Surging demand for Eli Lilly's (LLY.N) diabetes drug Mounjaro, which is also being used off-label for weight loss, led to a surprise third-quarter profit, but the drugmaker on Thursday said it expects supply constraints for some time as it adds manufacturing capacity.
Lilly shares have rallied over 60% this year, making it the world's most valuable healthcare company, as investors have bet on Mounjaro's success. Shares were up another 5% in early trading on Thursday.
On an adjusted basis, Lilly posted a profit of 10 cents per share. Analysts' were expecting a loss of 13 cents per share, according to LSEG data.
Mounjaro, which crossed over a billion dollars in quarterly sales for the first time, is widely expected to gain U.S. approval as an obesity treatment by the end of this year. Lilly can then begin promoting it for weight loss.
Finance chief Anat Ashkenazi said the company was seeing manufacturing capacity for Mounjaro ramp up every week and that she expected that to continue into 2024.
"But with all the investments we're making and the production plans, the expected demand for (Mounjaro) will be quite significant. So we can be in a tight situation for some time," the CFO said in an interview.
Lilly is aiming to double last year's supply capacity for Mounjaro by the end of this year.
Indianapolis-based Lilly and Danish rival Novo Nordisk (NOVOb.CO) are ahead in the race to grab a slice of an estimated $100 billion market for anti-obesity treatments from a class of drugs originally developed for diabetes known as GLP-1 agonists.
Novo earlier on Thursday said it will supply "significantly" more doses of its popular weight-loss drug Wegovy in the United States next year, but cautioned shortages would continue in the short to medium term.
While Lilly flagged delays in fulfilling orders of certain Mounjaro doses in the quarter, its sales of $1.41 billion beat analysts' estimates of $1.31 billion.
Two analysts told Reuters Lilly's results were a boon for obesity drug manufactures as a whole. "At this point, the market is supply driven and every vial of (these weight-loss drugs) is getting used," said BMO analyst Evan Seigerman.
Quarterly sales of top-selling diabetes drug Trulicity came in at $1.67 billion, below analysts' estimates of $1.86 billion.
The majority of Mounjaro and Trulicity sales were recorded in the U.S. The company said supplies remain constrained internationally.
Ashkenazi said Lilly asked doctors outside the U.S. to stop putting new patients on Trulicity to cope with increased demand, which affected sales in the quarter.
The company also said it now expects a U.S. regulatory decision on its experimental Alzheimer's drug donanemab in the first quarter of 2024. It had previously guided to an approval decision by the end of this year.
Ashkenazi said the FDA asked for more time to go through the data submitted for donanemab.
Lilly has been bolstering its pipeline through small deals, and previously disclosed it expects to record a $2.98 billion charge related to those transactions.
The company said it now expects a full-year adjusted profit of $6.50 to $6.70 per share, compared with the $9.70 to $9.90 range it forecast previously.
The forecast cut was "a continuation of Lilly's under promise, over deliver strategy," BMO's Seigerman said.
It reported third-quarter revenue of $9.50 billion, topping Wall Street estimates of $8.95 billion.
