Eli Lilly (LLY) missed Wall Street's revenue expectations in its third quarter earnings released Wednesday morning, which sent shares down more than 6%.
The drugmaker also slashed its profit guidance and the high end of its revenue outlook for the year.
The company reported revenue of $11.4 billion, falling short of Wall Street estimates of $12.17 billion. Still, that represented a 20% increase year over year. The company also missed earnings per share by a whopping 20%, reporting $1.18 per share versus Wall Street expectations of $1.51.
Lilly's blockbuster weight-loss drug Zepbound and diabetes drug Mounjaro remain bright spots, as the GLP-1 drug portfolio remains a focal point of the company's earnings story. But revenue from Zepbound missed analyst estimates of $1.7 billion, with Lilly reporting nearly $1.3 billion.
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Eli Lilly said US sales of the two drugs were "negatively impacted by inventory decreases in the wholesaler channel."
CEO Dave Ricks told Yahoo Finance in an interview Wednesday that the company has seen 25% growth in GLP-1s quarter over quarter.
"We need to make enough [supply], and we need better insurance coverage," Ricks said. "Those are the two problems that are slower to change than we want, but those are the gating factors right now."
The FDA took the drugs off the shortage list this quarter, though the agency is reportedly reconsidering the move.
Ricks said the FDA would have no basis to do so since the company is ramping up and planning to finally begin advertising the drug in the US to help promote sales.
"Underlying production is on track to beat our goal of 50% year over year," he said. "We feel really confident in that picture exiting the year [and] into next year. So that's why we're going to be promoting in the US and launching in a few markets ex-US as well."
Mizuho's healthcare expert Jared Holz wrote in a note to clients Tuesday that he expected sales for Zepbound to beat estimates while diabetes drug Mounjaro could slightly miss estimates of $3.8 billion as more patients turn to Zepbound for its higher-dosage weight-loss benefit.
There are concerns that the market overall could be seeing some softness since competitor Novo Nordisk (NVO) also missed expectations last quarter and continues to face some shortages.
"Some have asserted that the stock and group have peaked," Holz wrote. "Given the complexities around much of the Healthcare sector and difficulty establishing a simple thesis for the vast majority of names in Pharma/Biotech or otherwise, we think investors will remain very engaged in weight-loss names."
Ricks rebuffed the idea, saying that there is still growth in the ex-US market, as launches have been pushed back to ensure supply is available. In addition, the company is working on additional approvals for the drugs, such as to help treat sleep apnea and fatty liver disease, which would open the floodgates to greater insurance and government coverage.
Lilly posted $4.3 billion in revenue last quarter from the two drugs. On Wednesday, the combined sales total was $4.4 billion, with Mounjaro sales reported at $3.1 billion.
Researchers at Lilly Research Laboratories, shown here on June 17, 2014, developed basal insulin peglispro, a diabetes molecule undergoing Phase 3 clinical trials. ·smontgom65 via Getty Images
Lilly's value as a large pharma company isn't only tied to the GLP-1 market.
"People think of us as the weight loss company, but actually the rest of the business is really healthy across cancer, immunology and neuroscience now," Ricks said, noting the rest of the portfolio grew 17% in the quarter.
Lilly has recently launched an Alzheimer's drug candidate, creating competition with current market lead Leqembi from Biogen (BIIB) and Eisai. That also has a slow ramp due to requirements before getting treated, including a variety of tests, according to Ricks.
"It's not a big financial driver for us," Ricks said. "But we do expect a linear uptake here. I think there's a lot of gating factors in the healthcare system that need to change in order for this drug to be used."
A recent study showed that with lower starting doses, the potential for brain swelling could decrease. That has been one of the concerning side effects of all Alzheimer's drugs, including Lilly's Kisunla.
But the sheer potential market for obesity has made Lilly's stock soar in recent years and has put the company on course to potentially become the first trillion-dollar healthcare company. The stock is up more than 50% so far in 2024, and until Tuesday, the market cap had been above $860 billion. The company's valuation sank by $100 billion Wednesday morning, reaching $750 billion. The stock closed slightly higher, and Lilly ended the day with its market cap at just over $800 billion.
The company has worked hard to end the shortage of its drugs, known by the key ingredient tirzepatide. In addition, Lilly launched a direct-to-consumer platform that would allow cash-paying patients to access vials of the drug, rather than auto-injector pens, at a discounted rate.
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Anjalee Khemlani is the senior health reporter at Yahoo Finance, covering all things pharma, insurance, care services, digital health, PBMs, and health policy and politics. That includes GLP-1s, of course. Follow Anjalee on most social media platforms @AnjKhem.
