Eli Lilly (LLY) Earnings Q3 2024

Eli Lilly on Wednesday missed expectations for third-quarter profit and revenue, weighed down by disappointing sales of its blockbuster weight-loss drug Zepbound and diabetes treatment Mounjaro, and lowered its full-year adjusted profit forecast.

The company’s stock fell more than 12% in morning trading. Shares of its biggest rival, Novo Nordiskfell by more than 3 per cent

Eli Lilly now expects full-year adjusted earnings of between $13.02 and $13.52 per share, down from previous guidance of $16.10 to $16.60 per share. The drugmaker cited a $2.8 billion charge recorded in the third quarter related to its acquisition by intestinal disease drugmaker Morphic Holding, which touts its results.

Eli Lilly also lowered the high end of its revenue outlook for the year, now expecting sales of between $45.4 billion and $46 billion. The company’s previous guidance called for revenue of a whopping $46.6 billion.

Here’s what Eli Lilly reported for the period ended Sept. 30 compared with what Wall Street expected, based on a survey of analysts by LSEG:

• Earnings per share: $1.18 adjusted vs. $1.47 expected
• Income: $11.44 billion vs. $12.11 billion expected

The September period was Zepbound’s third full quarter in the US market after winning approval from regulators nearly a year ago. The weekly injection brought in $1.26 billion in sales for the period, below the $1.76 billion that analysts were expecting, according to StreetAccount.

Meanwhile, Mounjaro posted $3.11 billion in revenue for the third quarter, more than double what it booked in the same period a year ago. But analysts expected $3.77 billion in sales for the diabetes treatment, according to StreetAccount.

Demand in the US has far outstripped supply for Lilly’s incretin drugs, such as Zepbound and Mounjaro, over the past year. Both treatments mimic certain gut hormones to suppress a person’s appetite and regulate their blood sugar.

The popularity of these injectable drugs has forced both Eli Lilly and Novo Nordisk to invest billions to increase production capacity for the treatments.

Eli Lilly’s supply woes began to ease earlier this year. As of Wednesday, the Food and Drug Administration’s drug database said all doses of Zepbound and Mounjaro are available in the US after prolonged shortages. Nevertheless, the agency warns that patients may not always be able to immediately fill their prescription for these medicines at a particular pharmacy.

In an interview with CNBC, Eli Lilly CEO David Ricks said third-quarter performance for Zepbound and Mounjaro “is not a function of supply.” The company said third-quarter sales of the drugs were negatively impacted by inventory declines among wholesalers.

Ricks also said the company pushed back plans to advertise and promote Zepbound due to customer service levels. The drugmaker will begin those efforts in November, he said.

“When people go and they can’t get their medication, they’re very frustrated. They tell us. So we didn’t want to send more people to do that necessarily,” Ricks said.

Eli Lilly has said it expects production of incretin drugs in the second half of 2024 to be 50% higher than it was in the same period last year. And Ricks said Wednesday that the company expects “even larger” expansions in production capacity through the end of the year and 2025.

For the third quarter, Ely Lilly recorded net income of $970.3 million, or $1.07 per share, compared with a net loss of $57.4 million, or 6 cents per share, in the third quarter of 2023.

Excluding one-time items associated with the value of intangible assets and other adjustments, Eli Lilly had earnings of $1.18 per share for the most recent quarter.

Revenue rose 20% year over year to $11.44 billion.

The FDA’s decision to remove tirzepatid, the active ingredient in Zepbound and Mounjaro, from its shortage list has drawn fierce opposition from compounding pharmacies that make custom and sometimes cheaper alternatives to Eli Lilly’s brand-name drugs. Compounding pharmacies are urging the FDA to reconsider its decision as both Eli Lilly and Novo Nordisk try to crack down on unapproved versions of their best-selling drugs.

Ricks told CNBC that the company agrees with the FDA that Zepbound and Mounjaro are no longer in short supply, adding, “We have stock.” He said compounded versions of Eli Lilly’s branded products are not regulated by the FDA, raising questions about their safety and effectiveness.