Eli Lilly Stock Tumbles on Slower-Than-Expected Weight Loss Drug Sales. Is This a Buying Opportunity?

GLP-1 drugs have become all the rage for weight loss, with sales for drugs like Novo Nordisk's Ozempic and Eli Lilly's (NYSE: LLY) Mounjaro skyrocketing over the past year. However, Eli Lilly recently surprised investors when it cut its full-year revenue guidance ahead of an investor conference after sales of its GLP-1 drugs fell short of expectations.

Eli Lilly now expects revenue to be approximately $13.5 billion for its fourth quarter and $45 billion for the full year 2024. The company had earlier forecast full-year revenue to come in between $45.4 billion to $46 billion. Analysts, meanwhile, were projecting Q4 revenue of $13.94 billion and full-year revenue of $45.49 billion, as compiled by LSEG.

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The new forecast from Lilly reflects 44% year-over-year revenue growth for the fourth quarter and 32% for the year. So the company is still seeing strong growth -- just not as robust as anticipated. It is also worth noting that Lilly's original full-year revenue guidance was for $41 billion, so it handily surpassed that.

GLP-1 drugs still lead the way for Eli Lilly

Turning to its GLP-1 drugs, Lilly is looking for sales of Mounjaro to be $3.5 billion and $1.9 billion for Zepbound. Mounjaro is FDA-approved to help improve blood glucose levels in adults with type 2 diabetes, but is commonly used off-label for weight loss. Zepbound has the same active ingredient, tirzepatide, but is approved for weight loss in obese adults or overweight adults with at least one weight-related condition, such as high cholesterol or high blood pressure.

A year ago, Mounjaro had sales of $2.2 billion, so that would be an increase of 59%. Zepbound had just been introduced and only had sales of $175.8 million a year ago.

At a JPMorgan conference following the announcement, the company said the revenue shortfall stemmed from weaker-than-expected scripts for diabetes in December. The company said December is usually a strong month, as people will often get two scripts to avoid deductible costs in January, but that this did not happen this year.

Looking ahead, the company forecast 2025 revenue to come in between $58 billion to $61 billion, which would represent growth between 29% to 36%. It said it did not push its missed 2024 December sales into January, nor did it include a strong December in its 2025 guidance.

Lilly noted that it has spent aggressively to add more manufacturing capacity for its GLP-1 drugs, spending $23 billion over the last three years. It expects to be able to ship 60% more doses in the first half of 2025 compared to the first half of 2024. The company said overall capacity growth for 2025 was uncertain, as there are regulatory and technical channels it needs to work through before seeing how much capacity it can add in the back half of the year.

Meanwhile, the company discussed how its international opportunity in terms of volumes was about 9 times that of the U.S. market. However, it noted that international pricing comes in lower.

Outside its incretin drugs, the company said it saw strong performances in oncology, immunology, and neuroscience medicines. It noted that sales of non-incretin drugs rose by 20% in the quarter. It is looking for several newer non-incretin drugs to also help drive revenue in 2025, as it has several new drugs to treat conditions like cancer, ulcerative colitis, and Alzheimer's disease.

Image source: Getty Images.

Is it time to buy the dip on Eli Lilly?

If Lilly is correct in its assessment that its revenue shortfall was due to a lack of patients doubling scripts in December, as is typical for some drugs, the company could see a stronger-than-expected Q1. Meanwhile, its overall 2025 forecast looks to be conservative, with the company not accounting for the potential of even more doses of its popular GLP-1 drugs being available in the second half.

GLP-1 drugs are likely to remain popular, and the company has a big international opportunity ahead of it as well. Meanwhile, its non-weight loss drug portfolio is also growing nicely.

From a valuation perspective, Lilly trades at a forward price-to-earnings (P/E) of 25.4 times 2025 analyst estimates, with a price/earnings-to-growth ratio (PEG ratio) of 0.3. PEGs below 1 are generally considered undervalued, so on that basis, the stock is very cheap.

Data by YCharts.

Given its valuation and the growth still in front of it with GLP-1 drugs, investors can look to buy the dip in Eli Lilly stock.

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JPMorgan Chase is an advertising partner of Motley Fool Money. Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.