Eli Lilly, the world’s most valuable healthcare company, has raised its annual sales forecast by $3 billion thanks to increased manufacturing capacity for its highly sought-after weight-loss drug, Zepbound. The news sent the company’s shares soaring as much as 14% on Thursday. Lilly also increased its 2024 profit forecast and announced that Zepbound sales crossed the $1 billion mark for the first time in a quarter since its launch in late 2023. This milestone comes after Lilly’s Danish competitor, Novo Nordisk, reported a surprising miss on its quarterly sales of its weight-loss drug Wegovy and lowered its full-year profit forecast.
With shares climbing about 8% at midday, reaching $831 after hitting a high of $877.78 earlier, the Indianapolis-based drugmaker is on track to add nearly $55 billion to its market value if the stock gains hold. The surge in Lilly’s share price highlights the growing demand for weight-loss treatments, which has propelled the company to the top of the healthcare industry. Lilly’s Chief Scientific Officer, Daniel Skovronsky, revealed in an interview that the company had committed more than $18 billion since 2020 to building new manufacturing facilities and modernizing existing ones in both the US and Europe. This investment strategy includes a $5.3 billion allocation in May for a manufacturing site in Indiana dedicated to the production of tirzepatide, the active ingredient in both Zepbound and Mounjaro.
“We’re seeing those investments that we’ve made over the last four years start to come online, including the Research Triangle Park site (in North Carolina), and as we do that, that unlocks additional supply,” Skovronsky stated. Lilly is progressively scaling up production at its Research Triangle Park facility in accordance with its goals and making significant progress in constructing its new site in Concord, North Carolina, as confirmed by Lilly CEO Dave Ricks during a call to discuss the company’s results.
Skovronsky emphasized that supply has been the primary factor determining market share in the US weight loss treatment sector. Christian Greiner, equity portfolio manager at F/m Investments, described Lilly’s results as “kind of a relief” following Novo’s unexpected sales shortfall.
Lilly and Novo are locked in a race to expand their manufacturing capacity to keep pace with the unprecedented demand for their drugs, which have demonstrated the ability to help patients lose an average of 20% of their body weight. Some analysts predict that the market for new weight loss medications could surpass $150 billion by the early 2030s.
Ricks expressed concerns about Novo Nordisk’s parent company’s $16.5 billion acquisition of contract drug manufacturer Catalent. “It’s more the oddity of your main competitor being also your contract manufacturer,” he stated.
As Lilly’s supply for both Mounjaro and Zepbound increased during the quarter, the company reported an ability to fulfill backorders and increase inventory levels at wholesalers. Mounjaro is marketed for diabetes in the US and for weight loss in other regions. Lilly revealed that wholesaler stocking accounted for up to 20% of the company’s sales during the quarter.
“We’re just seeing unbelievable demand, and we’re not even trying that hard to promote this drug,” Ricks remarked in a CNBC interview, pointing out that pricing for Zepbound remained “pretty stable” throughout the quarter. Mounjaro generated $3.09 billion in sales during the quarter, while Zepbound brought in $1.24 billion. Combined, the two tirzepatide products surpassed analysts’ forecasts by over $750 million. These drugs are anticipated to achieve combined sales of $15 billion this year.
Lilly stated that as of July 1, Zepbound was available on approximately 86% of commercial insurance coverage lists in the US and that it believes over 50% of employers have offered that option. Novo, whose Wegovy held a stronger position in commercial insurance coverage than Lilly’s drug at the beginning of the year, reported on Wednesday that it had offered price concessions to maintain its coverage profile.
Lilly intends to launch 2.5 mg and 5 mg single-dose vials of Zepbound in the US within the coming weeks. Skovronsky explained that these vials would create additional manufacturing capacity as they require less production than the autoinjectors currently used to administer the medicine. Both Wegovy and Zepbound have experienced shortages this year, according to the US FDA’s website. While the agency recently announced that all doses of Zepbound are now available, it has not yet removed the treatment from its shortage list.
Ricks acknowledged that pharmacies do not have an abundance of supply but said that Lilly is fulfilling orders as they are received. Analysts predict that the companies will likely split the US market roughly 50-50 by the end of 2024 as Lilly strengthens its manufacturing capacity to close the gap with Novo.
“This is going to be not a matter of what the split is going to be, (but) how quickly the pie is going to grow in this space,” said Greiner, whose firm holds about 47,500 shares of Lilly and 181,500 Novo ADRs.
Lilly now anticipates 2024 adjusted profit of $16.10 to $16.60 per share, representing an increase from its previous forecast of $13.50 to $14. The company projects overall revenue to range from $45.4 billion to $46.6 billion, compared to its earlier estimate of $42.4 billion to $43.6 billion.
