By Bhanvi Satija and Patrick Wingrove
(Reuters) - Increased manufacturing capacity for Eli Lilly (NYSE:LLY)'s highly sought after weight-loss drug Zepbound drove the company to raise its annual sales forecast by $3 billion on Thursday, and its share jumped as much as 14%.
Lilly also raised its 2024 profit forecast and said sales of Zepbound crossed $1 billion for the first time in a quarter since its launch in late 2023.
The Zepbound milestone comes after Danish rival Novo Nordisk (NYSE:NVO) reported a rare miss on quarterly sales of its weight-loss drug Wegovy and trimmed its full-year profit forecast.
With shares up about 8% at midday to $831 after earlier climbing as high as $877.78, the Indianapolis-based drugmaker was on track to add nearly $55 billion to its market value if stock gains hold. Lilly is already the world's most valuable healthcare company primarily due to demand for weight-loss treatments.
Lilly Chief Scientific Officer Daniel Skovronsky in an interview said the company had committed more than $18 billion to creating new manufacturing facilities and updating old ones in the U.S. and Europe since 2020.
The company invested $5.3 billion in May on a manufacturing site in Indiana for production of tirzepatide, the active ingredient in both Zepbound and Mounjaro.
"We're seeing those investments that we've made over the last four years start to come online, including the Research Triangle Park site (in North Carolina), and as we do that, that unlocks additional supply," Skovronsky said.
Lilly is steadily escalating production at Research Triangle Park in line with its goals and making good progress building its new Concord, North Carolina site, Lilly CEO Dave Ricks said on a call to discuss the results.
Supply has been the predominant factor determining U.S. market share for weight loss treatments, Skovronsky said.
Christian Greiner, equity portfolio manager at F/m Investments, said Lilly's results were "kind of a relief" following Novo's miss.
Lilly and Novo are racing to increase manufacturing capacity to meet unprecedented demand for their drugs that have been shown to help patients lose as much as 20% of their weight on average. Some analysts have said the market for new weight loss drugs could exceed $150 billion by the early 2030s.
Ricks noted that concerns remain around the $16.5 billion acquisition by Novo Nordisk's parent of contract drug manufacturer Catalent (NYSE:CTLT).
"It's more the oddity of your main competitor being also your contract manufacturer."
'UNBELIEVABLE DEMAND'
As Lilly's supply for both Mounjaro and Zepbound increased during the quarter, the company said it was able to backfill orders and increase stocks at wholesalers. Mounjaro is sold for diabetes in the U.S. and weight loss elsewhere.
Lilly said stocking by wholesalers accounted for up to mid-20% of the sales for the quarter.
"We're just seeing unbelievable demand, and we're not even trying that hard to promote this drug," Ricks said in a CNBC interview, noting that pricing for Zepbound was "pretty stable" during the quarter.
Mounjaro had sales of $3.09 billion in the quarter, while Zepbound took in $1.24 billion. Combined, the two tirzepatide products exceeded analysts' forecasts by more than $750 million.
They expect the drugs to make a combined $15 billion this year.
Lilly said that as of July 1, Zepbound was available on about 86% of the commercial insurance coverage lists in the U.S. and that it believes over 50% of employers have offered that option.
Novo, whose Wegovy had a stronger position than Lilly's drug for commercial insurance coverage at the beginning of the year, said on Wednesday that it had provided price concessions to retain its coverage profile.
Lilly plans to launch 2.5 milligrams and 5 mg single-dose vials of Zepbound in the U.S. in the coming weeks. Skovronsky said those vials would create additional capacity as they involved less manufacturing than autoinjectors currently used to deliver the medicine.
Both Wegovy and Zepbound have been in shortage this year, according to the U.S. FDA's website. Although the agency recently said all doses of Zepbound were now available, it did not remove the treatment from the shortage list.
Ricks acknowledged that there was not an abundance of supply at pharmacies, but said it was building orders as it received them.
Analysts have said the companies will likely split the U.S. market roughly 50-50 by the end of 2024, as Lilly bolsters its manufacturing capacity to close the gap with Novo.
"This is going to be not a matter of what the split is going to be, (but) how quickly the pie is going to grow in this space," said Greiner, whose firm holds about 47,500 shares of Lilly and 181,500 Novo ADRs.
Lilly now expects 2024 adjusted profit of $16.10 to $16.60 per share, up from its prior forecast of $13.50 to $14.
It forecast overall revenue to be $45.4 billion to $46.6 billion, compared with its earlier view of $42.4 billion to $43.6 billion.