Eli Lilly and Company’s LLY shares declined 6.6% on Tuesday after the company lowered its sales guidance for full-year 2024 and announced disappointing preliminary fourth-quarter sales numbers. The company also issued its total revenue guidance for 2025 at the JP Morgan Healthcare Conference.

Lilly’s total revenues for the fourth quarter fell short of expectations due to lower-than-expected sales of its popular GLP-1 drugs, Mounjaro for type II diabetes and Zepbound for obesity. In addition, lower-than-expected channel inventory at year-end also hurt sales of these incretin-based medicines. It was the second quarter of sales miss for Lilly after it missed estimates in the third quarter, also due to disappointing sales of Mounjaro and Zepbound.

Lilly is scheduled to report its fourth-quarter and full-year 2024 results on Feb. 6.

Lilly’s stock has risen 17.5% in the past year against a decrease of 1.4% for the industry.

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LLY’s FY24 and Q424 Total Revenues Fall Short

Lilly expects revenues to be approximately $45.0 billion in full-year 2024, which falls short of its previous guidance range of $45.4 billion to $46.0 billion.

In the fourth quarter, revenues are expected to be approximately $13.5 billion, rising approximately 45% year over year. The fourth-quarter sales number, however, falls short of the Zacks Consensus Estimate of $13.93 billion.

Lilly said it generated approximately $3.5 billion in sales from Mounjaro and $1.9 billion from Zepbound. Sales of Mounjaro and Zepbound also fell short of the Zacks Consensus Estimate of $4.3 billion and $2.15 billion, respectively, raising concerns about moderating demand for these popular medicines. Per the company, its previous guidance had assumed a “faster acceleration of growth” for Mounjaro and Zepbound in the fourth quarter.

LLY’s 2025 Revenue Guidance In Line With Expectations

In 2025, Lilly expects to record revenues in the range of $58.0 billion to $61.0 billion, indicating growth of 32% at the midpoint of 2024’s expected range. The Zacks Consensus Estimate stands at $60.26 billion.

Are Sales Expectations of Mounjaro & Zepbound too Optimistic?

Both Mounjaro and Zepbound include an ingredient called tirzepatide, which is a dual GIP and GLP-1 receptor agonist (GIP/GLP-1 RA).

Despite a short time on the market, Mounjaro and Zepbound have become key top-line drivers for Lilly, with demand rising rapidly. However, the quarter-over-quarter growth of Zepbound and Mounjaro in 2024 was impacted by supply and channel dynamics. Slower-than-expected growth and unfavorable channel dynamics hurt sales of Mounjaro and Zepbound in the fourth quarter, raising concerns about the sky-high expectations for these drugs.

The disappointing performance of Zepbound and Mounjaro in the second half of 2024 can change the bullish narrative around the stock. Investors are now worried about whether Lilly’s sales will be significant enough to justify the stock’s premium valuation.

However, the company is hopeful that sales of Mounjaro and Zepbound should pick up in 2025 as it launches the drugs in new international markets and ramps up manufacturing in the first half of the year. Since 2020, Lilly has committed more than $23 billion for manufacturing capacity for Zepbound and Mounjaro in the United States and Europe. Lilly expects to produce at least 60% more salable doses of incretins in the first half of 2025 compared to last year.

In addition, Lilly expects its new drugs, Omvoh for ulcerative colitis, Jaypirca for mantle cell lymphoma and chronic lymphocytic leukemia, Ebglyss for atopic dermatitis and Kisunla for early Alzheimer's disease, to contribute to sales growth in 2025. It also expects the potential launch of new medicines like imlunestrant for metastatic breast cancer to contribute to growth in 2025.

Stocks of NVO, VKTX and AMGN Decline

The GLP-1 segment is an important class of drugs for multiple cardiometabolic diseases and is gaining significant popularity. Lilly and Novo Nordisk NVO are presently dominating the market.

Sales of Novo Nordisk’s semaglutide medicines, Ozempic and Rybelsus for type II diabetes and Wegovy for weight loss were also disappointing in the third quarter, with not much expectation of improvement in the to-be-reported quarter. Last month, Novo Nordisk announced disappointing data from a late-stage study on its next-generation obesity drug, CagriSema.

The competitive dynamics in the GLP-1 segment continue to evolve by the day, especially in the obesity segment.

Several companies like Amgen AMGN and Viking Therapeutics VKTX are making rapid progress in the development of GLP-1-based candidates in their clinical pipeline.

Shares of NVO declined 4% on Tuesday, while VKTX was down 12.7% after Lilly announced disappointing preliminary fourth-quarter sales of Mounjaro and Zepbound. AMGN’s stock declined slightly more than 1%.

LLY’s Zacks Rank

Lilly has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Eli Lilly and Company Price and Consensus

Eli Lilly and Company price-consensus-chart | Eli Lilly and Company Quote

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