Eli Lilly (LLY) shares rose on Tuesday despite a mixed first-quarter report after sales of weight-loss drug Zepbound crushed Wall Street expectations.
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According to FactSet, Zepbound posted revenue of $517.4 million in the March quarter, beating forecasts of $373 million. That prompted Lilly to raise its revenue forecast for the year by $2 billion, despite weak revenue from diabetes treatments Mounjaro and Trulicity.
Analysts noted Eli Lilly and its biggest rival, Novo Nordisk (NVO) are struggling to meet demand for their diabetes and weight loss medications. Lilly plans to significantly expand production in the second half of the year, says David Song. Song is a portfolio manager for Tema ETFs’ Obesity and Cardiometabolic (HRTS) exchange-traded fund, which holds Eli Lilly shares.
“In summary, this was a solid report with positives (forecast hikes and Zepbound) and some negatives (low on Trulicity and Mounjaro),” Song said in an email to Investor’s Business Daily. “I feel that the initial positive stock reaction was due to guidance pressure and Zepbound trends.”
In early trading on the stock market today, shares rose 6.8% to 787.10, signaling a gap above the 50-day moving average. According to MarketSurge, Eli Lilly stock has a flat base with a buy point at 800.78.
Investors could use a descending trend line or the March 28 high of 793.67 as an early entry.
Novo Nordisk, which sells diabetes and weight-loss drugs Ozempic and Wegovy, rose 1.4% and is expected to exit its 50-day line. This could serve as an early entry for Novo stock, which has a 138.28 buy point on a flat base.
Eli Lilly Stock: Sales Failure Predictions
Across all products, Lilly’s sales rose 26% to $8.77 billion. But sales remained behind. Analysts forecast revenue of $8.94 billion. Adjusted earnings, on the other hand, significantly exceeded expectations at $2.58 per share, an increase of 59%. Analysts forecast a decline of $2.47.
But sales of Mounjaro and Trulicity missed forecasts. Despite rising 218%, Mounjaro generated revenue of $1.81 billion, missing expectations of $2.15 billion. Trulicity’s revenue fell 26% to $1.46 billion, compared with the Street’s estimate of $1.63 billion.
Evercore ISI analyst Umer Raffat said investors had expected Lilly’s GLP-1 franchise to be “soft” at the start of its first-quarter report. These medications interact with the GLP-1 hormone to improve satiety and blood sugar levels and slow the rate of gastric emptying. These include Trulicity, Mounjaro and Zepbound.
Raffat attributed the weakness to lower-than-expected gross-to-net ratios from Mounjaro and Zepbound.
“However, Lilly raised full-year guidance and demand remains robust,” he said in a report. “In addition, Lilly clearly points to ‘the most significant production increases in the second half of the year’.” “
He maintained his inline rating on Eli Lilly stock.
Sales of other key products, cancer drug Verzenio and diabetes drug Jardiance, also fell short of expectations. Verzenio’s revenue rose 40% to $1.05 billion, but fell short of forecasts of $1.13 billion. Jardiance posted revenue of $686.5 million, up 19%, but beat the consensus estimate of $720 million.
Increased production of weight loss drugs
Notably, Eli Lilly raised its full-year revenue forecast by $2 billion and now expects sales of $42.4 billion to $43.6 billion. That exceeded the Street’s demand for $41.44 billion.
The company also raised its earnings forecast, now forecasting $13.50 to $14 per share, net of certain items. Analysts expected Lilly alone to earn just $12.49 per share.
According to Leerink Partners analyst David Risinger, the increase in guidance is due to better visibility into production expansion this year. He also noted that Zepbound is becoming increasingly popular with insurance companies. As of April 1, two-thirds of commercially insured patients have access to the weight-loss drug, up from one-third of the group on February 1.
Risinger reiterated its outperform rating on Eli Lilly stock.
Follow Allison Gatlin on X, the platform formerly known as Twitter, at @IBD_AGatlin.
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