Zepbound Disappoints: Should Investors Abandon Eli Lilly?

Eli Lilly & Co.'s (LLY) stock has been volatile in recent months, with shares plummeting as much as 8% on Tuesday following the company's fourth-quarter revenue outlook that missed expectations. The pharma giant's diabetes and obesity drugs, Mounjaro and Zepbound, failed to meet sales projections, raising concerns about the company's future prospects. However, investors should not rush to abandon Eli Lilly just yet, as the company's overall financial outlook remains robust.



Eli Lilly's fourth-quarter revenue is expected to be approximately $13.5 billion, which is about $400 million, or 3%, below the guidance range issued in October 2024. The company attributed the shortfall to lower-than-anticipated channel inventory at year-end and slower-than-expected growth in the U.S. incretin market. While these factors are concerning, Eli Lilly's full-year 2024 revenue is still expected to be around $45.0 billion, representing growth of 32% compared to the previous year.



Moreover, Eli Lilly anticipates 2025 revenue to be in the range of $58.0 billion to $61.0 billion, growth of 32% at the midpoint compared to expected 2024 revenue. The company expects strong sales contributions from new Lilly medicines such as Jaypirca, Ebglyss, Omvoh, and Kisunla, as well as potential launches of new medicines like imlunestrant for metastatic breast cancer.



Investors should also consider the potential impact of Zepbound's performance on Eli Lilly's stock price. While the drug's sales missed expectations in the fourth quarter of 2024, its long-term prospects remain promising. Zepbound is a dual GIP and GLP-1 receptor agonist, which sets it apart from competitors like Novo Nordisk's Wegovy. In the SURMOUNT-5 trial, Zepbound demonstrated superior weight loss compared to Wegovy, with participants losing an average of 20.2% of their body weight versus 13.7% for Wegovy.

In conclusion, while Eli Lilly's stock price has been volatile due to the performance of Mounjaro and Zepbound, the company's overall financial outlook remains strong. Investors should not abandon Eli Lilly just yet, as the company's diversified portfolio of medicines and robust growth prospects provide a solid foundation for future success. As Eli Lilly continues to invest in its manufacturing processes and expand into new markets, the company is well-positioned to capitalize on the growing demand for obesity treatments and other innovative medicines.