Lilly CFO Warns Obesity Drug Demand Might Outstrip Supply

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by Tyler Durden
Wednesday, Mar 06, 2024 - 11:00 PM

US pharmaceutical company Eli Lilly & Co. is racing to expand the manufacturing capacity of its lucrative new class of diabetes and weight-loss drug Zepbound. This comes as rival Novo Nordisk's blockbuster appetite suppressant Wegovy drug is being rolled out across the West to capitalize on the obesity crisis. 

In November, Zepbound, featuring the active ingredient tirzepatide, also used in diabetes drug Mounjaro, was approved for weight-loss use in the US in Novemeber, making it the first drug to compete against Wegovy.

Since the rollout, the Indianapolis-based company has signed multiple deals with US government-backed manufacturer National Resilience and Italian producer BSP to expand manufacturing capacity, according to the Financial Times

"There was a lot of investment in high-speed, large-capacity fill lines during Covid and there were questions about how that capacity is going to be used going forward, and then the GLP-1s came along and now the problem is almost the opposite," said Jim Miller, a consultant who advises drugmakers on manufacturing strategy.

Even as Zepbound production is set to increase and sales are projected to be in the billions of dollars this year, according to projections by research group GlobalData, there is growing concern that demand won't be met. 

On Wednesday, Lilly CFO Anat Ashkenazi warned investors at the TD Cowen annual healthcare conference that it might be unable to keep up with demand through 2025. 

Ashkenazi said that Lilly is undertaking the most ambitious expansion agenda in its history but that production capacity will be strained for some time. 

Last month, Nordisk CEO Lars Fruergaard Jørgensen warned: "There'll be a demand that outgrows what can be produced by us, and probably also competition."

Lilly's and Novo's shares have surged several hundred percent since 2021. 

The shift in investor euphoria around GLP-1s began around the first half of 2023. This was noticeable in the Goldman Sachs Global HLC GLP Risk Index versus Goldman's GLP-1 Obesity drug basket to capitalize on slimming down Americans. 

Besides slimming down the West, investors piled into big tech, artificial intelligence, and crypto. 

Instead of overweight Americans rushing to weight loss drugs, why not change diets and go outside and exercise? Or better yet, demand change from the food-industrial complex that continues pushing unhealthy crap on consumers