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

I'm Mike Czapar, thank you again for being with us. Ken, let's just get straight to the discussion, just to tee you up high level, and we're going to talk about your -- a lot of your programs and your products, but I want to start at sort of 10,000 feet so much happening in obesity, very dynamic field that Lilly is really trailblazing and at the leading edge of where this market is headed. Talk to us about what's been most surprising to you in terms of how this market is developing and what the landscape might look like in, call it, 5 years?

First, great to be here and great to see everyone. We're in a very privileged position right now to have been a part of the earliest innings of this vibrant and growing obesity category. But the reality is, is despite the fact that we have millions of people on these medicines in the United States, maybe tens of million more outside the United States, there are plausibly billion that could benefit from these medicines. So we're like in the infancy of this space. And so the thing that has surprised me so much is the scale of both what we have to accomplish, but also the legacy we could create as an industry in terms of transforming human health for the better. And so the biggest thing that I've really been focused on and I think our ADA message was centered around this is that as we look ahead, what do we need to do in order to unlock this bigger opportunity and help more people and go from 3% total penetration, something much larger than that. We do a number of things. We need to drive cultural change, recognizing obesity as a chronic disease where they want treatment. We need to facilitate access and reimbursement. We need to educate the primary care community on how to manage because they're going to bear the brunt of managing such a large population. We need to invest in manufacturing as you've heard Lilly talk about a lot in the past. And the thing we got to it, ADA we also need to give people options because it's completely unreasonable to think that a population measured in the hundreds of millions or even billions will be satisfied with one thing. This is not going to be a one-size-fits-all category, in the future. Lilly was very proud to become a 2-product company in obesity in April and at ADA. We also share data on what we expect will be our third medicine and the treatment obesity that's [ retatrutide ], or investigational triple receptor agonist, do we share data on how that medicine works in diabetes obesity as well as other complications, including osteoarthritis knee pain and obstructive sleep apnea. And of course, we shared a lot more new data on one. So we are really trying to bring forward the broadest suite of solutions for people with overweigh obesity and other cardiometabolic conditions for the future.

So that's a great starting point, Ken. Let's start with that obviously, great data at ADA, and we certainly don't have to go through all of it again. I'm not going to put you through that, but highlight -- give us some of the key takeaways that you'd like to double second.

Well, we shared data on 2 Phase III studies for -- actually have 3 positive Phase III studies after the TRIUMPH-4 results that we disclosed last December. The studies that we shared at ADA this year the TRANSCEND-T2D-1 study of type 2 diabetes, that's in monotherapy setting. And in that study, we showed up to 2% [ HP1 ] on very competitive with the existing, best-in-class agents in the treatment of diabetes. And importantly, we also showed a 17% body weight reduction at the highest dose, which I think moves the -- on weight loss in diabetes, particularly in such a short study. Likewise, we also shared data from the TRIUMPH-1 study that was in patients with overweight obesity. It included -- it was a basket design that included substudies for osteoarthritis knee pain and obstructive sleep apnea in this trial, we saw across the broader population up to 28.3% weight loss after 80 weeks and for patients who continued on to 104 weeks on therapy, they lost up to 30.3% of their body weight will also delivering impressive productions in osteoarthritis knee pain of about a 73% reduction as well as relief from obstructive sleep apnea with more than a 60% reduction in events. So this is a very powerful medicine. And with the highest doses, this is unlocking levels of weight loss. We've historically only seen with bariatric surgery. But also, there was something else exciting in the data, which is that there's a 4-milligram dose of retatrutide to be included. And then on that dose, patients lost 19% of their body weight, which is not bad, competitive with our other dual agonists and they got there with just a single dose titration step. And importantly, they discontinued to go to adverse events on that dose at a rate that was nominally lower than placebo. So I think in totality, what these data say about retatrutide, which could be Lilly's third approved obesity medicine that not only could it deliver the most powerful efficacy that we've seen thus far from an agent. But also at the lower doses, it could be a real workhorse in the treatment of obesity offering really a lot of simplicity, near 20% weight loss, low discontinuation rate, simplicity with a single dose titration step. So I think reta can fill a lot of spaces in the treatment of overweight and obesity going forward, and we were delighted to share these results.

So let's stay with that. The 4-milligram dose certainly was one of the things that got a lot of attention, got a lot of our attention. And reta, the way I think about it, you've just got such a range, right, at the highest above milligram dose, you're getting weight loss that's approaching 30% and -- like you said, about like efficacy of the 4-milligram dose were just one step bounce. So I guess in that context, one question that people are starting to fund is just on the potential for broader use of reta beyond just the niche high -- highest BMI, morbidly obese bariatric surgery patient population, which is really how we've been modeling -- we've all been modeling this drug. So talk to us about with this range of data, how you see where reta is going to be positioned within the context of the overall portfolio.

So I think at the high end, when you're unlocking weight lowering approaching or even exceeding 30% at 104 weeks with really strong benefits on common comorbidities like osteoarthritis knee pain and obstructive sleep apnea, that's a new standard for efficacy. And I think it's pretty obvious how that part of the drug gets used. People have been waiting for something that for those patients who aren't even getting what they need from the state-of-the-art with [ zeta ]. So like that story, I think, is well understood. I think introducing the idea that this could be a molecule that plays a much broader role, including earlier in disease that was a new part of the story. And given the size of the number of people that need help and need new options, we think it could play a pretty broad role. And it's -- I think up until now, we haven't always been able to match or predict which medicine is going to work best in which person. So the idea of having a medicine like [ zeta, anta ] medicine like retatrutide, they can help those patients. That's a good thing.

But on that same point -- 1 question that as we think about the commercial opportunity, another emerging question in people's minds is whether weather will be cannibalistic to the franchise? Or will it be additive to the treseputide franchise? So help us -- that needle.

Yes. I mean if you go back to the idea that we're sort of serving like 3% of the total addressable market right now with these obesity medicines. -- probably fixating -- probably not as productive as thinking about how we unlock the remaining 97%. But honestly, if a patient wants to move from 1 great Lilly medicine to another Lilly great medicine, I'll celebrate that and help them do it through the offerings that we have. My goal is to bring forward a suite of solutions like [ Fondeo ] like step bound and eventually -- and even other investigational agents like [ elora ] presented to people living with overweight obesity or other cardiometabolic health conditions wherever they are in their journey and help them start stay and switch between these agents through a common platform and maybe someday rather than worrying about whether they're taking rate tiers at Fondeo, they'll just be taking Lilly for overweight.

So you think this is going to create an unlock on top of the franchise more than -- similarly to how sort of when the -- emerged, is that sort of...

I really do. Yes, obviously, the orals emerging. That's clearly sort of a new segment in the market that's driving a lot of people who have previously not been using incretins, bringing them into the fold because they've clearly been waiting for something like this that fits with their individual preferences. But I do think that being a sort of weight loss partner with a broad suite of solutions will be the company that people want to work with.

And I think another thing with -- hasn't impressed us as I think it did a lot of people. It's just the cardiovascular benefits. I mean you've got LDL-C rolling and many other markers that you showed at the ADA presentation, Talk to us about how that impact the positioning of the drug. So maybe some that...

Certainly, we have results from 3 Phase III studies right now, and we've seen what we would expect from a powerful incretin, which is great weight lowering along with reductions in non-HDL cholesterol reductions in C-reactive protein, blood pressure, all of the things that would be historically associated with cardiovascular risk reduction or moving in the right direction. Of course, we won't have a read on cardiovascular safety until we see the TRIUMPH-3 data as they're coming later this year. But then more importantly, we have the TRIUMPH outcome study running, which is a more full -- cardiovascular outcome study that includes cardiovascular in endpoints. But right now, nothing we see in the data suggest to us that it's not going to bring forward the benefits that you see in the single dual agonist.

And now that the launch is planned as a 2027 event, what can you tell us in terms of just high-level sort of pricing strategy?

Yes. Obviously, too early to speculate on pricing here. We obviously price in accordance with value, and this looks like a pretty valuable medicine. But at the same time, we have broad aspirations to help a lot of people on this planet reach their individual health foods. And to do that, we're going to need to create access and we'll do what we need to do to create that access.

And if this drug were to scale at the way you're describing, create this additional unlock talk to us kind of about supply and capacity constraints. Is the manufacturing process fungible vitrocepatide?

So maybe let's start with we've been very focused on creating a highly scalable solution with fundeo, which we can, I guess, talk about in a bit. But for patients may be graduating from -- oral agent to a medicine like -- or retatrutide, we've been aggressively investing in production capacity to support them as well. In fact, little over $50 billion in manufacturing commitments announced since just 2020, and a significant portion of that is centered on our anchor tin medicines and our parenteral endocrines incretin medicine. So we're making those investments. It will be on a common platform, which means that we can support whatever sort of mix of tirzepatide, retatrutide and eventually a lorlyntide ultimately proves to be -- proved out in the market.

And I guess we've seen a lot of online awareness already about retatrutide. There haven't been a lot of investigational drugs. It's so much early consumer attention, a bit of a gray market as well, if you will. How does that impact how you think about the launch and the positioning of the product?

Well, certainly, it's probably the most extreme example we've seen that tells us there's a lot of experimentation in this category. And so while we don't condo in the use of sort of gray market, retatrutide, which, frankly, don't know what it is or where it's coming from, and we haven't even finished running the old program, yes, it does remind us that there's a need for additional options. And so we -- we're obviously optimistic about this molecule, and we look forward to bringing authentic Lilly branded retatrutide to people around the world as soon as we can. But like I said, a good reminder that the people are looking for additional options.

Okay. I'm going to pause there and see if there any questions on beta from the audience. Let's keep moving. Let's talk about elabolinotides, another very exciting program that seems to be moving very fast. You mentioned it's potentially becoming one of the largest development programs. in Lilly's history, which is a very intriguing comment. And it feels like this is starting to emerge as a long-term platform asset. So give us a high-level framing on what makes you so excited about elora, it's differentiation with versus other -- positioning just highlight first.

Yes. I'm tremendously excited about laurentide. We have known about amylin for a long time. In fact, the first amylin analog in the first GLP-1 analog, we're approved around the same time pramlintide and exenatide, but it's taken us a little bit longer to get to a long-acting amylin with the molecular properties that we think we need for it to be the right clinical profile. Amylin actually reasonably completed biology. There's sort of calcitonin receptors and the 3 different flavors of amylin receptors. And I think it's becoming increasingly clear to us at Lilly that the different molecules are not all going to be the same. And there are things about these different efforts that Lilly and other sponsors in the industry are doing, they're not all going to be the same. And we like what we're seeing with Loralentide. We shared clinical data at Obesity Week last year. Phase II data showing that patients with overweight obesity lost about 17% of their body weight on our sort of titrated 3, 6 and 9-milligram dose. And yet, it's like losing 17% of the body weight, they had a vomiting rate of just like 2%, which is -- suggest to us that this could be new important medicine in the treatment of overweight obesity that becomes an option for those 5% to 10% of patients in our trials, we just can't continue due adverse event. So they have a non-GLP-1 MACE mechanism out there feels really important, something that delivers anchored like efficacy with placebo-like tolerability. That's the goal. So we see that eloralintide could be a foundational agent certainly for that 5% to 10% of people, which, by the way, 5% -- 5% to 10% of the obesity market, a sizable group of individuals. But we're also developing it as a potential add-on therapy for patients currently on -- therapies to help them get to go through additional beneficial pharmacology. There's even some indications or new indication ideas with Amylin where it might work better than incretins, I'm not going to speak about those yet, but you can expect that we'll continue to add to. Our development program for eloralintide.

And maybe just as we think about this commercial strategy, and like you said, it's a little early to talk about that. But will you position it as an option for people who are not tolerant GLP-1s, those plateau incretins or broader naive population, these are all very different patients again.

Yes, I guess it gets to the broader question, we're having about visiting with reta sort of as a powerful agent but also a flexible agent, a simple agent here with elora, it could be for patients who don't tolerate GLP-1s or who aren't getting enough from GLP-1s and then some other ideas that they're working on. I think were going to have to get comfortable with the idea that as we bring forward really innovative medicines, a category that's big that we have to sort of position them for multiple different use cases and be really clear how to support all those different uses. So expect to do that.

And if the tolerability profile that you saw in Phase II holes in the Phase IIIs, what's the level of weight loss that you think would be enough to make it really differentiated versus the current medications and also other candidates in the pipeline.

Certainly as a monotherapy, I think if you can get into the high teens and have a clear differentiation on GI tolerability, that's that meaningful medicine. As you think about alternative use cases, combination with incretins, you're looking for slightly different things in that context.

Yes. And then I guess similar question to Red as it relates to manufacturing. Are there any fill finish constraints that could constrain supply as the product scales?

Again, so eloralintide -- retatrutide on common platforms. And so our goal is to forecast the aggregate injectable incretin market to make sure we build for the cost, but we can tolerate fluctuations between the molecules within that stack.

And you're also studying elora in combination with prezepatide, that Phase IIb study, I believe, as a PCD primary completion date of sometime this month, June '26, right, right? And the study is going to be reading out later this year. What should we be looking for? What would constitute a positive outcome in your view?

Well, we've -- we do expect to disclose data on that program later this year. As you noted, I guess if you take a step back and say, we have single agonist, dual agonist, triple agonist with retatrutide, why do we need another triple agonist Well, one of the things in my mind is that GIP GLP-1 and amylin feel like 3, like maybe the ultimately, the 3 best nutrients stimulated hormones to put together into a medicine and the idea that maybe you can sort of lightly agonize 3 pathways rather than lasting one, I'm a biologist raining and that appeals to me. biology is not super highways. It's -- I think this could potentially be a very physiological way to drive weight loss, both for the earlier patients, but obviously, by coagonism of GIP GLP-1 and amylin, 3 great pathways, you probably also drive a lot of wait as well. So we'll look at the date and share them with the community and there'll likely be a lot of ways we can think about these combination of continues in the future.

Okay. I'm going to take a pause there again and see if any audience questions on elora? All right. I'm going to keep going. Let's pivot to long acting. Again, monthly obviously have become more of a theme [ tea, 88 ], Pfizer had some data, you're going to have maritide, Amgen, more and more companies are starting to chase what seems to be a suburban commercial opening in the market. You guys haven't revealed a lot about your own long-acting strategy, although in your ADA slide deck, you did reference ultra long acting. I'm looking at you, Mike, a couple of times, suggesting that there is program underway. And about a year ago, you did this deal, if I remember exactly a year ago with the Swedish company called [ Gamers ] really focused on the development of long-acting input therapies using that technology. So what's the strategy there, right? Like what's in your view -- like where are these long-acting therapies going to fit in the market? How meaningful do you think that differentiation is going to be when you go from weekly to monthly or even longer?