Lilly rides wave of weight-loss drug demand, working to expand capacity

Eli Lilly on Tuesday forecast 2024 profit above Wall Street estimates on soaring demand for Zepbound, its recently approved weight-loss drug, and said the treatment helped reduce symptoms of a common, difficult to treat fatty liver disease in a mid-stage trial.

Eli Lilly on Tuesday forecast 2024 profit above Wall Street estimates on soaring demand for Zepbound, its recently approved weight-loss drug, and said the treatment helped reduce symptoms of a common, difficult to treat fatty liver disease in a mid-stage trial. Explosive demand for diabetes treatment Mounjaro, which had also been used off label for weight loss, and now Zepbound, has led to a buying spree of Lilly's stock, propelling the drugmaker's market value to over $600 billion.

The Indianapolis-based drugmaker said it will expand manufacturing capacity, but expects demand for Mounjaro and Zepbound to outpace supply in 2024. Zepbound sales reached $175.8 million in the first few weeks of its launch, following U.S. approval in November.

"I guess, (I was) most surprised by the sales of Zepbound. I wouldn't have expected near that much," said Troy Harmon, Chief Investment Officer at Henssler Financial. The company said it expects 2024 revenue of $40.4 billion to $41.6 billion, and adjusted earnings of $12.20 to $12.70, putting the midpoint ahead of analysts' estimates of $12.43 per share, according to LSEG data.

Shares were off slightly at $699.52 after gaining about 11% in January, making Lilly the eighth largest company in the U.S. by market capitalization and most valuable healthcare company. Truist analyst Robyn Karnauskus raised her price target for the company to $850 from $650.

Lilly announced on an investor call that its new Concord, North Carolina site, in which it invested $1 billion in early 2022, would begin producing the drugs, which have the same main ingredient, tirzepatide, as early as the end of the year, with products available to ship in 2025. The company in November said it would build its first plant in Germany for 2.3 billion euros ($2.47 billion) to help increase tirzepatide capacity.

Lilly said it expects to produce one and a half times as many sellable doses in the second half of 2024 as it did in the second half of last year. Fourth-quarter Mounjaro sales rose to $2.21 billion from $279.2 million last year, easily outpacing expectations of $1.8 billion, according to BMO Capital Markets.

The company and its main rival in the obesity market, Novo Nordisk, are both testing their treatments for other health benefits such as heart disease, obstructive sleep apnea and chronic kidney disease, which could expand insurance coverage for the medicines. Lilly said tirzepatide met the main goal in a study for a type of fatty liver disease formerly known as NASH and now called metabolic dysfunction-associated steatohepatitis, or MASH.

It said the drug helped up to 74% of patients achieve absence of the disease with no worsening of liver scarring at 52 weeks, compared to 13% of patients on placebo. A clinical trials database said patients in the study had stage 2 or 3 fibrosis. Two analysts said they wanted to see more data on the benefit of tirzepatide on liver scarring. Lilly called the results "clinically meaningful" but did not say whether they were statistically significant, they said.

The drugmaker on its call said the study was not designed to demonstrate statistically significant improvement in liver scarring. Still, the data sent shares of other companies developing drugs for the fatty liver disease tumbling. Madrigal Pharmaceuticals was down more than 18%, Akero Therapeutics was off 10% and 89Bio shares fell 16%.

Fourth-quarter profit of $2.49 per share on an adjusted basis, beat Wall Street expectations by 27 cents.