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

Cowen's 46th Annual Healthcare Conference. And we are absolutely delighted to have Eli Lilly back at the conference again this year. Representing the company is Lucas Montarce, who is the CFO; as well as Mike Czapar, who is the Head of Investor Relations. So thank you so much for making the journey, and it's great to have you here.

So much to talk about at Lilly, so many dynamics to dig into, so many details to explore. So we'll dig right into it. But should you have questions anywhere along the line, please just raise your hand, and we'll do our best to get your question answered. So probably the number one thing on people's mind is orforglipron, and we're all just holding our breaths waiting for its approval and launch. So maybe you can give us an update on how the review is going? What stage you in? And what's your level of confidence that on April 10, we will get a letter of a positive nature?

Yes. Thank you for having us, Steve. Pleasure to be here. And yes, orforglipron is front and center. We are well on track for regulatory approval. We mentioned that the time line we are expecting that early Q2. Nothing has changed from that perspective. Of course, as you can imagine, we are prepared for a full commercial implementation and launch in the U.S. We talk about OUS markets that takes more time. Again, the regulatory process we will think about, again, most likely a 2027 type of broad market access outside the U.S. as well. So well on track in the U.S., expect to see potentially that product coming into the market as early as Q2.

Excuse, my naive question because I've never actually worked at a company. But how quickly can orforglipron be on trucks and leaving Lilly Docs and getting into the hands of patients?

After the FDA approvals, it depends on the dates and so on, but it takes within a week or so to see the product shipping to the patients -- to the customers and the patients and afterwards.

And so you must already be in conversations with payers and preparing the reimbursement landscape. Give us what should we expect the landscape to look like as we exit 2026? Is it going to be broad access to orforglipron? Or will it be more limited? What should be our expectation?

Yes. Well, I think given that all the information on incretins is broadly available and public at this time, I'm not planning to open it up anything that is not in the public domain. What you think about, again, the access for orfoglipron, of course, the product will be available once they get the regulatory approval on Lilly Direct. We already actually announced as a result of the MFN deal, the starting dose price at $149, and that will scale again the price up to $3.99. That's what we have communicated already. Then we have now the Medicare access on anti-obesity medication that will start no later than July 1. So orfoglipron will enjoy that access in Medicare for Medicare patients, potentially then in the future into Medicaid as well. So again, expect to see more broader access on the anti-obesity medication as a result of the Medicare deal. Last but not least, on commercial, we are in negotiation. By the way, we have our commercial leaders seated here with me, James. And we are in negotiations with all the PBMs as we speak to get also commercial access. So expect that to materialize. But again, those conversations are dynamic at this time.

I think there's a good number of investors who expect the launch of orforglipron to be at least Wegovy pill-like, if not even more impressive because of the obvious easier to tolerate administration profile. Would you walk that expectation back? Or is that an okay expectation that this is going to be Wegovy like squared or something like that?

Yes. Our expectations, thinking about the opportunity in the marketplace, bringing an oral option for patients that nowadays, as you know, we have a large patient population opportunity, not only in the U.S. but globally is significant. There is a significant number of patients that they are not willing to get treatment for injectables and they're waiting for an oral solution. So we are very pleased with what we are seeing with Wegovy Pill as of the first 5 to 6 weeks after the launch. Thinking about the expectation for us is to continue to drive that market expansion, starting in the U.S. and going on U.S. as well. Then you have the dynamics when you got first to the market and second to the market. If you reference back, I think you all agree that Saba nowadays is the market leader. We have almost 70% of share of market versus Wegovy. But you need to go all the way back 2 years ago that actually Wegovy was first to the market, and it took us a time to get that market leadership. So usually, the second to the market has some time to get that market leadership. How we think about this opportunity is more about to drive that market expansion, and we feel very strongly that orrfoglipron will drive that market expansion over time with the access as well in Medicare, bringing the product in Lilly Direct as well.

A frequent investor question is, is the really impressive Wegovy Pill rollout good or bad for orforglipron. But it seems that you're in the good camp that it's just exemplifying the patient population out there that want the oral tablet. Is that correct? Because you could also say that all the people who wanted the oral formulation are going to the competitor now, so they will not be patients for orforglipron.

Well, you have a bolus of patients that when you have a product launching into the market that will get and seek the treatment. At this time, for that oral, you have the competitor basically serving those patients. We are very excited about the opportunity with orforglipron that will bring. You talk about the profile. We feel very good about the profile and has this actually simplicity in my eyes or convenience, how you think about it on not having water or food restriction as well. Remember that this is a daily treatment. So simplicity and convenience is very important.

Glenn, do you had a question?

Yes. And you talked about the opportunity [indiscernible] But could you also see a significant opportunity with orforglipron maintenance [indiscernible] taking drugs [indiscernible]. So people for convenience or for other reasons pricing [indiscernible] injectables, but now would like to switch [indiscernible] because you don't have the as Steve alluded to the convocations with [indiscernible].

The question is, can orforglipron fit very nicely in that maintenance setting for patients who have already lost weight on the injectable?

Yes. And the primary focus, as I mentioned, again, once we launch is to expand the market to those patients that they have a BMI on 30, 30-plus that they can get to their basically weight loss target that they have that they can achieve it with orfoglipron. That will be our initial focus. Of course, again, we are thinking about maintenance as well. That's why we run the -- basically the study on ATTAIN-MAINTAIN. And that showcase basically, to your point, that patients that are switching either from semi-injectables or tirzepatide that they can maintain certain weight basically reduction over time as well, in particular, versus semi-injectable, both basically GLP-1s was pretty much maintaining the same weight loss when they were switching from high-dose sema 2.4 to basically orfoglipron as well. So there is a component that will educate and inform physicians on how they think about the maintenance treatment as well.

So this about $1.5 billion in prelaunch orforglipron inventory on the balance sheet for Lilly. What does that imply for -- or what does that tell us about expected or anticipated 2026 revenue?

I wouldn't correlate the prelaunch inventory with, again, an estimation of the forecast for 2026. The way that we think about it, in particular, given the learnings that we had 2 years ago with the situation that we have with supply challenges that we face, it was to have the ability to basically scale our supply to have a global launch. I would correlate again the estimation of the inventory levels that we have nowadays with a 2026 revenue. As you know, the prelaunch inventory is a number basically based on several stages of where the product is in the process. So I wouldn't use that as a proxy. We feel really good about the projections of the revenue that we have for orforglipron in the U.S. We'll build over time. We'll expand the market, in particular, also thinking about OUS 2027. Again, there is a strong preference of orals in OUS markets as well that we can scale and provide that solution for patients around the globe.

So Lilly has 4 key assets at least in this domain. So Zepbound, Mounjaro, orforglipron and retatrutide eventually. What -- can you rank the peak sales potential of these products? What would be at the top and what might be closer to the midpoint and bottom?

Yes. Interesting question. Thinking about ranking them, I will think first, again, they are all Lilly assets and part of our portfolio that we can serve more patients. So I think most likely our manufacturing organization will be very interested on my answer because, again, it's not the same if you think about an oral versus an injectable. We try to still build global platform, so we have the flexibility to adjust based on the market demand. I think it's early days. The way that I will think about it is tirzepatide is the foundation of our platform that we have, both for obesity and diabetes and will continue to be the case. Thinking about orfoglipron will bring this oral opportunity to expand the market and serve more patients at scale globally. Retatrutide, given the initial study that read out in Q4 last year and in osteoarthritis in the knee, but provided significant weight reduction, actually up to 28%, 29% weight reduction. And we have more data readouts both in obesity and type 2 diabetes that all will read out this year as well. Now everybody gets super excited about the level of efficacy of retatrutide. But the way that we think about it is -- the vast majority of the patients will be already served by tirzepatide. I think we always think about retatlutide as more this segment of patients that will have a BMI over 37, maybe over 40 that needs to be served for a drug to get to the weight level reduction that they expect to have. So it's a more targeted population. I see.

Maybe sticking with retatrutide. So the people in this room were all paid to worry. And so we're watching Lilly start new studies that are looking at different dosing titration schedules and doses of retatrutide. That kind of tells us that Lilly isn't quite where it needs to be relative to dosing of retatrutide. Is that incorrect?

I will say so. I think the dosing was very clear even when we started the TRIUMPH-1, 2, 3 and TRACEND-1, 2, 3. Again, we are running, if you look at not only for retraatutide, for orlfroglipron, for tirzepatide, what we call a wall of studies to educate basically clinician and the medical practice on a daily basis. These studies that you referenced, I think you're referencing like TRIUMPH-8 and 9. There are other studies that will continue to educate. Now in this case, for example, TRIUMPH-8 will educate basically the efficacy and tolerability of retitutide low dose. TRIUMPH-9 will be actually the dose regimen if you start scaling at a lower pace through those doses over time. Will that change how we think about the dosing? No, it does not.

Okay. Questions from the audience? So another frequent question from investors is how will the market dissect between oral and injectables. And we have KOLs who come to conferences like this, and we'll be here on Wednesday who will say, this is really or should remain an injectable market. It's the way to treat patients. Injectables are easy to deal with and so forth. So they think the majority of the value will be in injectables. Does Lilly agree or disagree with that?

As I said, I think it's less so about agreeing or disagreeing is to provide a portfolio of products that will let the physicians, as you described, some of these physicians that feel more inclined to prescribe with injectable versus orals. I think there is also a strong preference of consumers or patients to decide in this equation as well, and we hear that a lot, that patients who go basically to the physicians with an idea already that either they see in social media and so on, that they are interested to get treatment with an oral and an injectable. So educating the physicians, providing these options of portfolio opportunities across injectables or different platforms, different options, single-acting, dual-acting, triple-acting like ritraclutide will actually help us to have a breadth of our portfolio to serve all the patients at the global level.

Where is the larger market opportunity for obesity agents? Is it U.S. or ex U.S.?

Do you want to comment on that one?

I mean we can start with just sort of people. I mean, certainly, if you look at the globe, there's over 900 million people around the world outside the U.S. that could be a potential patient for an infant medicine. In the U.S., it's over 100 million. So just from a sheer volume standpoint, that's kind of how things shake out. But I think that much like your question about oral injectable U.S., ex U.S., I mean, our benefit in our luxury is that we don't really have to pick and segment. It's only an issue if you only have a U.S. oral or an ex U.S. injectable. We just want to have a broad portfolio that we have, and we want to serve as many patients as possible. And so that's the goal, and that's the undertaking. And we're very early in that uptake. So in the U.S., there's very low penetration into this eligible population. Ex U.S. is even later because the launches were a little bit behind. And so there's a lot of room to run in the future.

Okay. One area where Lilly isn't present is in a monthly GLP-1. Is this -- are you talking with your feet that you just don't feel it's a real market? Or do you just not have the candidate? Or what should we read into that?

No, we do, by the way. It's in early stages, but we are going after, as you can imagine, a broad portfolio. And as I said, and we have single-acting, dual acting, triple acting. We are going between orals and injectables, frequency of dosing, tolerability, we didn't talk about tolerability, but we have eloralintide as well that is an amylin with low levels basically of side effects associated with this drug as well that we could have potentially similar efficacy on some of the drugs, including tirzepatide, but with lower side effects. So there is a breadth of that portfolio. I mentioned portfolio like 4 or 5 times because we truly believe that, again, thinking about the different combinations, and we are going to try to have all of them in the marketplace, including basically that dose frequency as well.

Okay. The next question has 7 parts, and there's no way I could answer this question, but I'm not the one who has to answer it. So which one -- can you rank these in terms of risk? Like what do you worry about 7 things? So -- and I'll put them in group. So U.S. pricing or foreign pricing, so that's two. compounding, that's three. Portfolio concentration. So Lilly's -- a lot of eggs at Lilly are in the obesity, diabetes basket, four. Challenges outside diabetes and obesity, so maybe in oncology or something else, or IP, just the overall global respect for IP. What do you worry about the most out of that list?

Yes. It's a good list. Pricing, I would say, both U.S. and OUS. is certainly one of those things that are basically a headwind to the industry as a whole. I don't think that is just individual for the incretin space, but it's to the entire pharma industry. The way that we are addressing that is through innovation and it's growing volume and offsetting that erosion of prices. And if you look at the price erosion putting aside the 2026 that it was a reset year, we have been on that mid- to high single digit. I don't feel that, that will be anything different in the future, right? And how we continue to drive growth, and you see that in the growth trends that we've seen with Lilly performing again and growing and outpacing the price erosion over time, that's the best way to address that risk. I don't think that it will get worse, it's just a continuation of the same risk that we continue to see nowadays. This year is more predominant in the U.S. because of MFN, different years could be OUS as well. You have, again, new changes on the regulatory system in many countries, and that could vary by year as well. But we know the system rules and we know how to operate on those schemes as well. The second one, I think, is a reality. I think you call it more of the concentration on the obesity and diabetes. The reality is that we are in that space. And we are happy that we are in the space, and it's happening in the situation that the market is growing exponentially, in particular on the obesity side, and we are the market leader. So we are not shying away of that, we are actually driving that and ensuring that not only that we maximize the opportunity, but actually we provide a portfolio of products. So we don't take, again, one risk on one single asset, but we have the breadth of the portfolio to continue to innovate in that space. Then our role on that is to continue to reinvest into the rest of the therapeutic areas in oncology, neuroscience, immunology to basically continue to drive that growth in the other therapeutic areas that are very important for us. I know that, again, obesity is getting a lot of time and efforts, but we are all very much focused to driving growth, and we have actually a very impressive pipeline, in particular, in oncology to drive that growth into the future as well.

I'm sorry, did you mention compounding?

I did not.

Okay. And does that mean you're not worried about it or...

I think the compounding is -- I mentioned that last year that I was getting that question almost every day, is a reality. We continue to drive again our legal case and trying to enforce that FDA takes action on this case, but it's part of the reality of the business, I feel really good about the health of the business and where the business is heading showcase that basically the brand are being prioritized in the marketplace and driving consistent growth over time.

Okay. Questions from the audience? So let's lead the incretin space and look at some other products that Lilly has. So what non-incretin pipeline assets do you think have the most significant potential to impact Lilly revenues over time?

Yes. Thinking about, of course, again, we brought to the market several products over the last few years like Jypirica, Ebglyss, Omvoh, Kisunla, all those products, they are in a very nice trajectory of growth and we will continue to drive that growth over the next 10 years. Thinking about the pipeline, very excited opportunities. We are getting into cardiovascular. Nobody noticed that, but that space, we used to call it diabetes. We extended to then chronic weight management and diabetes and now we are getting into cardiovascular. And we are actually having 2 assets that will potentially treat cardiovascular risk like LPA, and we have lepodisiran and muvalaplin. This is a large space and could potentially have a large impact for our patients, in particular, getting into the next decade as well. We talk about Kisunla. I know that front and center is the data readout of TB3 or TRIALBLAZER-3. I'm glad that you didn't ask yet about it. But again, getting into preclinical for Alzheimer could be another unlocking of a large opportunity in terms of patients that could make -- many of them will not have symptoms nowaday that could more significantly reduce the cognitive decline and even the risk of ARIA could be lower as well. That could unlock a significant opportunity. It still will be gradual to growth, but it's a large patient population that is not being served nowadays. So those are 2 in my eyes that could drive significant growth in the future. [ Throw ] 1 and 2 just to round out the TAs. I mean, oncology. So there's a lot of talk about oral SERDs amongst competitors. Lilly actually has an oral SERD that's approved on the market in the metastatic setting. We have a trial ongoing number four in the adjuvant setting. So that's projected to read out by 2027. As in oncology, all these trials are event-based, and so that dictates when they read out. But that's a big prevalent pool of patients that are currently on endocrine therapy, and that's a great opportunity where patients typically take these medicines for multiple years. So large prevalence pool times long duration of therapy equals big market opportunity.

We do have a breast cancer panel on Wednesday, and I'm sure SERDs will be a very hot topic on that panel. So let's go to Kisunla for a second. So we're -- again, as you said, we're awaiting the TRAILBLAZER-ALZ 3 readout, which I know is sometime in '27. But are you more or less confident than a year ago that it could read out early?

At this time, our position has not changed, Steve. We -- again, completion is 2027. As you know, it's event-driven. That could read out again any time. I don't have a view on this time when that will happen.

Okay. And is Lilly privy to the event accumulation across the study, not necessarily in each group?

Do you want to comment on that?

I mean, look, we don't get into lots of details here. I mean, obviously, you have blinded events that dictate when things read out. But it's a common question, and it wouldn't be a Steve Scala panel without multiple choice and true false. That's good.

And sticking with Alzheimer's disease, you have another very exciting drug in remternetug. And you're doing a study, which honestly seems kind of odd. So the TRAILBLAZER-ALZ 1 -- not TRAILBLAZER, TRAILERUNNER-ALZ. And it's kind of like can you -- is there a scenario where you can file the drug on this? And if not, why are you doing it?

Sure. I can take that. Yes. So TRAILRUNNER and TRAILBLAZER. We tried to make them as interchangeable to confuse people as possible. But remternetug is a program that's also in a Phase III trial that's assessing preclinical. It's ongoing right now. It's projected in the back part of this decade to read out. So that's where we see the medicine and where we think the biggest use case is. We also have a trial that was basically more like a dose-finding study. So TRAILRUNNER-ALZ 1, looked at subcu, IV, different dosing schedules. And so it really was meant to inform the Phase III design. So it's not fileable, but you'll see more data from that later this year.

Okay. Questions from the audience? So a couple of hot topics at conferences like this and other venues are both AI and China. So maybe you could talk about China first. So when I think about China and I think about the pharma industry, Lilly is not a name which kind of rises to the top, right? So I don't think your presence there is particularly large compared to other companies. And your kind of tentacles into the country to bring out innovation seem competitive but not kind of stand out. Tell me why those 2 statements might be completely incorrect if they are.

No. Again, comparing to other pharmas, again, the split of the business could be different depending on the therapeutic area that they stand. We have a long-standing commercial footprint in China, and we have been extending that into, for example, very recently, we opened a Lilly Gateway lab as well in Beijing. So we have been expanding and partnering as well in the Chinese business, and it's not new. You have, again, access to our filing, you can see that actually. Last year, I think the size of the business was roughly $2 billion out of the $65 billion. So you can do the math about the representation of that business, but it's growing very nicely. I mentioned that, again, as of January 1, they got NRDL reimbursement for Mounjaro in type 2 diabetes that will provide an unlocking an opportunity to drive significant growth in the years to come. I always get the question, well, but you will have generic of semaglutide in the future. But the way that the system works in China, they have 2 different basically path for the generics and the branded products. So we have a path for our business to be protected in the future as well. So we expect to see significant growth in the future. If you look at very exciting is the timing between the launches in the U.S. and the launches in China. Again, 5, 10 years ago, there was a significant lag, and you see that actually shrinking more and more. So expect that to continue to happen in the future that we will have those launches, again, in a more subsequent basically launches that you see in the U.S. getting into the OUS, but in particular, China as well.

You brought up the semaglutide patent expiration. Does Lilly see its obesity and diabetes assets growing through the semaglutide patent expiration?

The answer is yes. Yes. And you see it nowadays even because already in many countries, we have a premium to semaglutide. And in some countries, it's up to 50% the premium that we have, and we have market leadership position. So there is already a premium differentiation of our brand versus even the original semaglutide. There are markets that are more generic driven that could potentially have an impact, but we feel very strongly about our position even to navigate growth through the generic entrance of semaglutide OUS.

Okay. Questions from the audience? So we only have a few -- yes.

What's your strategy in [indiscernible] associated effects from GLP-1 like turn off [indiscernible].

You want to comment? The strategy on basically adverse events associated with GLP-1s. Is that the question?

Yes. I can take that. So specific to like the muscle bone composition idea, I mean, we're looking at that. We have obviously a study in Phase II that read out last year at ADA bimagrumab that was in combination with semaglutide. I think it's TBD on exactly what the path forward for some of those medicines look like, what the regulatory path is as well as kind of what the need is looking to assess is. I would broaden it a little bit more to say, what are we looking at is actually a lot of other effects that GLP-1s have that are positive. So outside of just obesity and some of the cardiometabolic diseases, we're looking in immunology, neuroscience, things like alcohol use disorder, tobacco cessation. We're looking at an asthma study. So there's really a wide aperture of different conditions that we're looking to treat that are, I think, can be positive.

So only a couple more minutes. When you look at your P&L, which line is most likely to benefit from AI?

Over time, all of them. Short term, I would say SG&A naturally so, starting with back office. Again, we are seeing that nowadays that we are growing significantly, and we are actually leveraging AI to close books and records to automate all our processes, forecasting. I think manufacturing maybe midterm is one of the one to follow, in particular, with all the new sites that we are putting in place. We are leveraging automation and AI significantly to make the lines as efficient as possible. That will continue to drive significant value in my eyes. The third one, it takes as always more time, but of course, is R&D, starting from discovery all the way to clinical trials and late phase that could benefit from AI, but it will take more time to get there. We are investing heavily. You've seen some of the partnerships that we signed. the supercomputer that our Chief Technology Officer called out last week is already up and running in our offices. And then we have this new K innovation lab that we bring basically our best scientists with their best technical people to continue to drive that innovation.

Okay. So in our remaining minute, we tried to close every panel with the following question and that is, over the next decade, what do you think the biggest surprise or change will be at Lilly?

Okay. Well, interesting. I've been in with Lilly 25 years. And if I look back 10 years ago, our size of the business was roughly $20 billion. You look nowadays, again, our guide is $80 billion to $83 billion, right? So 10 years past, and we have almost quadrupled the size of the business in that time frame. So significant growth that we have seen, and we are not planning to stop here, as you can imagine, right? So you think about the 4 molecules that you described that will continue to drive significant growth. So that's, I think, in my eyes, a big enabler of that part of the growth, thinking about mid, but also long term. And it's, again, new platforms, new modalities, tolerability as we discussed. Mike mentioned as well getting incretins into outside of the obesity and type 2 diabetes space as well, again, areas like immunology, areas like in neuroscience. Again, we see and we are running studies on that space. So expect to see that in our leadership position and how we leverage that position to get into those spaces. Then continue to drive again and putting our capital to work. And we will leverage this time to continue to reinvest to drive that growth into the other therapeutic areas. Of course, we will remain our discipline on what we invest in, but expect again that we will continue to drive that growth and that penetration in the other therapeutic areas.

Great. Sounds exciting, exciting future, a lot to look forward to. So thank you so much for this great rundown.

Thank you for having us .