Pharmapalooza: Earnings Highlight Highs and Lows of Cutthroat Sector

Sales of Eli Lilly’s game-changing weight-loss drug Zepbound soared, but that didn’t whet many appetites on Wall Street. Pfizer beat the Street’s expectations and saw revenue shoot up over 30% in the third quarter, but its shares were stuck in neutral as activists hungered for more.

It’s just another earnings week in the life of pharmaceutical CEOs, with blockbuster expectations running up against cruel reality.

Hard Times and Great Expectations

Among the pharma companies to report earnings Wednesday was Biogen, which beat third-quarter revenue and profit estimates, only to see its share price slide a yawn-worthy 1%. US sales of the company’s Alzheimer’s treatment Leqembi rose 33% over the previous quarter to $39 million, but were well below the consensus estimate of $55 million, Mizuho Financial analysts said. That, combined with a 9% decline in revenue from multiple sclerosis treatments to $1 billion, put the brakes on any hope of shares popping.

Eli Lilly and Pfizer had to contend with their own market malaise:

• Sales of Eli Lilly’s Zepbound, which launched last November, reached $1.2 billion in the third quarter, but that fell short of FactSet’s consensus expectations of $1.7 billion. Diabetes drug Mounjaro’s sales more than doubled to $3.1 billion from $1.4 billion a year ago, but it also missed lofty expectations of $3.8 billion. Eli Lilly’s shares dipped 6% Wednesday as it failed to meet the high bar.
• Pfizer, which reported Tuesday, said third-quarter earnings climbed 31% to $17.7 billion. But an acquisition spree in the wake of the company’s COVID-19 windfall and a 50% decline in share price since its pandemic high point has given activist investor Starboard, which revealed a $1 billion stake earlier this month, room to rile up investors about bigger returns.

CEO Albert Bourla said conversations with Starboard, which has all but called for his ouster amid its stinging criticisms, have been “constructive and cordial.”

Bopped by a Flop: The swings and roundabouts of pharma can be even crueler to small firms. After an antibiotic candidate flopped at trial, Spero Therapeutics disclosed in an SEC filing this week that it will lay off about 39% of its staff to extend its cash runway. As of December 2023, the company had 46 employees, with around two-thirds working on research and development.