Goldman Scrutinizes Hits, Misses, And Growth Trajectory Concerns For Eli Lilly And Its Its Obesity and Diabetes Drugs

Tuesday, Eli Lilly And Co LLY reported first-quarter revenue of $8.77 billion, up 26% year over year, marginally missing the consensus of $8.92 billion, driven by increases of 16% in volume and 10% due to higher realized prices.

Eli Lilly posted an adjusted EPS of $2.58, beating the consensus of $2.46, higher than $1.62 a year ago.

Goldman Sachs writes that Eli Lilly reported somewhat of a mixed quarter. Topline underperformance was driven primarily by lower-than-expected Mounjaro sales ($1.8 billion vs. GS/Consensus of $2.4 billion/$2.1 billion).

Additionally, there was a miss by several in-line products (Trulicity -12%/-12% vs. GS/Consensus, Verzenio -2%/-3% vs. GS/Consensus, Taltz -2%/-7% vs. GS/Consensus).

Goldman Sachs writes that Zepbound sales exceeded consensus expectations ($517 million vs. GS/Consensus of $500 million/$390 million, respectively).

Goldman highlighted that progress on bolstering supply for incretin products and expected growth trajectory for 2024 should be a focus for the investor call. Also, any insight into the potential timelines for the narrower gap between supply and demand would be considered.

• Anat Ashkenazi, CFO, said, “While we are working tirelessly to ramp supply and expect meaningful increases in shipment volumes in the second half of the year, demand continues to outstrip even increased supply.”
• “We remain on track to meet expectations we set earlier this year. The production of salable doses of incretin medicine in the second half of 2024 will be at least 1.5 times the salable doses in the second half of 2023. In the short to midterm, we expect sales growth to primarily be a function of the quantities we can produce and ship.”
• She added that the company has seven sites either “ramping up or under construction.
• Last week, Lilly acquired a manufacturing facility from privately held Nexus Pharmaceuticals. Production is planned to begin at the end of 2025.

The analyst also noted that questions could focus on expectations for broadening payor access for Zepbound in the US, including upcoming obesity-related outcomes studies.

• An analyst asked if tirzepatide would be considered differently than a “weight loss drug” to secure Part D reimbursement.
• Patrik Jonsson, President of Lilly Diabetes and Obesity and Lilly USA, answered, “I think with the announcement made by the CMS early April to reimburse comorbidities for obesity based on the SELECT trial, we're also confident that with the new data that we presented just weeks ago in terms of obstructive sleep apnea, that's going to be reimbursed in Medicare Part D.” 
• “And we expect similarly for other comorbidities and the readout of HFpEF, assuming that's positive and approved and later on with the mobility-mortality outcome study. Still, our true north is really to get the true of a treat and reduce obesity at cost, and we strongly believe it's not a matter of if, but when. We don't see it likely to pass in 2024, but it's still a small likelihood that that's going to happen.”

Price Action: LLY shares are up 5.54% at $778.04 at the last check Tuesday.

Photo by Ciara Kimsey via Shutterstock