Eli Lilly (LLY) Q1 2024 earnings

Eli Lilly On Tuesday, it reported first-quarter adjusted earnings that beat Wall Street expectations and raised its full-year guidance thanks to strong sales of its popular diabetes drug Mounjaro and newly launched weight loss treatment Zepbound.

The drugmaker now expects full-year adjusted earnings to be between $13.50 to $14.00 per share, up from previous guidance of $12.20 to $12.70 per share. Eli Lilly also expects revenue for the year to range between $42.4 billion and $43.6 billion, an increase of $2 billion at both ends of the range.

Analysts surveyed by LSEG expected full-year adjusted earnings of $12.50 per share and sales of $41.44 billion.

The company said the enhanced guidance was due in part to optimism about increased production of Zepbound, Mounjaro and similar drugs for the rest of the year.

“Now that we're four months into the year, we have greater visibility into that, at those capacity points and feel more confident,” Eli Lilly Chief Financial Officer Anat Ashkenazi told investors during an earnings call on Tuesday.

She noted that Eli Lilly has several manufacturing sites that are either “extensive or under construction,” including two in North Carolina, two in Indiana, one in Ireland and one in Germany, along with a seventh site that the company recently acquired from Nexus Pharmaceuticals.

Eli Lilly said demand for Mongaro and Zippound treatments — known as incretin drugs, which mimic hormones produced in the intestines to suppress a person's appetite and regulate blood sugar — outpaced increases in supply during the quarter. Ashkenazi said the company expects supply to remain “very tight” in the near to medium term amid continued demand for those drugs.

But she indicated that Eli Lilly expects the most significant increases in production in the second half of the year.

“Our top priority is making more products, and we're doing everything we can to make that happen,” Eli Lilly CEO David Rex said in an interview Tuesday on CNBC's “Squawk Box.” “We are aggressively ramping that up. But it is capital-intensive, technically complex and highly controlled.”

The results and guidance increase reflect Zepbound's first full quarter in the US market after receiving regulatory approval in early November. The drug reported sales of $517.4 million in the first quarter, even as most doses of the drug were hit by a shortage in the United States that is expected to last through June.

Analysts say the weekly injection could generate more than $1 billion in sales in its first year on the market, potentially becoming the biggest drug ever.

Here's what Eli Lilly reported for the first quarter compared to what Wall Street was expecting, based on a survey of analysts conducted by LSEG:

Earnings per share: $2.58 adjusted vs. $2.46 expected Revenue: $8.77 billion vs. $8.92 billion expected

Eli Lilly reported net income of $2.24 billion, or $2.48 per share, during the first quarter. That compares to a profit of $1.34 billion, or $1.49 per share, the previous year.

Excluding one-time items related to the value of intangible assets, among other adjustments, the company reported earnings per share of $2.58 for the first quarter of 2024.

The pharmaceutical giant had first-quarter revenue of $8.77 billion, up 26% year over year.

Eli Lilly shares jumped more than 5% on Tuesday. The stock is up 26% this year after rising nearly 60% in 2023 on insatiable demand for the company's weight-loss and diabetes drugs. This is despite their high prices, spotty insurance coverage, and intermittent supply shortages.

With a market capitalization of about $700 billion, Eli Lilly is the largest pharmaceutical company based in the United States

Both of the company's top-selling diabetes drugs missed Wall Street expectations for the first quarter.

Mounjaro generated revenue of $1.81 billion in the first quarter, more than triple the $568.5 million it booked during the same period a year earlier. However, analysts were expecting sales of $2.11 billion, according to StreetAccount.

Eli Lilly said higher prices for Monjaro helped boost revenues, specifically pointing to a decline in the use of savings card programs to purchase the drug in the United States.

But the company said the dynamics of these savings cards “should stop significantly impacting realized price comparisons” because the $25 monthly coupon for patients without insurance coverage for Mounjaro expired in June.

“From the second half of each year, we should expect to see typical prices for Mongaroo,” Patrick Johnson, executive vice president of diabetes and obesity at Eli Lilly, said during the call Tuesday.

Meanwhile, sales of Eli Lilly's older diabetes drug Trulicity fell 26% during the first quarter to $1.46 billion. This is less than the $1.59 billion that analysts expected, according to StreetAccount.

In the United States, declining sales were primarily due to supply constraints and competition with other diabetes treatments, according to Eli Lilly. Revenues outside the US also declined, driven by lower demand and realized prices, as well as tight supply.

Revenue growth was also driven by sales of Eli Lilly Verzenio's breast cancer pill, which rose 40% to $1.05 billion during the quarter due to increased demand.

However, these results fell short of analysts' expectations, which called for sales of $1.11 billion for the period.

Sales of Jardiance, a pill that lowers blood sugar in people with type 2 diabetes, rose 19% to $686.5 million in the first quarter. Analysts had expected sales of $718.3 million from Jardiance.

Jardiance, which Eli Lilly shares with Boehringer Ingelheim, is among the first 10 drugs selected to face price negotiations with the federal Medicare program.