Eli Lilly (LLY 2.55%) is one of the world's top pharmaceutical companies, selling treatments for a wide range of diseases -- from diabetes to cancer. But one type of product has stood out in recent times and driven both revenue and share performance for the company. I'm talking about Lilly's weight loss drugs, which are bringing in billions of dollars in revenue.
Lilly sells the compound tirzepatide in two forms: Mounjaro for type 2 diabetes and Zepbound for weight management. Doctors have been known to prescribe either for weight loss patients. Demand is high for these products because they are efficacious, easy to take, and treat a growing problem. The weight loss drug market may reach $100 billion by the end of the decade, according to Goldman Sachs Research.
In fact, demand has been so high that it's been surpassing supply, forcing Lilly and rival Novo Nordisk to invest in additional manufacturing capacity. Recently, Lilly made a new move that could solve this supply issue -- the biggest problem facing these drug makers -- and boost Lilly's already strong earnings.
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Lilly's new version of Zepbound
So, what is this important move? Lilly launched a new version of Zepbound in single-dose vials of 2.5 mg and 5 mg, distributed directly through the company's self-pay channel for patients with a prescription. A four-week supply of the lower-dose vials is available for $399, while the higher-dose vials cost $549. This is less than half the price of other similar weight loss drugs, including Lilly's own Zepbound in its original injector pen form for which the list price tops $1,000. (This original version of Zepbound will remain available.)
As it stands, even with Lilly unable to fully serve demand and offering only the higher-priced injector pen product, Zepbound revenue has taken off. The drug launched late last year and reached blockbuster status in less than six months. In the second quarter of this year, Zepbound generated revenue of more than $1.2 billion. At the same time, Lilly reported more than $3 billion in revenue for Mounjaro.
This quarterly performance by the weight loss portfolio prompted Lilly to boost the company's full-year revenue guidance by $3 billion to the range of $45.4 billion to $46.6 billion.
Lilly says the launch of single-dose vials will "significantly" expand the supply of Zepbound. This is great news for patients who have been waiting to give the drug a try, and it's also fantastic news for Lilly as it signals additional revenue growth ahead.
NYSE: LLY
Key Data Points
Expanding weight loss drug supply
So, how exactly will the single-dose vials expand supply? Lilly didn't offer details, but it's fair to say vial packaging, compared to injector pen packaging, could simplify the manufacturing process and save Lilly production time and money. Serving the product through the self-pay channel should also help Lilly gain efficiency, streamlining the costs of the weight loss drug portfolio.
Lilly has heavily invested in manufacturing in recent years, pouring about $18 billion into this area since 2020. This, along with the new vial format, could result in major progress when it comes to lifting weight loss drug supply.
Now, let's consider what this means for us as investors. Lilly is a leader in the high-growth weight loss drug market, but the one hurdle has been the supply issue. Faced with difficulty obtaining Lilly's and Novo Nordisk's weight loss drugs, some patients have turned to compounded options -- reformulated versions made by independent pharmacies. (Compounding pharmacies are allowed to sell these in the case of product shortages.) This represents lost revenue for makers of the approved drugs.
Lilly's recent moves have made big steps in addressing the supply problem. As a result, we, as investors, have reason to be optimistic about its ability to meet product demand and generate revenue growth in this expanding market. That makes Lilly a top pharmaceutical stock to add to your portfolio right now and hold on to for the long term.
