Lilly rides wave of weight-loss drug demand, working to expand capacity

By Patrick Wingrove and Bhanvi Satija

(Reuters) - Eli Lilly on Tuesday forecast 2024 profit above Wall Street estimates on soaring demand for Zepbound, its recently approved weight-loss drug, and said it would have new supply from expanded manufacturing capacity as soon as this year.

Explosive demand for diabetes treatment Mounjaro, which had also been used off label for weight loss, and now Zepbound, has led to a buying spree of Lilly's stock, propelling the drugmaker's market value to over $600 billion.

Lilly announced on an investor call that its new Concord, North Carolina site would begin producing Zepbound and Mounjaro, both known chemically as tirzepatide, as early as the end of the year, with products available to ship in 2025.

Lilly said it expects to produce one and a half times as many sellable doses in the second half of 2024 as it did in the second half of last year.

The Indianapolis-based drugmaker said while it will expand manufacturing capacity, it expects demand for Mounjaro and Zepbound to outpace supply in 2024.

Zepbound sales reached $175.8 million in the first few weeks of its launch, following U.S. approval in November, Lilly said.

"I guess, (I was) most surprised by the sales of Zepbound. I wouldn't have expected near that much," said Troy Harmon, Chief Investment Officer at Henssler Financial.

The company said it expects 2024 revenue of $40.4 billion to $41.6 billion, and adjusted earnings of $12.20 to $12.70, putting the midpoint ahead of analysts' estimates of $12.43 per share, according to LSEG data.

Shares were off about 1% at $696.82 after gaining about 11% in January, making Lilly the eighth largest company in the U.S. by market capitalization and most valuable healthcare company.

Truist analyst Robyn Karnauskus raised her price target for the company to $850 from $650.

Fourth-quarter Mounjaro sales rose to $2.21 billion from $279.2 million last year, easily outpacing expectations of $1.8 billion, according to BMO Capital Markets.

Finance chief Anaz Ashkenazi addressed this week's news that contract manufacturer Catalent will be sold to the parent company of Novo Nordisk since that company also makes drugs for Eli Lilly.

Novo, which manufactures the weight-loss drug Wegovy and related diabetes treatment Ozempic, is Lilly's main rival in the obesity market.

Ashkenazi said Catalent was an integral manufacturer of both commercial and pipeline products for the industry, especially in diabetes and obesity, "and we have products with these sites as well."

She told investors the company will hold Catalent accountable to their contract, as it seeks more information about the deal, while CEO David Ricks told the Financial Times that Novo's proposal to buy three of Catalent's plants was "unusual" and raises potential antitrust concerns.

Both companies are testing their treatments for other health benefits such as heart disease, obstructive sleep apnea and chronic kidney disease, which could expand insurance coverage for the medicines.

Lilly on Tuesday said tirzepatide met the main goal of a mid-stage trial for a difficult to treat fatty liver disease formerly known as NASH and now called metabolic dysfunction-associated steatohepatitis, or MASH.

It said the drug helped up to 74% of patients achieve absence of the disease with no worsening of liver scarring at 52 weeks, compared to 13% of patients on placebo. A clinical trials database said patients in the study had stage 2 or 3 fibrosis.

Two analysts said they wanted to see more data on the benefit of tirzepatide on liver scarring. Lilly called the results "clinically meaningful" but did not say whether they

were statistically significant, they said.

The drugmaker on its call said the study was not designed to demonstrate statistically significant improvement in liver

scarring.

Still, the data sent shares of other companies developing drugs for the fatty liver disease tumbling. Madrigal Pharmaceuticals was down more than 18%, Akero Therapeutics was off 10% and 89Bio shares fell 16%.

Fourth-quarter profit of $2.49 per share on an adjusted basis, beat Wall Street expectations by 27 cents.

(Reporting by Bhanvi Satija and Leroy Leo in Bengaluru and Patrick Wingrove in New York; Editing by Arun Koyyur and Bill Berkrot)