Eli Lilly soars 8% after Q1 earnings reveal surging popularity for its Zepbound weight-loss drug

"Demand continues to outstrip even increased supply," Eli Lilly's CFO said of its Zepbound weight loss drug on the company's conference call.

• Eli Lilly stock surged as much as 8% on Tuesday after the company's first-quarter earnings report.
• The world's biggest healthcare company said it experienced surging demand for its GLP-1 Zepbound weight loss drug.
• Eli Lilly raised its 2024 revenue guidance, suggesting that the supply shortage of its weight loss drug may soon ease.

Eli Lilly shares surged as much as 8% on Tuesday after the world's largest healthcare company reported first-quarter earnings.

The company's earnings report was mixed, with earnings per share beating estimates while revenue was light, but encouragingly to investors, the company raised its 2024 revenue guidance.

The results showed soaring demand for its GLP-1 weight loss drug Zepbound, and the revenue guidance increase suggests that ongoing supply shortages of the drug may soon ease.

Here are the key numbers:

• Adjusted earnings per share: $2.58, versus analyst estimates of $2.49
• Revenue: $8.77 billion, versus analyst estimates of $8.93 billion
• 2024 revenue guidance: $42.4 billion to $43.6 billion, representing a $2 billion increase
• 2024 earnings per share guidance: $13.05 to $13.55, representing a $1.25 increase

"Our progress in addressing some of the world's most significant health care challenges has resulted in increased demand for our medicines. As we continue to make pipeline investments that position us for future growth, we are rapidly expanding manufacturing capacity to make our incretin medicines available to more patients," Eli Lilly CEO David Ricks said.

Eli Lilly's stock surge on Tuesday added as much as $51 billion to its market value to $751 billion, making it the eighth largest company in America. 

The first-quarter was the first full quarter for sales of Zepbound, which is a GLP-1 drug indicated for treating weight loss and was launched in November. Sales of the drug surged to $517.4 million, while Mounjaro, which uses the same active ingredient as Zepbound but is indicated for the treatment of type 2 diabetes, saw sales of $1.8 billion.

According to JPMorgan, sales of Zepbound exceeded its own estimates, partly driven by an increase in insurance acceptance of the drug.

"We have approximately 67% access in the commercial segment," Eli Lilly CFO Anat Ashkenazi said on the company's earnings call.

Eli Lilly said it expects to see supply constraints ease in the second half of the year considerably, leading to an increase in available doses of its highly popular weight loss drugs. But even that may not be enough to meet demand.

"While we are working tirelessly to ramp supply and expect meaningful increases in shipment volumes in the second half of the year, demand continues to outstrip even increased supply," Ashkenazi said.

JPMorgan reiterated its "Overweight" rating on Eli Lilly stock following the earnings report.

"More broadly on the story, LLY remains one of our favorite names in the group, as we see further upside to Street estimates as Mounjaro continues to ramp and Zepbound fully launches as well as a number of additional incretin datapoints ahead," JPMorgan said in a note on Tuesday.

Eli Lilly is looking to expand its indications of Zepbound so it can treat more health problems, including sleep apnea.

While the stock is trading near its all-time highs, JPMorgan isn't too concerned about its premium valuation just yet.

"And while shares trade at a significant premium to peers, we see unprecedented growth for LLY over the next decade with the company's incretin franchise reaching $60bn+ by 2030 and continuing to grow from there," JPMorgan said.