Eli Lilly & Co. (NYSE: LLY) shares experienced a sharp downturn in morning trading, with the stock plunging nearly 3% as investors digested a series of developments that have cast uncertainty over the pharmaceutical giant’s near-term outlook.
The drop follows a turbulent week for the company, marked by mixed first-quarter earnings, lowered profit guidance, and a strategic blow in the competitive weight-loss drug market.
Mixed Earnings and Lowered Profit Guidance Shake Investor Confidence
Eli Lilly reported robust first-quarter revenue, climbing 45% year-over-year to $12.7 billion, powered by surging demand for its GLP-1-based blockbuster drugs, Mounjaro and Zepbound.
These two products alone contributed $6.1 billion in sales, underscoring Lilly’s dominant position in the fast-growing obesity and diabetes treatment markets. However, despite beating consensus revenue and adjusted earnings per share estimates, the company’s profit margins slipped and its earnings per share (EPS) missed analyst expectations by a significant margin.
The pharmaceutical leader revised its full-year profit forecasts downward, citing net losses on investments and substantial research and development charges.
Adjusted EPS projections were cut to a range of $20.78 to $22.28, down from previous guidance of $22.50 to $24.00. This move rattled investors, who had anticipated stronger profitability given the company’s high-profile product launches and recent market momentum.
CVS Formulary Decision Adds to Downward Pressure
Compounding the earnings disappointment, Eli Lilly suffered a strategic setback when CVS Health announced it would remove Zepbound from its preferred formulary, favoring rival Novo Nordisk’s Wegovy.
This decision, effective July 1, triggered concerns about Lilly’s ability to maintain its market share and pricing power in the lucrative obesity drug segment. The announcement sparked fears of an impending price war and intensified competition, even as Zepbound had recently surpassed Wegovy in U.S. prescription share.
Market reaction was swift and severe. Shares tumbled as much as 12% at one point, marking the steepest one-day drop for Eli Lilly since 2008.
The stock, which had been up more than 16% year-to-date, has now erased much of those gains, reflecting the volatility that can arise even for blue-chip pharmaceutical leaders amid shifting industry dynamics.