By Josh Nathan-Kazis

An hour after the market closed on what had been Eli Lilly's worst trading day since March of 2021, Lilly CEO David Ricks sought to make the case that everything is fine with the outlook for the company's blockbuster weight-loss drug.

Ricks appeared late Tuesday, at J.P. Morgan's annual healthcare investment conference in San Francisco, amid growing worries that investors may have overestimated the demand for its weight-loss drug Zepbound, and for Mounjaro, the same drug sold to treat Type 2 diabetes.

Early in the day, Lilly disclosed fourth-quarter sales of Zepbound and Mounjaro that significantly fell short of Wall Street estimates. The second consecutive miss for the two drugs, it sparked a selloff that left Lilly shares 6.6% lower at the market close.

The run-up that has more than doubled Lilly's market value since the start of 2023 has been predicated largely on the notion that demand for a weight-loss drug like Zepbound is virtually unlimited. But Tuesday evening, J.P. Morgan analyst Chris Schott asked Ricks if there were new debates within Lilly itself around what the demand actually is for drugs like Zepbound.

"We think we're in the early innings of this," Ricks said. He acknowledged that there are limits to demand for each category of conditions treated by incretins, the drug category that includes GLP-1s. The number of categories, however, will keep growing, Ricks said.

Sales in diabetes may now increase more slowly, he said, but weight loss is still growing. Sleep apnea, which the Food and Drug Administration just recently approved Zepbound to treat, is a brand-new market.

"We see a long room to run on volume growth," Ricks said. "Our view is we've got at least a decade of growth ahead. It will unfold chapter by chapter. It won't be a straight line up and to the right."

Regarding the fourth-quarter Zepbound and Moujaro sales, Ricks said that while the company had expected distributors and pharmacies to restock at the end of the fourth quarter, that hadn't happened. He also said that the company had expected stronger sales in December for Mounjaro based on prior experience, and said that may not have happened due to changes in the Medicare prescription-drug benefit.

"A lot of people want to know, OK, does Lilly's Q4 miss say something about the incretin market?" Ricks said, displaying a chart that showed U.S. prescriptions for all incretins, including both Lilly and Novo Nordisk's drugs, growing sharply. All incretin prescriptions were up 45% in the fourth quarter of 2024 compared with the fourth quarter of 2024.

"We project that will continue," Ricks said of the growth shown in the chart.

Ricks also said that the company continues to hold back on what it calls "demand generation," or advertising Zepbound in the U.S., because of worries it could strain supply. "It's still metered," Ricks said. "We didn't want to hit the gas, or tap the gas, and have the thing run away from us again, get into supply problems."

Ricks didn't speak, and Schott didn't ask, about the challenge posed by compounding pharmacies, which have been able to legally make copycat Zepbound and sell it through telehealth storefronts. It remains unclear how many patients currently rely on compounded versions of Lilly's drugs. The FDA in mid-December said that all compounders n eed to stop making compounded tirzepatide by mid-March.

Investors seemed only somewhat convinced by Ricks's reassurances. The stock was up 1.2% early Wednesday to $754.01.

Write to Josh Nathan-Kazis at josh.nathan-kazis@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

January 15, 2025 09:47 ET (14:47 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.