Eli Lilly (LLY) earnings in the first quarter of 2024

Eli Lilly On Tuesday it reported adjusted first-quarter earnings that beat Wall Street expectations and raised its full-year guidance due to strong sales of its blockbuster diabetes drug Mounjaro and recently launched weight-loss treatment Zepbound.

The drugmaker now expects full-year adjusted earnings of $13.50 to $14.00 per share, up from previous guidance of $12.20 to $12.70 per share. Eli Lilly also expects revenue for the year to be between $42.4 billion and $43.6 billion, up $2 billion at each end of the range.

Analysts surveyed by LSEG expected full-year adjusted earnings of $12.50 per share and sales of $41.44 billion.

The company said the increased guidance is partly due to optimism around increased production of Zepbound, Mounjaro and similar drugs for the rest of the year.

“Now that we're four months into the year, we have greater visibility into that, into these capacity nodes, and we feel more confident,” Eli Lilly Chief Financial Officer Anat Ashkenazi told investors during an earnings call Tuesday. .

He noted that Eli Lilly has several manufacturing sites “under construction or under construction,” including two locations in North Carolina, two in Indiana, one in Ireland and one in Germany, along with a seventh site the company recently acquired from Nexus Pharmaceuticals.

Eli Lilly said demand for Mounjaro and Zepbound (treatments known as incretin drugs, which mimic hormones produced in the intestine to suppress a person's appetite and regulate their blood sugar) outpaced increases in supply during the quarter. And the company expects supply to remain “pretty tight” in the short and medium term amid continued demand for those drugs, Ashkenazi said.

But Eli Lilly expects the most significant production increases to come in the second half of the year, he said.

“Our top priority is to make more products and we're doing everything we can to do that,” Eli Lilly CEO David Ricks said in an interview Tuesday on CNBC's “Squawk Box.” “We're aggressively ramping this up. But it's capital intensive, technically complex and highly regulated.”

The results and increased guidance reflect Zepbound's first full quarter in the U.S. market after gaining regulatory approval in early November. The drug reported $517.4 million in sales during the first quarter, even as most doses of the drug suffered from a shortage in the U.S. that is expected to last until June.

Analysts say the weekly shot could generate more than $1 billion in sales in its first year on the market and potentially become the biggest drug of all time.

Here's what Eli Lilly reported for the first quarter compared to what Wall Street expected, according to a survey of analysts by LSEG:

• Earnings per share: Adjusted $2.58 vs. expected $2.46
• Revenue: $8.77 billion vs. $8.92 billion expected

Eli Lilly reported net income of $2.24 billion, or $2.48 per share, for the first quarter. That compares with a profit of $1.34 billion, or $1.49 per share, a year earlier.

Excluding one-time items associated with the value of intangible assets, among other adjustments, the company posted earnings per share of $2.58 for the first quarter of 2024.

The pharmaceutical giant posted first-quarter revenue of $8.77 billion, a 26% year-over-year increase.

Eli Lilly shares rose more than 5% on Tuesday. The stock is up 26% this year after rising nearly 60% in 2023 on insatiable demand for the company's diabetes and weight loss drugs. This despite their high prices, spotty insurance coverage, and intermittent supply shortages.

With a market capitalization of around $700 billion, Eli Lilly is the largest US-based pharmaceutical company.

The company's two best-selling diabetes drugs missed Wall Street's expectations for the first quarter.

Mounjaro generated $1.81 billion in revenue in the first quarter, more than triple the $568.5 million it posted during the prior-year period. However, analysts were expecting sales of $2.11 billion, according to StreetAccount.

Eli Lilly said higher prices for Mounjaro helped boost revenue, specifically citing lower use of savings card programs for the drug in the U.S.

But the company said that savings card dynamic should “no longer have a noticeable effect on the price comparisons made” because the $25 monthly coupon for patients without insurance coverage for Mounjaro expired in June.

“Starting in the second half of each year, we should expect to see typical Mounjaro pricing,” Patrik Jonsson, executive vice president of diabetes and obesity at Eli Lilly, said during Tuesday's conference call.

Meanwhile, sales of Trulicity, Eli Lilly's former diabetes drug, plunged 26% during the first quarter to $1.46 billion. That's less than the $1.59 billion analysts were expecting, according to StreetAccount.

In the United States, the sales decline was primarily due to supply constraints and competition with other diabetes treatments, according to Eli Lilly. Non-U.S. revenue also declined, driven by lower demand and realized pricing, as well as tight supply.

Revenue growth was also driven by sales of Eli Lilly's breast cancer pill Verzenio, which rose 40% to $1.05 billion during the quarter due to higher demand.

However, those results were below the expectations of analysts, who forecast sales of $1.11 billion for the period.

Sales of Jardiance, a tablet that lowers blood sugar in patients with type 2 diabetes, rose 19% to $686.5 million in the first quarter. Analysts expected Jardiance sales of $718.3 million.

Jardiance, which Eli Lilly shares with Boehringer Ingelheim, is among the first 10 drugs selected to face price negotiations with the federal Medicare program.