Eli Lilly investors spooked by poor sales of Mounjaro, but it’s obesity drug approval that will unlock…
The demand is there, but so are the obstacles. Eli Lilly investors were faced with reality on Thursday as the stock fell more than 6%. Hopes are high for the company’s recently launched Mounjaro. At present, the drug has been approved to treat type 2 diabetes, but many expect sales to really take off once it is approved to treat obesity and overweight, which could happen later this year. But investors are now increasingly worried as insurance companies have been slow to come on board. Lilly said just over 50% of commercial and Part D subscribers have access to the drug through their insurance plans. This is only a slight increase from 45% in the third quarter. “We would have expected a bit more upside,” SVB Securities analyst David Risinger said in a research note Thursday. This trend contributed to the drug’s disappointing sales in the fourth quarter. Mounjaro made $279.2 million in sales, below the $319.3 million expected by analysts, according to a Refinitiv poll. The slow adoption is concerning when you consider that this was supposed to be the easiest battle. LLY 1D mountain LLY falls as questions around Mounjaro linger There has long been a stigma around weight-loss drugs, as many consider their use to be driven by vanity more than medical necessity. But new classes of weight-loss drugs are helping to change that mindset. Part of the reason is that these drugs are more effective and shed light on the mechanisms in the body that help patients lose weight. Still, legislation will be needed to get Mounjaro covered for the treatment of obesity and overweight by health insurance plans. By law, these plans are prohibited from paying for weight-loss drugs. Manufacturing issues are also hurting sales and Lilly is investing to increase capacity, the company said. In an interview with CNBC on Thursday, CEO David Ricks said Lilly is expected to release this year with 50% more capacity than when it started. He added that additional capacity will come online in 2024 and 2025. Inflated expectations The increased bandwidth will be needed when the drug gains approval to treat obesity. This is already clear because patients, who hoped for Mounjaro’s potential for weight loss treatment, obtained prescriptions for the drug from their doctors and used the company’s patient access program for the treatment. In the fourth quarter, Lilly cracked down on this “unlabeled use,” Ricks said. The company went through a process to verify that patients entering the program had a diagnosis of type 2 diabetes. “Our commitment is really to patients who need the drug for what it is right now and who can get a insurance coverage and who have already started the drug,” he told CNBC. These prescriptions may also have inflated analysts’ expectations for sales of the drug this quarter. In the long run, however, Lilly expects these motivated consumers to be helpful in convincing insurance companies. Management even mentioned it during its conference call on Thursday. “I’ve seen the power of consumer interest to help improve access to medicines, and what we’ve seen over the last year is that people with obesity are very engaged and willing to do a lot to access effective treatments,” said Michael Mason, executive vice president at Lilly. “They will have an important voice with employers and their insurers for access. … I am more encouraged than ever by our potential to unlock the obesity market and help many people.” Wegovy and Mounjaro An encouraging sign: Lilly’s competitor, Novo Nordisk, has gained access to more than 80% of insurance company forms for their obesity treatment, Wegovy. Wegovy is similar to Mounjaro in that both treatments are based on incretin hormones called glucagon-like peptide-1, or GLP-1. Mounjaro, or tirzepatide, also has a second incretin, a glucose-dependent insulinotropic polypeptide, or GIP. Although Wegovy is first to market, Lilly’s entry may have an advantage when the drugs compete, as clinical trials have shown Mounjaro to lead to higher rates of weight loss. Novo’s fourth-quarter earnings this week showed strong gains in GLP-1 sales. This affected its entire portfolio, which also includes type 2 diabetes treatments Rybelsus and Victoza. And no doubt these results were also tempered by Novo’s own supply issues. “GLP-1 products increased by 42% [coupon equivalent rate], with Wegovy (+18% beat), Rybelsus (+8% beat) and Victoza (+3% beat) beating in 2022,” Bank of America analyst Geoff Meacham wrote in a research note. “Novo ended Q4 with 55% GLP-1 market share (vs. 56% in 3Q22); which we would attribute to Mounjaro’s continued expansion into T2D space. That said, we expect both players to continue to increase volumes as the use of the GLP-1 class expands into earlier lines of treatment, with the GLP-1 class offering superior HbA1c and weight loss compared to other classes.” HbA1c, or a hemoglobin A1C test, is a blood test commonly used to monitor blood sugar over the past 3 months by patients with prediabetes and diabetes. Novo’s actions and Lilly have both seen strong gains over the past year due to the buzz around these drugs.Even with Thursday’s sell-off, Lilly shares are up nearly 32% over the course of the year. year, while shares of Novo gained 23%. In an interview, Meacham said he expects some of the weakness in the stock can be attributed to ongoing sector rotation on the market Large-cap pharmaceutical stocks have been particularly strong last year, and there has been a comeback to tech stocks following strong earnings this week. He also expects Mounjaro’s revenue picture to improve in coming quarters. , as s declines and more insurance companies add coverage. Meacham noted that Mounjaro has many other benefits for patients with diabetes, such as reduced lipid levels, blood pressure improvements and weight loss, and its price is not out of step with comparable treatments. – CNBC’s Michael Bloom contributed reporting.
Eli Lilly investors spooked by poor sales of Mounjaro, but it’s obesity drug approval that will unlock…
