Eli Lilly's stock experiences a 10% decline following the company's failure to meet expectations and reduction of profit forecast.

• On Wednesday, Eli Lilly failed to meet profit and revenue expectations for the third quarter due to poor sales of Zepbound and Mounjaro.
• The drugmaker reduced its full-year adjusted profit forecast to a range of $13.02 to $13.52 per share.
• The surge in demand for injectable weight loss and diabetes medications has compelled Eli Lilly and its primary competitor, Novo Nordisk, to invest vast sums to enhance their production capabilities.

The third quarter saw Wednesday fall short of profit and revenue expectations, due to disappointing sales of Zepbound and Mounjaro, resulting in a slashed full-year adjusted profit guidance.

In premarket trading, the company's stock dropped by 10%, while its main competitor's shares decreased by approximately 3%.

Eli Lilly has revised its full-year adjusted earnings forecast to between $13.02 and $13.52 per share, a decrease from its previous guidance of $16.10 to $16.60 per share. The drugmaker attributed this change to a $2.8 billion charge recorded during the third quarter due to its acquisition of bowel disease drugmaker Morphic Holding.

Eli Lilly revised its revenue outlook for the year and now anticipates sales between $45.4 billion and $46 billion, down from its previous guidance of up to $46.6 billion.

Based on a survey of analysts by LSEG, Eli Lilly's reported results for the period ended September 30 differed from Wall Street's expectations.

• Earnings per share: $1.18 adjusted vs. $1.47 expected
• Revenue: $11.44 billion vs. $12.11 billion expected

Zepbound experienced its third full quarter on the U.S. market after gaining regulatory approval a year ago. Despite analysts predicting $1.76 billion in sales for the week, the company only made $1.26 billion.

Although Mounjaro generated $3.11 billion in revenue for the third quarter, which is more than double the revenue from the same period last year, analysts predicted $3.77 billion in sales for the diabetes treatment, according to StreetAccount.

Over the past year, demand for Lilly's incretin drugs, including Zepbound and Mounjaro, has exceeded supply in the U.S. These medications mimic specific gut hormones to suppress a person's appetite and manage their blood sugar levels.

Due to the high demand for injectable drugs, Eli Lilly and Novo Nordisk have had to invest billions to expand their manufacturing capabilities for these treatments.

Earlier this year, Eli Lilly's supply issues with Zepbound and Mounjaro began to ease. As of Wednesday, the Food and Drug Administration's drug database stated that all doses of these drugs are now available in the U.S. However, the agency cautions that patients may not always be able to immediately fill their prescription for these drugs at a specific pharmacy.

In a CNBC interview, Eli Lilly CEO David Ricks stated that the third-quarter performance of Zepbound and Mounjaro was not due to supply issues. However, the company revealed that third-quarter sales of the drugs were affected by inventory decreases among wholesalers.

Ricks stated that the company delayed advertising and promoting Zepbound due to customer service issues. The drugmaker will commence those efforts in November, he added.

People who can't get their medicine when they go are frustrated, as they tell us. Therefore, we didn't want to send more people to do that necessarily, said Ricks.

Eli Lilly anticipates a 50% increase in incretin drug production in the second half of 2024 compared to the same period in the previous year. Additionally, Rick stated on Wednesday that the company expects even more significant expansions in manufacturing capacity at the end of the year and in 2025.

In the third quarter of 2023, Ely Lilly recorded a net loss of $57.4 million, or 6 cents per share, while in the same period in 2022, the company recorded a net income of $970.3 million, or $1.07 per share.

Eli Lilly reported earnings of $1.18 per share for the most recent quarter, excluding one-time items associated with the value of intangible assets and other adjustments.

Revenue was up 20% year over year to $11.44 billion.

The FDA's decision to remove tirzepatide from its shortage list has sparked opposition from compounding pharmacies that produce cheaper alternatives to Eli Lilly's branded drugs. These pharmacies are urging the FDA to reconsider its decision, as Eli Lilly and Novo Nordisk seek to curb the production of unapproved versions of their top-selling drugs.

Ricks stated to CNBC that Zepbound and Mounjaro are no longer in shortage, as the company has stock. However, he also pointed out that compounded versions of Eli Lilly's branded drugs are not regulated by the FDA, which raises concerns about their safety and efficacy.

This story is developing. Please check back for updates.