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

Well, good afternoon and welcome once again to TD Cowen's 45th Annual Healthcare Conference. We're delighted to have with us again this year, Eli Lilly. Joining us from the company is Jake Van Naarden, who is President of Lilly Oncology. So thank you so much, Jake, for being with us.

Steve, thanks for having me.

So while we're going to spend 95% of the time in this session on oncology, I'll start out with a more broad question and that is, Jake, what are the key upcoming pipeline catalysts for Lilly overall as an entity?

Yes. So I think in the late-phase portfolio on the R&D side, there's probably a handful of things I would highlight for the remainder of this calendar year. I'm sure most people are waiting on the readouts of the orforglipron program. This is the small molecule -- oral small molecule GLP-1 nonpeptide agonist that we initiated a pretty broad program around. And we can talk about the studies that are reading out this year. The first study will be in type 2 diabetes. The second study will be in obesity. I think those are -- and there's more coming after that. Those will be really important readouts, I think, for this medicine and for this class, especially for an oral small molecule that we can manufacture at scale. We've -- I'll come back to maybe that medicine in a second as I maybe run through some of the other catalysts and we can then talk about orforglipron a little bit more. Just sticking with the chronic weight management portfolio. We'll also get the first readout from the retatrutide program. This is the triple-acting injectable incretin. The first study there is in patients who are overweight and have osteoarthritis of the knee. So in that study, we'll be looking, of course, at changes in weight but also pain scores associated with the osteoarthritis. I think at the most recent earnings call, was the first time we talked about that study actually reading out this calendar year. So that's a medicine that we think can offer like a real step change actually in weight loss and outcomes for, in all likelihood, higher BMI patients who can't get to goal on medicines like tirzepatide. This is a medicine that we hope will allow them to get to goal with a higher frequency. So there's a big Phase III portfolio there, too and that's the first study to read out. And then on the oncology side, I'll just highlight, this is a big year for the Jaypirca pirtobrutinib program. This is the BTK inhibitor of ours that's on the market today in a fairly narrow indication. And there are 5 randomized studies that we started for this medicine but only one of them has yet read out. At least 2 others will read out this year. One is against chemoimmunotherapy in newly diagnosed CLL patients. The other is a head-to-head study against ibrutinib in CLL, both pretty important studies for evidence generation and hopefully, label expansion of that medicine over time. So it's going to be an exciting year on the late-phase side. And of course, on the early phase portfolio, we have a lot going on across our therapeutic areas. And the hope is by the end of the year, we know a lot more about what those medicines are and can accelerate their development, particularly in oncology, where we put a lot of medicines into the clinic over the course of the past year and expect to do so this year, too. So maybe I'll pause there. I don't know, do you want to talk a little bit more about orforglipron, just given the focus on that medicine?

Sure. And there is a tremendous focus among investors on that medicine. And so we kind of look at it in 2 buckets, efficacy and safety and there seems to be less concerned about efficacy that that's pretty much not going to be an issue. But safety is a bit more of a concern. So why should we not be concerned about the safety profile that comes out of these trials?

Yes. So I think maybe just take a step back and we can talk about like what do we think this medicine is based on it's -- the data we've generated in Phase II. I think we've been pretty consistent over time that this is a single-acting oral incretin and the profile that we observed in the Phase II looks very semaglutide like. That's what we expect out of these studies. And so I think as you think about what to expect, at least in these first 2 readouts on the efficacy side, both for A1c as well as weight reduction, like you got to look at the sort of right comparable studies from the semaglutide program. The first diabetes study to read out is a 40-week endpoint. Of course, the time in which you look matters a lot in these studies. And so in that -- and we know that patients with underlying diabetes experience less weight loss than those without diabetes when they take incretin medicines. So that's a study where the prior semaglutide studies would suggest, call it, a 5% to 7% body weight loss at that 40-week time point. And then in the chronic weight management study that will read out a few months after that, that's a 72-week endpoint. And again, in patients without diabetes, you can look at the comparable semaglutide studies there. You can also even look at 5 milligrams of tirzepatide in SURMOUNT-1 there. That's -- those are settings where the comparable studies would suggest roughly a 15% weight loss at that moment in time. Of course, these studies remain blinded. I don't have information you don't have. But based on what we learned in Phase II and the precedent studies for sema and tirzepatide, that's what we expect. On the safety side, I think the sort of common side effects that patients experience on incretins, notably the GI side effects, I think those, I think, are -- we are unlikely to be surprised by when we unblind these data. What I think is -- the risk, I think, that's yet to be discharged on safety is just uncommon idiosyncratic things that happen when novel small molecules are put into large populations. And I don't say that because, again, I know anything, like we remain blinded to these data. And to the extent that there are uncommon things that occur, even on a blinded basis, we wouldn't actually know about that. So it's sort of an unknowable component of any new small molecule administered to large populations that until we discharge the risk, we haven't discharged it. And we'll all be paying close attention to that when the diabetes study first reads out.

Okay. Questions from the audience on orforglipron or any of the 3 key events this year, Glenn?

I was wondering as I see [indiscernible] over the next 5 years. My concern isn't about the arguments that some have whether the weight loss was 18% or 25%. The upper end may only be for a small percent of patients. But I'm looking at the orals, especially yours, perhaps being used in some patients as a maintenance therapy once they've lost their weight that they want to lose on the injectable. Do you see that as being a potential significant component because you don't need to lose more weight just want to [indiscernible] oral drug [indiscernible] who either want to take an oral, they don't want to take injections or economic [indiscernible] might be less expensive.

Do you mind paraphrasing the question?

Sure. The question from the gentleman in the front was about the sort of use case of orforglipron as a maintenance incretin after achieving a certain amount of desired weight loss on one of the injectable drugs. Yes, that's absolutely something that we foresee as a possibility. In fact, we're running actually a clinical trial transitioning patients who've chosen to transition off of the injectables on to orforglipron. So we're studying this exact phenomenon. And I think -- I don't know that, that will be something that everyone wants but there will probably be some percentage of the population who wants that. The addressable population for chronic weight management in the United States is alone is about 100 million people. So the notion that like assuming that we surmount the access barriers that currently exist, the notion that like 100 million people are all going to choose the same thing, I think, is not realistic. Patients are going to choose different medicines and regimens depending on their comorbidities and depending on their lifestyle. So our job is to generate as much data as we can for all of these different patient segments and enable access broadly. And that's what we're trying to do.

Let me just follow up on something you said earlier. So when we were talking about safety, you said the GI side effects are unlikely to be of a surprising nature and that's very understandable. But I think investors might be worried more about the rate of those GI side effects as opposed to the side effects themselves. So based on related studies, what would you say would be a reasonable or a likely nausea rate or other GI safety issue rate of AEs?

That's a good -- I don't know if I would guide to like a specific number because this is -- that's even sort of more imprecise, so to speak, than talking about weight loss percentages. But I do think that we have commercially successful injectable incretins like semaglutide and tirzepatide that have different rates of adverse events. And yet these are, in general, pretty well-tolerated medicines that patients really like. So I think that if the medicine ultimately delivers on a semaglutide-like profile, I think we've said that in the context of both safety and efficacy, at least as it relates to like the GI side effects that are most talked about. And remember, the titration schedule that we ultimately deployed in the Phase III is different than what we used in Phase II. We learned from that to try and ameliorate some of the side effects that we saw in Phase II. We've had a lot of experience, of course, over time with various titration schedules. I think if you rewind the clock on like the tirzepatide experience, I think when we modified that titration schedule going into Phase III, there was a lot of talk of like, wow, you guys are exploring so many different doses and it's such a long titration, you sure patients are going to want to do this, like isn't there a simpler way? I think that turned out to be the right course. And ultimately, patients and physicians are fine with it. And I do think we've mitigated some of the GI side effects that we might have otherwise seen. So we've done a very similar thing with the orfor program and we'll see how that plays out. But I feel reasonably optimistic about it.

Okay. Other questions? Yes.

[indiscernible] question on maintenance dosing. [indiscernible]

You're saying a GIP-only medicine?

Yes, the antagonists versus, yes [indiscernible]

Sort of a different idea entirely. I don't -- I mean we're not exploring sort of that specific concept.

Other questions? Okay. Let's dig into oncology and let's start out with the drug that you mentioned, Jake and that's Jaypirca. So you mentioned that there are several readouts coming in 2025. Which of them is the most important relative to ultimately building and establishing this brand even further?

I think that this is an interesting medicine in the sense that it's entering into a relatively mature space. There are 3 covalent BTK inhibitors largely competing for new patient starts in newly diagnosed CLL. Our medicine works when those medicines stop working. And it works for a pretty prolonged period of time and it's because the binding mechanism of the drug is completely different. And so our initial focus with this medicine for as long as we've been developing it was really in that sort of second line and beyond treatment setting. I think we can deliver a lot of value for patients and for the business by utilization of the drug there. And we're not yet there even today. Even today, we have a label that's much more confined to patients who have not just been on a covalent BTK inhibitor but also venetoclax. It's a pretty niche indication. Today, the NCCN guidelines actually recommend the drug for a broader population. And so the guidelines are a little bit ahead of the label as of right now. That's not that uncommon in oncology. So I mentioned that to say that like we're all on a sort of stepwise journey here. And there are some physicians that want to use the drug in newly diagnosed patients. And there are some physicians who want to use the drug in second line. There are some that want to wait and use it in third line. Our job is to generate all the data to get all of these indications on the label so that physicians can use it however they want to. And I think if we fast forward, in 5 years, my guess is that you're going to see like a lot of different treatment patterns as to where this medicine is used but that like most, if not all, patients with CLL at some point, see this drug in the course of their journey. And so to answer your question more pointedly, it's sort of the sum of them all rather than any given one of them that I'm most focused on because I just want to get to the point where we have all the labeled indications and the entire pivotal program has read out. And then we can walk into the physicians' offices or I can meet with physicians at medical meetings and sort of say, okay, like which of these regimens is most interesting for your patient population? Do you want to treat with monotherapy Jaypirca in the first line? Do you want to treat with a combination of 2 years time-limited Jaypirca plus venetoclax and Rituxan in the second line? Are you interested in Jaypirca plus venetoclax for a year in the first line? That's a study we're running with the German CLL cooperative group. So we're just trying to cover all of our bases of regimen and line of therapy.

Okay. So ultimately, do you see the need to -- in the first line, do you see the need to run against the current incumbents head-to-head?

We're running a study against ibrutinib. That study is going to read out this year. I think that will generate important evidence that can be compared to ibrutinib but also people, who I'm sure will cross trial, compare to other studies that have compared their drugs to ibrutinib. That's natural despite the caveats that you have to apply. Now if you're asking, do I think we need to run a head-to-head study against the other 2. Interestingly, in mantle cell lymphoma, we actually are running a head-to-head study against [indiscernible] choice of covalent BTK inhibitor. So admittedly a different disease but we actually are going to have a decent data set of pirto versus acala and pirto even versus zanu in the context of the mantle cell Phase III that we're running. I think in all likelihood, people will do some read-through from that to CLL. I think that's sort of natural despite them being different diseases.

Okay. And do you see the BTK degraders as meaningful competitive threats to Jaypirca?

Not yet. I think those medicines look pretty good based on their Phase I datasets. They actually remind me a lot of the Phase I data set that we had for pirtobrutinib about 5 years ago. And -- so they have an efficacy quotient in patients who've relapsed on pirtobrutinib. That's good if it's an important option for those patients after pirto. We don't have one of those medicines and I think the companies that do have to figure out sort of how to make them more broadly relevant, if at all. When I talk to physicians about that class, I think at least today, they see them as post-Jaypirca medicines.

Okay. Let's dig into Verzenio, very important oncology asset for sure. I have to admit, it really does look like ribociclib has a lot of momentum. So how does Lilly maintain its franchise here and not lose too much share to the competitor?

Yes. I'm not particularly surprised at the velocity of Kisqali's uptake since the approval in EBC. Remember, the same dynamic happened when Verzenio was first approved in EBC. I think that's somewhat natural for a class that's this mature. These medicines have been on the market for a long time. Most prescribing physicians have used all 3 of them aplenty. And of course, in the adjuvant setting, we're only talking about 2 of the 3 but the point still holds. And even so in the case of us with monarchE, in the case of Kisqali with NATALEE, these adjuvant data sets were in the public domain and sort of broadly discussed and debated for a long time even before the EBC approvals from FDA. So I don't think it should come as a surprise that you see like a brisk uptake really immediately post approval. We saw that with Verzenio, they're experiencing that with Kisqali. When you -- when I look -- when we look at the sort of new patient start data, it looks to us that currently, they're getting about 15% of the, call it, jump balls for the patients that overlap between us. That's a number that's not that surprising to me. I think these medicines are different. They have pretty different side effect profiles. Neither one is squeaky clean. But as a result, have different patient populations for whom they address. Of course, Kisqali is 3 years long, Verzenio is 2 years long. So patients on Verzenio can move on with their life sooner. I think that's compelling to a lot of men and women in this treatment setting. So there's different choices people will make. What we hear pretty consistently is that for the Verzenio high-risk population, Verzenio remains standard of care for a variety of reasons and that Kisqali is broadly being used in the population that's not overlapping. I think the sort of new patient start data actually fall right in line with that. And of course, it's still early days. So we'll see how that evolves over time.

Okay. What are the pros and cons of initiating an early breast cancer trial in the N0 and N1 patients?

You're talking about the population, the NATALEE study that's not in monarchE, like for Verzenio right now?

Yes.

It's pretty late life cycle to start a new adjuvant trial for Verzenio studying that population. I don't think that's high likelihood. I mean Verzenio is likely to be an IRA negotiated product in the next couple of years and the U.S. patent expires in 2031. So the time line of running adjuvant studies like that is probably in the rearview mirror for Verzenio alone. That having been said, now switching gears a little bit. But for imlunestrant, our oral SERD, EMBER-4 is the adjuvant study we're running for that medicine. And that is a study that actually has inclusion criteria from a patient population perspective, that are much more similar to NATALEE. So we learned from the NATALEE experience in the way we designed EMBER-4.

Okay. I do want to get to imlunestrant. But let me ask one more on Verzenio. And that is that -- and I've asked you this question in the past about these novel CDKs like the Pfizer CDK4. And in the past, when I've asked you that you've responded, well, Verzenio is the most selective of the 4/6 inhibitors for 4 already. So the advantage of a pure 4 is not that great. Is there any change in your view in that regard?

Not particularly. Again, I think actually, like the CDK4 Phase I data sets that I've seen are compelling. They look pretty good. The problem is that like it's not sort of 2014 again. Now the CDK4/6 class exists. Some of these drugs have prolonged overall survival. They've all prolonged progression-free survival. In oncology, you have to run a head-to-head study and win on efficacy with a compelling hazard ratio. And so I -- that's hard when the sort of only modification you've made is minor. And so I think like to me, that's why we haven't entered this space because I think winning a study like that is pretty difficult.

Okay. Questions about Verzenio before we move on to the SERD class. Yes.

So last time I think you were pretty adamant that you don't think the overlapping population with Kisqali will change much with this 15% that you cited so far. [indiscernible] they were pretty adamant that they're going to go after that and growth there. So why do you think they're -- how are you going to hold them off [indiscernible] pointing towards cardiac risk factors as [indiscernible] is there anything else we are missing there?

All I can do is reflect what physicians tell me and us when we interact with them. And it seems as though, at least in this treatment setting, there interested in being more splitters than lumpers. And we'll see whether that changes or not. But I think the treatment regimen length is a big thing for patients and providers. And especially if they view the efficacy as broadly similar. They're actually -- there is some false equivalence there even being applied. But okay, like we do have a more mature data package than they do and we always will because of when it read out. There are some physicians who see that for what it is and there's others who look at the 2 efficacy quotients and say, they're sort of very similar. But I think Verzenio has known GI tolerability issues. We've tried to manage those with dose reductions and some physicians use different kinds of dose titration schedules to manage that. Okay. I think Kisqali has cardiac monitoring. And I think there's a lot of physicians in the real world who had rare but real liver enzyme issues that forced patients off the drug and then cause real problems. I think for the physicians who have that like once they sort of don't want to do it again. And you saw that even in the context of the NATALEE study itself. So again, I don't want to make too forward-looking predictions about how that 15% will evolve because I don't know. But what physicians tell me today is that these are sort of 2 different populations that they're thinking about.

So let's move to the SERDs. In what ways is imlunestrant different than other SERDs in development?

So I think there's the medicines themselves and then there's how the medicines are developed. On the medicines themselves, there are I think differences in particular, on the safety side that we've seen over time. There are certain SERDs in development that have either ophthalmic toxicities, cardiac toxicities, changes in lipid levels. These types of things, which, by the way, the field doesn't even understand why any of these things even occur. But imlunestrant doesn't seem to have any of these issues. And I know we don't tend to talk about sort of tolerability as sort of the main driver of oncology programs. But in this context, when like the main reasons entire class was invented is to change outcomes for patients in the adjuvant setting. Patients in the adjuvant setting take endocrine therapy for 5 to 10 years. It's a pretty long time. And if the medicine is intolerable, then they're not going to be able to stay on it and if they're not going to stay on it, they can't get the efficacy. So we've always been very focused on the tolerability profile of our medicine and is one of the bigger learnings actually from the Phase III EMBER-3 study that read out last year, was just seeing the tolerability profile of the agent in a sort of rigorous Phase III study. We had Phase I data many years ago but you always look to a Phase III for sort of a more rigorous determination. That was a big sigh of relief, in many ways, sort of surprised us on the upside as to how well tolerated the agent was in that setting. And then on the development side, we've developed our medicine in the metastatic setting in combination with CDK4/6. Verzenio, I think that led to, I think, a pretty differentiated set of outcomes, that have excited clinicians, now admittedly in second-line breast cancer. And then our adjuvant program is differentiated on the basis of both design and time line. We're running at an extended endocrine switch study. So this is in the adjuvant setting after the CDK4/6 period. We are -- patients that enter the study, get randomized to switch from their aromatase inhibitor backbone to imlunestrant or stay on the aromatase inhibitor. And so in a way, it's sort of a pure SERD versus AI comparison. And we think we know from historical studies that SERD versus AI comparison without CDK4/6 in the backbone, the SERD wins. And so that's the basis of that experiment that we're running with the EMBER-4 study. Pretty big swing if that study hits. That will be a very, very important new medicine for us. And in the meantime, we hope to be launching it in metastatic disease later this year.

Speaking about EMBER-4, do the results of EMBER-3 and the fact that it didn't reach significance in the overall population concern you at all about the probability of success of EMBER-4?

Not really actually, in fact, sort of the opposite, and this goes back to what I was just saying a second ago. Like if you look at EMBER-3, remember the comparator in that study and this is really important, the comparator was fulvestrant, another SERD. The comparator in EMBER-4 are aromatase inhibitors, not a SERD. And so in the context of EMBER-3, what we saw is that in the ESR1 wild type population, the comparison of imlunestrant versus fulvestrant has a progression-free survival hazard ratio of about one. They look very, very similar. You might say like, well, Jake, isn't that a problem? Well, in the context of the adjuvant design no, because there we're comparing to an aromatase inhibitor. And if historical studies are right and fulvestrant beats an aromatase inhibitor and imlunestrant looks similar to fulvestrant, then imlunestrant ought to be the aromatase inhibitor too. So if anything, like the randomized data we got from EMBER-3 furthered my conviction in the likelihood of EMBER-4 working.

[indiscernible]

That is the main body of evidence in fairness. And we only have a handful of these experiments that have been run, right? You have FALCON without CDK4/6. You have PARSIFAL with CDK4/6. I think many of us in the field made our judgments rightly or wrongly on the basis of those 2 seminal experiments.

[indiscernible]

PARSIFAL was hugely impactful into how we were thinking about the development program. You'll note that, well, I think we're the only company with a novel SERD that chose not to run a first line study. Because there you have to run concurrent CDK4/6 and PARSIFAL would suggest that those -- that study -- that won't work. Obviously, like we'll see later this year, I think whether we were right or wrong because some of the competitor studies will read out and we'll find out whether or not that was the right conclusion to draw. It also impacted our development thinking for the adjuvant setting because, as I mentioned earlier, EMBER-4 isn't running concurrent with CDK4/6. It's actually running after the CDK4/6 period. We did that very deliberately in part because of PARSIFAL.

We're down to only 1 minute left. I thought one of the most interesting points at dinner yesterday evening was your identification of things that could be game changers to Lilly. And Lilly is already pretty much a game changer, right? But could put the company on an even greater trajectory. And you noted 3 things. And what jogged my memory is, one of them was EMBER-4, which we've already discussed. The other 2 were Lp(a) and Alzheimer's disease prevention. So maybe you could just spend in our last few seconds, just to spend a moment as to why you view those, or Lilly views those, as game-changing events?

Yes. So -- as it relates to Alzheimer's disease prevention, I think we know that -- Alzheimer's disease remains a public health epidemic, a leading cost of death in this country, a huge cause of morbidity to families that have a loved one with this disease. And yes, we have the launch of [indiscernible], as an example, in symptomatic disease, has gone somewhat moderately. I think as we transition the medicine to preventing the occurrence of symptoms of this disease with a blood test as the sort of entry way to getting the medicine, I think we'll be having a very, very different conversation with patients. I think that looks very different than like slowing the course of the disease that is otherwise progressing. And by the way, all of the evidence we have from both the donanemab studies as well as even lucitanib studies, which suggests that the earlier you go, admittedly in patients with symptoms, the larger the effect size you observe. Of course, patients who have amyloid pathology in the brain but no observable symptoms, which is the population in TRAILBLAZER 3 is an even earlier version of that same biological idea. So that gives us a lot of conviction that the study will have a big effect size. And of course, in the context of preventing a disease, we also need to observe a safety profile that's amenable to a positive risk benefit quotient. That has yet to be borne out. So we actually -- we need the study to read out, to prove that to us. Patients with -- preclinical, is what the term is. Preclinical Alzheimer disease is presymptomatic. Tend to have lower amyloid burden in the brain. We know amyloid burden does correlate with the onset of ARIA-E and it is amyloid-related safety events with the amyloid lowering agents. And so we're hopeful that patients with lower amyloid burdens in the brain will experience meaningfully less safety issues with the medicine. But if we can deliver a medicine that can prevent the occurrence of this disease, I think that to be a big game changer for public health and Lilly has a result -- has a follow-through to that. And then the LP(a) is, in many ways, I think, it's like the highest profile unaddressed for underlying cause of excess morbidity in cardiac disease. And there's a lot of genetic evidence to suggest that lowering this will have an impact on patients' cardiac outcomes. And of course, cardiac disease remains one of the biggest killers globally, including in the United States. So a lot of unknowns here. We don't know like how low do you need to go? How long do you need to go to keep it low? What will the effect size be upon the intervention? So today, the evidence around Lp(a) is a little bit more correlation than causation because none of the actual drug intervention studies have read out yet. But I think the genetic risk combined with the correlative studies we've seen, I think, are about as tight as one of these ideas gets. And now it's just a matter of seeing whether or not that translates into a big effect size in the context of these outcome studies and excited about the work we're doing in both primary and secondary prevention there.

We do have a cardiology panel ending today, and Lp(a) will be a topic. Well, thank you so much, Jake. This has been a wonderful conversation and lots to look forward to.

Thanks for having us, Steve.