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

All right. Good morning, everyone. I believe we are now live. And this is the second day of Guggenheim's oncology days. I can't say that we can't call it the oncology day anymore because it's now a 2-day conference because there are so many companies really drilling into oncology. But I'm really pleased to be joined here today with Anne White, who you see on the screen. Anne is the Senior Vice President and President of Lilly Oncology. And also, we have Jake Van Naarden, who many of you know, Jake is CEO of Loxo Oncology, which is one of the acquired subsidiaries of Eli Lilly.

So just to jump right in, we only have 25 minutes, so there's plenty to get to. Anne maybe just to kick us off just from a big picture strategy perspective, if you don't mind, just love to maybe start off on your thinking about drug pricing and relative to the opportunity that you see going forward within Lilly Oncology.

Well, thanks, Seamus. It's great to be here today and to see you and everyone again. It is -- on drug pricing, it's definitely our intent to actively engage with the Biden administration and with Congress on solutions, which increase patient access and reduce out-of-pocket costs. I think we're going to be guided by our core principles as we always have, encouraging and protecting innovation, fairness and transparency and really lowering costs at the pharmacy counter is the #1 goal for patients. So we do believe that redesign of the Part D benefits is long overdue. And the Part D program really lacks a true out-of-pocket limit, which is a concern. And beneficiaries are really exposed to an indefinite amount of out-of-pocket spending. And so there's some proposals, which have some bipartisan support to redesign the Part D benefit. I think 2 of these, I would say, are most critical for cancer patients. So one is the creation of a true out-of-pocket cap and then the monthly smoothing of out-of-pocket expenses for patients, I would say, are probably the biggest things that we advocate on behalf of cancer patients. So while these cancer -- these solutions are very important for cancer patients, I would say they won't have a material effect on our business. But I would say that it's possible that with redesign, it does drive higher utilization. So that could be an upside for the business. So we definitely -- you'll see us be very engaged in the space over the next year.

Great. And then just to drill into what's unique that's coming for Lilly. Maybe you can just talk a little bit about the registration trials that we might see completed in the next 18 months or so.

Well, thanks for that question. We are incredibly excited about what's coming up in the next 18 months. Now while we don't have global Phase III registration readouts, we do have a number of catalysts that are coming. So if you'll bear with me, I'll just mention a few. And I'm going to ask Jake because we've got some exciting readouts in his space coming. But we have regulatory action coming for Verzenio in the high-risk early breast cancer space. So that will be in U.S., Europe and Japan. We have regulatory action for Retevmo in lung and thyroid cancer in EU and Japan. And then the regulatory submission for sintilimab or Tyvyt as it's known in China, so that will be coming this year as well. So a busy year on the regulatory front. We also are initiating a Phase III study for Verzenio in the HER2+ space, in high-risk adjuvant HER2+ patients. So very pleased to build off the momentum that we saw in the EBC space. And so there's a lot going on there, but maybe I'll give Jacob a minute to talk about what's going on in the rest of the portfolio.

Yes, happy to. Thanks, Anne, and thanks, Seamus. So just starting with LOXO-305, the BTK inhibitor, a drug that we're incredibly excited about. We presented data at ASH that I think sort of start to tell the story about what this drug could be for patients. We're investing very heavily behind this asset, initiating a suite of randomized Phase III trials in a variety of settings over the course of this year. They won't read out this year nor would they read out in the next 18 months just in the framing of your question. But they're really important studies to get off the ground and get going. In parallel with that, I think we have to figure out whether there are any accelerated path to market for the compound using the Phase I/II data. I don't know the answer to that yet. We need to engage with FDA and find out. But I -- we're very encouraged by the profile we've seen. I think the investigators that work on the trial see a home for the drug in terms of where they want to fit it into their clinical practice. But how and when exactly we get the drug approved still remain to be seen. Moving on from that drug. The next program in the portfolio sort of right behind that, that we're increasingly getting excited about is the oral SERD that we have in development, which is in a Phase I/II trial. We haven't talked a lot about this one publicly. I think you'll hear us talk more about it this year. Well, we hope to be in a position to share some initial clinical data for the first time that I think will help put the drug in the context of the competitive landscape as well as hopefully initiate the first of what we hope to be a number of more advanced development activities for that compound. And we think we're in a very unique position with that drug given the abemaciclib franchise. And then beyond that, we have a couple of earlier stage programs, which I won't highlight in the moment. And we hope to be in a position to talk a little bit more about what's coming out of our discovery efforts as well this year. So I think it's going to be an exciting year for the portfolio, both spanning from things that the world doesn't yet know about all the way to very late-stage activities for the 305 program?

Great. And Jake, just to follow up on the oral SERD. I guess one of the things -- and this is a little bit of a conversation for, I guess, both you and Anne because you're integrating, I'm sure, that work overall. But there are a ton of oral SERDs out there. In terms of positioning Verzenio, I guess, many of us are kind of confused as to the choices that some of the players are making to utilize palbociclib as the drug of choice. Despite the fact that they may be the market leader, I'm not sure that, that's skating to the puck. So wanted to get a little bit of your thoughts along those lines as it relates to the willingness to broaden out your collaboration with Verzenio or if your confidence really is that high that you have sort of an oral SERD that is at least in line with some of the best-in-class potential assets.

You're asking -- you're framing the question to a biased audience, Seamus. So I think we see the puck headed in the same direction that you do perhaps to extend your metaphor. But look, the oral SERD space, I think, is on one hand, crowded in name; and on the other hand, like perhaps not as crowded when you sort of double-click on how these drugs are going to be developed downstream. And so I'll just say a few things. So number one, ultimately, we have limited data sets for all of these compounds. A handful of our competitors have shown some clinical data publicly, and you'll see data from us this year. I think the way to think about just stacking up these drugs against each other based on the early data sets is -- I can just tell you how we're thinking about it. So on the efficacy side, we're interested in seeing some single-agent activity out of the drug. These are settings of hormonal cancers, where you never are going to see like whopping response rates. None of these drugs are ever going to do that. So that's not the bar here. But the bar ought to be some single-agent activity, ideally in the right settings of prior therapy. And what I'm really talking about is seeing some activity in patients post-fulvestrant. It's a bar that we're interested in observing. So that's sort of number one. And I think our competitors have been sort of varied as to the robustness of the efficacy data as a single agent. And then I think on the safety side, these are drugs that need to be very well tolerated. The bar for endocrine therapy as it relates to tolerability, especially if your comp is fulvestrant is high. The bar is high. These need to be very well-tolerated drugs. And so we're paying very close attention to that, both for our drug in a vacuum as well as the competitive space. Speaking beyond the clinical data, just moving to the development of these drugs, I think, like I said earlier, we're in a particularly unique position with abemaciclib. And I think if we didn't have abemaciclib in the portfolio, exactly how to develop an oral SERD gets complicated quickly. The -- yes, there are trials that can be run in the metastatic setting of ER-positive breast cancer. But if you think about the real liability of fulvestrant in the way it's administered, the true, true home for an oral SERD from a -- in terms of maximizing its differentiation is in the adjuvant setting. And just given where abemaciclib now stands, I think it's -- I think we're in a very unique position. And so as it relates to your question about the choices others have made by partnering with palbo. I think you're seeing a diversity of choices that they're making. Some are choosing both. From our perspective, we're more than willing to give -- to partner with other oral SERDs who want to generate safety data with abemaciclib. And we've done some of those. You've seen some of those publicly announced. We're happy to give free abemaciclib to people who want to generate 30-patient cohorts of safety data with their oral SERD. So if others want to do that and sort of share our collective view of where the puck is headed, great. So we'll see if that happens. We're not going to like proactively push it, obviously. But if people come to us, like they have in the past, we'll say yes to those safety experiments. So I guess at a high level, I see where you say it's competitive, and I acknowledge that. But in the long term, we don't see it as all that competitive actually because I think these other companies that have these drugs are going to find themselves having a hard time developing their drugs in the adjuvant setting. That's my prediction.

Got it. Super helpful. So Anne, your -- I guess I offered my own opinions of how Verzenio should do, maybe you could tell us how it is doing.

Great. Yes, thanks for the question. So we are quite pleased with how Verzenio has been performing over the last year. It was an incredible year with announcing the EBC data in the middle of the year. But even prior to that, we were seeing good momentum in 2020. So as you know, some of the objective measures like TRx growth, 66% year-on-year. Worldwide revenue growth of 57%. And we really think that this was driven by the release of the OS data and the execution on that, making sure that people were aware of that overall survival data. So that was really, I think, a driver going into it. But I think people are starting to recognize what we have believed for a long time, which is that these agents are differentiated. And it goes way back to having -- starting with a monotherapy indication; and then we think the higher CDK 4 selectivity; and then the overall survival data, which not all in the class were able to produce. And so that was a very important milestone for us in combination with fulvestrant. And even in that data, where I think we caught a lot of people's eye was the performance in the primary endocrine-resistant population. And to us, that gave us additional momentum in our belief that we'd see good results in the EBC high-risk adjuvant space, and then we did. So I think we're pleased with how it's playing out. Now our job is just to focus on execution on the MBC space. And then as I said, we've submitted the EBC data to the U.S. at the end of the year. We look forward to that regulatory action towards the end of this year and just continue, I think, to that message that we do believe that it's differentiated and the right choice for patients, both in the metastatic setting and then in the high-risk EBC setting following approval.

And we're also hearing -- just in terms of new patient starts, can you just talk about what you're seeing in market as it relates to new patient starts, patients actually getting tested appropriately? Has the pandemic actually been a material drag from that perspective? Or are you starting to see a pickup and a recovery in that regard?

It's another good question. So what we saw was, particularly in the breast cancer setting, we did see a concerning drop in testing for new patients, screenings, mammograms, other things in Q2. Some rebound in Q3 and then more rebound in Q4. So I think we're encouraged by the trajectory we're seeing out of that. But it's very concerning most importantly for patients that don't get caught early and then move into the metastatic setting where things are obviously very concerning. So we were concerned, I think, as everyone was. But I think we're encouraged to see that that's rebounding, particularly in the testing space. In as far as the impact on our portfolio, what we saw was the oral programs, like Verzenio and Retevmo, were much less affected during COVID. There was some downturn in the early days but then a quick return and as physicians seem more comfortable in the space to give the orals and maybe space out the office visits. We did see more impact on our infused portfolio, although similarly, we expect to see that begin to rebound as well. But for the oral agents like Verzenio, we were pleased. And then as I said, the growth overall far exceeded the growth of the class. The class had some modest growth, but Verzenio definitely accelerated its share significantly over the last year. So we hope to continue that trend into 2021.

Got it. So Jake, I wanted to talk a little bit about your thoughts around combination opportunities with LOXO-305. It seems to me like the majority of physicians are still enthusiastic about venetoclax. We're starting to see some more BCL-2, BCL-X, MCL emerging at other pharma companies with sort of second-generation assets. Love to just get your growth thoughts on where you see the treatment in CLL and in some areas evolving.