Despite obesity drug momentum, why Eli Lilly’s earnings remain uncertain for traders | Wilnesh News
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 earnings at risk, analysts say. Tezepatide is the active ingredient in Eli Lilly’s diabetes treatment Mounjaro and its anti-obesity drug Zepbound. The U.S. Food and Drug Administration (FDA) recently reported that it expects availability of both brands to be limited in all but one dose (an introductory 2.5 mg level) through the second quarter. (To minimize side effects, patients gradually increase their dose of the drug.) IMS/IQVIA script data suggests Eli Lilly’s first-quarter revenue will be about $4.45 billion higher than Wall Street’s consensus estimate of $8.9 billion, said Deutsche Bank analyst James Shin. Dollar. Based on this calculation, earnings would be down about 13 cents per share, he said in a research note released last Tuesday. Analysts expect earnings of $2.46 per share on revenue of $8.92 billion when Eli Lilly reports results before the bell on Tuesday, according to a survey by LSEG. Shin expects Eli Lilly to post earnings of $2.43 per share, slightly below the consensus, which had been trending lower ahead of print. “While there may be a miss in 1Q24, we do not believe a miss will cause LLY to lower its FY24 guidance,” Shin said. “Strong demand for Mounjaro and Zepbound can easily ride out and make up for it in 2H24 Any shortfall in 1H24.” But investors want more details on how quickly Eli Lilly can ramp up drug production and how much that effort will cost. Leerink analyst David Risinger said in a research note Thursday that ongoing shortages are hampering the performance of these drugs. Combined prescription volume for Mounjaro and Zepbound increased 63% year over year in the week ended April 19, according to IQVIA data. However, he said the drugs increased by 91% over a rolling four-week period. Zepbound has been available since December. Digging into the details Meanwhile, total prescriptions for Trulicity, an earlier generation drug that uses a glucagon-like peptide-1 agonist (GLP-1), are also slowing. Analysts said this would hurt the overall performance of Eli Lilly’s incretin portfolio. Wells Fargo’s Mohit Bansal said he expects investors to overlook any shortcomings in Trulicity because Eli Lilly’s future growth focus will be on Zepbound and Mounjaro. Shin also noted that there will be some confusion in trends in the first quarter, as some sales in the fourth quarter are to pharmacies looking to build inventory after Zepbound is approved. Analysts are also interested in knowing how quickly insurance companies will add Zepbound to their lists of covered drugs and what impact this will have on the drug’s actual price. “We are seeing growing acceptance of Zepbound as many plans make underwriting decisions,” UBS analyst Jo Walton wrote in an April 18 research note. As of mid-2018, no decisions had been made on plans covering about 45% of the U.S. population. Pricing may provide some upside, but supply dynamics remain key, Bansal said. “We do not expect a significant upward revision to guidance this quarter,” he said. As for Eli Lilly’s attempts to expand the label for its incretin drug into other indications besides obesity, we likely won’t hear more on that front until June. Earlier this month, the company announced some early results from its Surmount study in obstructive sleep apnea, which were very positive and helped the stock price rise. LLY YTD Eli Lilly stock has gone public so far this year. More details of the study are expected to be released in June. Research into whether tilsiparatide has cardiovascular benefits is ongoing and more details are expected to be released by the end of the second quarter. Eli Lilly’s shares are up more than 25% so far this year. LSEG said analysts are largely optimistic about the stock, with an average price target of $826.94, representing an upside of about 12%. Deutsche Bank’s Shin said any stock weakness around earnings could be seen as a “buying opportunity” as investors look to understand the growth story of a new class of drugs that are expected to have peak sales potential of more than 100,000 by 2020. $100 billion. Beyond the diabetes and obesity space, further updates on Eli Lilly’s Alzheimer’s treatment donanemab are worth watching as another key catalyst for the stock. In March, the FDA delayed a decision on a closely watched monoclonal antibody treatment. The surprising move delayed the drug’s approval timeline. —CNBC’s Michael Bloom contributed to this report.
