By Bhanvi Satija and Patrick Wingrove
(Reuters) -Eli Lilly's stock tumbled 8% on Tuesday after it forecast fourth-quarter sales of weight-loss drug Zepbound below Wall Street estimates, marking the second time sales have disappointed since the drug's launch in late 2023.
The company's shares were trading at $739.23, on track for their worst single-day decline in nearly four years. Copenhagen-listed rival Novo Nordisk (NYSE:NVO)'s shares also fell 3.5%.
Lilly's stock went on a tear in the beginning of 2023, with the company's shares doubling as investors bet on the drug's popularity. The stock stumbled in October last year, after Zepbound's sales disappointed, and has been subdued since.
The forecast is "likely less a shock to investors but may still shake some confidence in incretin demand," said BMO Capital Markets analyst Evan Seigerman, referring to the class of drugs that Zepbound belongs to.
Lilly said on Tuesday it had expected the market for incretins to grow faster, based on the performance in previous quarters.
As supply normalizes, Lilly's Chief Financial Officer Lucas Montarce said wholesalers did not seek to build up their stocks of incretins, including Zepbound, toward the end of the year as they have in the past.
"This year, given all doses are available ... that (trend) did not materialize. We finished pretty much at the same inventory level in the channel that we had in the third quarter."
Lilly expects $3.5 billion in Mounjaro sales in the fourth quarter, and $1.9 billion for Zepbound. Analysts had expected the drugs to bring in $5.35 billion and $2.08 billion, respectively, according to data compiled by LSEG.
In October, Lilly posted third-quarter sales of the two drugs below analysts' estimates, blaming physical and financial constraints at wholesalers and igniting some concerns about cooling demand.
Bernstein analyst Courtney Breen said Tuesday's downbeat forecasts show the company needs to take steps to stimulate further demand.
Lilly also forecast 2025 sales between $58 billion and $61 billion, the midpoint of which is above analysts' estimates of $58.52 billion, helped by the launch of Mounjaro in new markets.
The drug's launch for both obesity and type-2 diabetes patients in China, India, Brazil and Mexico was on the company's "to-do list for 2025," Montarce said, without providing further details on when the drug would be launched in each country.
Lilly's 12-month forward price-to-earnings ratio, a common benchmark for valuing stocks, stood at 34.59, much higher than peers Merck & Co (NYSE:MRK) and Pfizer (NYSE:PFE)'s 10.72 and 9.07, respectively.