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

Okay. Good morning and welcome to our fireside chat this morning with Eli Lilly at the Barclays Global Healthcare Conference. We're pleased to have with us today Patrik Jonsson, President of Lilly USA and Chief Customer Officer. Sara Smith from the Lilly IR team is on the call as well. There have been companies that have executed well with their portfolio during the pandemic, and there have been companies that have done well in helping address COVID directly. Lilly is one of those few that have done both exceptionally well. And thinking about just kind of how we were thinking 2020 would set up versus how it executed, they've had success across Verzenio, tirzepatide and now some promising results with donanemab for Alzheimer's with data coming this weekend. It's an exciting time at Lilly. So to Patrik and Sara, welcome. Thanks for joining me this morning.

Thank you very much. Great to see you, Carter.

Patrik, maybe just to jump right into it. We've seen COVID cases fall pretty dramatically in the past recent weeks and progress on the vaccination front. As you now are seeing sort of that reopening narrative really kind of gather momentum, can you sort of set the stage for where things stand today and how you expect some of your core businesses kind of move back to normalcy over the course of 2021?

Absolutely. Happy to, Carter. It has been a bumpy year, and we saw a nice recovery late Q2 and Q3. And then in Q4, we were back to 80% to 90% versus the pre-pandemic levels in terms of new therapy starts. However, we saw a different impact across our competitive areas of therapeutic areas, with less of an impact in particularly oral diabetes and oral oncology products. For example, SGLT2 were down minus 8% in new therapy starts but grew 6% in TRx versus the previous quarter. Now when we've started 2021, we are quite encouraged by the trends we see. Of course, it's differs in between the therapeutic areas, as I said, diabetes and oral oncology assets less impacted, but we have seen more impact on immunology where we're down in terms of minus 20% on new therapy starts in Q4 and CGRP even more, but encouraging trends early on in 2021. And I think overall, we foresee that we will be back to the pre-pandemic levels and growth during the second half of this year. But most importantly, what [ has taught me ] with confidence, Carter, is if we look at all the key performance indicators across our therapeutic areas, we do very well in terms of market share performance in terms of the NBRx, TRx and also brand equity. So whenever we see this trend continues, we are quite confident that we will continue to perform very strong in 2021 and beyond as well.

Maybe the flip side to that -- to the COVID question is how the business will be sort of structurally altered coming out of this. You clearly saw greater reliance on telemedicine, digitization of sales force, et cetera. But as you think about some of these practices and what did -- sort of [ this started ] as we get back to normalcy versus what's maybe a little bit stickier, how should we think about sort of the evolution of the commercial franchise on that end?

Well, I think that's probably one of the silver linings with the pandemic. We took quite a conservative approach as a company. And already, in the beginning of pandemic, March 15, we will draw more or less all our sales resources from the [ peak ]. And that forced us to really build capabilities and competencies across the organization to reach out to our customers virtually. That's what we have done. We have invested heavily in terms of reaching out virtually for [ ordinary ] costs, [indiscernible] and not just on the sales channels, but also with other customer-facing functions. And we really believe that the future is going to be a hybrid model. And the benefit of that hybrid model is that it will actually enable us to go for a broader reach and increase frequency with multiple touch points at the customer levels, improving the experiences they have working with Lilly. On top of that, we also invested in telehealth. We started our first pilot in the space of migraine, and that was during the latter part of 2020. And it's too early to conclude, but based upon everything we have seen so far, we believe that telehealth is here to stay as well. And that's something that we will consider scaling up in other therapeutic areas. So I actually think we will return to whatever the new normal looks like, very different compared to how we enter into the pandemic stronger than ever before. And we see some positive signs because now we have more than 50% of our sales force back on the field. So we are keeping fingers crossed that the light that we see in the end of the tunnel is getting even brighter day by day.

Okay. Maybe moving on to sort of your effort on the COVID front. Neutralizing antibodies clearly have had an impact and had a nice ramp into the year-end and had subsequent contracts. As you think about that business on maybe a little bit more of a sustainable front, I guess, first off, do you see a sustainable business there going forward going out, whatever sort of number of years or months, if you think about it? And I guess maybe as we think about those contracts that have been signed more recently, is that really sort of addressing real-time demand? Or is -- are we already starting to see some stockpiling efforts?

Well, thank you very much. We are very pleased with the EUA for bam and epi together, and we're very proud of the fact that we have been able to reduce hospitalization and the COVID-related deaths with 70%. I think that's a tremendous benefit of the overall community and all of us. But you're right that utilization of the [ bams ] was slow back in Q4 and early Q4, but we actually saw a significant improvement towards the end of the year, and those trends continue very nicely. When we look at the [ cabinet ] reported usage of the antibodies, we see reported in between 20,000 to 30,000 doses a week from 60% of sites that are reporting back to us. And together with the FDA, we also made some significant efforts to make sure that we are increasing utilization and awareness. And particularly, the FDA are driving some significant efforts here in terms of disease awareness campaigns and also improving access to institutions and thirdly, educating physicians about the antibodies and how they can help in the pandemic. With the current supply agreements, I would say we have no concerns -- or see no concerns to stockpiling. We believe that there is -- and we see that there is a worldwide view. And that's something that we share with governments across the globe, and we will do everything we can to make sure that patients and physicians get access to those antibodies and that they are being utilized. In terms of the long-term commitment to antibodies, you know what, I think we see it's a business that is with the current ones that we've paid out over 2021. But this is a platform, and we don't know when the need will raise again. And I think we'll continue to build upon the expertise and the learnings we have had in 2021 but also future needs.

Okay. Maybe switching to some additional products here. I think when we initiated last year, we thought 2020 was going to be sort of the year of tirzepatide and clearly, at least for part of the year, got overshadowed by some of your other efforts. But now that we've seen a number of these studies read out all successfully, maybe just help put that data into some context and sort of what are the main takeaways, maybe also touch on how you expect that to be incorporated alongside some of your existing diabetes franchise, particularly alongside Trulicity.

Yes. I'm happy to respond to that. And we are thrilled about the tirzepatide readouts for obvious reason. And if we just reflect on SURPASS-2 that read out recently, we have seen that tirzepatide is showing superiority both with 5, 10 and 15 milligram versus 1 milligram of semaglutide. And if we go beyond SURPASS-2 and we look at all the studies so far, we have been able to demonstrate superiority on HbA1c reduction, weight reduction, both in a patient population, but it's relatively early on in the type 2 diabetes as well as compared to insulin [indiscernible] on top of insulin and consistently, superiority on both those aspects. If we look at the entire population treated with 15 milligram, we see that more than 90% of those patients treated with a high dose or achieving an HbA1c of 7 or less, which is the American Disease Association's [indiscernible] of treating diabetes. And beyond that, more than 60% of the high dose patients are achieving an HbA1c of 5.7% or less, which is back to normal levels. And that, combined with the learnings from the Phase IIb and the dose titration scheme that we have been applying in both studies, we also believe that we have a safe and tolerability profile that is very much consistent with the overall GLP-1 class. So really excited about the tirzepatide opportunity. If we look at the bigger -- sorry, diabetes franchise, it's important to bear in mind that Trulicity today is the market leader in this space. We have 47% of the TRx. We outgrew the class back in 2020. So a strong performance, outgrown the class, and we see a significant opportunity for further class growth as well. In this space, we know that Trulicity comes with a powerful efficacy, simple delivery and proven [ CD ] benefits. And for a patient with diabetes, switching treatment is one of the most cumbersome moments. So I think the fact that we are the market leader, 47%, a very appealing product profile and now also the opportunity with dose escalation, I think Trulicity will continue to play a significant role for us and the patients we serve. However, with tirzepatide, I think we open opportunities that we have never seen in the diabetes stage before. And based upon the data, I see an opportunity [ with proteins ] to be used much earlier on in the disease and again, being able to deliver more than 90% -- for more than 90% of the population and HbA1c below 7, with more than 60% below 5.7. That is really revolutionary. So we believe that both of those assets will -- well, Trulicity will continue to play an important role. Tirzepatide is potentially a game changer in treating diabetes.

A follow-up on that. Some of the weight loss figures clearly have brought the opportunity in obesity front and center. At the same time, I learned pretty early in my career to be pretty skeptical around that as a commercial market. So I guess there have been -- it's been a minefield of commercial launches in the past. What gives you sort of confidence that this time will be different that there's a real market here that can be obtained and really show some good penetration?

Well, I think there are a couple of reasons to believe that tirzepatide could be a game changer also in treating obesity. First, if we look at previous entrants into this market space, they have been offering a weight reduction, normally around 7% to 8%. If we look upon our SURPASS data in a diabetes population, that we are able to offer a weight reduction of up to 40%, almost twice as high as we have seen with previous assets. And we also know that in our diabetes study, the weight reduction did not plateau at week 52. So I think that's important to have in mind. And this is a patient population that in the U.S. consists of at least 100 million people, and many of those have comorbidities. Comorbidities such as, well, diabetes, cardiovascular disease, liver disease and cancer. And today, obesity is covered, at least to a certain extent, in Part A and Part B, but not in Part D. So I think that's the other effort where we need to spend a lot of time and effort in environment shaping because obesity is clearly a disease. We know its comorbidities, and we saw it also during the pandemic. The second factor for hospitalization after age was actually obesity. So I think, first and foremost, the efficacy, almost quite as good based upon the diabetes [ priors ] in terms of weight reduction and the opportunity to also offer glycemic control to those patients, and thirdly, the need to work on the environment shaping efforts to make sure that's also being covered by the payers in the future.

Maybe switching gears now to the immunology franchise, a franchise I know that's near and dear to your heart given your past experiences. [indiscernible] had a very nice second half. But maybe if we can just kind of take a step back and you've got some kind of launches coming in the relatively near term. Sort of take a step back and give us -- portray how you sort of see the immunology franchise evolving over the next 5 years as you kind of overlay some of these additional growth levers into the story.

Yes. Indeed, it's very close to my heart. And I believe immunology is one of those areas that truly will play increased importance for Lilly moving forward. [ You refer to reports ]. I think the [indiscernible] were extremely pleased with what we're seeing right now. You know that we gained the OptumRx access back in 2020, and we also gained the BAs and quite a few customer accounts. And then we are now towards the end of the year that [indiscernible] IL-17 with ESI. So just [indiscernible] specifically, now we are the best in class access in dermatology. And we actually more than doubled the access in rheumatology, and we see very encouraging trends early on in 2021 in terms of both NBRx and TRx versus the class and also versus the IL-23. However, it's important to have in mind that such an access improvement also comes with increased rebates and discounts. So I think it's important to have in mind that short term, we will see a pricing impact driven by [indiscernible] that is above the average of the U.S. portfolio, that this is more than compensated for mid to long term in terms of volume gains. So it's a very well thought through strategy. Beyond [indiscernible], I think we've recently had the readout of alopecia areata, an opportunity for us to be first in disease, and we have prioritized the review with the FDA here. We will hopefully launch atopic dermatitis in the very near future with Olumiant. We have some exciting readouts this year where the induction data for mirikizumab in ulcerative colitis, where the induction data of lebrikizumab both in mono and combo in atopic dermatitis. So I think immunology for us, as they started, will play an increased importance, and we will be [ placed ] most likely with an IL-13, IL-17, IL-23, a JAK inhibitor, and we will play across all the therapeutic areas of high importance in immunology, dermatology, rheumatology and gastroenterology. So I'm really excited about that.

Maybe just a follow-up on the baricitinib opportunity in the U.S. I mean, to date, U.S. penetration in RA has been pretty modest. You're going to be launching up against a number of other JAKs launching contemporaneously with you. I guess should we -- I mean, how would you sort of level-set investor expectations on that front?

Well, I don't think it's a secret that we are not extremely pleased with the label we have for rheumatoid arthritis in the U.S., but we see atopic dermatitis as a growth accelerator for Olumiant in the U.S. And I think it's important when we look at this opportunity and all the assets currently being studied, but atopic dermatitis is pretty much where psoriasis was 15 years ago, and this is a heterogeneous disease. We have around 10 million Americans being -- suffering from moderate to severe atopic dermatitis, 2 million to 3 million have also been diagnosed and approximately 20%, around 400,000 to 500,000, are needing treatment beyond the topicals. And there, the penetration of biologics or similar is very low. So we believe that the fact that there is a huge unmet need, there is a low penetration, Olumiant being the first JAK in the marketplace, and we're also encouraged by the data because we need to compare studies by studies when we see the entire design, et cetera. But we have been studying a tough-to-treat areas such as the palm of the hand, the sole of the feet, face and scalp. So I think we have a very appealing value proposition with patients with atopic dermatitis, moderate to severe atopic dermatitis. And then adding to that, hopefully in the not-too-distant future, alopecia, a first in disease. We have a powerful value proposition to offer in the dermatologist's office.

Maybe switching to oncology quickly and talking about -- certainly, on the back of the Verzenio adjuvant data, [indiscernible] a truly meaningful opportunity for you guys, particularly with some of the setbacks to your competitors. As we think about sort of the benefit, potentially duration and moving to the adjuvant in the metastatic setting as well as maybe just how a rise in adjuvant just might impact metastatic dynamics either in terms of share today, but just sort of general utilization down the road.

Well, we believe we have a very strong momentum right now with Verzenio [indiscernible] metastatic breast cancer opportunity. And if we look upon 2020, we grew revenues with 36% for the entire year. But in Q4, the growth was 43%. We grew TRx with 6 points from 10% in the beginning of the year to 16% towards the end. NBRx grew with 10%, almost 30% by the end of 2020. And we strongly believe that this performance has driven the metastatic breast cancer space and mainly by the higher CDK 4/6 activity that we see with Verzenio versus other assets. And the differentiation through continuous dosing, monotherapy indication and also the MONARCH 2 overall survival data in the [ endocrine ] resistant treatment population. So a very, very strong performance in the metastatic space that we believe will continue. If we look into the adjuvant data, yes, we submitted early breast cancer late last year. And of course, we are very excited about that opportunity as well. We believe it represents approximately 50% of the opportunity we currently have in metastatic. And we have also seen that the length of treatment in early breast cancer is longer than in the metastatic phase. And in our study so far, we have an average length of treatment of 17 months compared to 7 to 8 months in the metastatic breast cancer [indiscernible]. And actually, the length of treatment in the early breast cancer continues to improve in the study. So 50% of the opportunity, as a metastatic, a length of treatment that seems to be at least twice as high as in metastatic breast cancer and also space where only we have been able to show benefits so far. We have high expectation on this space as well.

Maybe just quickly one last question on oncology, which is maybe the decision last year to expand your collaboration to bring TYVYT to the United States. Just talk about how you see that fitting into your broader oncology strategy and your ability to compete with some of the more entrenched competitors in the space.

You refer to TYVYT for [indiscernible]?

Yes, yes, yes. TYVYT, yes, in the U.S.

Yes. You know what, we are working very closely together with our partner Innovent here with the submission to the U.S. FDA and leveraging the strong lung [ data packet ] that we currently have. And what I can say here is that we are on track for a 2021 submission, and we believe that this is going to be a very nice addition to our overall oncology portfolio. And we're looking forward to sharing more data once we have submitted it.

Great. And then I would be remiss in not asking. So if it's -- you recognize it's out of your direct purview, maybe Sara can answer as well. But just in terms of just setting the stage for the Alzheimer's data this weekend, frame that however you can to help investors as well as, I guess, the call on Monday.

Well, I can't miss that opportunity because after 3 decades -- well, not me -- 3 decades, but 3 decades of commitment to Alzheimer's research and all the [ failures ] so far, I think the excitement level is extremely high across the entire enterprise and with several of the [indiscernible] leaders as well. And for the first time ever, being able to show a [ slower ] decline in both [ cognition ] and functions with 32% measured by IVRS, I think that's huge. And as you have heard so far, we see a flat clearance that is unique. I think the baseline was 108 centiloids of amyloid, and we saw an average clearance of 84 centiloids of amyloid. So that means that the huge majority of patients were [ flat free ] after the study beyond this. And of course, you will hear much more on Saturday. But I think we are so encouraged that even if the study was empowered to show the difficult -- difference on all the secondary end points, what we saw was a consistent and positive trend across all set -- predefined secondary end points and time points. And I think that's probably as much as I can share with you today, but we are looking forward to sharing more data this coming weekend, but we're excited about this opportunity as well. And of course, now all our efforts are focused on replicating the findings of [indiscernible]. I think that's important. To replicate [Audio Gap]