Eli Lilly shares fell on Wednesday after the diabetes and obesity drug giant reported disappointing third-quarter results and cut its full-year sales outlook. Although the report was sloppy, it didn’t dampen Eli Lilly’s positive multi-year outlook, which sees falling stock prices as buying opportunities. LSEG said sales for the three months ended Sept. 30 were $11.44 billion, up 20% from a year earlier, and below analyst consensus of $12.11 billion. Adjusted earnings per share (EPS) came in at $1.18, below expectations of $1.47, according to LSEG data. The club’s shares opened nearly 12% lower on Wednesday, but have since pared back some of those losses. This shows we’re not alone in thinking the decline has gone too far. Eli Lilly was up about 55% this year through Tuesday’s close. He remained disciplined not to get greedy, and on September 3, he booked a profit at around $961 per share. Now we think there is an opportunity to buy back at a lower price. For better or worse, Eli Lilly is a hot stock as investors bet big on the long-term potential of an emerging class of drugs to treat type 2 diabetes and obesity known as GLP-1. Most have turned around in recent years, with stocks more than tripling since the start of 2022, while the broader healthcare sector has grown by just 5%. But Lily’s sharp retreat on Wednesday shows that the momentum is in danger. The margin of error is small, and profit takers lurk. LLY .SPX 5Y Mountain Eli Lilly’s five-year stock performance compared to the S&P 500. Conclusion We upgrade Eli Lilly to a Buy rating of 1 and maintain our $1,000 per share price target. At Wednesday’s morning meeting, Jim Cramer said he wants to buy back the 10 Eli Lilly shares he sold in September at an even higher price. However, trading in the stock is currently restricted as Jim discussed this on CNBC within the past 72 hours. Nuance needs to analyze Eli Lilly’s third quarter financial results. Sales of the company’s two most important GLP-1 drugs (diabetes drug Mounjaro and obesity drug Zepbound) fell far short of Wall Street expectations and missed the top line. The lowered full-year outlook is also related to GLP-1. At first glance, it’s not great. However, management explained that it’s not simply a case of demand far outstripping supply, but that it helps to see the forest for the trees. It all begins in the second quarter, when sales of Mounjaro and Zepbound far exceeded expectations, in part as U.S. wholesalers and retailers stocked up on the drugs between April and June. . This inventory benefit did not persist through the third quarter as much as some analysts had expected and therefore incorporated into their earnings forecasts. Inventory levels in the wholesale channel actually declined during this period, and Eli Lilly estimated that this impacted pharmaceutical sales by a mid-single-digit percentage of U.S. revenue. Analysts at JPMorgan said in a note to clients on Wednesday that destocking moves by Maunjaro and Zepbound “accounted for a large part of the failure.” Another part of the story is demand, and CEO David Ricks said Eli Lilly has made several decisions that will impact its results and outlook. Important background before Ricks explains: Eli Lilly and Novo Nordisk, its main rival in the GLP-1 space, are aggressively investing in drug manufacturing capacity to meet surging demand. Still, supply shortages have become a major problem in recent years. The active ingredient in both Mounjaro and Zepbound, known as tirzepatide, was removed from the Food and Drug Administration’s shortage list in August. Semaglutide, the molecule behind both Novo Nordisk’s diabetes drug Ozempic and obesity drug Wigovy, remained in short supply. But as of Wednesday, the FDA’s website listed all available doses. Supply constraints have led to so-called hybrid versions of GLP-1 drugs that the FDA allows other companies to manufacture and sell in the event of a shortage. Eli Lilly is seeking to crack down on compounded versions of its drugs, suing companies for warning about safety risks and making false statements in marketing their products. Novo Nordisk has taken similar action, recently asking the FDA to prevent mixed versions of Ozempic and Wegovy from being manufactured together. Now, back to Ricks’ on-demand comments. In an interview with CNBC, the CEO said Eli Lilly chose to delay the start of Zepbound’s marketing campaign in the United States and slow its expansion into new international markets due to supply concerns. “If we had done more aggressive promotions this quarter, we might have risked a bad experience where people went to the pharmacy counter and didn’t have access to some dosage forms,” Ricks said on CNBC. spoke. “We are on track to meet our (supply) target of at least a 50% year-on-year increase in the second half of this year compared to the second half of last year. They told us they were very frustrated when they didn’t get in. So we didn’t want to send more people to do that.” It said growth in consecutive prescriptions increased 25% in the third quarter compared to the second quarter. “So even though we didn’t advertise, more people went to pick up their prescriptions. But as we finish this year and into next year, we expect to expand our manufacturing capacity even more. , we are going to start it,” he said. Reasons to own Eli Lilly: Eli Lilly’s best-in-class medicines should enable growth above the industry average for many years to come. The portfolio is supported by the GLP-1 franchise, which currently consists of Mounjaro, a type 2 diabetes treatment, and Zepbound, an obesity treatment. This rapidly growing class of drugs may treat other conditions such as sleep apnea and reduce the risk of stroke. Lilly’s Alzheimer’s disease drug pipeline, including the recently approved Kisunla, further enhances the long-term appeal of the stock. Competitors: Novo Nordisk, Biogen, Eisai, Merck, Pfizer Portfolio Weight: 2.38% Latest Purchase Date: February 7, 2023 Start Date: October 8, 2021 All Formulation GLP-1 Status There are improvements in both Eli Lilly and Novo Nordisk, which investors are watching closely as sources of supply. Indeed, Lilly executives said multiple times on Wednesday’s earnings call that they don’t see any real financial impact from compounding GLP-1. “I think the problem is people are being harmed and deceived, right? And so we want that to stop,” Ricks said. There’s no question that Wednesday was Eli Lilly’s messiest earnings report yet, especially after such a strong second-quarter report in August. But our faith in the company and its leadership remains unwavering. We continue to believe that the GLP-1 market will grow in the coming years as the drug’s broad health benefits become more apparent and insurance coverage expands. “We’re happy with the situation we’re in,” Ricks said in a phone conversation. “Obviously, there was some volatility this quarter, but I think the underlying growth here is as strong as we expected.” Guidance Eli Lilly provides full-year earnings guidance. It was lowered to a range of $45.4 billion to $46 billion, with a $600 million decrease at the high end. This brings the midpoint of the forecast to $45.7 billion, up from $46 billion. As of Tuesday, the Wall Street consensus was $46.24 billion, according to FactSet. The revisions come less than three months after Lilly raised its full-year sales guidance by $3 billion on the low and high end. The company also lowered its 2024 EPS outlook, primarily due to accounting charges related to its acquisition of Morphic Holdings, which makes inflammatory bowel disease drugs. Lilly currently expects adjusted EPS in the range of $13.02 to $13.52, compared to its previous target of $16.10 to $16.60. QUARTERLY COMMENTS According to FactSet, Munjaro’s third-quarter sales came in at $3.11 billion, below expectations of $3.77 billion, despite more than doubling year-over-year. Revenue increased less than 1% sequentially. US sales were $2.4 billion, consistent with second quarter results. International sales were $728 million, an increase of $51 million from the April-June quarter. Zepbound entered the market for the third consecutive quarter, with sales of $1.26 billion in the July-September period, below the FactSet analyst consensus of $1.73 billion. Next, Zepbound’s sales increased by 1.1%. The breakdown of sales by region has not been disclosed. Sales of the type 2 diabetes treatment drug Trulicity continued to decline year-on-year, partly due to patients switching to Munjaro. However, the 22.2% decline in the third quarter was modest compared to the 31.3% and 26.3% declines in the second and first quarters, respectively. Sales were $1.3 billion, exceeding expectations by $100 million. While GLP-1 is the most important part of Eli Lilly’s investment story, breast cancer drug Verzenio also deserves attention. Sales were $1.37 billion, slightly lower than the expected $1.41 billion, but still a 32% increase over the same period last year, a new record high. This was the company’s second-largest drug by sales for the second consecutive quarter. Eli Lilly’s new Alzheimer’s drug Kisunla, which was approved by the FDA in July, was not a big focus of the call. Executives said the launch is “in the works and progressing.” (Jim Cramer’s Charitable Trust is Long LLY. See here for a complete list of stocks.) As a subscriber to Jim Cramer’s CNBC Investment Club, you will receive trade alerts before Jim makes a trade. I will receive it. After Jim sends a trade alert, he waits 45 minutes before buying or selling stocks in his charitable trust’s portfolio. If Jim talks about a stock on CNBC TV, he will issue a trade alert and then wait 72 hours before executing the trade. The above investment club information is subject to our Terms of Use and Privacy Policy, along with our disclaimer. No fiduciary duties or obligations exist or arise from your receipt of information provided in connection with the Investment Club. No specific results or benefits are guaranteed.
Eli Lilly and Company is a pharmaceutical company headquartered in Alcobendas, Madrid, Spain.
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Eli Lilly shares fell on Wednesday after the diabetes and obesity drug giant reported disappointing third-quarter results and cut its full-year sales outlook. Although the report was sloppy, it didn’t dampen Eli Lilly’s positive multi-year outlook, which sees falling stock prices as buying opportunities.
