Eli Lilly tumbles after failing to clear the high bar set by weight-loss-drug growth
When optimism backfires… Eli Lilly stock fell 7% yesterday after the pharma juggernaut trimmed its annual sales forecast, saying demand for its weight-loss and diabetes drugs wouldn’t match the lofty levels it had expected. Its diabetes treatment, Mounjaro, and obesity drug, Zepbound, have spiked in popularity as more folks inject them to shed pounds. Still, the company said it made a combined $5.4B from the drugs in the fourth quarter, less than the $6.5B that analysts were looking for.
Problem: Lilly was struggling to keep up with demand for the blockbuster drugs, whose active ingredient (tirzepatide) was in shortage until late last year.
Solution: Lilly spent billions ramping up production of the injectables, and CEO Dave Ricks said there’s “tons of supply coming online.”
Don’t just blame supply… As companies pile into the weight-loss-drug biz, Lilly has had to fend off rising competition — and not just from industry leaders like Novo Nordisk, which makes Ozempic and Wegovy. The two-year shortage of GLP-1 injections gave telehealth companies like Hims & Hers and Ro a chance to weigh in with cheaper compounded versions of name-brand obesity drugs. But now that the FDA’s declared the shortage over, compounding pharmacies will be likely hampered from selling copycats, which could boost pharma titans.
Investors want their expectations beat… but that’s hard to do when the bar is high. Lilly’s revised forecast of $45B in annual sales isn’t far off from what it predicted in October and would still represent a 32% sales pop from the previous year. But disappointed investors sold off the stock. We’ve seen similar reactions to earnings from other buzzy companies like Nvidia, whose feverish growth wasn’t enough to satisfy high hopes.