Eli Lilly Raises Forecast, Mounjaro & Zepbound Drive 7% Share Rise

Key Takeaway

• Eli Lilly raises 2023 revenue forecast by $2 billion due to soaring sales of Mounjaro and Zepbound, with shares up 7%.
• Faces supply shortages for key drugs, potentially impacting Q1 earnings; strong demand expected to offset shortfalls later.
• Expanding drug applications for other conditions; stock up over 25% YTD with positive outlook despite FDA delays on Alzheimer’s treatment.

Eli Lilly Raises Revenue Forecast Amid Drug Demand

Eli Lilly has increased its full-year revenue expectations by $2 billion, attributing the growth to the high demand for its diabetes and weight loss medications, Mounjaro and Zepbound. The company now forecasts revenue to be in the range of $42.4 billion to $43.6 billion. This adjustment comes as Eli Lilly's shares saw a 7% rise in pre-market trading, nearing record highs achieved two months prior. The first quarter showed a significant increase in new products revenue, with figures reaching $2.39 billion, up from $600 million in the same period last year. Earnings per share also exceeded analysts' predictions, standing at $2.58 compared to the expected $2.48.

Supply Challenges and Market Expectations

Despite the optimistic revenue forecast, Eli Lilly faces supply shortages for its key ingredients in Mounjaro and Zepbound, with the FDA indicating limited supplies through the second quarter for all but the introductory dosage. Analysts, including Deutsche Bank's James Shin, suggest that these shortages might lead to a first-quarter revenue shortfall of approximately $445 million against the Wall Street consensus, potentially impacting earnings by 13 cents per share. However, Shin believes that the strong demand for these drugs could compensate for any initial shortfalls in the latter half of the year. Analysts are also focused on Eli Lilly's ability to ramp up production and the costs involved, alongside the pace at which insurers are adding Zepbound to their coverage lists.

Future Growth Prospects and Drug Expansion

Eli Lilly is not only contending with current supply and demand dynamics but is also looking to expand the applications of its incretin drugs to other indications. Early positive results from the Surmount study for obstructive sleep apnea have contributed to a stock rally, with further details expected in June. Research into the cardiovascular benefits of Tirzepatide is ongoing, with updates anticipated by the end of the second quarter. Despite the challenges, Eli Lilly's stock has seen a more than 25% increase year to date, with analysts maintaining a positive outlook and projecting about 12% upside. The company is also awaiting further updates on its Alzheimer’s treatment, donanemab, following a delay in FDA decision-making.