Eli Lilly & Co Shares Plunge After Disappointing Sales of Weight-Loss Drug

Shortfall in Third-Quarter Sales

Eli Lilly & Co's shares took a hit in premarket trading following the company's announcement of lower than expected third-quarter sales for its weight-loss drug. The company attributed the disappointing sales to 'inventory issues'. However, it seems that Lilly had been trying to capitalize on the popularity of anti-obesity drugs by pushing GLP1s, only to find that demand had dwindled in the quarter. This could be due to the high cost of these drugs and the limited insurance coverage available.

Third-Quarter Revenue Details

Eli Lilly reported a third-quarter revenue of approximately $11.4 billion from all its products, marking a 20% increase year on year. However, this fell short of the Bloomberg Consensus estimate of $12.18 billion. The drug Mounjaro generated $3.11 billion in revenue, while the weight-loss drug Zepbound brought in $1.26 billion. Bloomberg analysts had expected revenues of $3.62 billion and $1.63 billion respectively.

Earnings Report Snapshot

Here's a quick look at the third-quarter earnings report: - Adjusted EPS $1.18 vs. 10c y/y - Revenue $11.44 billion, +20% y/y, estimate $12.18 billion (Bloomberg Consensus) - Trulicity revenue $1.30 billion, -22% y/y, estimate $1.21 billion - Mounjaro revenue $3.11 billion, estimate $3.62 billion - Zepbound revenue $1.26 billion, +1.2% q/q, estimate $1.63 billion - Humalog revenue $534.6 million, +35% y/y, estimate $423.6 million - Taltz revenue $879.6 million, +18% y/y, estimate $839.4 million - Jardiance revenue $686.4 million, -2.1% y/y, estimate $823.7 million - Verzenio revenue $1.37 billion, +32% y/y, estimate $1.39 billion

Updated Full-Year Sales Forecast

Eli Lilly has revised its full-year sales forecast to between $45.4 and $46 billion, down from the previous upper limit of $46.6 billion. This is despite the company having raised its full-year guidance twice this year.

Impact of High Inventory Levels

According to the pharmaceutical giant, higher wholesaler inventory levels at the end of the second quarter negatively impacted the sales of Mounjaro and Zepbound in the third quarter. It appears that the company's strategy of pushing GLP1s may not have been the best decision as demand for these expensive drugs with limited insurance coverage waned.

The Burst of the Fat Bubble

The bursting of the 'fat bubble' had been evident for several months. Eli Lilly & Co. is now selling vials of its blockbuster weight-loss drug Zepbound to patients for as little as $399 a month. The FDA has stated that Eli Lilly’s weight-loss drugs are no longer considered to be in shortage in the US. In premarket trading, Lilly shares have dropped about 10.25%. If losses exceed the 10.51% plunge seen on December 16, 2016, this will mark Lilly's largest single-day drop since October 2008.

Bottom Line

The disappointing sales of Eli Lilly & Co's weight-loss drug and the subsequent drop in its shares highlight the challenges faced by pharmaceutical companies in predicting and meeting market demands. The high cost and limited insurance coverage of such drugs can significantly impact their sales. What are your thoughts on this development? Do you think the 'fat bubble' has truly burst? Share your thoughts and this article with your friends. Don't forget to sign up for the Daily Briefing, delivered every day at 6pm.