Eli Lilly, one of the world’s leading pharmaceutical companies, recently reported third-quarter 2024 financial results that disappointed investors due to lower-than-expected profit and revenue. Sales of its key drugs, Zepbound (weight loss) and Mounjaro (diabetes treatment), fell short of analyst expectations, prompting the company to cut its full-year adjusted earnings forecast. This news led to a sharp 12% drop in Eli Lilly’s stock, with its competitor Novo Nordisk also experiencing a 3% decline.
Here's ads banner inside a post
Profit and Revenue Fall Short of Expectations
In its report, Eli Lilly noted that adjusted full-year profit is now expected to range between $13.02 and $13.52 per share, a reduction from the previous forecast of $16.10 to $16.60. A primary reason for this decrease is a $2.8 billion expense related to its acquisition of Morphic Holding, a company specializing in bowel disease treatments. The company also revised its annual revenue outlook downward, now predicting between $45.4 billion and $46 billion, compared to the previous high of $46.6 billion.
Detailed Third-Quarter Results
Based on an LSEG survey, analysts anticipated third-quarter revenue to reach $12.11 billion, but Eli Lilly reported only $11.44 billion. Adjusted earnings per share (EPS) were $1.18, falling short of the expected $1.47. This result is concerning, as Eli Lilly previously held high expectations for its new products and potential markets.
Zepbound, Eli Lilly’s leading weight loss drug, was projected to reach $1.76 billion in third-quarter sales, but only achieved $1.26 billion. Meanwhile, Mounjaro, used for both diabetes and weight loss, recorded $3.11 billion in revenue, which was below the $3.77 billion expected by analysts. This demonstrates that, despite the company’s products holding substantial potential, the disparity between predictions and actual results is creating significant pressure on Eli Lilly.
Here's ads banner inside a post
Supply Issues and Delayed Advertising Strategy
An additional factor affecting sales is supply issues surrounding these drugs. Over the past year, demand for Eli Lilly’s diabetes and weight loss drugs has far exceeded supply, prompting the company to invest billions in expanding manufacturing capacity. However, Eli Lilly CEO David Ricks clarified that the current supply is not the primary reason for unmet sales expectations but rather a decrease in inventory at distributors.
Ricks also mentioned that the company delayed advertising for Zepbound to prevent adding strain on customers who might face availability issues when demand spikes. Eli Lilly plans to start the advertising campaign for Zepbound in November, once the supply situation becomes more stable.
“When people cannot get their medication, they become very frustrated, and we did not want to exacerbate that frustration,” Ricks shared in an interview with CNBC. His comments reveal the company’s cautious approach in managing customer expectations and avoiding overpromoting their product when there might be supply constraints.
Here's ads banner inside a post
Impact on Competition and Market Landscape
Eli Lilly’s reduced profit and revenue projections impact not only the company but also its competitor Novo Nordisk, which saw a 3% dip in stock prices following the news. Both companies are fiercely competing in the diabetes and weight loss drug markets, which are becoming increasingly crucial as obesity and diabetes rates rise.
Looking Ahead: Eli Lilly’s Strategy
Despite current challenges, Eli Lilly remains committed to significant investment in production capabilities and exploring new growth opportunities. Expanding production lines not only supports domestic demand but also positions the company to enter other international markets in the future. Additionally, Eli Lilly is advancing clinical trials for potential new drugs, aiming for long-term growth.
The company is currently focusing on enhancing customer relations by optimizing customer service to ensure that patients can access its products more easily. This is particularly important as products like Zepbound and Mounjaro continue to grow and play a significant role in the company’s revenue.
In summary, Eli Lilly is navigating several financial and supply-related challenges amid rising market demand. Despite the third-quarter setbacks in sales and profits, the company is implementing strategies to adjust and better meet customer needs. With its core products’ potential and a strong commitment to expanding manufacturing, Eli Lilly is positioned to improve its financial outlook in the coming months and maintain its leadership in the pharmaceutical industry.
