Eli Lilly Shares Drop as Weight Loss Drug Demand Falters

Eli Lilly and Company (LLY) shares took a hit on Tuesday, January 14, 2025, after the drugmaker cut its revenue guidance for the full year and the fourth quarter. The company cited slower-than-expected growth in the U.S. incretin market and higher inventory levels of its weight loss and diabetes drugs, Mounjaro and Zepbound, as the primary factors contributing to the revenue shortfall.



Eli Lilly's shares dropped about 6% in early trading on Tuesday, following the announcement of the revenue guidance cut. The stock price decline reflects investors' disappointment with the slower-than-expected growth in sales of the company's diabetes and weight-loss drugs. Eli Lilly's stock is still up significantly year-to-date (YTD) and over the past 12 months, indicating that the company's long-term prospects remain attractive to many investors.



The drugmaker now expects full-year 2024 revenue of about $45 billion, lower than the $45.4 billion to $46 billion it anticipated in October. For the fourth quarter, Eli Lilly expects $13.5 billion in revenue, which includes about $3.5 billion for the diabetes treatment Mounjaro and $1.9 billion for obesity drug Zepbound. The company's expected 2024 revenue is $400 million, or about 3%, below the guidance range issued on October 30, 2024, as part of the Q3 2024 earnings call.

Eli Lilly CEO David Ricks attributed the slower-than-expected growth of Mounjaro and Zepbound sales to two main factors:

1. Slower acceleration of growth in the U.S. incretin market: While the U.S. incretin market grew 45% compared to the same quarter last year, the company had anticipated even faster acceleration of growth for the quarter. This slower growth rate contributed to the lower-than-expected sales.
2. Lower-than-expected channel inventory at year-end: The company experienced higher inventory levels of Mounjaro and Zepbound in the hands of wholesalers, which dragged on sales. This inventory buildup was not anticipated and negatively impacted the fourth-quarter sales figures.

To address the inventory issues that impacted Q4 results, Eli Lilly plans to bring additional manufacturing capacity online. This will allow the company to produce at least 60% more salable doses of incretins in the first half of 2025 compared to the first half of 2024. This increased production capacity will help to meet the growing demand for Mounjaro and Zepbound and reduce the risk of inventory buildup in the future.



The revenue guidance cut by Eli Lilly has several potential implications for the company's stock price and market position. The stock price drop indicates that investors are reassessing the company's growth prospects and may be selling their shares in response to the revised guidance. The revenue guidance cut suggests that Eli Lilly may be losing market share in the competitive diabetes and obesity drug markets, potentially leading to a shift in market dynamics. However, Eli Lilly still expects significant revenue growth in 2025, which could help it maintain its market position.

In conclusion, Eli Lilly's revenue guidance cut and subsequent stock price decline reflect investors' disappointment with the slower-than-expected growth in sales of the company's diabetes and weight-loss drugs. To regain investor confidence and maintain its market position, Eli Lilly must address the underlying issues and deliver strong performance in the coming quarters. The company's long-term prospects remain attractive, and investors may see an opportunity to buy the stock at a discounted price.