Eli Lilly Plunges 12% in Pre-Market Despite 38% Q2 Revenue Surge and Raised Guidance as Oral Weight-Loss Drug Falls Short of Expectations

Deep News
08/07

Eli Lilly delivered impressive Q2 financial results but simultaneously announced disappointing efficacy data for its experimental oral weight-loss medication, triggering a 12% pre-market stock decline on Thursday.

**Strong Q2 Financial Performance:**

The pharmaceutical giant reported Q2 revenue of $15.56 billion, representing a 38% year-over-year increase that surpassed market expectations of $14.7 billion. This growth was primarily driven by robust sales of Zepbound and Mounjaro.

Reported earnings per share reached $6.29, marking a 92% year-over-year increase, while non-GAAP EPS hit $6.31 compared to $3.92 in the prior year period, reflecting 61% growth. The company's gross margin improved to 84.3%, up 3.5 percentage points year-over-year, benefiting from enhanced production efficiency and optimized product mix.

Based on this strong performance, Eli Lilly raised its full-year revenue guidance to $60-62 billion from the previous range of $58-61 billion.

**Core Business Highlights:**

Mounjaro achieved global revenue of $5.2 billion, up 68% year-over-year, with $3.3 billion from the U.S. market and $1.9 billion from international markets. Zepbound generated $3.38 billion in U.S. revenue, surging 172% year-over-year despite facing pricing pressures amid strong demand. Verzenio contributed $1.49 billion in revenue, maintaining steady 12% growth.

**Disappointing Oral Weight-Loss Drug Trial Results**

However, Eli Lilly's experimental oral weight-loss pill orforglipron achieved only approximately 11% weight reduction in Phase 3 clinical trials, falling short of Wall Street expectations and significantly underperforming compared to Novo Nordisk's Wegovy injection, which demonstrates 14-15% weight loss efficacy.

Following this announcement, Eli Lilly shares plummeted over 12% in pre-market trading on Thursday. If this decline persists into regular trading, it would mark the largest single-day drop since August 9, 2000, when shares fell 29%. In contrast, competitor Novo Nordisk's stock surged 8.4% on the Copenhagen exchange, posting its largest gain in nearly four months.

**Revenue Growth Strong Despite Pricing Pressures**

The quarterly revenue of $15.56 billion proved impressive, with the 38% year-over-year growth driven primarily by 42% volume expansion. However, pricing factors created a 6 percentage point headwind, with U.S. market pricing declining 8 percentage points, indicating intensifying negotiations with insurance companies and government healthcare programs.

This pricing pressure particularly affected the company's two flagship products, Zepbound and Mounjaro, despite continued strong demand. The situation suggests evolving competitive dynamics in the GLP-1 medication market.

Mounjaro demonstrated relatively stable performance with $5.2 billion in global revenue, up 68%. International markets showed explosive growth, jumping from $677 million in the prior year to $1.9 billion, nearly tripling due to new market access and volume increases.

Zepbound exhibited typical new product growth trajectory with $3.38 billion in revenue, soaring 172% year-over-year, though this growth largely reflects a low comparison base and faces similar pricing pressures. Combined, these products contributed over $8.5 billion in revenue, representing 55% of total revenue.

Research and development expenses increased to $3.34 billion, up 23% year-over-year and slightly above the $3.2 billion expectation, demonstrating continued high investment in pipeline development.

Additionally, the company raised its 2025 full-year revenue guidance by $1.5 billion to the $60-62 billion range, reflecting management confidence in business prospects. EPS guidance was correspondingly increased to $20.85-22.10 on a reported basis, though the tax rate guidance was raised from 17% to 19%, reflecting changes in U.S. tax policy impact.

**Phase 3 Trial Results for Oral Weight-Loss Pill**

Eli Lilly's experimental oral weight-loss pill orforglipron achieved approximately 11% weight reduction in pivotal Phase 3 trials, falling below Wall Street expectations and setting the tone for next year's additional competition in the weight-loss medication market.

The trial results landed at the lower end of Wall Street's expectation range. Investors had hoped orforglipron could match the efficacy of Novo Nordisk's blockbuster weight-loss injection Wegovy, which achieved 14-15% weight reduction in pivotal trials.

However, obesity specialist Dr. Katherine Saunders noted that physicians will prescribe medications as long as they prove safe and effective, regardless of whether they meet investor expectations for weight-loss benchmarks. The drug is expected to launch next year, providing a more affordable oral option for the weight-loss medication market projected to reach $95 billion by 2030.

Eli Lilly plans to submit the 18-month trial results involving over 3,100 adults to regulatory authorities for approval by year-end. The company has made "substantial investments" in anticipation of expected demand, including stockpiling at least $600 million worth of pills and raw materials.

The most common side effects of orforglipron include nausea, vomiting, and diarrhea, occurring at rates similar to existing GLP-1 medications. Notably, orforglipron did not cause liver problems, a concern with other investigational oral weight-loss pills. Approximately 10% of patients discontinued the trial due to side effects.

The medication is easier to manufacture than Eli Lilly's Zepbound injection and is expected to offer patients a more affordable option. In earlier orforglipron trials, Type 2 diabetes patients achieved 7.6% weight reduction over 40 weeks while also experiencing improved blood sugar levels.

While Eli Lilly and Novo Nordisk's injections have revolutionized obesity treatment, investors view pills as key to reaching more patients in a market expected to grow to $95 billion by 2030. However, developing oral weight-loss medications presents significant scientific challenges, with companies like Pfizer and AstraZeneca experiencing setbacks in their race to develop potent pills.

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