In this article, Eli Lilly’s blockbuster weight loss drug Zepbound and diabetes treatment Mounjaro reported weaker-than-expected sales for the third quarter, despite the recovery of supply for both medicines from previous shortages in the U.S.
The company attributed the disappointing sales not to issues of demand or supply but to drug wholesalers reducing their inventory of Zepbound and Mounjaro. Wholesalers purchase medicines from manufacturers and distribute 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 increased supply, resulting in higher inventory levels of Zepbound and Mounjaro. However, wholesalers utilized some of the existing stock in the third quarter instead of purchasing more from the company, leading to decreased revenue from both treatments.
Mounjaro’s third-quarter sales of $3.11 billion fell short of the $3.7 billion expected by analysts, while Zepbound sales were $1.26 billion, missing the $1.76 billion expected. Analysts noted that the primary reason for the revenue shortfall was due to inventory adjustments rather than weaker demand.
Despite the inventory challenges, Eli Lilly has made significant investments in expanding manufacturing capacity for its injectable drugs, which is expected to help address the reported trends. Some analysts believe that the inventory issue can only explain a portion, around 20%, of the revenue misses for Zepbound and Mounjaro in the third quarter.
While demand for weight loss and diabetes injections has exceeded supply in recent years, Eli Lilly’s supply situation has improved, with the FDA removing tirzepatide from its shortage list. However, a trade group representing compounding pharmacies has raised concerns about the continued shortage of tirzepatide.
During the earnings call, Eli Lilly executives emphasized that the underlying demand for the medicines remained strong, dismissing the notion of a demand problem. CEO Dave Ricks highlighted the variability in channel stocking decisions made by downstream customers and mentioned upcoming demand-stimulating activities for Zepbound, including advertising and providing drug samples to healthcare providers.
The company is also focusing on enhancing its direct-to-consumer website to offer telehealth prescriptions and direct home delivery of certain drugs to improve patient access. Ricks refuted the idea that the sales decline in the quarter was due to competition from compounded versions of Mounjaro and Zepbound, stating that they do not see a financial impact from compounding on Eli Lilly.
