Eli Lilly's Zepbound and Mounjaro are no longer in shortage, but their sales still fell short.
- Despite recovering from widespread shortages in the U.S., Eli Lilly's weight loss drug Zepbound and diabetes treatment Mounjaro posted weaker-than-expected sales for the third quarter.
- Zepbound and Mounjaro's inventory cuts by drug wholesalers were the cause of the drugmaker's missed targets.
- Despite the decline in sales, Eli Lilly executives maintained that the demand for the medicines remained robust and that the company had sufficient supply on hand.
Despite the recovery of supply for both Zepbound and Mounjaro, the third quarter sales for the blockbuster weight loss drug and diabetes treatment were weaker-than-expected.
The reason, as stated by the company, is not related to demand or supply.
Eli Lilly accused drug wholesalers of cutting inventory of Zepbound and Mounjaro, which led to disappointing sales. Wholesalers buy medicines from manufacturers and sell them to hospitals, clinics, pharmacies, and other healthcare providers.
Eli Lilly was able to fulfill back orders for wholesalers in the second quarter due to an increase in supply, resulting in higher inventory levels of Zepbound and Mounjaro, according to the pharmaceutical company.
Eli Lilly reported that instead of purchasing more stock from the company, some wholesalers utilized existing inventory in the third quarter, which negatively impacted revenue from both treatments.
Mounjaro's third-quarter sales of $3.11 billion were below the $3.7 billion analysts had predicted, while Zepbound's sales of $1.26 billion fell short of the $1.76 billion expected by analysts.
Geoff Meacham, a Citi analyst, wrote in a research note on Wednesday that the main cause of the issue was an inventory hit to Mounjaro and Zepbound, not weaker demand.
Jared Holz, Mizuho health care equity strategist, was taken aback by the suggestion of "destocking" drugs, which involves selling existing inventory instead of restocking, despite the high demand for the treatments.
Eli Lilly has invested $10 billion to $15 billion to expand manufacturing capacity for its injectable drugs in this year alone, which should help reverse some of the trends reported in this period.
While some analysts believe that the inventory issue may have contributed to the sales decline of Zepbound and Mounjaro in the third quarter, Barclays analyst Carter Gould suggests that it only accounts for approximately 20% of the revenue shortfall in a note on Wednesday.
Over the past two years, the demand for weight loss and diabetes injections has exceeded the available supply.
Earlier this year, the Food and Drug Administration removed tirzepatide, the active ingredient in Mounjaro and Zepbound, from its shortage list, easing Eli Lilly's supply woes.
A trade group representing compounding pharmacies filed a lawsuit against the FDA earlier this month, arguing that tirzepatide remains in shortage and should remain on the shortage list. As a result, the agency reconsidered its decision.
Eli Lilly executives maintained that the demand for the medicines remained robust during an earnings call on Wednesday.
"According to Eli Lilly CEO Dave Ricks, there is no demand problem, but rather "a lot of lumpiness in channel stocking.""
According to Ricks, downstream customers from Lilly, including wholesalers and retailers, make their own decisions about which of the 12 different dosage forms they want to stock at what level.
Wholesalers face financial pressures and "cold chain" capacity constraints, which require them to maintain a temperature-controlled supply chain that ensures the quality of drugs from production to delivery.
Eli Lilly has not yet begun advertising and promoting Zepbound, and the company plans to start those activities in November, according to Ricks.
That will include providing drug samples to health-care providers
Eli Lilly is investing heavily in its direct-to-consumer website to offer telehealth prescriptions and direct home delivery of certain drugs, executives said during the call.
Ricks rejected the notion that the poor sales in the quarter were caused by competition from compounded versions of Mounjaro and Zepbound.
Ricks stated that there is no significant financial impact on Lilly from compounding.
Business News
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