Eli Lilly appears to be making as much of its popular obesity and diabetes drugs as possible, but shortages are worsening, putting the company's profits at risk, analysts say. Tirzepatide is the active ingredient in Eli Lilly's diabetes treatment Mounjaro and anti-obesity drug Zepbound. The FDA recently reported that supplies of both brands are expected to be limited during the second quarter, for all but one dose — the 2.5 milligram introductory level. (To reduce side effects, patients gradually increase their dose of medication.) Text data from IMS/IQVIA suggests Lilly's first-quarter revenue will exceed Wall Street estimates of $8.9 billion by about $445, said Deutsche Bank analyst James Chen. million. He said in a research published last Tuesday that based on this calculation, profits would decrease by about 13 cents per share. According to a survey by LSEG, analysts expect Lilly to earn $2.46 per share on revenue of $8.92 billion when it releases its results on Tuesday before the market opens. Shen's estimate calls for Lilly to earn $2.43 per share, just below the consensus, which was trending lower in print. “Although a failure may be in the cards for Q1 2024, we do not believe a failure will cause LLY to lower its FY24 guidance,” Shen said. “Strong demand for Mounjaro & Zepbound can easily continue through 2H24 and make up for any shortfalls in 1H24.” But investors will want to know more details about how quickly Lilly can ramp up drug manufacturing and what those efforts will cost. In a research note Thursday, Leerink analyst David Reisinger said persistent shortages are hampering the drugs' performance. For the week ending April 19, combined prescriptions for Mounjaro and Zepbound rose 63% year over year, according to IQVIA. However, he said the drugs saw 91% growth over the four-week period. Zepbound has been on the market since December. Digging into the details At the same time, total prescriptions for Trulicity, a previous-generation drug that uses glucagon-like peptide-1, or GLP-1, agonists are also slowing. Analysts said this would hurt the performance of Lilly's portfolio as a whole. Wells Fargo Mohit Bansal said he expects investors to look beyond any shortfall in Trulicity as the focus is firmly on Zepbound and Mounjaro for Lilly's future growth. Shen also noted that there will be some chaos in Q1 trends because some of the Q4 sales were pharmacies looking to build inventory in the wake of Zepbound's approval. Analysts will also be keen to know how quickly insurers add Zepbound to the list of covered drugs, and how that affects the prices realized for the drugs. “We see increasing acceptance of Zepbound as a number of plans make coverage decisions,” UBS analyst Joe Walton wrote in an April 18 research note. Plans covering about 45% of U.S. lives remain undecided, as of mid-April, according to Walton, who noted that patients appear to be able to access Zepbound at a faster pace than Wegovy in a similar period of time. According to Bansal, pricing can provide room for upside, but supply dynamics remain key. “We do not expect a significant guidance revision during this quarter,” he said. Beyond Obesity As for Lilly's attempts to expand its incretin drugs into other indications, there may not be more news on that front until June. Earlier this month, the company revealed some early results from its Surmount study of obstructive sleep apnea that were very positive, and helped send the stock higher. LLY YTD Mountain Eli Lilly has been participating for a year now. More details about this study are expected to be published in June. Research into whether Tirzepatide has cardiovascular benefits is ongoing, and more details are also expected by the end of the second quarter. Lilly shares are up more than 25% year to date. Analysts remain largely positive on the stock, with an average price target of $826.94, or about 12% upside, according to LSEG. Deutsche Bank's Shen said any weakness in stocks around earnings would likely be viewed as a “buying opportunity” as investors look to get a sense of the growth story of this new class of drugs, which is expected to peak with potential sales of more than $100 billion. dollars by next year. End of the contract. Outside of the diabetes and obesity space, more updates on Lilly's Alzheimer's treatment donanemab, which is another major catalyst for the stock, would be worth listening to. In March, the US Food and Drug Administration delayed a decision on the closely monitored monoclonal antibody treatment. This surprise move delayed the drug's approval timeline. — CNBC's Michael Bloom contributed to this report.
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Why Eli Lilly's earnings are no certainty for traders despite obesity drug momentum
