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Eli Lilly's extensive evaluation means there is little room for error. Shares have more than tripled since the start of 2022, making the company the most valuable drugmaker in the world. Thanks to enthusiasm for its weight-loss drugs, the company had a market cap of over $860 billion at its peak last month. Its price-to-forward earnings multiple of over 50 also gives the company a significant premium over other pharmaceutical companies. Pfizer only trades 11 times.

Given the high expectations, it didn't take much bad news for Eli Lilly's rapid run to go into reverse.

That appears to have happened on Wednesday. The stock fell as much as 11 percent in premarket trading after Eli Lilly reported quarterly sales for its key GLP-1 drugs – Mounjaro and Zepbound – that fell short of analysts' estimates. After Eli Lilly raised its forecast twice this year, the company now expects full-year sales to be $46 billion, compared to its previous forecast of $46.6 billion.

The shares recovered slightly and were trading 9 percent lower. Still, the sale looks exaggerated. The latest results are not a sure-fire success. Sales of Mounjaro, a diabetes drug that some doctors prescribe off-label as a weight-loss aid, were $3.11 billion in the quarter. While that missed analyst expectations of $3.6 billion, it is still more than double the $1.4 billion the drug brought in in the same period last year. Zepbound, a weight-loss drug approved just last year, posted sales of $1.26 billion, below the $1.69 billion forecast.

The outages are largely due to inventory issues rather than weaker demand. Until recently, Eli Lilly had difficulty producing enough Mounjaro and Zepbound to meet demand. By expanding production capacity, the company was finally able to fulfill backorders and improve supplies to wholesalers in the second quarter. In the third quarter, wholesalers opted to sell existing inventory rather than buy more.

There is a good reason for this. Both Mounjaro and Zepbound are available in six different dosages. Managing inventory efficiently means wholesalers must wait to see which dosages are more popular before restocking. A better indicator of demand would be the number of prescriptions for the medication. These rose by 25 percent compared to the previous quarter.

With more than 40 percent of U.S. adults considered obese, demand for weight loss medications will remain robust. According to one estimate, the market for GLP-1 drugs could be worth up to $150 billion by 2031. The long-term prospects for Eli Lilly's obesity business remain intact – especially if the drugs end up offering other health benefits.

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