Pharmaceutical giant Eli Lilly (LLY, Financial) has delivered an impressive Q2 performance, surpassing EPS and revenue estimates and significantly raising its FY24 guidance. This remarkable achievement, akin to NVIDIA's (NVDA, Financial) beat-and-raise performances, is rare in the healthcare sector. The primary catalysts were the strong demand for LLY's GLP-1 diabetes and weight loss drugs, Mounjaro and Zepbound.
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Concerns existed about supply constraints for these blockbuster drugs potentially affecting LLY's ability to meet investor expectations. These worries intensified after competitor Novo Nordisk (NVO, Financial) reported disappointing Q2 results, with sales of its GLP-1 drugs, Ozempic and Wegovy, falling short of estimates.
- Despite this, Wegovy sales surged by 55% to $1.7 billion, and Ozempic sales rose by 26% to $4.2 billion, although supply shortages hindered even stronger sales.
- In a CNBC interview, LLY CEO David Ricks confirmed that unlike NVO, LLY is not constrained by supply issues. This was evident in the Q2 results, with Mounjaro sales skyrocketing by 214% to $3.09 billion and Zepbound sales reaching $1.2 billion, both exceeding analysts' estimates.
- The only downside for LLY was a 31% drop in Trulicity revenue to $1.25 billion. Increased competition, including from its own Mounjaro diabetes drug, is impacting Trulicity's demand. However, the success of Mounjaro is a significant growth catalyst for LLY.
- Looking forward, LLY's updated FY24 guidance indicates no signs of slowing down. The company has raised its EPS forecast to $16.10-$16.60 from $13.50-$14.00 and its revenue outlook to $45.4-$46.6 billion from $42.4-$43.6 billion.
The key takeaway is that LLY's stellar Q2 earnings report dispelled concerns about supply constraints and the GLP-1 market. Additionally, LLY's superior execution compared to NVO is likely to attract more capital to LLY shares.
