Eli Lilly (LLY) CEO David Ricks expressed optimism on the drugmaker’s innovation pipeline on Tuesday, a stance we share despite Club Holding’s cluttered earnings report released earlier in the day. “The underlying fundamentals of the business are really strong,” Ricks said in a CNBC interview with Jim Cramer. “Seventy percent of our sales are relatively new products, and they grew 24% currency-neutral in the third quarter, so a really strong operational performance for the quarter.” Overall, the Indianapolis-based pharmaceutical giant’s third-quarter sales and earnings exceeded expectations analysts. However, investors were disappointed by the company’s lower full-year sales and earnings outlook, which sent the stock down 2.6% to close at $352.58. While the stock closed well above its session low of $340.75, we understood its drop on Tuesday. That’s especially true considering the stock closed at an all-time high Monday after posting a major outperformance throughout the year. Lilly’s shares are up more than 27.5% year to date, compared to the S&P 500’s 19% decline in 2022. Eli Lilly — which derives about 40% of its sales overseas — largely led the guidance cut back to the strong US dollar. Ricks said Eli Lilly expects around $300 million in revenue headwinds based on current exchange rates, with “most of that going into bottom line in the fourth quarter.” With three quarters already reported, Eli Lilly now expects full year revenue to be between $28.5 billion and $29 billion and adjusted earnings per share to be between $7.70 and $7.85. Previous guidance had called for revenue of between $28.8 billion and $29.3 billion and earnings per share of $7.90 to $8.05. Great Start for New Diabetes Drug One of the top reasons we like Eli Lilly is the company’s new type 2 diabetes drug, which has also shown promise as a treatment for obesity. While regulatory approval specifically for weight loss could come in late 2023 or early 2024, the drug is already being prescribed for diabetes. And so far the start is going better than expected. Third-quarter sales of $187 million not only beat Street’s expectations, but Ricks told CNBC on Tuesday that the drug — under the brand name Mounjaro — will be available alongside Trulicity, another type 2 diabetes drug of the company, well exists in the market. Mounjaro received FDA approval in May, while Trulicity was approved in 2014. The drugs fall into the same class of drugs, but Mounjaro has some additional innovations centered around incretin hormones. “We probably expected a little more cannibalization than we saw,” Ricks said, referring to the idea that Mounjaro’s debut on the market would hurt Trulicity’s sales. “Trulicity has held up pretty well. Most of Mounjaro’s growth is new patients coming into this class from drugs that haven’t worked well for them with diabetes. So that’s great news – class growth for us as we look ahead with the prospects. Lilly’s Alzheimer’s Trial Update In late September, we were encouraged by positive trial results for an experimental, late-stage Alzheimer’s treatment being developed jointly by Japanese pharmaceutical company Eisai and Lilly’s US competitor Biogen (BIIB). Why? The drug is similar to that , which Eli Lilly is working on to treat the most common form of dementia. Both drugs try to reduce the buildup of amyloid beta protein in the brain. The results of the latest Eisai-Biogen study are indeed “great news for the field,” Ricks said, “because the field needs confidence that tackling amyloid plaques can reduce the burden of Alzheimer’s.” “Our study is fully enrolled,” Ricks added, while noting that the FDA has approved to review Lilly’s Alzheimer’s drug, called donanemab, through its accelerated approval path d we hope to have definitive proof by the middle of next year that this is helping patients.” (Jim Cramer’s Charitable Trust is Long LLY. For a full list of stocks click here.) As a subscriber to CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling any stock in his charitable foundation’s portfolio. When Jim spoke about a stock on CNBC television, he waits 72 hours after the trade alert is issued before executing the trade. THE ABOVE INVESTMENT CLUB INFORMATION IS GOVERNED BY OUR TERMS AND CONDITIONS AND PRIVACY POLICY ALONG WITH OUR DISCLAIMER. NO OBLIGATION OR OBLIGATION SHALL BE OR CREATED BY YOUR RECEIVING OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC RESULT OR PROFIT IS GUARANTEED.
David Ricks, CEO, Eli Lilly
Scott Mill | CNBC