Eli Lilly and Company (LLY) experienced a sharp decline in its stock price on Wednesday, following the release of its third-quarter earnings report which revealed disappointing results and a downward revision of its 2024 guidance.
The company reported a 20% increase in revenue year-over-year, reaching $11.44 billion. However, this fell short of analysts’ consensus estimate of $12.10 billion, contributing to the stock’s significant drop. The revenue growth was primarily fueled by a 15% increase in volume and a 6% increase due to higher realized prices. These gains were partially offset by a 1% decrease resulting from unfavorable foreign exchange rates.
The volume increase was driven by strong performance from key drugs like Mounjaro and Zepbound. However, sales were impacted by the sale of rights for the olanzapine portfolio (Zyprexa) in the third quarter of 2023, as well as a decline in sales of Trulicity, the company’s diabetes medication.
Eli Lilly also reported an adjusted earnings per share (EPS) of $1.18, significantly lower than the $1.45 consensus estimate and a stark contrast to the $0.10 reported in the same period last year. Mounjaro sales more than doubled year-over-year, reaching $3.11 billion, while Verzenio, a breast cancer drug, saw a 32% increase in sales, reaching $1.37 billion. Despite the strong performance of these drugs, the decline in Trulicity sales, which fell 22% to $1.30 billion, played a significant role in the overall earnings shortfall.
The company’s revised guidance for 2024 also contributed to investor concerns. Eli Lilly now projects fiscal year 2024 sales of $45.4 billion to $46 billion, down from its previous forecast of $45.4 billion to $46.6 billion and below the consensus estimate of $46.24 billion. The company attributed this revision to increased R&D costs, particularly those associated with acquisitions.
Eli Lilly also lowered its adjusted EPS guidance for 2024 to $13.02 to $13.52, down from its previous forecast of $16.10 to $16.60 and below the consensus estimate of $13.47. This adjustment is directly linked to the acquisition-related IPR&D charges incurred in the third quarter. In Q3 2024, Eli Lilly recognized $2.83 billion in IPR&D charges, primarily related to the acquisition of Morphic, compared to $2.98 billion in Q3 2023, primarily related to the acquisitions of DICE Therapeutics, Versanis Bio, and Emergence Therapeutics.
The news of the missed earnings and lowered guidance sent shockwaves through the market. As of Wednesday’s premarket session, LLY stock was down 10.50% to $808.75. This significant drop highlights the market’s reaction to Eli Lilly’s disappointing performance and underscores the importance of these factors in driving stock price movements.
