in the U.S. Lilly filled an average of around 140,000 Zepbound prescriptions per week this quarter, compared to just over 93,000 per week last quarter, according to IQVIA data shared by an analyst.

J.P. Morgan analyst Chris Schott said the results suggested wholesalers had utilized their existing inventories without placing additional new orders as analysts had expected.

Lilly’s shares had been up 55 per cent so far this year, making it the world’s most valuable healthcare company, as investors bet on the success of the weight-loss drug.

Mounjaro and Zepbound compete with Novo Nordisk’s popular Ozempic and Wegovy. Novo, whose U.S. listed shares were down almost 1 per cent, has been aggressively marketing Wegovy on U.S. television.

Lilly also slashed its annual adjusted profit forecast to $13.02 to $13.52 per share, compared to prior view of $16.10 to $16.60, citing acquisition charges in the third quarter.

The previously disclosed $2.8-billion acquisition-related charge and higher manufacturing costs also contributed to the third-quarter profit miss.

Zepbound and Mounjaro were in short supply for much of this year due to soaring demand for the medicines that have been shown to help patients lose an average of 20 per cent of their weight. Lilly said supply had started to catch up with demand last quarter.

David Heupel, senior portfolio manager at Thrivent Financial for Lutherans, which owns about 370,000 Lilly shares, called third-quarter results “a blip in the road” and said he was not concerned about overall demand for Lilly’s weight-loss and diabetes drugs.

It’s just “a consequence of a market that’s still in its infancy,” Heupel said.

Lilly has invested billions of dollars to expand production of Mounjaro and Zepbound, both known chemically as tirzepatide, including about $7-billion in its Indiana site and facilities in Ireland. The drug is sold under the brand name Mounjaro for both diabetes and weight loss outside the U.S.

Lilly trimmed the upper end of its full-year sales forecast by $600-million to $46-billion. It maintained the lower end at $45.4-billion.

Lilly and Novo Nordisk have been racing to increase capacity and meet unprecedented demand for a weight-loss market some analysts estimate could reach $150-billion in annual revenue by the next decade.

In August, Novo trimmed its full-year profit forecast and reported a rare miss on quarterly sales of Wegovy.