Eli Lilly's Q3 Misses Expectations, Stock Plunges Nearly 11% Pre-Market
3min read On Wednesday pre-market, Eli Lilly reported the company's revenue for the third quarter. The data showed that pharmaceutical giant's revenue and profits both failed to meet expectations, and moreover, the company also lowered its full-year adjusted profit forecast. The pessimistic atmosphere directly led to a nearly 11% plunge in its stock price pre-market.
Eli Lilly's financial report showed that the company's revenue for the quarter was $11.44 billion, short of the expected $12.18 billion; net income was $970 million, diluted to $1.18 per share, nearly halved compared to the previous expectation of $1.69 billion. At the same time, affected by the revenue data that fell short of expectations, Eli Lilly also lowered its full-year expected sales to between $45.4 billion and $46 billion.
The sluggish sales of the previously popular glucagon-like peptide (GLP-1) drugs, Mounjaro and Zepbound, were the main factors dragging down revenue: Eli Lilly's financial report showed that in the third quarter, Mounjaro's sales were $3.11 billion, significantly lower than the expected $4.2 billion, while Zepbound's sales for the quarter were $1.26 billion, also below the market expectation of $1.63 billion. Affected by the weight loss drugs, the total revenue of all of Eli Lilly's products was also $800 million lower than the expected value, at $11.4 billion.
Eli Lilly stated that the declining sales of the two weight loss drugs were mainly negatively impacted by insufficient inventory in the wholesale channel, in other words, supply issues are still dragging down the final sales of the products.
However, the company had previously indicated to the public that the supply issues for its drugs, especially the highly demanded weight loss drugs, had begun to ease earlier this year: as of Wednesday, according to the U.S. Food and Drug Administration's drug database, all doses of Eli Lilly's Zepbound and Mounjaro are available, but Eli Lilly also emphasized at the time that this does not mean that all patients can get the dosage they need to fill their prescriptions.
In addition, Eli Lilly stated that it expects the production of incretin drugs in the second half of 2024 to be 50% higher than it was during the same period last year. Company chairman and CEO David A. Ricks said on Wednesday that the company expects to significantly expand manufacturing capacity by the end of the year and in 2025.
Apart from the sales dragged by production capacity, the company also pointed out that higher manufacturing costs and a previously disclosed $2.8 billion acquisition-related charge were also factors that prevented the company from achieving expected profits in the third quarter.
Therefore, Ricks believed that, after excluding capital expenditures and R&D investments, Eli Lilly actually achieved strong growth in the third quarter. In his view, excluding the asset divestment activities of the same period last year, total revenue grew by 42%, and revenue, including oncology, immunology, and neuroscience product portfolios, grew by 17% compared to the third quarter of 2023.
At the same time, analysts also believe that one cannot judge Eli Lilly, and the weight loss drug industry behind it, to be at the end of its glory just because of one quarter's revenue and profit that fell short of expectations: in the view of professional institutions, obesity is the fastest-growing field in the pharmaceutical industry—analysts estimate that the weight loss treatment market will reach $130 billion by 2030. And Eli Lilly's success in this field has already made it the most valuable pharmaceutical company in the world.
Some have asserted that the stock and group have peaked, Mizuho's healthcare expert Jared Holz wrote in a report on Tuesday: But 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.
In fact, as a large pharmaceutical company, Eli Lilly's investment value has long been more than just tied to the GLP-1 market. Now, it is also developing a candidate for Alzheimer's disease drugs, which could compete with Biogen (BIIB) and Eisai's leading market product Leqembi.
A recent study showed that with lower starting doses, the potential for brain swelling could decrease. This has been one of the concerning side effects of all Alzheimer's drugs, including Eli Lilly's Kisunla, which is currently in late-stage trials.
However, at least for now, the potential market related to obesity is the main reason driving the surge in Eli Lilly's stock in recent years and is rapidly moving the company towards the goal of becoming the first trillion-dollar healthcare company—so far in 2024, the company's stock has risen by more than 50%, and as of Tuesday, the company's market value has reached $860 billion.
