Eli Lilly and Co released a performance report showing that the Q4 revenue forecast fell short of expectations. The company explained that the growth in demand for weight loss drugs was lower than anticipated, and insufficient inventory levels at the end of the year affected performance. This marks the second consecutive quarter that the company has missed sales targets due to forecast discrepancies. Analysts state that the market has extremely high growth expectations for Eli Lilly and Co, leaving almost no room for error. Despite optimism that revenue will reach between 58 billion and 61 billion dollars in 2025, exceeding market expectations, the stock price fell nearly 9% in early trading on Tuesday.
On January 14, Tuesday, Eastern Time, the American pharmaceutical giant $Eli Lilly and Co (LLY.US)$ announced its performance expectations for the full year of 2024 and performance guidance for 2025.
According to the company's announcement, Eli Lilly and Co expects its revenue for 2024 to reach approximately $45 billion, a year-on-year increase of 32%. This growth is mainly attributed to strong performance in its diabetes and weight-loss drugs, as well as good performance in oncology, immunology, and neuroscience drugs.
Eli Lilly and Co also expects its revenue for the fourth quarter of 2024 to be approximately $13.5 billion, a year-on-year increase of 45%, lower than the analysts' average expectation of $14 billion.
Among them, the company's heavy-hitting diabetes drug Mounjaro is expected to have fourth-quarter revenue of about $3.5 billion, lower than the market expectation of $4.4 billion. Another weight-loss drug, Zepbound, is expected to have fourth-quarter revenue of about $1.9 billion, also not meeting analysts' expectations of $2.2 billion.
Despite the slightly weak short-term performance, Eli Lilly and Co remains optimistic about the prospects for 2025. The company expects full-year revenue to reach between 58 billion and 61 billion USD, exceeding the analysts' average expectation of 58.72 billion USD.
After the announcement, on Tuesday morning, Eli Lilly and Co's stock price fell nearly 9% at one point, marking the largest intraday drop since March 2021. By the close, Eli Lilly and Co had dropped 6.59%, closing at $744.91.
Eli Lilly has mispredicted forecasts for two consecutive quarters.
Eli Lilly's Q4 revenue forecast fell short of expectations, marking the second consecutive quarter that Eli Lilly failed to accurately estimate market demand for popular weight loss and diabetes medications.
Thanks to the rising demand for weight loss among Americans, over the past two years, demand for Eli Lilly's weight loss and diabetes drugs Zepbound and Mounjaro has surged. To meet the demand, Eli Lilly has invested over 20 billion dollars to ramp up production. However, the problem arises as the current supply of drugs has exceeded the actual market demand the company originally anticipated.
The company's Chief Financial Officer Lucas Herrmann Monta stated at JPMorgan's Medical Care conference on Tuesday, "I think this primarily comes down to inaccurate forecasting and not an issue with market demand itself."
Regarding the reasons for Q4 revenue falling short of expectations, Eli Lilly explained:
“Although the USA GLP-1 receptor agonist market grew by 45% compared to the same period last year, our previous expectation was that growth in this quarter would be faster. Additionally, the year-end channel inventory was lower than expected, and these factors affected our fourth-quarter performance.”
Typically, Eli Lilly's inventory would see a slight increase at the end of the year. However, Monta pointed out that the inventory levels in the fourth quarter were basically unchanged from the previous three months. This is the second consecutive quarter that Eli Lilly attributed its sales shortfall to inventory management issues, raising concerns in the market regarding the overall sales growth expectations for the company.
Bloomberg Industry Analyst John Murphy pointed out:
"Everyone has high expectations for Eli Lilly and Co's growth, so any minor missteps in sales will be magnified, and they have little room for error."
Eli Lilly and Co remains optimistic about its growth prospects for 2025 and has pointed out future performance growth drivers. Eli Lilly and Co stated that Mounjaro and Zepbound showed strong sales growth momentum in the fourth quarter, and this trend is expected to continue into 2025.
Eli Lilly and Co plans to increase production capacity in the first half of 2025, with a projected increase of at least 60% in salable doses of GLP-1 drugs compared to the first half of 2024. In addition, the company also expects new drugs to launch in 2025, including Jaypirca, Ebglyss, Omvoh, and Kisunla, which will contribute to revenue growth.
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