Eli Lilly Stock Tumbles on Slower-Than-Expected Weight Loss Drug Sales. Is This a Buying Opportunity?

Shares of Eli Lilly & Co. (LLY) took a tumble on Tuesday after the company lowered its guidance for the December quarter, citing slower-than-expected sales for its weight loss drugs, Mounjaro and Zepbound. The Indianapolis-based drugmaker now expects revenue of about $13.5 billion for the quarter, below consensus estimates of $13.93 billion. For the full year 2024, Eli Lilly anticipates revenue of approximately $45 billion, down from its previous outlook of $45.4 billion to $46 billion.

The revenue shortfall can be attributed to several factors, including inventory issues, weaker scripts for diabetes in December, and potential impacts from copycat drugs and insurance company requirements. Wholesalers had a lot of drug in stock at the end of the second quarter, leading to lower third-quarter sales. Additionally, December is typically a strong month for scripts, but this year, people did not get two scripts to avoid deductible costs in January, resulting in a revenue shortfall.

Despite the setback, Eli Lilly's guidance for 2025 reflects a strong rebound and long-term growth prospects. The company expects revenue to come in between $58 billion to $61 billion, which would represent growth between 29% to 36%. This outlook suggests that the company is confident in its ability to overcome the temporary setback in Q4 2024 and continue its growth trajectory. Eli Lilly's focus on operational quality, expansion into new markets, and strategic acquisitions, such as the $23 billion investment in manufacturing capacity for its GLP-1 drugs, underscores its solid growth potential.

International markets play a significant role in Eli Lilly's future revenue growth. The company's discussion at a JPMorgan conference revealed that the international opportunity in terms of volumes is about 9 times that of the U.S. market. However, it is important to note that international pricing comes in lower compared to the U.S. market. This indicates that while there is a vast potential for growth in international markets, the revenue generated from these markets may not be as high as that from the U.S. market. Nevertheless, the international market remains a crucial driver for Eli Lilly's future revenue growth.

In conclusion, Eli Lilly's stock tumble on slower-than-expected weight loss drug sales presents an opportunity for investors to consider. The company's strong guidance for 2025 and its focus on long-term growth prospects suggest that the setback may be temporary. As the company continues to invest in operational quality, expansion into new markets, and strategic acquisitions, it remains well-positioned for future growth. However, investors should closely monitor the company's progress and the market's reaction to its performance in the coming quarters.