Why sales of Eli Lilly’s Zepbound and Mounjaro fell short

Eli Lilly’s blockbuster weight reduction drug Zepbound and diabetes treatment Mounjaro posted weaker-than-expected sales for the third quarter, whilst supply of each medicines has largely recovered from widespread shortages within the U.S. 

The explanation for the disappointing sales, in line with the corporate, just isn’t a difficulty of demand or supply. 

During an earnings call Wednesday, Eli Lilly as a substitute blamed it on drug wholesalers cutting inventory of Zepbound and Mounjaro. Wholesalers purchase medicines from manufacturers and sell them to hospitals, clinics, pharmacies and other health-care providers.

Supply increases allowed Eli Lilly to satisfy back orders for wholesalers within the second quarter, which led to increased inventory of Zepbound and Mounjaro through the period, in line with the pharmaceutical giant.

But those wholesalers tapped into a few of that existing stock within the third quarter as a substitute of shopping for more from the corporate, which dampened revenue from each treatments, Eli Lilly said. 

Mounjaro’s third-quarter sales of $3.11 billion fell well wanting the $3.7 billion analysts had expected, in line with estimates compiled by StreetAccount. Sales of Zepbound were $1.26 billion within the quarter, missing the $1.76 billion expected by analysts. 

“The first offender was a listing hit to Mounjaro and Zepbound … not weaker demand,” Citi analyst Geoff Meacham wrote in a research note Wednesday. 

Jared Holz, Mizuho health-care equity strategist, wrote in an email that “destocking” — or selling existing inventory for the drugs moderately than stocking up on more — got here as a surprise, especially with the high level of demand for the treatments.

But he said Eli Lilly has invested $10 billion to $15 billion to expand manufacturing capability for its injectable drugs on this yr alone, which should “help to reverse a number of the trends reported in this era.”

Still, some analysts query whether the inventory issue can explain all of what happened with the sales of Zepbound and Mounjaro within the third quarter. That factor likely explains “only a fraction,” or around 20%, of the drugs’ revenue misses, Barclays analyst Carter Gould wrote in a note Wednesday. 

Demand for weight reduction and diabetes injections has outpaced supply over the past two years. 

But Eli Lilly’s supply woes began to ease earlier this yr, and the Food and Drug Administration removed tirzepatide, the energetic ingredient in Mounjaro and Zepbound, from its shortage list.

Earlier this month, a trade group representing compounding pharmacies, which make customized and infrequently cheaper alternatives to branded drugs in shortage, sued the FDA. The group said tirzepatide continues to be in brief supply and will subsequently remain on the shortage list, which led the agency to reconsider its decision.

On the earnings call, Eli Lilly executives insisted that underlying demand for the medicines remained strong. 

“Is there a requirement problem? No,” Eli Lilly CEO Dave Ricks said, pointing as a substitute to “plenty of lumpiness in channel stocking.”

“I feel what we actually don’t control and do not try and but as a reality is that downstream customers from Lilly, wholesalers and retailers, are making their very own decisions about which of the 12 different dosage forms they need to stock in at what level,” Ricks said. 

He noted that wholesalers are coping with some limitations, including financial pressures. In addition they should take care of “cold chain” capability constraints, or maintain a temperature-controlled supply chain that ensures the standard of the drugs from production to delivery. 

Ricks said Eli Lilly had yet to start what the corporate calls “demand-stimulating activities,” or promoting and promoting, for Zepbound. The drugmaker will start those efforts in November, he said.

That can include providing drug samples to health-care providers. 

Eli Lilly can be investing heavily in its direct-to-consumer website, which offers telehealth prescriptions and direct home delivery of certain drugs to expand patient access, executives said through the call. 

Ricks dismissed the concept that the disappointing sales within the quarter was on account of competition from compounded versions of Mounjaro and Zepbound. 

“We do not really see a financial impact on Lilly of compounding,” Ricks said.