Eli Lilly Stock Slumps as Anti-Obesity Drug Sales Fall Short

Eli Lilly and Company (NYSE: LLY) shares tumbled Tuesday after the pharmaceutical giant lowered its fourth-quarter sales guidance by 5%, citing slower-than-expected growth in the incretin market and lower-than-anticipated channel inventory at year-end. The company now expects $13.5 billion in fourth-quarter sales, roughly $400 million below the low end of its previous guidance. This includes $3.5 billion for type 2 diabetes drug Mounjaro and $1.9 billion for the weight-loss drug Zepbound.



Analysts had expected combined sales of $7.43 billion for the two treatments, but Lilly's updated guidance suggests that the company may struggle to meet demand. The surging popularity of Zepbound and rival Novo Nordisk's (NVO) Wegovy has led to significant supply constraints, with both companies racing to expand manufacturing capacity to keep pace with demand. However, logistical bottlenecks and production limitations have hindered progress, leading to persistent shortages.



Leerink Partners analyst David Risinger maintained his outperform rating on Eli Lilly stock but cut his price target to $950 from $970. He noted that Zepbound's recent approval to treat obstructive sleep apnea should lead to insurance reimbursement for people with Medicare coverage, potentially opening up a substantial revenue opportunity for the company. Risinger estimates that there are 20 million Americans with moderate-to-severe obstructive sleep apnea, with about 18.5% of the U.S. population over the age of 65, representing a potential market of 3.7 million people.

However, the slower-than-expected sales growth of Zepbound and the resulting revenue shortfall may negatively impact investor sentiment and make it more difficult for Eli Lilly to raise capital or maintain its current valuation in the long term. The company must address its manufacturing constraints and maintain a strong market position in the weight-loss drug market to mitigate these risks and ensure the long-term success of its anti-obesity drugs.

In conclusion, Eli Lilly's stock fell Tuesday after the company announced slower-than-expected sales growth for its anti-obesity drug, Zepbound. The revenue shortfall, attributed to manufacturing constraints and lower-than-anticipated channel inventory, has potential long-term implications for the company's financial performance, including revenue shortfalls, market share loss, investor sentiment, and dependence on weight-loss drugs. To mitigate these risks, Eli Lilly must address its manufacturing constraints and maintain a strong market position in the weight-loss drug market.