Eli Lilly on Wednesday fell short of profit and revenue expectations for the third quarter, weighed down by disappointing sales of its blockbuster weight loss drug Zepbound and diabetes treatment Mounjaro, and slashed its full-year adjusted profit guidance.

The company’s stock tumbled more than 8% on Wednesday.

Eli Lilly now expects full-year adjusted earnings of between $13.02 and $13.52 per share, down from previous guidance of $16.10 to $16.60 per share. The drugmaker cited a $2.8 billion charge recorded during the third quarter and related to its acquisition of bowel disease drugmaker Morphic Holding as denting its results.

Eli Lilly also lowered the high end of its revenue outlook for the year and now expects sales of between $45.4 billion and $46 billion. The company’s previous guidance called for revenue of as much as $46.6 billion.

Here’s what Eli Lilly reported for the period ended Sept. 30 compared with what Wall Street was expecting, based on a survey of analysts by LSEG: 

• Earnings per share: $1.18 adjusted vs. $1.47 expected
• Revenue: $11.44 billion vs. $12.11 billion expected

The September period was Zepbound’s third full quarter on the U.S. market after winning approval from regulators nearly a year ago. The weekly injection raked in $1.26 billion in sales for the period, below the $1.76 billion that analysts expected, according to StreetAccount.

Meanwhile, Mounjaro posted $3.11 billion in revenue for the third quarter, more than double what it booked in the same period a year ago. But analysts expected $3.77 billion in sales for the diabetes treatment, according to StreetAccount.

In an interview with CNBC, Eli Lilly CEO David Ricks said the third-quarter performance of Zepbound and Mounjaro “is not a function of supply.” The company said third-quarter sales of the drugs were negatively impacted by inventory decreases among wholesalers.

Supply increases allowed Eli Lilly to fulfill back orders for wholesalers in the second quarter, which led to increased inventory of Zepbound and Mounjaro during the period. Those wholesalers tapped into some of that existing stock in the third quarter instead of buying more from the company, which dampened revenue from both treatments. 

“We did have a lot of inventory going into the quarter. We had a lot less going out in the channel,” Ricks said. He also said underlying demand for Mounjaro and Zepbound remains strong.

Demand in the U.S. has far outpaced supply for Lilly’s incretin drugs, such as Zepbound and Mounjaro, over the last year. Both treatments mimic certain gut hormones to tamp down a person’s appetite and regulate their blood sugar.

The popularity of those injectable drugs has forced both Eli Lilly and Novo Nordisk to invest billions to increase manufacturing capacity for the treatments.

Eli Lilly’s supply woes began to ease earlier this year. As of Wednesday, the Food and Drug Administration’s drug database said all doses of Zepbound and Mounjaro are available in the U.S. after extended shortages. Still, the agency warns that patients may not always be able to immediately fill their prescription for those drugs at a particular pharmacy.

Ricks said the company pushed back plans to advertise and promote Zepbound due to customer service levels. He sad the drugmaker will begin those efforts, which are expected to help drive demand, in November.

“When people go and they can’t get their medicine, they’re very frustrated. They tell us that. So we didn’t want to send more people to do that necessarily,” Ricks said.

Eli Lilly has said it expects incretin drug production in the second half of 2024 to be 50% higher than it was during the same period last year. And Ricks said Wednesday the company expects “even greater” expansions in manufacturing capacity at the end of the year and 2025.

For the third quarter, Ely Lilly recorded net income of $970.3 million, or $1.07 per share, compared with a net loss of $57.4 million, or 6 cents per share, during the third quarter of 2023.

Excluding one-time items associated with the value of intangible assets and other adjustments, Eli Lilly posted earnings of $1.18 per share for the most recent quarter.

Revenue was up 20% year over year to $11.44 billion.

The FDA’s decision to remove tirzepatide, the active ingredient in Zepbound and Mounjaro, from its shortage list has drawn fierce opposition from compounding pharmacies that make customized and sometimes cheaper alternatives to Eli Lilly’s branded drugs. Compounding pharmacies are calling for the FDA to reconsider its decision, as both Eli Lilly and Novo Nordisk attempt to crack down on unapproved versions of their top-selling drugs.

Ricks told CNBC the company agrees with the FDA that Zepbound and Mounjaro are no longer in shortage, adding, “We have stock.” He said that compounded versions of Eli Lilly’s branded drugs are not regulated by the FDA, raising questions about their safety and efficacy. 

Eli Lilly will spend $4.5 billion to build a center aimed at finding better ways to manufacture its medicines. 

The facility, called the Lilly Medicine Foundry, will house development of new manufacturing methods with an eye toward efficiency. It’s a strategy that’s already paying off with Lilly’s obesity and weight loss drugs Mounjaro and Zepbound, and Lilly wants it to propel the rest of its pipeline.

The foundry serves a dual purpose: researching new manufacturing procedures, then putting them into practice with production of drugs for clinical trials. Lilly says the facility will be the first of its kind to combine research and production in a single location. 

“The idea is to take molecules from a bench in a lab to scaled for medicines in a pharmacy, and this research and development site will do that work,” Eli Lilly Chief Executive Officer David Ricks said in an interview from the company’s headquarters in Indianapolis. 

The center, which is slated to open in late 2027, will be equipped to make small molecules, biologics and genetic medicines. It will be near a $9 billion manufacturing complex Lilly is building in Lebanon, Indiana, to produce pharmaceutical ingredients like tirzepatide, the active ingredient in Mounjaro and Zepbound.

The cranes and steel frames of the active construction site stick out amid the flat farmland, about a 40-minute drive from Lilly’s Indianapolis headquarters. 

The investments are part of Lilly’s plan to build upon its success with Mounjaro and Zepbound, which are riding a wave of popularity in so-called GLP-1 drugs with Novo Nordisk’s Ozempic and Wegovy.

Mounjaro and Zepbound are expected to bring in $50 billion alone by 2028 – almost twice the company’s entire full-year revenue in 2022. That gives Lilly more freedom to invest, but it also puts pressure on the company to find and develop more new medicines to keep growing in the years to come. 

Lilly is already charting its future beyond tirzepatide. The company also wants to develop more drugs for Alzheimer’s disease and other neurodegenerative conditions like amyotrophic lateral sclerosis, or ALS.

“There are all of these huge opportunities to improve human health that are hiding in plain sight,” said Dr. Dan Skovronsky, Lilly’s chief scientific officer. “In our industry, people usually like to see what’s popular and then follow the leader. So a lot of the other companies are now stopping their different research projects so they can try and figure out how to catch up to us in obesity and Alzheimer’s disease. OK, we’re working on the next thing. Sorry.” 

Lilly wants to look for “breakthrough ideas” in areas where the company already has a foothold such as oncology and immunology, as well as newer areas like cardiovascular disease, chronic pain and hearing loss, Skovronsky said.

Neuroscience is one area where he and Ricks want to put particular focus. Lilly has a long history in the space between its antidepressant Prozac and its newly approved Alzheimer’s drug Kisunla, but they see more work to do. 

“Neuropsych is a huge unmet need,” Ricks said. “Addiction and mental health, but also neurodegenerative conditions, so we’re investing heavily there. And perhaps the gains we’ve made in obesity can help fund the research in new areas.”

That’s not to say Lilly is done with obesity.

Ricks acknowledged that one drug won’t meet all needs and that Lilly needs to keep moving the science forward. The company has 11 obesity drugs in its pipeline with different mechanisms of action and modes of delivery, he said. That includes two closely watched drugs in Phase 3 trials: an experimental pill called orforglipron and another injectable medicine called retatrutide. 

Lilly is investing everywhere it thinks makes sense in obesity, Ricks said, but he recognizes other companies might explore new mechanisms that it’s possible Lilly hasn’t. He wants to see more pills, especially ones that can go after multiple targets. He’s also interested in technologies that mean giving injections less frequently, such as short interfering RNA. 

Any new advances could help Lilly become the first trillion-dollar health-care company. The company’s stock has soared nearly 65% over the past year, giving Lilly a market capitalization of about $840 billion.

Ricks downplays the importance of hitting the trillion-dollar mark, saying it would be an outcome, not a goal, for Lilly. 

“We want to do valuable things, and if we’re successful, we create value,” Ricks said. “That’s how we’ll get to a bigger number.”