Why Eli Lilly Stock Is Falling Today

Shares of Eli Lilly (LLY -6.44%) fell 6.3% as of 11:11 a.m. ET on Wednesday. The sharp decline came after the major drugmaker reported its third-quarter results before markets opened.

Lilly reported third-quarter revenue of $11.4 billion, up 20% from a year ago. However, the consensus forecast among the analysts surveyed is: LSEG Sales amounted to $12.1 billion.

The company reported net income of $970.3 million, or $1.07 per share, based on generally accepted accounting principles (GAAP). Non-GAAP earnings per share (EPS) were $1.18, well below analysts' average EPS estimate of $1.47.

Perhaps most concerning for investors, Lilly cut its full-year EPS forecast. The company now expects non-GAAP EPS of $13.02 to $13.52. It previously forecast full-year non-GAAP EPS of $16.10 to $16.60.

What's behind Lilly's disappointing Q3 update?

Type 2 diabetes drug Mounjaro and weight-loss drug Zepbound remained the brightest stars on Lilly's roster. Mounjaro's revenue more than doubled year-over-year to $3.1 billion. Sales of Zepbound, which received U.S. regulatory approval in November 2023, totaled $1.26 billion.

However, analysts expected stronger performance for both products. Lilly said U.S. sales of Mounjaro and Zepbound were “negatively impacted by inventory declines in the wholesale channel.”

Lilly's full-year guidance cut was primarily due to its acquisition of Morphic Holdings. The company said the transaction impacted acquired ongoing research and development costs of $3.09 billion, or $3.33 per share.

Should you buy Lilly shares on a decline?

Lilly continues to have great opportunities in type 2 diabetes and obesity. Its Alzheimer's disease treatment drug, Kisunla, is expected to become a blockbuster drug over time. The company also has a promising pipeline.

Should investors consider buying Lilly shares on a decline? I think so. Despite the company's disappointing Q3 update, the bull market for Lilly remains intact.