Eli Lilly and Company (LLY) Earnings Call Transcript & Summary

All right. Good morning. I'm Carter Gould, senior biopharma analyst here at Barclays. I'm delighted to welcome Eli Lilly to the Barclays Virtual Global Health Care Conference. Today represents a great opportunity to go a bit deeper on the Lilly Diabetes franchise as I'm joined today by Dr. Jeff Emmick, VP of Diabetes Product Development; and Ilya Yuffa, VP of U.S. Diabetes on the commercial side. We've also got Mike Czapar from the Lilly IR squad on the phone. I -- before we get started, I want to, first of all, thank Lilly and all the investors, for everyone's patience surrounding logistics overall here, and we're set up for good conversation.

Maybe to set the stage, guys. We're going to get to all the relevant individual products and some of the later-stage pipeline opportunities. But just from a broader perspective, when Eli Lilly sort of sits down and thinks about the Diabetes franchise going over the next decade-plus, can you maybe talk a bit about the sort of the broader themes that are going to dictate the shape of how that landscape plays out and how that informs some of your development and commercialization choices?

Sure. Well, good morning, Carter, and I appreciate the flexibility as well. As we think about diabetes, it's an exciting time. I think we've seen significant progress in innovation over the last number of years, which has been a pretty remarkable benefit for patients living with diabetes. If I think about the broader themes, I'd probably put them into 2 different categories. One broad theme that we're seeing as we talk to physicians and we see the treatment, we see the expectations change from going beyond just glycemic or A1c control to A1c plus additional benefits. And some of the insights we're seeing there is that the glycemic control is still the most important aspect when deciding treatment for type 2, but we do see cardiovascular benefit and other benefits like weight increasing in importance. And so we've seen this already play out with both SGLT2 and GLP-1 classes driving considerable growth. You have SGLT2 growing at over 20% now, and GLP-1 is growing at close to 30%. And so they are starting to be utilized early in the treatment paradigm. You've also seen treatment guidelines change very quickly in the last number of years with growing evidence of benefits beyond the glycemic control. I think Jardiance with EMPA-REG and Trulicity with REWIND probably provided some significant milestones in shaping some of the guidelines and utilizations, and obviously, they are positioned very well in those spaces. That space will continue to evolve. So with the introduction of next-generation incretin, so from a future standpoint, we do believe incretins like tirzepatide, there's an opportunity that would step change in how you look at both glycemic control as well as the additional benefits like weight. And so we do believe that in the future incretins will have even greater impact and be incorporated earlier in the treatment paradigm. So that's one theme in growing, I would say, utilization of classes like SGLT2 and the overall incretin space. The second theme I'd probably look at from a commercial perspective is on the insulin space. And I do believe that with greater data and CGMs being used in broader diabetes patients, there's an increased need to get better control through the convergence of technology and treatment. And so going forward, we do believe that there'll be increasing role of technology, the medication and data to make more informed treatment decisions. All in all, between our very strong position in incretins with Trulicity and tirzepatide, the additional indications for Jardiance, investments in connected care and insulin space, we believe we're well positioned in this changing and evolving landscape. And maybe I'll turn it over to Jeff to talk through what those implications are from a development standpoint.

Sure. Thanks, Ilya. And just briefly, thanks, Carter and Barclays for this great opportunity. Coming at this from someone who's now spent 22 years in the industry and research and development of pharmaceuticals at Lilly, it's such an exciting time to work in diabetes research and development. If I look over the past 10 years, we've experienced such great advances in terms of the options available to treat patients with diabetes, particularly type 2 diabetes. And as Ilya alluded to, now having 2 distinct classes of medicines that have demonstrated cardiovascular benefits in cardiovascular outcome studies is very, very exciting. Based on the innovative new treatments we currently have at Lilly and also in conjunction with our partner, Boehringer Ingelheim, and our expertise in diabetes drug development, we've certainly set a very high bar that any new medicine needs to meet in order for us to advance our assets into Phase III. Ilya alluded to our strong incretin platform, and we will continue to leverage that platform as we pursue new options. And as you know, in addition to targeting GLP-1, we have dual- and triple-agonist approaches to treating diabetes and related conditions. And of course, tirzepatide is our lead asset in this space, and I'm sure we'll talk about that a little bit a bit later in the call. But we're also looking forward to expanding our indications beyond diabetes as we are now targeting other conditions like obesity, NASH and heart failure, and we are looking to alter beta cell decline as well, something that's very important as we look at the progression of type 2 diabetes. Additionally, we are pursuing new oral options via both small molecule and oral peptide approaches with a goal of bringing better oral incretin options to the patients. And for patients with type 2 diabetes, our longer-term goal is really to provide options that will either delay as much as possible or negate the need to move to insulin therapy. We know that insulin therapy is difficult for many patients, produces weight gain and is not associated with the macrovascular benefits we have observed with treatments like Trulicity and Jardiance. However, we are also looking to improve outcomes for patients once they advance insulin therapy as well. We are pursuing next-generation insulins like our Ultra Rapid Lispro currently under regulatory review, and we have our weekly basal insulin well into Phase II with readouts expected later this year. Adding to the new medications we're pursuing, we have multiple efforts in connected pens and pumps as well that we think will help patients and providers better integrate patient data and therapeutics to improve outcomes for patients with diabetes. So in summary, this is a very exciting time with many advances in treatment for the many patients with diabetes, and we are optimistic that some of these ongoing efforts could change the way we improve lives for those patients.

Well, that sounds like a pretty good setup to the questions we have here. So why don't we just sort of sort of jump into it. And I'll, just to remind people joining on the call, if you do have questions, feel free to e-mail me at [email protected] or you can, of course, hit me on -- hit me up on Bloomberg. Maybe we can just touch a bit initially sort of on the near-term commercial questions. And clearly, the one we get all the time is sort of on the resilience of Trulicity. We've gone through, I guess, a couple of rounds of, I guess, I call it hyperventilating from investors around competitive threats, most recently from oral semaglutide, and yet Trulicity has sort of held its own. And I guess, a big part of that is attributed to just sort of continued class growth. But the #1 question we get from investors is sort of how sustainable is that looking forward? Ilya, I guess, how would you sort of address that?

Yes, there are probably 2 areas. I think, one, we do believe it's sustainable from a growth standpoint, and there are probably 2 reasons. One, if you take a look at the class growth, it's still growing at 30%. And even if you dissect it into injectable GLP-1, it's still growing just shy of 30%. And so we do believe there's considerable growth for the class to be utilized earlier. If you think about the first injection space, there are still only 50% of patients that get onto the first injection that gets treated with a GLP-1 with another 50% going to a basal insulin. So we do believe there is still considerable growth out there in the first injection space. The other source of growth is actually using, and I think with addition of REWIND and -- into our label, we believe that will also be a benefit to overall class growth and being utilized earlier. Now obviously, then we move to our position within GLP-1, and there are a number of aspects of why we continue to believe Trulicity is the best experience from a GLP 1 standpoint. Both in the overall GLP-1 and the first injection experience, we see that in terms of our powerful efficacy simply deliver, really translates into real world outcomes, and we see that in evidence around second and fourth refill data, where Trulicity has refilled more often than any other injectable therapy but also oral therapies. And so when you think about the experience that patients are looking for in being motivated to really treat their -- treat diabetes, Trulicity provides a great option to them. And so we're pretty confident in both in the class growth as well as Trulicity's position. And obviously, with the latest REWIND label, we do believe that with having a differentiated label, we do feel pretty confident in continuing our strength and performance. You've seen even with -- when Ozempic launched, we've gained since that launch even to the -- till now, about 6% in share, and we continue to have strength in our share performance even with competitive response.

And then when we think about some of the higher doses you're pursuing, how should we think about that sort of incremental impact on the marketplace? Is that -- do you guys sort of view that as sort of helping you stem the tide from the competition? Or is that really an opportunity for further growth? And I guess I'll just throw one more in there. When may we see that full data set from AWARD-11?

Yes. So I'll touch on it from a commercial perspective, and then maybe Jeff can touch on the timing of a data disclosure. But I guess I see it in 2 different aspects. I think the higher doses of Trulicity with 3 or 4.5, first, the additional doses provide greater efficacy, both in terms of weight and A1c for new patients. And so it does strengthen our ability to compete from a profile and strengthens our powerful efficacy simply delivered positioning of Trulicity. The second element is, one, from an insight on patients and providers, when they do switch therapies and not just as dose escalation but therapies in general, that is a significant tension point and stress for both patients and providers. And so we do see the addition of higher doses of 3 and 4.5. That can provide the ability to gain greater efficacy when needed and stay on therapy longer. And so we do see both playing a role in our positioning of Trulicity in GLP-1. And maybe, Jeff, on timing?

Sure. So just a quick reminder. The Award-11 study, which was our study, Phase III study of dulaglutide 3.0 and 4.5 milligrams, was a 52-week study, but the primary endpoint was assessed at 36 weeks and then, of course, the extension to meet 1-year exposure requirements that we agreed to with FDA. The 36 primary endpoint data was actually accepted as a late breaker for oral presentation at the Endocrine Society later this month. However, as this been the case with a number of medical meetings, we learned just yesterday that the Endocrine Society has been canceled due to the coronavirus outbreak. We're in discussions with them right now to better understand their plans around both abstract publication and any plans for electronic disclosures, and then we'll reassess our plans around that as well. I think our current thinking is they'll still release abstracts. ACC, for example, canceled their meeting, but they're doing an electronic format. So we do still plan to release those data in the first half of this year. The full 52-week data was also slated to be presented at ADA. So stay tuned. We still plan for this to be a first half event, and we remain very excited to share the data from this important study.

Great. I appreciate all that color. And I guess it's a good segue to ask around sort of the impact of COVID on the broader diabetes franchise. You clearly put out the press release last week talking around insulin supply remaining sustainable during this period, but we've gotten questions around just the broader franchise with particular emphasis on products like Trulicity. I don't know if, Ilya, you want to comment that or that's more of a question for Mike. Maybe just sort of the state of the state as you look across the broader franchise.

Sure, yes. This is Mike. I can take that one. The situation continues to be fluid, and we're monitoring it closely. At the point in time, there's been no change from what we issued in our press release last week, which was, we see no issues with supply in the market, the important medicines that patient needs -- patients need. We're taking a number of necessary precautions at our manufacturing facilities. But again, point in time, they're off operational. And so even within our Chinese facility, we maintained a base level of operations during the peak of the issue there. So we continue to monitor it, and we'll stay closely in tune with it. Our #1 priority is to make sure patients have supply of medicine as well as keeping our employees safe and healthy as well as within the communities they live. And so at current, no change to our status quo that we issued last week.

And maybe one follow-up on that, Mike. And this is, again, the question we get from live investors is, okay, so they feel a little bit better about the supply, but in terms of impact to of some of the ongoing studies, how should we -- I guess, are you seeing anything there? Anything you can comment on in terms of time lines being disrupted or other impacts?

This is Jeff. I'll comment briefly on that. Obviously, we have a pretty significant work stream across the company that's evaluating the effect of COVID-19 on all of our clinical development programs. To date, most of the impact has been, when it comes to clinical development, has been in China, but that may continue to evolve. Right now, I can speak at least to tirzepatide. We haven't had a significant impact on our tirzepatide development program to date. Our China registration program is actually a separate trial being done in China and several other countries across Asia. But we continue to monitor this very closely. Obviously, there's always the risk of patients actually in the trials having -- or coming down with coronavirus. We do have a lot of high-risk patients so we're monitoring it very closely. But I think we've got the right resources around this. There are opportunities for us to -- we're allowed to get study drug to patients even if they can't come into the office, for example, and I will be working closely with regulators as well on addressing any gaps in data or patient visits, et cetera. But we feel pretty confident that we've got a solid plan around continuity when it comes to clinical trial operations.

Perfect. That's helpful. And then, I guess, maybe it seems like a good segue to tirzepatide here. And you talked a little bit about it before. But I guess, one of the questions we get a lot is around sort of how you kind of planned for tirzepatide and Trulicity potentially coexisting. And if that's going to be more of a sort of a switch dynamic? Or there really is a place for them to sort of coexist on their own? How would you address that Ilya?

Yes. I guess, what I would say is I think Trulicity has a pretty significant profile right now with the [ top 5 procedures ] simply delivered, resonating with both patients and providers and growing the use of GLP-1 and now having a label and benefit of reducing cardiovascular events, MACE-3 within both prevention and secondary prevention in patients. That is a significant value proposition now and I think going forward. The way we see tirzepatide is that it is a step change in what can be expected, both from patients and providers around the efficacy on both A1c and on weight. And we see tirzepatide helping us grow the utilization of incretins overall. And between the 2, we feel that both together will provide us a great position within incretin to be a leader. So I think it will expand the overall utilization of incretins and kind of that's the theme that I alluded to in the beginning around what I see changing over the course of the next 5 years and decade. I do believe the expectations will continue to increase. But Trulicity will probably maintain a pretty strong position as it is today.

Okay, great. And then, I guess, when we think about all the different tirzepatide readouts that are going to come, how would you think about sort of which of those are maybe more commercially important than others? Clearly, SURPASS 1, you said the monotherapy will be important, I guess, to get a sense for the activity and maybe in a little bit of a cleaner setup. But when we think across the rest of the data sets, any sense on sort of prioritizing or orienting investors in terms of which one of those may be more commercially impactful than others?

Well, this is Jeff. Let me first kind of comment from a medical perspective, and then I'll see whether Ilya wants to add anything. I don't know that either from a kind of a medical or a development perspective we view one individual SURPASS trial as more or less clinical importance relative to others. They all address important questions from a perspective of enrolling patients, taking a full spectrum of potential treatments for type 2 diabetes so that we can fully understand the effect when added to current therapies. And that includes patients taking 1, 2 or 3 oral antidiabetic simple medications or even patients on insulin. And then, of course, the program has been designed to meet regulatory requirements for patient exposures, both in terms of number and duration. SURPASS 4 is a very important study in higher-risk cardiovascular patients, will help us discharge the requirements as outlined in the 2008 cardiovascular guidance. And we recognize that the head-to-head study against semaglutide will be of great interest to many. We certainly look forward to seeing those results in the first half of 2021 as well. But it's really a package of studies that all answer important questions against a group of commonly administered medications for type 2 diabetes. Ilya, would you add anything?

Yes. The only thing I would add is I would probably just take a look at where Trulicity is being used today. And although we see significant growth opportunity in this first injection space and using it before you would go to basal insulin, we do see the prescribers that believe in GLP-1, start using it earlier and earlier in overall benefits. And so we're seeing an expansion of utilization of GLP-1. And so I would expect the same with tirzepatide. If you think about the percentage of patients in our Phase II that achieved normal glycemia, those are out -- there are a number of elements, both from a competitive set in terms of data versus [ STEMI ] or using it with other medications and also looking at monotherapy, all of them to what Jeff was saying as a complete package and portfolio of data is an important aspect from a commercial standpoint. I wouldn't highlight one versus the other. I think the entire portfolio of data that we'll have on outcomes and then translate that to what matters in the real world will be a very competitive position.

Okay. We've only got a couple of minutes left, and I could go on for tirzepatide for another 10 minutes easily. But maybe just to touch base on the URLi opportunity here and how we really kind of think about sort of that incremental opportunity versus Humalog? And how you expect those to potentially coexist in sort of the insulin landscape going forward?

Yes. So this is Jeff. Let me comment just from a clinical perspective in patients with diabetes, and I know Ilya will weigh in from a commercial perspective. We believe ultrarapid insulins are a needed innovation, and they do bring additional benefits for people managing their diabetes with insulin. For patients who are meeting their goals and are well controlled on Humalog, we don't -- wouldn't expect them to switch. Unfortunately, the majority are not meeting their glycemic goals on current mealtime insulins. URLi has consistently demonstrated superior postprandial glucose reduction when compared to Humalog at both 1 and 2 hours during meal tests. So we view it as a significant advancement in the mealtime insulin space. But Ilya, I'll turn it to you to add your thoughts from a commercial perspective as well.

Yes. From a commercial perspective, what I would say is from meal market -- mealtime market, I believe it will probably be relatively constant. I think what URLi provides is just a greater opportunity to be competitive within this space, especially with -- as you see greater increase in monitoring. We believe URLi provides an opportunity to have greater control as its profile, it more closely mirrors the way insulin works for people without diabetes. So if you think about patients taking mealtime, they typically take mealtime for a considerable number of years. And so every mealtime is an opportunity to get better control, and URLi has a great advantage in that space.

Okay, great. Well, guys, I appreciate the time today. We're coming up with the end of our time here. Thanks again for joining us, and I -- again, I appreciate your flexibility.

Thank you.

Thanks for the opportunity.

Thank you.