Shares of Eli Lilly fell on Tuesday after updated financial guidance disappointed investors. Jim Cramer says the downturn is a buying opportunity. The pharmaceutical giant lowered its revenue outlook for 2024 due to a weaker-than-expected fourth quarter for its important GLP-1 drugs used for weight loss and diabetes. Eli Lilly said fourth-quarter sales should now be about $13.5 billion, missing Wall Street estimates of $13.9 billion, according to FactSet. This is approximately $400 million below the low end of the guidance management issued during the October quarter. Shares fell more than 7% on Tuesday as a result. Jim said that members should use the downturn to buy shares of a quality company at a better price. “2024 is already in the history books,” Jim said. “Never mind the stock – I think you should be on the horse that is Eli Lilly.” The shortage stems from its popular weight loss treatment Zepbound and type 2 diabetes drug Mounjaro, adding to the disappointment. Lilly said fourth-quarter sales of Zepbound and Mounjaro are expected to be $1.9 billion and $3.5 billion, respectively, missing estimates of $2.1 billion and $4.4 billion, according to FactSet. Earlier guidance assumed faster growth than was realized in the three months ended December 31. Zepbound and Mounjaro, which share an active ingredient called tirzepatide, are part of the burgeoning class of GLP-1 drugs. The drugs mimic the natural GLP-1 hormone to help regulate blood sugar and suppress appetite, leading to weight loss. Eli Lilly and Danish rival Novo Nordisk, which makes Wegovy for weight loss and Ozempic for diabetes, currently dominate the GLP-1 space. Some on Wall Street see the GLP-1 market worth at least $100 billion a year by the end of the decade. Jim has long said that tirzepatide could become the best-selling drug of all time. “Let the uninformed people sell” Eli Lilly stock on Tuesday’s news, Jim said. “Look at the size of the market — we’re at the beginning of it, and the beginning of it is already much bigger than any drug I’ve ever seen.” LLY YTD Mount Eli Lilly’s (LLY) Year-to-Day Performance We last added to our Eli Lilly position in late November, a few weeks after we upgraded the stock to our buy-equal rating of 1 on the back of softer than – expected earnings of the third quarter. In September, we did a small sell of Eli Lilly out of discipline, booking a roughly 300% gain on the trade. The club is currently restricted from trading Eli Lilly because Jim has mentioned the stock on CNBC within the last 72 hours. But for members, it’s worth buying more shares because nothing in Tuesday’s update suggests that the long-term upside potential for GLP-1 drugs has diminished. In fact, Eli Lilly said Tuesday that it expects sales in the range of $58 billion to $61 billion in fiscal 2025. The $59.5 billion midpoint beat analysts’ expectations of $58.4 billion. The company will provide full guidance for 2025 on February 6 along with its full fourth quarter results. Eli Lilly’s update on Tuesday coincided with the influential JPMorgan Healthcare Conference in San Francisco. It’s common for companies to make changes to their guidelines and announce deals during the event. After Tuesday’s close, Lilly CEO David Ricks will participate in a “fireside chat” at the conference. In an interview on CNBC Tuesday morning, Ricks told Jim that “the fundamentals of the GLP-1 market are incredible.” He added, “The total GLP-1 market last year grew 45%. We grew 60%, and we increased share in the fourth quarter.” Eli Lilly gave another reason to be optimistic about the company’s long-term health earlier this week. CEO Ricks told Bloomberg on Monday that he expects the weight-loss pill, or forglipron, to be approved in early 2026. Zepbound and Mounjaro are once-weekly injections. Investors see a lot of potential in obesity pills because of their convenience, both for patients taking the medicine and on the manufacturing side. Bottlenecks involving the auto-injector pens used to administer Zepbound and Mounjaro in the US played a major role in the supply shortage for those drugs. Eli Lilly has invested billions of dollars to alleviate these shortages, and the company noted on Tuesday that all doses of Zepbound and Mounjaro were available in the fourth quarter. In a note to clients on Tuesday, analysts at Leerink Partners reiterated their equal-buy rating on Eli Lilly shares, saying the potential for encouraging trial results on orforglipron later this year should help support the stock. (Jim Cramer’s Charitable Trust is long LLY. See here for a full list of stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you’ll receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a share in his charitable trust portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after the trade alert is issued before executing the trade. THE ABOVE INVESTMENT CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY ALONG WITH OUR STATEMENT. NO OBLIGATION OR FIDUCIARY DUTIES EXIST, OR ARE CREATED BY VIRTUE OF YOUR RECEIVING ANY INFORMATION DIRECTED IN CONNECTION WITH THE INVESTOR CLUB. NO SPECIFIC RESULTS OR PROFITS ARE GUARANTEED.
Beata Zawrzel | Nurfoto | Getty Images
