Eli Lilly Stock Slumps Amid Inventory Concerns and Weight Loss Drug Sales Miss

Eli Lilly's recent market performance has shown a decline, with its stock decreasing by 4.58% as of March 10, leading to a three-day drop of 10.75%. Intraday lows marked the lowest since February 2025. These fluctuations come amidst concerns over the sales performance of Lilly's weight loss drug, Zepbound, which fell short of expectations in the third quarter. The pharmaceutical giant reported third-quarter revenue of $11.44 billion, a 20% increase annually, but Zepbound's sales were only $1.26 billion, significantly lower than analysts' predictions of $1.76 billion.

Eli Lilly attributed the underperformance to wholesalers reducing inventory levels for both Zepbound and Mounjaro, its diabetes treatment drug. This decision followed efforts in the previous quarter to fulfill pending orders, which led to increased stock holdings by wholesalers. In the third quarter, these wholesalers utilized their existing inventory instead of purchasing more from Lilly, thereby affecting sales outcomes.

Despite the decline in sales, Eli Lilly executives have emphasized the strong underlying demand for Zepbound. CEO Dave Ricks commented on the unpredictable nature of inventory decisions made by downstream customers, including wholesalers and retailers. He assured investors of robust demand, while acknowledging that Lilly's strategy to stimulate demand through advertising and promotion is set to commence in November.

Across the industry, the weight loss drug market continues to show vast potential, with forecasts predicting a market size reaching hundreds of billions by the decade's end. Eli Lilly, alongside companies such as Novo Nordisk, is central to the current market, yet faces competition from other pharmaceutical companies racing to develop new weight loss solutions and capitalize on the burgeoning sector.

Adding to the industry's dynamics, some analysts have corroborated Lilly's remarks about inventory impacts, citing them as the primary cause of lowered sales figures rather than diminished demand. Citigroup analyst Geoff Meacham and others point out that demand remains high, with inventory adjustments being the unexpected factor affecting performance.

The potential of weight loss pharmaceutical sales is projected to grow exponentially, with firms like BMO Capital Markets predicting sales to reach $150 billion by 2030. Factors contributing to this growth include the increasing prevalence of obesity globally and advancements in GLP-1 class drugs, like those produced by Novo Nordisk and Eli Lilly. The landscape is competitive with new entrants seeking to develop innovative treatments and capture market segments. Eli Lilly remains committed to expanding its product offerings to maintain its leadership position in the industry.