Eli Lilly (LLY 2.66%) had a very good year in 2023. Revenue jumped 20% and its stock skyrocketed 59%. The company also claimed the mantle as the world's largest drugmaker by market cap.
Will the momentum continue going forward? Probably. However, it won't be as easy as some might think. Here are four reasons why 2024 could be Eli Lilly's worst year for the rest of this decade.
NYSE: LLY
Key Data Points
1. Trulicity supply shortage
Type 2 diabetes drug Trulicity ranked as Lilly's top-selling drug last year, raking in sales of more than $7.1 billion. But that total could have been even higher were it not for supply issues.
Lilly reported that fourth-quarter U.S. sales for Trulicity fell 18% year over year. The company noted that it "experienced intermittent delays" in filling orders for its popular diabetes drug. The company expects these delays to continue in the coming months.
It's not just a U.S. problem, though. The big drugmaker had to advise healthcare professionals in international markets against starting new patients on Trulicity.
2. Slowing growth for Jardiance
Another diabetes drug, Jardiance, is Lilly's fifth-biggest moneymaker. It generated revenue of more than $2 billion for the company in 2023, up 33% year over year.
Look for Jardiance to remain a top growth driver for Lilly this year. However, CFO Anat Ashkenazi said in the Q4 earnings call that this growth could be slower because of "pricing dynamics in the U.S."
Jardiance is one of 10 initial drugs included in Medicare's drug-price negotiation program. Those negotiated prices, though, will be for 2026 and shouldn't affect the drug's sales this year.
3. Limited initial access for Zepbound
The U.S. Food and Drug Administration (FDA) approved Zepbound as a treatment for weight loss in November 2023. Lilly announced the drug was available in U.S. pharmacies in early December. In less than one month on the market, Zepbound pulled in sales of nearly $176 million.
Analysts and investors have great expectations for Zepbound over the long term. However, Lilly is still working to gain access to formularies for its new weight-loss drug. Ashkenazi acknowledged in the Q4 call that "it will take some time before we reach broad open access in this market."
Lilly will attempt to overcome this hurdle somewhat by offering commercial savings cards to U.S. patients who don't have coverage for Zepbound. This won't help with Medicare Part D, though: The federal program still hasn't opted to pay for weight-loss drugs.
4. Modest contributions from donanemab and lebrikizumab
2024 could bring two important regulatory approvals for Lilly. The company expects to win FDA approval for donanemab in treating early Alzheimer's disease in the first quarter. It also hopes to secure FDA approval for lebrikizumab in treating atopic dermatitis (eczema) toward the end of the year.
Should investors bank on big revenue boosts from these two drugs? Not this year. Ashkenazi said in the Q4 call, "With the current state of diagnostic and treatment readiness, initial uptake [for donanemab] will be somewhat limited." She added that Lilly expects that the Alzheimer's disease drug will "contribute only modestly to growth in 2024 once approved."
The issue for lebrikizumab is the anticipated timing of the FDA's decision in late 2024. There probably won't be enough days remaining on the calendar after a potential approval for the drug to make much money for Lilly this year.
The good news and the great news
Now for the good news. Even with these four headwinds, Lilly still projects revenue of between $40.4 billion and $41.6 billion in 2024. The midpoint of that guidance range reflects a 20% year-over-year increase.
There's also great news for Lilly. If 2024 is the company's worst year for the rest of this decade, it means that investors have a lot to look forward to in the coming years.
