Eli Lilly and Company (LLY) Says It Can Overcome High-Quality Issues with Excessive Demand | Wilnesh News
Eli Lilly’s upgraded guidance stole the show on Tuesday, offsetting mixed first-quarter results and sending shares up nearly 6%. The numbers leave no doubt that Eli Lilly’s long-term success story remains intact as demand for its new diabetes and obesity drugs Mounjaro and Zepbound outpaces supply. Revenue rose 26% year-on-year to $8.77 billion in the three months ended March 31, below analysts’ expectations of $8.92 billion, according to estimates from London Stock Exchange Group (LSEG). First-quarter adjusted earnings per share were $2.58, higher than the consensus estimate of $2.46, LSEG data showed. Eli Lilly Why We Have It: Eli Lilly’s best-in-class drugs should enable above-industry average growth for many years to come. The portfolio builds on its GLP-1 franchise and currently includes Mounjaro for type 2 diabetes and Zepbound for obesity. This fast-growing drug has the potential to treat other conditions, such as sleep apnea, and reduce the risk of stroke. Eli Lilly’s experimental Alzheimer’s treatment adds to the stock’s long-term appeal. Competitors: Novo Nordisk, Biogen, Eisai, Merck, and Pfizer Portfolio Weight: 2.7% Last Buy: February 7, 2023 Day Launch: October 8, 2021 Bottom Line Eli Lilly checks all the boxes that matter to long-term investors, including Club, which is why it’s not surprising to see the stock having one of its best days of the year It’s strange. Eli Lilly shares are trading at morning highs, above the all-time closing high of $792.28 set on March 4. Demand for sipalatide, the active ingredient in the drug, is at record levels. But just as important, management is deftly handling the complex and expensive process of increasing production capacity for injectable drugs to ease supply constraints. Eli Lilly needs to do just that to meet Wall Street’s lofty growth expectations. “It’s a matter of quality at the highest level,” Jim Cramer said Tuesday, pointing to demand at Mounjaro and Zepbound far outstripping supply. LLY .SPX 5Y mountain Lilly’s stock performance over the past five years compared to the S&P 500 Index. The full-year revenue and profit guidance comes less than three months after it was originally released, quelling the noise surrounding first-quarter results. “I liked everything I heard from Eli Lilly on Tuesday,” added Jim, who has long said tilsiparatide could become the best-selling drug of all time. In fact, nothing in Tuesday’s report will reduce the likelihood of this happening in the next few years. We maintain our 2 rating and $850 per share target price on the stock. Quarterly Comments Zepbound’s first full quarter of sales in the U.S. beat Wall Street expectations, with sales totaling $517.4 million in the three months ended March, compared with expectations of $373.3 million, according to FactSet. Chief Financial Officer Anat Ashkenazi said on a post-earnings conference call that Zepbound’s insurance coverage, a key part of its long-term financial success, is improving “rapidly.” As of April 1, Zepbound had about 67% of the commercial insurance market, up from about 33% on February 1, according to the company. Zepbound received approval from U.S. regulators in early November and hit shelves a few weeks later. In the fourth quarter, Zepbound’s revenue was approximately $176 million. Mounjaro’s first-quarter sales more than tripled to $1.81 billion, but fell short of Wall Street expectations. This isn’t surprising given supply constraints. Sales of GLP-1 Trulicity, another type 2 diabetes treatment marketed by Eli Lilly, fell 26% to $1.46 billion. It also fell short of revenue expectations. Like Zepbound and Mounjaro, Trulicity is facing shortages. Historically, some patients have also switched from Trulicity to Mounjaro. Availability of most doses of Zepbound and Mounjaro is expected to be limited by the end of the second quarter in June, according to the FDA’s database. Most doses of Trulicity, which was first approved nearly a decade ago, have a similar schedule. All three drugs are given as weekly injections, with patients gradually increasing their dosage during treatment. Ashkenazi said on the call that “unprecedented demand” for Eli Lilly’s so-called incretin drugs, including Zepbound, Mounjaro and Trulicity, is exacerbating shortages. “In the short to medium term, we expect sales growth to depend primarily on the volumes we can produce and ship,” she said. Numbers are still expected to increase. Ashkenazi said Eli Lilly’s incretin dose production in the second half of 2024 is still expected to be about 1.5 times that of the same period last year. Ashkenazi said the company has six production facilities under construction or expansion. Last week, the company announced a deal to acquire Nexus Pharmaceuticals’ seventh Wisconsin facility. Eli Lilly expects production at the plant to begin late next year. Eli Lilly’s main rival in the GLP-1 market, Ozempic and Wegovy maker Novo Nordisk, are also investing heavily to overcome shortages of their drugs. “Our first priority is to make more products,” Eli Lilly CEO Dave Ricks told CNBC earlier Tuesday. “We’re doing everything we can to do that. This is the technology we make the most. “Eli Lilly also said an FDA advisory panel plans to review the safety and effectiveness of its experimental Alzheimer’s treatment, donanemab, but has not yet scheduled a meeting. However, expected mid-year, management reiterated their confidence in the drug’s ability to slow the progression of the memory-depriving disease. Eli Lilly had previously planned to receive regulatory approval by the end of March. Eli Lilly now expects full-year sales to be between $42.4 billion and $43.6 billion, with an increase of $2 billion at either end of the range. Its revised adjusted earnings per share outlook is $13.50 to $14.00, compared with a previous range of $12.20 to $12.70; the midpoint is roughly 10% higher. Eli Lilly also raised its adjusted operating margin forecast to 33% to 35% from 31%. The changes were driven by strong performance from Mounjaro and Zepbound and “greater transparency” into Eli Lilly’s manufacturing expansion plans, the company said in a release. These are exactly the reasons you’d expect Eli Lilly to raise its guidance. Overall, a more optimistic financial outlook helps make Eli Lilly’s high price-to-earnings ratio more palatable to investors. Eli Lilly’s full-year outlook for other income and tax rates remains unchanged. The company does not provide quarterly guidance. (Jim Cramer’s Charitable Trust is long LLY. See here for the full list of stocks.) As a subscriber to Jim Cramer’s CNBC Investing Club, you’ll get Jim Cramer Receive trade alerts before making a trade. Jim waits 45 minutes after sending a trade alert before buying or selling stocks in his charitable trust portfolio. If Jim talked about a stock on CNBC TV, he would wait 72 hours after issuing a trade alert before executing the trade. The investment club information above is subject to our Terms and Conditions and Privacy Policy and our Disclaimer. No fiduciary duty or obligation shall exist or arise upon your receipt of any information relating to the Investment Club. No specific results or profits are guaranteed.
The injection pen of Eli Lilly and Company’s weight loss drug Zepbound is on display in New York City, the United States, on December 11, 2023.
Brendan McDermid | Reuters
Eli Lilly and CompanyThe raised guidance stole the show on Tuesday, offsetting mixed first-quarter results and sending shares up nearly 6%. The numbers leave no doubt that Eli Lilly’s long-term success story remains intact as demand for its new diabetes and obesity drugs Mounjaro and Zepbound outpaces supply.
