Eli Lilly Shares Tumble as Weight Loss Drug Sales Miss Expectations
1min read In the latest development from Eli Lilly, the pharmaceutical giant's third-quarter sales for its flagship weight loss drug Zepbound fell short of market expectations, causing concern among investors. Despite the growth potential of the weight loss drug market, which is projected to reach hundreds of billions by the end of this decade, Zepbound's sales only reached $12.6 billion, significantly below analysts' predictions of $17.6 billion.
The underperformance of Zepbound, combined with another Lilly product, Mounjaro, whose sales of $31.1 billion also fell short of the expected $37 billion, was attributed by the company to wholesalers reducing their stocks of these drugs. Lilly explained that increased supply allowed them to fulfill delayed wholesale orders in Q2, boosting inventory levels, but in Q3, wholesalers opted to use part of existing inventory rather than purchase more, which dampened sales.
During the Q3 earnings call, Lilly's executives reaffirmed their belief in the strong potential demand for drugs like Zepbound. CEO Dave Ricks highlighted the issue of excess channel inventory, explaining that it was beyond their control. He noted that downstream customers, such as wholesalers and retailers, make their own decisions regarding storage levels across various dosages. Ricks added that financial pressures faced by wholesalers and limitations in cold chain capabilities to ensure quality from production to delivery also played a role.
Lilly has yet to commence its "demand stimulation activities," which involve advertising and promoting Zepbound, set to begin in November. They are also investing heavily in their direct-to-consumer website, which offers telemedicine prescriptions and direct drug delivery, aiming to broaden patient access.
Some Wall Street analysts agree with Lilly's assessment, saying that the inventory reduction temporarily affected sales. However, others are skeptical, suggesting that inventory issues might account for only a portion of the revenue decline. Despite these challenges, Lilly remains optimistic about future growth, as they ramp up investments in production capacity and marketing initiatives.
Furthermore, Eli Lilly's recent strategic move involved a collaboration with a South Korean biotech firm to develop RNA editing treatments for hearing loss, a $1.3 billion deal showing their commitment to advancing gene therapy. Overall, the company continues to maintain a strong presence in the therapeutic field, keeping its innovations and collaborations at the forefront of health solutions.
