Eli Lilly's Mixed Quarter: Strong Demand, Supply Constraints, and Future Growth Potential

Eli Lilly and Company (NYSE: LLY) reported mixed quarterly results, with soaring demand for its weight loss and diabetes drugs offset by supply constraints and inventory issues. Despite the challenges, the company's long-term growth prospects remain promising, driven by its robust pipeline and potential new indications for its existing medicines.



Strong Demand for Weight Loss and Diabetes Drugs

Eli Lilly's diabetes drug Mounjaro and weight loss drug Zepbound have been in high demand, with Mounjaro sales reaching $5.16 billion in 2023 and Zepbound generating $175.8 million in its first few weeks of launch. Mounjaro now accounts for 27% of total prescriptions for injectable incretins in the U.S., while Zepbound competes with Novo Nordisk's Wegovy, which has been shown to reduce the risk of heart problems.



Supply Constraints and Inventory Issues

Despite the strong demand, Eli Lilly's quarterly results were impacted by supply constraints and inventory issues. The company attributed the lower-than-expected sales to wholesalers having a lot of drug in stock at the end of the second quarter, leading to lower third-quarter sales. Additionally, demand for Mounjaro and Zepbound has outpaced supply, with Lilly expecting demand to exceed supply in 2024.

Potential Long-Term Growth Drivers

Eli Lilly's revenue growth in 2024 is expected to be driven by new Lilly medicines such as Jaypirca, Ebglyss, Omvoh, and Kisunla; approvals of new indications for existing Lilly medicines; and potential launches of new medicines like imlunestrant for metastatic breast cancer. The company anticipates revenue between $58.0 billion and $61.0 billion in 2025.



Encouraging Signs for MASH Treatment

In a Phase 2 trial, Mounjaro helped resolve symptoms of metabolic dysfunction-associated steatohepatitis (MASH) in 74% of patients who received a high dose, compared to only 13% of participants on placebo. If these results are confirmed in larger, more comprehensive studies, Mounjaro could potentially become a first-line treatment for MASH, opening up a new market for the drug and further strengthening its position in the market.

Conclusion

Eli Lilly's mixed quarterly results reflect the challenges of meeting strong demand for its weight loss and diabetes drugs while facing supply constraints and inventory issues. Despite these hurdles, the company's long-term growth prospects remain promising, driven by its robust pipeline and potential new indications for its existing medicines. As Eli Lilly continues to expand its manufacturing capacity and address supply constraints, investors can expect the company to capitalize on the growing demand for its innovative therapies.