What happened? Eli Lilly's first-quarter revenue exceeded expectations, soaring by 45%, and the stock price plunged over 10% during the trading session

Driven by the explosive growth in demand for weight loss drugs, Eli Lilly delivered impressive first-quarter results, but its stock price plummeted after the earnings report was released, reflecting investors' concerns about increased competition for Eli Lilly's star weight loss drug.

On Thursday, May 1st, Eastern Time, Eli Lilly's stock opened lower and continued to decline, hitting a daily low during the midday session, with an intraday drop of nearly 11.9%. This not only meant a fall from the closing high reached on Wednesday, the highest since March, but also indicated a complete reversal of all gains made over the past two weeks, dropping to its lowest level since April 16th.

First-quarter weight loss drug Zepbound sales tripled; full-year EPS guidance lowered

On Thursday before the U.S. stock market opened, Eli Lilly announced that its revenue for the first quarter of this year increased by 45% year-on-year to $12.73 billion, with a non-GAAP adjusted earnings per share (EPS) of $3.34, a year-on-year increase of 29%, both exceeding analysts' expectations of $12.67 billion and $3.02.

The financial report showed that Eli Lilly's weight loss drug business continued to grow rapidly in the first quarter. The diabetes drug Mounjaro generated sales of $3.84 billion in the first quarter, a staggering increase of 113% year-on-year; the weight loss drug Zepbound had sales of $2.31 billion, more than tripling from $517 million in the same period last year, reflecting Eli Lilly's strong performance in the popular GLP-1 receptor agonist market, where it currently holds a 53.3% share of the U.S. incretin class of drugs.

At the same time, Eli Lilly adjusted its adjusted EPS guidance for the fiscal year 2025, lowering it from the previous range of $22.50 to $24 to $20.78 to $22.28, with the lower end down more than 7.6% and the upper end down nearly 7.2%. Eli Lilly stated that this adjustment reflects the $1.57 billion transaction costs recorded in the first quarter, primarily stemming from the announcement of a $2.5 billion acquisition of the oral cancer drug—PI3Kα inhibitor project STX-478 from Scorpion Therapeutics.

CVX lists Novo Nordisk's Wegovy as the preferred choice, threatening Eli Lilly's Zepbound sales

Also on Thursday before the U.S. stock market opened, Eli Lilly's competitor Novo Nordisk announced an agreement with CVS Health, a leading prescription drug retail and pharmacy benefit management (PBM) company in the U.S. Starting July 1, Wegovy, Novo Nordisk's blockbuster weight loss drug, will be listed as the preferred GLP-1 weight loss drug product in CVS's PBM's main prescription drug formulary. Eli Lilly's Zepbound will not be included in the preferred list CVS stated that this decision means that patients using the CVS prescription drug plan will find it easier to obtain Wegovy at "more affordable prices."

Eli Lilly's CEO David Ricks expressed dissatisfaction with CVS's move during a media interview, calling it "a step backward." He emphasized that CVS is promoting it as expanding drug accessibility, but in reality, it is excluding Zepbound from the existing CVS high-control prescription list, which actually limits accessibility."

Ricks also specifically pointed out that Zepbound has surpassed Wegovy in head-to-head trials: "Wegovy is not equivalent to Zepbound. Zepbound outperforms Wegovy in almost every aspect—it is more effective, better tolerated, and more popular."

The media believes that this incident marks a counterattack initiated by Novo Nordisk in the weight loss drug market. Novo Nordisk also announced this week that it is collaborating with several telemedicine service providers, allowing them to offer significant discounts compared to official pricing to sell Wegovy to cash-paying patients, which is clearly a targeted response to Eli Lilly's existing strategy.

Eli Lilly may also face the impact of Trump's drug tariffs

Another factor of concern in the market is the potential drug tariffs that the Trump administration may implement.

When announcing its earnings report this Thursday, Eli Lilly stated that it maintains its revenue guidance for fiscal year 2025 at $58 billion to $61 billion, noting that this guidance only reflects the existing U.S. government tariff impacts as of May 1 and does not include tariffs that Trump plans to impose on drugs imported to the U.S.

In contrast to Pfizer CEO Albert Bourla's "cautious optimism" regarding tariff issues, Ricks appeared more cautious. He said, "Albert's optimistic attitude seems a bit premature. Maybe he knows something I don't."

Despite these challenges, analysts remain generally optimistic about Eli Lilly's long-term prospects. Goldman Sachs analyst Asad Haider stated last month to the media: "Eli Lilly has solid barriers to manufacturing, has rebate walls for protection, and possesses first-mover advantages and early action advantages in the market... When we model and analyze, it is difficult to conclude that competitors can surpass them."

Although Eli Lilly's product advantages are evident, CVS's decision indicates that competition is intensifying in the weight loss drug market, which could reach a scale of hundreds of billions of dollars, and price negotiations and insurance coverage will become key factors influencing the market landscape. Investors need to closely monitor how Eli Lilly responds to this market challenge and how the potential drug tariff policies from the Trump administration may affect industry supply chains and production base choices.

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