There is demand, but there are also constraints. Eli Lilly investors got a reality check on Thursday as the stock plunged more than 6%. There are high expectations from the company’s recently launched Monjaro. Right now, the drug is approved to treat type 2 diabetes, but many expect sales to really pick up once it’s approved to treat obesity and overweight, which could happen later this year. . But investors are now getting worried because insurance companies have been slow to come on board. Lilly said more than 50% of commercial and Part D customers have access to the drug through their insurance plans. That’s up only slightly from 45% in the third quarter. “We would expect some more upside,” SVB Securities analyst David Risinger said in a research note on Thursday. The trend contributed to disappointing fourth-quarter sales of the drug. According to a Refinitiv poll, Mounjaro had sales of $279.2 million, falling short of the $319.3 million analysts expected. The slow adoption is concerning when one considers that it was expected to be an easy fight. LLY 1D Mountain LLY Falls in question around Monjaro There has long been a stigma surrounding weight-loss drugs, as many consider their use to be driven more by vanity than by medical necessity. But new categories of weight loss drugs are helping to change this mindset. This is partly due to these drugs being more effective and shedding light on the mechanisms in the body that help patients lose weight. Still, the law would require Munjaro to receive coverage for obesity and overweight treatment by Medicare plans. By law, these plans are prohibited from paying for weight loss drugs. Manufacturing issues are also hurting sales and Lilly is investing in capacity expansion, the company said. In an interview with CNBC on Thursday, CEO David Ricks said Lilly should start this year with 50% more capacity. Additional capacity will come online in 2024 and 2025, he said. Raised expectations that increased bandwidth will be needed when a drug is approved to treat obesity. That’s already evident as patients, hopeful of Munjaro’s potential for weight loss treatment, were snagging prescriptions for the drug from their doctors and using the company’s patient access program to seek treatment. In the fourth quarter, Lilly cracked down on this “non-indicated use,” Ricks said. The company went through a process of verifying that patients accessing the program had a diagnosis of type 2 diabetes. “Our commitment is really to the patients who need the drug, who have it now and can get insurance coverage and who have already started the drug,” he told CNBC. These prescriptions may have also outpaced analysts’ expectations for sales of the drug this quarter. In the long run, however, Lilly hopes these motivated consumers will help it win over insurance companies. The management also mentioned this in its conference call on Thursday. “I have seen the power of consumer interest in helping to improve access to medicine, and what we have seen over the past year is that people with obesity are highly engaged and willing to do much to access effective treatments. ” Michael Mason, an executive vice president of Lilly. “They will have an important voice with employers and their insurers for access. … I’m more encouraged than ever by our ability to unlock the obesity market and help so many people.” Wegovy and Mounjaro One encouraging sign: Lilly competitor Novo Nordisk has gained access to Wegovy, the insurance company’s formulary, for more than 80% of its obesity treatments. Wegovy is similar to Mounjaro in that both treatments are based on an incretin hormone called glucagon-like peptide-1 or GLP-1. Monjaro, or tirgepatide, also contains a second incretin, glucose-dependent insulinotropic polypeptide, or GIP. While Vagovi is the first to market, Lilly’s entry may have an edge when the drugs face off, as clinical trials have shown Munjaro to achieve higher rates of weight loss. Novo’s fourth-quarter earnings this week showed a big gain in sales of GLP-1. It was across its entire portfolio, which also includes type 2 diabetes treatments, Rybelsus and Victoza. And no doubt these results were also affected by Novo’s own supply issues. “GLP-1 products increased by 42% [coupon equivalent rate]with Vigovi (+18% beat), Rybelsus (+8% beat) and Victoza (+3% beat) in 2022,” Geoff Meacham, an analyst with Bank of America, wrote in a research note. “Novo ended 4Q done. with a 55% share of the GLP-1 market (up from 56% in 3Q22); We attribute this to Munjaro’s continuous expansion in the T2D space. That said, we expect both companies to continue to see volume growth as use of the GLP-1 class expands into earlier treatment lines, with the GLP-1 class offering better HbA1c and weight loss than other classes. “The HbA1c, or hemoglobin A1C test, is a blood test commonly used by patients with prediabetes and diabetes to monitor blood sugar levels over the past 3 months. The discussion about these drugs caused both Novo and Lilly to The shares have had strong runs over the past year. Even with Thursday’s sell-off, shares of Lilly are up nearly 32% over the past year, while Novo’s shares are up 23%. In an interview, Meacham said he expects some of the stock’s weakness can be attributed to some of the sector rotation going on in the market. Large-cap pharmaceutical stocks were particularly strong last year, and tech stocks have been driven by strong earnings this week. is back. He expects Munjaro revenue to rise in the coming quarters in the form of coupon utilization The picture will improve. Depreciation comes and more insurance companies add coverage. Meacham said monjaro has many other benefits for patients with diabetes, such as decreased lipid levels, improved blood pressure and weight loss, and its price is not in line with comparable treatments. — CNBC’s Michael Bloom contributed reporting.