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

Okay. Good morning, and welcome to the Barclays Global Healthcare Conference. My name is Carter Gould, senior biopharma analyst here at Barclays. It's good to see all of you in person today. I'm pleased to welcome Lilly to the stage. We are [ overweight ] Eli Lilly and see a differentiated and compelling commercial portfolio and a pipeline with really attractive opportunities across metabolic health, neuro, oncology and immunology. Representing the company is Patrik Jonsson, President of Lilly Immunology, Lilly USA and Chief Customer Officer. Patrik, thank you very much for joining us.

Thank you very much, Carter.

Great. So I think before we get into the Q&A, Patrik was just going to make some opening comments to kind of give us a state of Lilly.

Thank you very much and really nice to see you all in person this year. So I'm leading our immunology efforts of the positive commercial decision and global brand building as well as Lilly USA, and as Carter said, the Chief Customer Officer. This is really an exciting time for Eli Lilly and Company. And I think you saw last year that we were growing our revenues with 15%, driven by 16% volume growth. And if we exclude the work we did for COVID, a growth of 10%. But most importantly, the bulk of that revenue. In Q4, we saw that more than 60% of our revenues came from our growth products, products like Taltz, Trulicity, Verzenio, Jardiance. And now we are in a position to most likely launch 5 new medicines over the coming 2 years. I think tirzepatide and donanemab, they are familiar to all of you, but it's not just about tirzepatide and donanemab. We're also looking forward to launch mirikizumab and lebrikizumab in the immunology space, as well ibrutinib In the oncology space. I think that, on top of a portfolio of products with tremendous growth opportunities, we are well positioned for top-tier growth over the coming years. And we have no major patent expiries until the end of this decade, the exception of ALIMTA this year. So really an exciting time at Eli Lilly and Company.

Absolutely. And we want to talk about those 5 assets. Maybe to start with tirzepatide. Certainly, from our vantage point, it's the most important of the 5, and you're looking at a launch later this year. Clearly, you're already very strong in diabetes. And as we think about sort of Trulicity and tirzepatide coexisting, how should we think about that tirzepatide launch, that positioning? I know you've talked in the past about growing the overall market opportunity. But when we think about those patients that are going to come on to tirzepatide, how much of that is going to be cannibalization versus new opportunities?

Thanks, Carter. Yes, I think you're right. What we will look at as our primary KPI is here actually market growth. Because if you look at the tirzepatide data from the SURPASS studies, we are really encouraged. And we have seen an HbA1c for huge amount of patients being below the level of 5.7, perhaps down to the level of normal HbA1c. We have seen weight loss in the high dose at an average of 14%. What we believe we have the opportunity to do here is to disrupt much earlier in the treatment paradigm and to move away from the current treat-to-pay model. And we believe, taking into account again that over 50% of patients that are treated with diabetes today are not achieving an HbA1c below 7. And more than 90% of those patients also suffering from obesity or significant weight gain. Such by disrupting much earlier on in treatment, we can avoid a lot of those comorbidities we see for patients suffering from diabetes. In terms of Trulicity tirzepatide, we actually believe that tirzepatide, when we look across the entire class of incretins is going to be the best in disease asset. And of course, patients today is stable on Trulicity and responding well and not in need of more lowering of the HbA1c or more weight. Patients stay on Trulicity, I mean, they probably wait to stay in therapy. But what we will look at is really new patients switch, that's where we see tirzepatide being used. And there will be some cannibalization. But most importantly, we believe this is a huge opportunity to expand the interest in market.

And when we think about sort of the pace of which access might open up for tirzepatide, clearly, you're again very established in the field. But maybe help level set expectations for that front to the extent you can.

Yes. You're right, the access in this space is going to be extremely important, and that's where we will spend a lot of time during the first months of launch. That's key. And of course, we will also make sure that we have patient assistance program in place because that's important, that the impact in terms of out of pocket is as low as it possibly can be. But we also realize in the retail space, it will take some time to build the franchise. But again, access is really our key priority for tirzepatide, and that's where we'll focus a lot of our efforts. And I think it's fair to say that what we have forecasted so far is already taken into account in our revenue guidelines for 2022. So the revenues that we foresee for tirzepatide this year is taken into account in our guidance for the year.

Okay. And obviously, you're going to have obesity data coming out in the not-too-distant future. Can you talk about how that data will help the diabetes launch in itself as well as maybe help frame the opportunity in obesity. I know every time I talk to my sales force around the opportunity in obesity, they start to run wild with some of these crazy numbers on how big this drug could be. So to whatever extent you can help on that front as well.

Obesity, for sure, it's a huge opportunity. And I think we've all seen the uptake of [indiscernible] as well and that instills with us a lot of confidence. But overall, we have approximately 110 million Americans suffering from obesity, and 15% of those are defined as having simultaneous type 2 diabetes. Out of those 110 million today, only 3 million are being treated with pharmacological treatment. There is a huge opportunity in front of us. However, I think when it comes to obesity, there's also a lot of work required in order to medicalize obesity. And I think a couple of factors here that will be of utmost importance. Of course, the data that we have seen, again, in the SURPASS study, an average 14% weight reduction on high dose. We know from other areas that, normally, you see a higher weight reduction in the obese population. But this is going to be the first time we really study a dual agonist. We are excited to see the readout of the SURMOUNT-1 coming up this year but also the outcome studies. Because in order to medicalize obesity, I really believe that the outcome studies will be extremely important factors. And we are currently doing 5 outcome studies that we believe will have a high relevance in order to change the treatment landscape. And -- but in ASH, in chronic kidney disease, in the -- one, on mobility and mortality outcome study as well. And we believe that all those will have the opportunity to really medicalize the obesity market.

Okay. And then maybe just one last on the diabetes market here. When you just think about the lasting impacts of COVID and how that's changed your business going forward, are there things that have changed that are just fundamentally you're going to be doing different in how you've reached out to patients in this segment?

Very much so, and I think that's not unique to the space in diabetes. But overall, I actually think that we are coming out of the pandemic stronger than we went into it. And I think very rapidly, we needed to build the capabilities in the digital and virtual space. And I think in all fairness, probably in the U.S., those companies were very much dependent upon the more conventional share of voice model. But I think we've built that into our DNA today. The way we are utilizing data and analytics, machine learning and omnichannel orchestration give such the opportunity to really meet the customers where they want and how they want it, being virtual or being in-office visits. And I think all of that has really enabled us to drive further efficiencies, more effectiveness and I think, at the end of the day, a more productive go-to-market model. So I think today, across our therapeutic areas, we're actually positioned to reach more customers and with a higher frequency than we were prior to pandemic. I think all of those capabilities will help us as well when we go to market with tirzepatide and all the new assets in the pipeline.

Okay. Actually, one more on tirzepatide. We talked about this a little bit last night. I know there's been some commentary in the past around potentially pursuing differential branding strategies between diabetes and obesity. Clearly, differential pricing scenario is probably off the table. Can you just talk about the -- how you see the -- what are the strengths or the benefits potentially from pursuing a differential branding strategy?

Well, I think, as I shared with you yesterday, we are still contemplating a dual brand for diabetes and obesity. And I think there are pros and cons on both sides in all honesty. It's probably premature to comment what we are going to go for, but we are currently assessing the pros and cons with dual brands versus one single brand. And I think that's something that we will make a decision upon over the coming year but not before that.

Okay. Maybe moving on to Alzheimer's space. It doesn't seem to stay out of the news for very long. Maybe just -- clearly, I think one of the major updates on your last earnings call was just sort of a change in your strategy or filing strategy for donanemab. Can you just walk through kind of like the latest status there? And to the extent that the NCD decision and competitor data in the fall may act as guidepost to potentially reassess that strategy.

Yes. I will try to talk to that. So I think we shared at the Q4 earnings call that we would continue the submissions on accelerated approval for donanemab, but we also shared that it couldn't be finalized by Q1. And I think most of us are familiar now with the NCD guidelines. That was a huge disappointment. I think the overall reason for having an accelerated pathway is really to make sure that patients much earlier can get access to new and innovative therapies, and that is pretty much negated by the current version of the NCD guidelines. From our side, we will continue our efforts to submit donanemab under the accelerated pathway. And we have also been clear, but for us, the key gating factor will be the readout of TRAILBLAZER-2. That is going to be mid next year in 2023. The way we foresee, we have a hard time to see that we would be able to present confirmatory Phase III data without being able to provide access and reimbursement to patients in the U.S.A. There are no such examples in the past. So that's really where we are. And we, the entire time, even before the NCD draft, stated clearly that we expect very limited revenues from donanemab from the time of accelerated approval until the readout of TRAILBLAZER-2. So TRAILBLAZER-2 is truly the gating factor. I think it's also fair to say that we expect some continued volatility in this marketplace. And I take into account here the competitive readouts during the second half of this year. And it's not unlikely that, that could be mixed results. However, the most important part here is that even if one of the trials would be negative, that there is a positive trend. But for us, it's truly about the TRAILBLAZER-2, and our confidence in donanemab has not changed. Our confidence in donanemab remains very strong and we look forward to hopefully being able to replicate that in a much bigger study with 1,500 participants and announce those data in mid-2023.

And then when you think about -- clearly, I think there's a lot of lessons you could take away from the Aduhelm experience. Those things that maybe resonate most with you when you think about go-to-market strategy down the road.

There is a lot that needs to be done. And I think that's -- and we still continue to learn every day. But I think there are a couple of important components. And if you look at the overall ecosystem, I've shared a couple of times today, we have 4.5 million patients in the U.S. that suffers from Alzheimer's disease. The diagnostics will be extremely important here. And for us, as a company, that's a space where we're also very much engaged. And we have currently 2 sets available in the marketplace, both amyloid and tau. But we're also simultaneously developing a blood-based diagnostics for Alzheimer's. I think being able to define those patients that can benefit from the treatment, that's going to be of high relevance when we go to market with donanemab. And out of the overall population, we believe that 30% to 45% of those would be eligible for a treatment with, for example, donanemab. But that effort is going to be key.

Okay. Great. Maybe switch gears to immunology. I know it's a space near and dear to your heart. Let's focus first on mirikizumab and sort of maybe help level set the expectations for that asset in light of some of the Phase III data, where I think the response rates you saw in isolation look good. But clearly, the placebo rate outperformed, I think, most people's expectations. And what that really means for the long-term viability and potential of this molecule.

Thank you. First, if we look at the IBD market, we will be in a position to be the first IL-23p19 in the phase of ulcerative colitis. There's probably a window of opportunity of 16 to 18 months. The overall UC market today, we expect 1 million patients in the U.S. approximately. The biologic penetration rate is very low, it's only 10%. and we see that only -- even among those patients being started on a biologic, we see a high discontinuation rate at the level of 35% to 40%. While we have been encouraged with the data from mirikizumab, we have only shared at the detailed level the induction data, and the maintenance data will be shared at the congress later on this year. But we were really, really encouraged by the maintenance data as well. And it's not just a matter of statistical significance. We have seen a clinically meaningful impact across chemical, symptomatic, physiologic and neurologic response. But also for mirikizumab, for the first time ever, we also embedded bowel urgency into our Phase III trial. But what we have seen here is a significant reduction of bowel urgency for patients suffering from ulcerative colitis. And we know that bowel urgency today is coming up on the top 3 list of items of importance for both the treated patients as well as the health care provider. And we realize our limitations with cross-trial comparisons. But when we do those, we believe that we have an asset here in mirikizumab that is very competitive, current medications approved for UC but also for medicines in development. So we're looking forward to a submission during the first half of this year and hopefully a launch by mid-2023.

And then just in terms of the importance of keeping our head-to-head data against some of the more relevant molecules going forward, how critical is that going to be in really maxing our potential here?

We believe it's going to be important to differentiate. And I think, again, efficacy and safety will be the entrance ticket, but the differentiation will be key. And I think what I referred to earlier, the bowel urgency data will be extremely important. And of course, we are now contemplating additional studies to be performed for mirikizumab in ulcerative colitis for further differentiation. That's a part of the work we're doing right now.

Okay. And obviously, we've got a number of biosimilars on the horizon and how that may disrupt the treatment paradigm or just make it a little bit more challenging for newer entrants.

Overall, at least the way we're looking at the biosimilar entrants now starting in 2023, we believe it's mainly going to change the dynamic among the TNFs. And we believe that PBMs will end up selecting 1 or 2 TNFs. And particularly, if you look at the stage of IBD, there is a huge need of new treatment options. Coming back to the low biologic penetration rate, I would say that we don't expect the biosimilar entrants to particularly impact the IBD. We see a tremendous opportunity there to further grow the biologic penetration. And we believe that mirikizumab will play a big role in those efforts. And then, of course, we're looking forward to the [indiscernible] Crohn's disease a couple of years after.

And just when you think about launching in that period, you talked a little bit about biosimilars but also just the challenges in getting sort of share of voice when you think about novel oral agents coming out and just other kind of novel mechanisms that, again, just add to the complexity of the space as docs try to figure out how to sequence these agents or how everything kind of might line up.

We have done that before. We are relatively new to immunology. That's our youngest business unit, and we have been in this space since 2016. But we did it in dermatology. We did it in rheumatology, and I think we will build up on those experiences when we are entering into IBD. And I think we learned the hard way the importance of access in immunology. Well, it's not unique, but we learned it the hard way. So I think we are extremely well positioned. And what we have done is really taking a lot of time to connect with the key stakeholders in this space. That is, of course, the [ post data ] community and clinicians but also advocacy groups to really understand how can we meet the opportunity in unmet needs in this space. And we've been better well prepared to enter into the IBD space as well. And it has been defined as 1 of the 3 critical areas for us to play in the space of immunology on top of dermatology and rheumatology. And we have also other assets in early-stage development for ulcerative colitis as well.

Okay. Maybe moving on to lebri. I guess the first question is when are we going to see the next data update? Any update on that front you can share with us?

Yes. So we had an Investor Day in mid last year, and we are now continuing with the -- for the maintenance study. And we expect the data based off the maintenance data prior to the end of the first half of the year. I think you should expect the top line results mid this year on the maintenance treatment as well. So that's the time line.

Okay. Perfect. And then when we think about -- again, another very competitive marketplace and we've seen a number of agents sort of get approved here now to be used after biologics, coming in with lebri, kind of how you see that fitting in, your confidence you'll be able to compete with DUPI and gain meaningful share.

Yes. You're right. There's a lot going on in the space of atopic dermatitis and that I think we shared at our last earnings call as well that we thought not unlikely to receive a complete response letter from the FDA on Olumiant for the treatment of atopic dermatitis. And I can share with you that we have received that complete response letter. And for us, it was all based on the indicated population. And we stated very clearly that we wanted to see Olumiant being indicated for the population that has been mainly started in the clinical trials, so early on in the treatment of atopic dermatitis. Right now, we have seen with JAK inhibitors are actually placed after biologics and therefore persistent of treatment failures. So we don't believe that's a role for at least Olumiant to play. Having said that, the lebrikizumab opportunity is exciting for us. And here, we have seen that in the monotherapy study, inhibition of the IL-13 cytokine is really playing a major role when it comes to treating atopic dermatitis, which are the results from the combination trials with topicals just prior to the end of last year. And we saw with lebrikizumab arm a significant improvement of skin clearance, of itch, of sleep and quality of life. So we believe that we have an asset here that is very competitive with the market leader DUPIXENT. I think when we look at atopic dermatitis and what's going on, it's also important to look at the overall opportunity. Currently, it's estimated that we have 2.5 million patients in the U.S. suffering from moderate to severe atopic dermatitis. The biologic penetration rate here is only around 5% to 7%. Compare that to the space of psoriasis, where it, depends on the source, is somewhere in between 35% and 50%. So atopic dermatitis is pretty much today where psoriasis was 5, 10 years ago. There is a huge opportunity. And we believe with the efficacy measures we have seen, we had more than 50% of patients achieving PASI 75. And we saw consistency across all the efficacy measures PASI 90, IGA 0/1. So we really believe that when we do those cross-file comparisons that we will be able to go head to head with DUPIXENT and that we will compete here for the first-line treatment in atopic dermatitis among the injectables.

With the few minutes we have left here, I wanted to touch on [indiscernible], where you've talked about an accelerated approval strategy potentially in mantle cell. And then in terms of still moving forward in CLL, have you guys sort of -- is that door still open for potentially an accelerated approval strategy in CLL? Or has a decision been made on that front?

We have initiated the rolling submission to the FDA on MCL, and we expect to finish those actions by the end of the second quarter, and we hope that we will see regulatory actions in the beginning of 2023. And in the beginning, this is going to be positioned for patients that failed covalent BTK inhibitor treatment because that's where we see, initially, the biggest unmet medical need. But we have also announced that we are going head to head, and we believe that we could be positioned for the first-line treatment in MCL later on as well. In terms of CLL, those discussions are taking place with the FDA today, and I'm not positioned today to share more with you, but we are continuing our efforts on that indication.

And in terms of just being prepared for potential mantle cell approval. Hem/onc is clearly -- has been strong in a lot of areas, but hem/onc has not been one of those areas historically. So just in terms of ramping up the commercial effort on that front, kind of where do you stand today?

Really exciting. We're excited of moving into that space as well. And I think that's the knowledge, to a large extent, that we gained when we acquired Loxo a couple of years ago. So I would say that those efforts are going on right now. Similarly, as we discussed when we spoke about the IBD opportunity, we believe that we have the expertise internally to drive that buildup and playing a major role in that franchise as well in the future.

Perfect. Well, we're out of time here. We'll leave it there. Patrik, thank you very much for joining us.

Thank you very much, Carter, and thanks a lot for joining us.