Eli Lilly is facing increasing pressure as shortages of its popular obesity and diabetes drugs, Mounjaro and Zepbound, worsen, putting the company’s earnings at risk. The Food and Drug Administration has reported that supplies of both brands are expected to be limited through the second quarter, with the exception of the introductory 2.5 milligram dosage. According to IMS/IQVIA script data, analysts at Deutsche Bank estimate that Lilly’s first-quarter revenue will miss the Wall Street consensus estimate of $8.9 billion by approximately $445 million, resulting in lower earnings per share by about 13 cents. While analysts do not anticipate that these shortages will cause Lilly to lower its FY24 guidance, investors are seeking more information about the company’s plans to ramp up manufacturing and the associated costs. Leerink analyst David Risinger has noted that the ongoing shortages are hindering the drugs’ performance, with combined prescriptions of Mounjaro and Zepbound increasing by 63% year over year for the week ended April 19, compared to a 91% growth rate in the previous four-week rolling period.
The slowdown in prescriptions for Trulicity, an earlier generation drug in Lilly’s incretins portfolio, is also expected to impact performance. However, analysts believe that investors will focus on Zepbound and Mounjaro as key growth drivers for Lilly. The company is also exploring the potential of its incretin drugs for additional indications, with positive early findings from the Surmount study for obstructive sleep apnea. Further details from this study are anticipated in June, along with updates on research into the cardiovascular benefits of Tirzepatide, the active ingredient in Mounjaro and Zepbound. Eli Lilly shares have risen by over 25% year to date, with analysts remaining largely positive on the stock’s outlook. The average price target of $826.94 indicates a potential upside of approximately 12%. Despite concerns over the impact of drug shortages on earnings, analysts view any weakness in the stock price as a buying opportunity, emphasizing the growth potential of this new class of drugs.
