Eli Lilly's Zepbound and Mounjaro sales miss estimates as wholesalers draw down inventory

Eli Lilly's third-quarter sales of its weight-loss drug Zepbound and its diabetes drug Mounjaro came in below Wall Street expectations, and the company blamed wholesalers working through existing inventory rather than weaker patient demand. The miss, reported Oct. 30, 2024, sent Lilly shares down 8% and wiped out nearly $70 billion in market value ^[1].

Zepbound brought in $1.26 billion and Mounjaro $3.11 billion in the quarter ^[1]. The two outlets covering the results reported different analyst expectations. Reuters, citing LSEG data, said analysts had expected $1.69 billion for Zepbound and $4.20 billion for Mounjaro ^[1]. CNBC, citing StreetAccount estimates, said analysts expected $1.76 billion and $3.7 billion respectively ^[2]. Analysts expect the two drugs to make a combined $19 billion this year ^[1].

Mounjaro and Zepbound are both tirzepatide ^[1]. The drugs had been in shortage for much of the year as demand ran ahead of supply, and Lilly said supply began catching up last quarter ^[1].

How inventory became the issue

Wholesalers, also called distributors, buy medicines from manufacturers and sell them to hospitals, clinics, pharmacies and other providers ^[1][2]. According to Lilly, increased supply let the company fill wholesalers' back orders in the second quarter, which built up inventory of both drugs. In the third quarter, those wholesalers used existing stock instead of buying more, which cut into reported revenue ^[2].

CEO David Ricks pointed to "a lot of lumpiness in channel stocking" and said, "Is there a demand problem? No" ^[2]. On an investor call he said customers of wholesalers and resellers chose how many doses to stock based on their own physical and financial constraints, and noted the drugs must be refrigerated during transport and storage ^[1]. He told CNBC that Lilly had not yet started advertising Zepbound and had held back on international launches to focus on building U.S. inventory. "We haven't been stimulating demand the way we had originally planned," Ricks said ^[1].

Not everyone accepts inventory as the whole explanation. Barclays analyst Carter Gould wrote that destocking likely explains "only a fraction," or around 20%, of the revenue misses ^[2]. Citi analyst Geoff Meacham wrote, "The primary culprit was an inventory hit to Mounjaro and Zepbound ... not weaker demand" ^[2]. Mizuho strategist Jared Holz said the destocking came as a surprise given the level of demand ^[2].

Prescriptions kept rising. Lilly filled an average of about 140,000 Zepbound prescriptions per week in the quarter, up from just over 93,000 per week the previous quarter, according to IQVIA data shared by an analyst ^[1].

Lilly cut its annual adjusted profit forecast to $13.02 to $13.52 per share from $16.10 to $16.60, citing acquisition charges ^[1]. A previously disclosed $2.8 billion acquisition-related charge and higher manufacturing costs also contributed to the profit miss ^[1]. The company trimmed the top end of its full-year sales forecast by $600 million to $46 billion and kept the low end at $45.4 billion ^[1].

Why it matters for patients

The quarter's numbers were about how wholesalers order and store the drugs, not about whether people are using them. Both medicines had largely recovered from widespread U.S. shortages, and the Food and Drug Administration removed tirzepatide from its shortage list ^[2]. That removal is being reconsidered after a trade group representing compounding pharmacies sued the FDA in early October, arguing tirzepatide is still in short supply ^[2]. For patients using compounded versions of tirzepatide, that legal fight could affect availability; how it will resolve has not been determined.

Ricks also dismissed the idea that compounded versions hurt Lilly financially: "We don't really see a financial impact on Lilly of compounding" ^[2].

Nothing in the quarterly reports indicates a change to the list prices of Zepbound or Mounjaro, and no change to insurance coverage was disclosed. Lilly's revenue miss does not mean the drugs became cheaper or easier to get. The episode also showed how closely investors watch these products: Lilly shares had risen 55% for the year to that point, making it the world's most valuable health care company, and the stock fell sharply on the numbers ^[1]. Its rival Novo Nordisk, which makes Ozempic and Wegovy, trimmed its own full-year profit forecast and reported a rare miss on Wegovy sales in August ^[1].

What happens next

Lilly said it would begin advertising and promoting Zepbound in November, including providing samples to health care providers, and is investing in a direct-to-consumer website that offers telehealth prescriptions and home delivery of certain drugs ^[2]. The company said it has invested $10 billion to $15 billion this year to expand manufacturing capacity for its injectable drugs ^[2], after previously spending billions on production, including about $7 billion for its Indiana site and facilities in Ireland ^[1]. The FDA's reconsideration of tirzepatide's shortage status remains open ^[2]. Whether wholesaler inventory has returned to normal levels has not been reported.