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

Thank you all for coming to listen to the Lilly story this morning, and hope I'm sure you've been tracking us for a while. And you've seen what we've shared on the earnings call, the great progress we've had last year and that we're continuing to have robust top line growth driven by our key growth products. And as we've shared for guidance for the year, at the midpoint, we're going to be growing at 20%. And since then, since the call, we launched our KwikPen, Mounjaro KwikPen in the U.K. So that's an exciting start to patients in the U.K. We saw the MASH or NASH data for tirzepatide, which was incredibly exciting. But we also have always in our business, sometimes there are setbacks, we've announced the CYCLONE 2 for Verzenio prostate cancer. Did not meet the endpoint, and we terminated CYCLONE 3 as well. So we -- and entering here, and I'm sure you'll have questions for him on our Lp(a) program that initiated Phase III as well as retatrutide, where we're expanding and initiated Phase III in type 2 diabetes. So we're really progressing across every part of our core therapeutic areas, and Lilly is showing meaningful progress in our pipeline as well as our commercial products and global presence as well. So we're excited with where we are and excited to be here with you today and answer any questions you might have.

So a lot to talk about, obviously, in this session. Should you have a question anywhere along the line, just raise your hand, and we will call on you. One of the things that has so impressed me over Lilly for decade -- regarding Lilly for decades is its ability to kind of conceive and move towards what's next. So we all see what's here now, and it's wonderful and has great opportunity. But what's around the corner is what we don't see, and that's what Lilly is so good at seeing and capturing. So let me open the session by asking Andrew a question, and that is your area could be the source of what's next. So you're working on a lot of brand-new areas with such promise. Just tell us about 2 or 3 of them.

Yes, for sure. Maybe we'll start with one of the more proximal ones that people are probably more familiar with in chronic pain. I think if you think about chronic pain, it sort of fits the phenotype of things that Lilly addresses as big rocks to move. You have a challenging landscape with massive unmet medical need, and you have science that's breaking, but it's breaking in sometimes challenging regulatory and environmental landscapes. You can drill parallels to Alzheimer's disease, where obviously it took a very long effort for Lilly and others to change that disease. And then from obesity, similar idea. When I joined Lilly 14 years ago, a lot of the advice that I was given at the time from my peers in academia was that don't work on obesity. That would require an active Congress, and the science is really not there. I think Lilly had the foresight to continue pushing at what we saw as a huge opportunity to help patients. And so I think chronic pain, for me, when I look at the science breaking, I get to see a lot of that internally at Lilly and our department in neuroscience. There's a lot of interesting things happening in Phase II that we hope could sort of disrupt the current unsatisfactory care landscape for patients with pain. And then in generic medicine, briefly, obviously, people have followed what we did with siRNA over the past 7 years. That's resulted this year in the first Phase III for Lp(a) at the company. Obviously, a program we're incredibly proud of since we've been private from inception to the Phase III. Also that time line, we're incredibly proud of, too, of going very quickly from an idea to a potential medicine in a registrational study, hopefully. So for us, those kinds of platform-type deals have continued. Lately, that's been more focused on gene therapy. People probably saw the Akouos acquisition. We're incredibly proud of the Akouos team and the work that they did. Obviously, the New York Times story is not something that happens particularly frequently in my business. And so when you're able to tell people about the work that we do, taking a child in that case, who had been profoundly deaf for a decade and then restoring normal hearing, I think it demonstrates the power of what can be done in regenerative medicine with gene therapies. And I think you'll probably see that expand at Lilly and in other places over the next few years. So that's another area, I think, that we see as a key growth opportunity and a place where maybe the field has shied away because the science has been hard. That's another thing I really love about Lilly is that when other people are moving away because it gets difficult, if we have conviction about an idea in a space, we sort of double down. And I think that's actually sometimes where we find counterintuitive value that other people miss.

Great. Sounds exciting. I'll pose some questions to Anat, and then we'd like to move to some of your questions. So we had a dermatology panel a day or two ago, and I wasn't personally there. But I understand the doctor was very -- doctors who were very excited about lebrikizumab, feeling that in -- when it comes to market, it could give Dupixent a strong run at first-line dominance or first-choice dominance. The problem with lebrikizumab, of course, is that it's not approved yet. And the path to approval is not crystal clear to me. So can you articulate where we go from here to get this very exciting product [ to market ]?

So we're confident that we'll get the approval and be able to launch lebrikizumab before the end of the year. We had a CRL, which was related to manufacturing at a third-party site. We've addressed that and we're working to ensure that this gets to market. And I agree. I think this is a very unique opportunity for patients. It does have special properties, not only just the efficacy data and the outcome but also the frequency of dosing. And certainly, as you know very well, patients and physicians like to have options. And we'll bring this to market and offer what I believe will be a very compelling option for physicians and patients in this space. And it could be a meaningful opportunity for Lilly as well.

Great. Questions from the audience? So let's move to tirzepatide. And first, let's maybe discuss the manufacturing topic. So Anat, maybe you could just bring us up to speed where you stand now and where you'll stand at the end of 2025.

So we have a very broad manufacturing expansion agenda, the largest the company has ever had in its 148 years' history. We -- as you know, we've launched or got approved and started launching product out of our site in North Carolina, the first site, RTP, and progressing very rapidly with the construction of the second site in North Carolina in Concord. That should be completed by the end of this year, and then we should start seeing contribution to capacities [indiscernible] 2025 from that site. These are both fill finish, very large fill-finish sites. We've also expanded and we just announced recently the construction of a new site in Germany. And then we have API sites in Ireland as well as 2 in -- north of Indianapolis not just for tirzepatide, but we're looking across the portfolio to see what the portfolio needs will be not just for the next year but over the next 5 years or so, and then moving aggressively with advancing our manufacturing agenda. As you know from Lilly, our strategy is, first and foremost, to rely on our own supply chain for production of our drugs and then expand with the use of CMOs and partners. And we do have those across the value chain, partners that we work with to support different products. We don't typically comment on which suppliers those are, that we have a robust supply chain. Where we can, we try to have multiple suppliers for every node of inputs into the process, so it's not always easy to do. But when we have suppliers of the right quality and qualifications, then we bring them into the fold so that we don't have dependency on a single supplier or a single geography. I think that's something we've all learned during COVID. Companies that had that got into trouble, and you've seen Lilly was able to get through that period very, very well. And that's part of the strategy. So it's progressing well. But even with that, as I said on the call, I don't expect that our production will meet demand this year. We'll be in a very tight supply/demand situation through 2024 and potentially even slightly beyond that. The fact that we launched our single-use vial outside the U.S. now in several markets helps provide a little bit of a relief valve, and the recent launch of the KwikPen will help as well. And then fast forward, assuming GGG is positive and Phase III is positive, then that should -- I'm sorry, not GGG, orforglipron, then that provides another presentation in terms of an oral formulation for patients. So that should expand that as well.

Questions from the audience? So Anat, you said -- so you're not going to meet demand this year, clear. In '25, you're leaving a little bit uncertain whether you meet it or not. And of course, there's two sides to that, demand and supply. So maybe you can just talk about each of those aspects, demand/supply, what your assumptions are now and where the uncertainty lies.

Yes. So as we think about demand/supply for this year and beyond, so where I think we are for this year is, again, demand and supply are going to equal, which means we're producing and we're selling everything we're producing, right? So that's the way to think about the demand/supply, which is a tight situation. Typically, you'd want to see us produce a lot more inventory than we have demand. But what we've seen with tirzepatide, the demand for the product is quite robust, really in every market we launched. Even -- I know some asked, well, you see the same demand when you launch a single-use vial into markets outside the U.S. We see there a robust demand. The efficacy of the product is so strong that there is strong demand from physicians for their patients and the patients that are using the drug and seeing the efficacy. So that's where we are, again, the launch of the KwikPen. Hopefully, we'll get that approved in other markets outside the U.S. We just launched in the U.K. That should help as we'll get more and more capacity for patients. That's a different supply chain or manufacturing network than what I've mentioned for the constructions we have ongoing that is for the auto-injectors. The KwikPen is a different device. It's a device we know very well. And we have those lines, but we still need to get them qualified to produce tirzepatide and then launch these outside the U.S.

Questions from the audience? So I had the opportunity to chat with management yesterday. And Andrew, when I asked you about donanemab, which has a Q1 '24 PDUFA date, and I asked you how it was going, your reply was it's a big file. That wasn't the most reassuring response. So maybe you can add a little color to that.

Sure. It wasn't intended to not be reassuring. It's a completely normal experience thus far. I mean -- and I've been part of that from assessing questions and feedback and things that we've provided. There is nothing that I've experienced on that filing that's out of the ordinary for a trial of that magnitude and an indication as important as Alzheimer's disease. So I would suggest that we just have to follow the time line set by the agency. And it's really out of our control, their review process, once we provide the data that they've asked for.

Helpful. So -- or have you yet to provide the data, the...

We are waiting on -- we provided everything. We're waiting on them to...

So everything is completely normal?

As far as I'm aware, everything is completely normal, yes. You'd have to ask the agency for their view. But from our side, everything is completely normal.

So we're witnessing Biogen's rollout, and it leaves something to be desired. Why won't -- why will Lilly do better?

Well, I mean there is something to be said, I think, in certain classes for not being the first people to go in. So obviously, we get to learn from seeing what's happening in the ecosystem with Biogen. So that's not something that you desire. We always want to be first. But when you're not, you can take advantage of learning from other people. I think at the same time, we've been thinking about this for over a decade, right? The solanezumab trials were going on through my entire tenure at Lilly. And that entire time, we were thinking about as we get those to the market planning for success, how are we going to enable a successful rollout for an antiamyloid antibody. The same is true for donanemab now. Like we're taking those learnings from solanezumab with networking with KOLs, understanding patient journeys through the diagnosis and treatment ecosystem, I think, and recognizing the points of frustration for patients with Alzheimer's disease here in the U.S. and globally. It's really tough even today to see a neurologist once you start experiencing the symptoms of cognitive impairment. Some people are waiting 9 to 12 months to even get a first diagnosis of Alzheimer's disease, and that's too long and it's frustrating for patients. So I think one of the things that we can do is raise awareness of the diagnostic tests, like the [ S-CitAD ] test that we've just put out into the ecosystem as well as best practices by specific places. There are certain institutions that are doing very good jobs of memory care. And I think modeling what they're doing well and expanding that to other sites and Lilly's role in facilitating that can be hopefully a proactive one moving forward. And then once donanemab is available, working with those sites to make sure that patients who can best benefit from the therapy get it as fast as possible.

Yes?

What's the role of the DTC advertising?

The question is what's the role of DTC advertising?

For donanemab, for Alzheimer's disease?

Yes.

We'll see when we launch the product. DTC tends to be better when you have an audience that's actually watched, whether it's on TV or whatever it is. There's different now DTC campaigns. And historically, we always thought about it as it's TV, but now we do a lot of digital. So it depends on where the patient is. We don't typically talk about marketing tactics before we launch our product. But you need to understand who the patient and where the patient is. If it's not a patient that's online, there's not much in terms of going online. Although for a product like donanemab, it's not always the patient. It's often the caregiver who will bring the patient in and will seek help and treatment. So that's where we need to see who do we actually need to communicate with, and it's -- that's not just the patient, it's the whole system around them, their caregiver, patient advocacy groups et cetera. So we'll see when we launch the product with -- how we decide -- you'll see it in our actions in terms of go-to-market. Rest assured, it's not something we think about after we launch. We prep for it well ahead. We just don't talk about what those tactics are.

Phil?

[indiscernible] how stratification will be part of the criteria for approval?

Will -- how stratification will be part of the criteria for approval?

And you're referring to whether or not it would be in the label. So we don't have a label yet, so we'll see when we get the label from the FDA. Anything you want to add?

No. I think we'd have to wait to see what the FDA give us.

Let's move back to manufacturing tirzepatide for a minute. So people like Mike and I, we worry for a living. So when Novo bought Catalent, it gave us something to worry about. And I -- the question is your level of worry, Anat. So let me give you 3 possibilities: either this is a modest distraction, it's a moderate concern or it's a substantial hurdle Lilly needs to cross.

Is there a none of the above or all of the above?

None of the above.

I worry for a living as well. So here is how I view the Catalent -- or the Novo acquisition of Catalent. And we don't typically talk about which suppliers or partners we work with. That remains confidential. But I think you all know that Catalent is a supplier or a partner to almost every company in the industry, and we have products that go through their facilities as well. So when we saw this, and I shared this on the call, there's nothing new that I can share just yet is, it does look to us like a vertical integration of -- as a manufacturer with a supplier that supplies, that manufactures direct competitors and other companies in the industry. And our focus has been -- continues to be to ensure that there is no supply interruptions for patients on our products or products that go through those sites as well as holding Catalent accountable for their contracts with us. So that's not changing. That's our focus right now. And we'll see where that -- we're watching where that transaction goes. We're eager to learn more about it.

Questions from the audience? So Anat, you have several diabetes and obesity drugs in development. You have obviously Mounjaro in Japan and then you have orforglipron in GGG. In each area, diabetes and obesity, assuming the drugs were successfully developed, what would be the dominant product in the Lilly portfolio in each category in, say, 10 years?

In 10 years?

Well, maybe 5 years.

Yes. We'll see what the evolution -- so by 5 years, fast forward, if GGG is successful and orforglipron is successful in their Phase III, then we assume we have already progressed into filing for approval and launching these products. And that means there are several Lilly products in the marketplace that cover essentially every patient needs. Whether a patient needs 15% to 16% weight loss or they are -- they can't take an injection for whatever reason, they can use orforglipron as a true oral. And this is, by the way, a small molecule through oral. It is not a simple molecule, so it's a complex small molecule from a production standpoint, but you can consume it any time during the day. So if patients need that, that's an option for them. If they need something more, then they have tirzepatide at 25% or 26% weight loss. And hopefully, with retatrutide, GGG, they're getting now to bariatric surgery levels at potentially up to or near 30%. Again, we'll have to see the data in the Phase III program. So we have a set of products that physicians can choose based on their patients' characteristics. In the specific need and in some markets we know globally, there are going to be varying needs or preferences, so we'll have a portfolio that covers everyone.

Yes. I think just to add on to what Anat said. I think one of the key things to think about here is that every diabetes and obesity patient is unique, and they have a unique set of comorbidities and a unique set of challenges that they need to work with the doctor to solve. I think that if you think about the medicines that we have in clinical trials and the medicines that we have approved like Mounjaro, you can also look at some of the biological rationale between the constituents of those medicines as to how they might benefit a specific patient with MASH or a specific patient with kidney disease or a patient that needs to lose a larger amount of weight. You can probably use that to also work -- allow that physician more choice to pick the medicine that's best suited to the patient that they have also.

Can you talk a little bit about the potential differences in either market strategy or patient profile for an oral weight loss drug versus an injectable? And is there a chance that oral has become greater than 50% of the market?

We'll see what percent of that market will be. We'll have to see the full Phase III data and then how we market it. Well, you have to wait for that.

Questions from the audience?

I want to just highlight something Andrew said was -- which is really critical. Obviously, we're studying tirzepatide in multiple indications. And that's really our view that managing someone's weight when they're obese is not just reducing the number on a scale. It is truly managing their health in a very broad way. So we saw the NASH data, we're going to be seeing the obstructive sleep apnea data here soon, the heart failure data. And if we're able to prove that what I think we already all know is that being obese has very broad health care implications, then it serves as another area for patients beyond just obesity but treating specific health care needs.

Yes. It's kind of hard to underscore how challenging it is being obese. If you even think -- look at oncology, actually, and look at the fastest-growing cancers, most of the fastest-growing cancers are actually associated with the GI tract and probably also impacted by patients living with obesity. And so anything you can do to directly address weight but also all these other comorbidities, completely agree that we're extremely confident that you're going to have knock-on effects into places that potentially even us aren't thinking about right now.

So we're all eagerly awaiting the LPA readout, and we're excited about it. But this group has been through many trials of novel lipid endpoints and their promise that just haven't panned out. So why should we be confident this time? And you just used the word on -- for another situation, extremely confident. Would you use those same words on your LPA Phase II trial?

It's always humbling to work in science, right? So I wouldn't say until we have a Phase III study, which is the case with GLP-1, where we know the benefits that it's equivalent to Lp(a), where no one has tested in a Phase III study yet, lowering of Lp(a) in patients. But the genetics are extremely strong. The apheresis data, while small, are also positive and lean towards being a long-term benefit to reducing Lp(a) levels. So in terms of the level of confidence, it's as high as it can be without having to run the Phase III study to prove the intervention and patients will lead to that same outcome. But we'll find out over the next few years. But from my perspective, in terms of the generics, at least it's one of the stronger targets that you could pursue in the cardiovascular space.

And I think there's at least 4 companies involved in LPA. Why is the Lilly molecule the best? And why is your study design best?

Well, we'll find out once we all run our studies as to which molecule is the best. But I would say that siRNAs as a class is my personal preference, mainly because I think the cardiovascular disease is someone who takes a statin every day. It's kind of inconvenient having to remember in many days, I forget to take my statins. So the idea of once every 6 months potentially injection where I see my physician, and he tells me my LPA number, I get my shot. And then I don't think about having high LPA again, hopefully, for the rest of my life. I just get my shot and forget about it. That kind of convenience is really compelling. And it sort of spills over actually into why we're excited about the idea of gene editing long term. But maybe I just get one intervention with my physician eventually, and then I never think about my Lp(a) level for the rest of my life again. I think that's a really exciting vision for the future for patients with high Lp(a). And Lp(a), it's a really interesting thing to think about because it's not like LDL where diet and exercise can impact the level of LDL in your blood. For Lp(a), you can be an extremely healthy marathon runner in your early 30s and still suffer cardiovascular events if you have extremely high LDL -- Lp(a) levels. And so for us, a medicine is really critical to intervene here because there isn't really any other option today for patients with high Lp(a).

Questions from the audience? Anat, we're very confident that the obesity and diabetes markets are going to be very, very large. But of course, there is the possibility that they're not for whatever reason. So the question is, what do you think is the probability or possibility that we're sitting here together in 3 years and we look back on the obesity dialogue among investors, and it really just never kind of met the expectations that people thought. And maybe it's unrelenting pressure from payers, maybe it's the fact that patients actually have to diet and exercise, and they don't want to do that. So what's the probability of that?

I think the probability of that is low. Just the obesity market is already large, right? If you look at 2023 results for Novo, and we already only have 1 quarter -- less than 1 quarter, a month of data in December revenue, it's already meaningful. So I don't think we're going to slip back to these being insignificant products in the marketplace. What could -- but what you described as pressure, I think we'll see. But it will still be a significant opportunity. So pressure from payers, absolutely. And we know how to -- we've dealt with this, by the way, across every category that we're in. This is a very large category. But it's interesting because we see opposing dynamics. So on the one hand, we do see the pressure on rebates discounts, potentially utilization management criteria, which means they can bifurcate patients in terms of who's eligible for a drug. But on the other side, if you think about employers, they're getting significant pull or push from their employees to get access to these medicines. So really, what they're trying to figure out is how do they make them work. This is for the U.S. market. Outside the U.S., where we're dealing with a single payer, it is not uncommon for that single payer, the government having obviously oversight and access to the entire health care system. So when they look at their population and the health of their population, they're not just seeing the cost of a GLP/GIP or the cost of any anti-obesity medication, they're also seeing the benefit down the road, whether it's absenteeism from work or other health complications, some of the things that I've just mentioned we're working on. They are certainly very costly to the system. We know the cost in the U.S. is incredibly high. I think the estimate was about $1 trillion as of recent. So certainly, there are benefits to introducing these agents to the marketplace. And -- but there are -- you're right, there are pressures and there are going to continue to be pressures. We're going to work in that system to ensure patients cannot get access. But I'd be surprised if we're sitting here in 3 years and that is the -- that's the outcome.

Questions? So you have cardiovascular endpoint trials underway for both Mounjaro and Zepbound. Assuming they're successful, what will we learn when we get the results given the fact that Lilly and Novo have already kind of produced a lot of data in this regard? So what will we learn?

So a couple of things, and then Andrew can jump in because he's worked on this for some time. There are 2 studies that I think you're referring to, 2 categories. One is the CV outcome study where we're testing against Trulicity. So the control arm is Trulicity. So it's a high bar for efficacy. It's a noninferiority study. The second study is what we call MMO. So it's all-cause mortality and morbidity, which is also an aggressive view on what we think the outcome will be. Both these studies are long in durations. They have thousands of patients involved. So it will take some time before they read out. But if they read out positively, which I think everything we see today in the tirzepatide data for their Phase III, both in SURMOUNT and SURPASS, show that there are cardiac benefits, right, if you look at blood pressure, lipid profile. So everything is moving in the right direction. So it gives us some confidence that these studies will read out positively. But as Andrew said, science is hard and sometimes studies don't read out positively. We've never assumed that, but we start with that hypothesis. But if they do, what it does, it provides just another layer of evidence of the importance of these drugs. Again, beyond managing someone's diabetes or someone's weight, it is addressing a very critical health conditions, which provides -- we talked about pressure from payers, just additional layer to that. I get the question often, you may ask this next, if we think this will be required for reimbursement. We're not seeing that.

Okay. I wish I could ask more questions, but we're out of time. So -- but allow me one more. So you obviously have much greater knowledge of Eli Lilly than we do. And you know what we think. What is the one thing that we are missing about Lilly that we will all see in 5 to 10 years?

So first, you're right, and yourself as well as our long-term investors are incredibly and quite knowledgeable and understand the company very well. We don't hide anything, obviously. What you don't see is you don't see data we haven't yet disclosed. Typically, we disclose it pretty quickly or thinking we have in preclinical stages or early stage of development just because it hasn't made kind of public -- made itself into the public domain. I'm always maybe not surprised, but when I meet with investors or analysts, we spend 75% of our conversation on tirzepatide. And it shouldn't be surprising, right? It's a great opportunity, a very large medical need literally globally, right? It's a global issue. So I'm not surprised that I'm getting a lot of these questions. But Lilly is well beyond tirzepatide and well beyond our endocrine portfolio, which I'm incredibly proud of. We have depth of expertise, that is incredibly impressive and unique and one that we've developed over literally decades. None of this happens overnight. But we have a very rich portfolio outside of diabetes and obesity. Andrew talked about Lp(a). We talked about donanemab, lebrikizumab. For those of you who've been following us for over a decade, I mean if you look 10, 12, 15 years ago, we were not in immunology. We had nothing in immunology. And we've built a really nice franchise, coupled with drug development expertise, marketing capabilities. And you look at what we have now with Taltz in the marketplace, that's a blockbuster drug. Olumiant, less so in the U.S. but certainly outside the U.S. We're going to bring -- we just brought Omvoh to patients. We're going to be launching lebrikizumab. We have earlier-stage programs with DICE as one example, but more than that, we're developing. So that's another franchise. Oncology, I know everyone knows Verzenio is doing very well and a standard of care for this group of patients. But we have beyond that, we launched Jaypirca, and that's going very well. We'll see more data, obviously, with every month and now that we've expanded into CLL as well. But more in oncology in earlier phases, and we're now in radioligand pharmaceutical. So we're going to advance that. In the neuroscience, multiple things. So you look at Lilly and it's a diversified portfolio with both the breadth and depth across multiple therapeutic areas. But what I always say, to those of you I meet with frequently, it's not too broad. And what that means is we're not spread so thin that we don't have the depth of expertise in the therapeutic areas, nor are we so concentrated that we have a risk associated with one therapeutic area. I think we've really hit kind of the sweet spot where we have this breadth across our 4 or 5 therapeutic areas as well as depth in each of these categories. So when we bring asset externally, for example, we do a lot of business development, tends to be early on. So it's not the $15 billion, $20 billion type of acquisitions. But we bring them on into an R&D organization that is really excellent in developing drugs in these categories and can accelerate their progression as well as bring a lot of unique insight into the clinical trial design for these assets. So that's -- I think these are things, when we sit here in 5 years, I'm guessing we're still -- we're going to be talking about tirzepatide and retatrutide and orforglipron. But hopefully, we'll talk about donanemab and lebrikizumab and Jaypirca and much more than that.

Great. Sounds like an exciting future. Thank you very much for your time.

Thanks.

Thank you for participating.