Eli Lilly and Company Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
August 8, 2023

There are 17 speakers on the call.

Operator

Ladies and gentlemen, thank you for standing by and welcome to the Lilly Q2 2023 Earnings Call. At this time, all participants are in a listen only mode. Later, we will be conducting a question and answer session and instructions will be given at that time. And an operator will assist you offline. I would now like to turn the conference over to your host, Joe Fletcher, Senior Vice President of Investor Relations.

Operator

Please go ahead.

Speaker 1

Good morning. Thank you for joining us for Eli Lilly and Company's Q2 2023 earnings call. I'm Joe Fletcher, Senior Vice President of Investor Relations. Joining me on today's call are Dave Ricks, Lilly's Chair and CEO Anat Ashkenazi, Chief Financial Officer Doctor. Dan Skovronsky, Chief Scientific and Medical Anne White, President of Lilly Neuroscience Ilya Juffa, President of Lilly International Jake Van Naarden, President of Loxo at Lilly Mike Mason, President of Lilly Diabetes and Patrick Johnson, President of Lilly Immunology and Lilly USA.

Speaker 1

We're also joined by Mikaela Irons, Mike Springnether and Loren Zirke of the Investor Relations team. During this conference call, we anticipate making projections and forward looking statements based on our current expectations. Our actual results could differ materially due to several factors, including those listed on Slide 3. Additional information concerning factors that could cause actual results Differ materially is contained in our latest Form 10 ks and subsequent Forms 10 Q and 8 ks filed with the Securities and Exchange Commission. The information we provide about our products and pipeline is for the benefit of the investment community.

Speaker 1

It's not intended to be promotional and is not sufficient for prescribing decisions. As we transition to our prepared remarks, please note that our commentary will focus on non GAAP financial measures. Now, I'll turn over the call to Dave.

Speaker 2

Thanks, Joe. In the Q2, Lilly's momentum continued. We advanced our R and D pipeline, progressed our ambitious manufacturing agenda and delivered strong financial results. Our business saw an acceleration of revenue growth driven by Manjaro, Verzenio and Jardiance. As base period headwinds from COVID-nineteen antibody revenue and Alimta's loss of exclusivity recede, we do expect strong growth to continue In the quarters ahead, Lilly has made substantial progress in advancing our pipeline of innovative medicines in recent years, But the past few months have been particularly noteworthy.

Speaker 2

In early May, we shared the top line results of the Phase 3 TRAILBLAZER ALLEZ II trial, which show donutamab treatment slowed clinical decline in Alzheimer's by 35%. While differences in enrollment criteria and study design make cross trial comparisons difficult, this represents the greatest percentage cognitive Slowing in a primary endpoint of any disease modifying Alzheimer's disease treatment reported to date and the only Phase 2 to Phase 3 replication to date. 3 weeks ago at the Alzheimer's Association International Conference in Amsterdam And simultaneously published in JAMA, we shared the detailed results, including new analysis, which demonstrate the potential of even greater cognitive slowing in patients in the earlier stages of Alzheimer's disease. At the ADA Scientific Sessions in June, we shared positive Phase 2 data on 2 next generation Diabetes and obesity product candidates, orforglipron and ritatricide. In less than 2 weeks ago, we shared top line results From the surmount 3 and surmount 4 Phase 3 trials, we showed participants on tirzepatide following intensive lifestyle intervention or With continued tirzepatide treatment achieved up to 26.6% mean weight loss.

Speaker 2

Dan will share more perspectives in his R and D update on these and other exciting areas of pipeline progress. Moving to our results, you can see on Slide 4, the continued progress made on our strategic deliverables so far this year. Excluding revenue from Baximi And from the sales of COVID-nineteen antibodies in 2022, Q2 revenue grew 22% on 23% volume growth. Volume growth in Q2 is driven by Manjaro, which leads our new products category. That category also includes J Perka and now Amvo, Which saw its first sales in Japan in Q2 and launched in Germany in July.

Speaker 2

In the Q2 of this year, new products And growth products categories combined contributed approximately 26 percentage points of volume growth. These products coupled with potential upcoming launches solidify Lilly's strong growth profile through this decade. We've had several important pipeline updates since our Q1 earnings call. For mirikizumab, approval in the EU and resubmission of our U. S.

Speaker 2

Application With regulatory action expected by the end of this year, regulatory submissions in the U. S. For tirzepatide for chronic weight management, Regulatory submission of daneumab for traditional approval to the FDA and EMA following the positive Phase 3 results from the TRAILBLAZER ALZ2 trial and positive Phase 3 top line readouts for SURMOUNT 3 and 4 in the 3rd and 4th global studies Evaluating tricipatide and chronic weight management. The 2nd quarter also was productive for business development. We've commented in the past on our active exploration and pursuit of external innovation and are pleased to have announced agreements to acquire 2 Clinical stage companies in the 2nd quarter, Dice Therapeutics and Versantus Bio.

Speaker 2

These companies operate in different therapeutic areas And each is a fit with Lilly's strategy. We also closed the sale of global rights to Baximi The financial impact of this transaction is reflected in our Q2 results. After quarter end, we closed the sale of rights to our olanzapine portfolio, which will be reflected in our Q3 financial results. Both these transactions are now incorporated into our updated 2023 financial guidance. We continued to progress the most ambitious manufacturing expansion agenda in the 147 history of our company.

Speaker 2

We're happy to share that commercial production to support our Incrogen portfolio has begun at our Research Triangle Park site in North Carolina. Beyond the capacity expansion that will come as we ramp production at this site, we're also pursuing other near term paths To expand access to our anchor tins to patients around the world, Anat will provide more detail on these efforts. And finally, we distributed over $1,000,000,000 in dividends this quarter. On Slide 5, you'll see a list of key events since our Q1 earnings call, including several important regulatory, clinical and other updates we're sharing today. So without further ado, I'll turn this over to Anat to share our Q2 results.

Speaker 3

Thanks, Dave. Slide 6 summarizes financial performance in the Q2 of 2023. I'll focus my comments today on non GAAP performance. In Q2, revenue increased 28% versus Q2 of 2022. Excluding revenue from Baximi and from COVID-nineteen antibodies in the base Period, revenue increased 22% or 23% on a constant currency basis.

Speaker 3

This acceleration of revenue growth Was achieved despite lingering headwinds from Alinta's loss of exclusivity in the United States, which occurred in the first half of last year and the effects of which should normalize going forward. Gross margin as a percent of revenue was flat in Q2 at 79.8%. Gross margin in the quarter benefited from product mix, including one time revenue from the sales of rights to Baximi, which was offset by increases in manufacturing expenses Related to labor cost and our investments in capacity expansion. Total operating expenses increased 14% this quarter. Marketing, selling and administrative expenses increased 18%, driven by higher marketing and selling expenses associated with recent and upcoming new product launches R and D expenses increased 32%, driven by higher development expenses For late stage assets and additional investments in early stage research, this quarter we recognized acquired IP R and D charges of $97,000,000 or $0.09 of EPS.

Speaker 3

In Q2 2022, acquired IPR and D charges Totaled $440,000,000 or $0.46 of EPS. Operating income increased 69% in Q2, Driven by higher revenue, including revenue associated with the sales of rights for Baximi and lower IP R and D charges, partially offset by higher R and D and SG and A Operating income as a percent of revenue was 27% for the quarter and reflected a negative impact of approximately 100 and basis points attributable to acquired IPR and D charges. Our Q2 effective tax rate was 16.1%. This represents an increase of 190 basis points compared to the same period in 2022, driven by the impact of the new Puerto Rico tax regime In the sales of rights for Baximy, at the bottom line, we delivered earnings per share of $2.11 in Q2, A 69% increase versus Q2 of 2022, inclusive of $0.43 of EPS Associates with the sales of rights for Baximy. On Slide 8, we quantify the effect of price, rate and volume on revenue growth.

Speaker 3

This quarter, U. S. Revenue increased 41%. When excluding revenue from COVID-nineteen antibodies and Baximi, U. S.

Speaker 3

Revenue grew 30%, driven by robust growth from Monjaro, Verzenio and Jardiance. Net price in the U. S. Increased 2% for Quarter driven by Manjaro access and savings cards dynamics. Excluding Manjaro, net price in the U.

Speaker 3

S. Decreased by low single digits, consistent with prior trends. As I mentioned in our Q1 earnings call, we expect Monjaro Access and Saving Cards dynamics Europe continued its growth trajectory with revenue in Q2 up 6% in constant currency, driven primarily by volume growth for Verzenio, Jardiance and Taltz. Volume in Europe increased 12% in the 2nd quarter. For Japan, Q2 revenue increased 7% in constant currency As we continue to see robust growth in our newer medicine led by Verzenio and to a lesser extent Jardiance, ILUMIENT and Monjaro, the last of which launched in Japan in April.

Speaker 3

Moving to China, revenue increased 20% in constant currency With volume growth only minimally offset by price declines. Volume growth in Q2 was driven by TYVIT and Verzenio. We're pleased to see our China business return to growth. Revenue in the rest of the world increased 19% in constant currency as volume growth of 20% driven by Monjaro, Verzenio and Jardiance. Slide 9 shows the contribution to worldwide volume growth by product category.

Speaker 3

As you may recall, on our Q1 earnings call, we simplified the categorization of our products with a focus on 2 categories, new products and growth products. As you can see, the new and growth categories combined contributed 26 percentage points of volume growth for the quarter. The volume growth for all others category was driven by the sale of Rytesubaximy. The lack of revenue from COVID-nineteen antibodies compared to the base period was a milder headwind to growth in Q2 compared to Q1 and will continue to be a modest impact to prior year comparisons. Slide 10 provides additional perspective across our product categories.

Speaker 3

I'll speak more about Monjara shortly. But first, let me highlight the continued outstanding performance of Verzenio, which saw worldwide sales growth of 57% in Q2 As OUS volume grew 82%, while U. S. Volume grew 47%. Jardiance also continued its strong performance With worldwide sales growth of 45% for the quarter, there have been 2 notable regulatory approvals for Jardiance in the last 2 months.

Speaker 3

In June, the FDA approved Jardiance for the treatment of Type 2 diabetes in children 10 years and older, making Jardiance the 1st and only SGLT2 inhibitor approved for this patient population. And in late July, Jardiance was approved in the EU for treatment of adults with chronic kidney disease. After almost a decade on the market, Gerardus continues to demonstrate its Importance to patients across a number of cardiorenal metabolic conditions. Trulicity performance has held up well in a growing and dynamic incretin market. In Q2, we saw worldwide Trulicity revenue declined by 5% as modest volume growth was more than offset by price erosion.

Speaker 3

In international markets, Trulicity volume continues to be affected by measures we have taken to minimize potential disruption to existing patients, including communications to healthcare professionals not to initiate patients on Trulicity. We remain confident that Trulicity will continue to be Moving to Slide 11, I will share some perspective on Manjarra's performance. We continue to be pleased with the strong momentum of Manjarra as more Type 2 diabetes patients benefit from the medicine. Manjaro's revenue in the U. S.

Speaker 3

Grew to $916,000,000 for the quarter. In Q2, we continue to make progress in expanding access to Manjaro and access reached 73% on July 1st for patients with Type 2 diabetes across commercial and Part D. We estimate that the percentage of paid scripts from Monjarra in Q2 was approximately 67%, up from approximately 55% in Q1. As a reminder, we define paid scripts as those prescriptions outside of the $25 non covered co pay card, but inclusive of the $25 covered copay card. Since the $25 non covered copay card program will Expired in June 30, we would expect the proportion of paid scripts next quarter to be 100% under this definition.

Speaker 3

Looking forward to the rest of the year, we expect continued growth in new to brand prescription as well as ongoing improvement in access. Lastly, regarding the demand and supply outlook for Incraton, we're pleased that commercial production has started at our RTP site in North Carolina. Even as we ramp up capacity at RTP, we believe supply will likely remain tight in the coming months and quarters due to significant demand. Given the expected global demand for tirzepatide, as we mentioned on previous earnings call, we are moving forward with different presentations To this end, we initiated bioequivalence study in early April for a multi dose QuickPen device. In many OUS markets, we expect to launch tirzepatide first in valve form later this year and transition to a multi dose Quick is approved and available in these markets starting in 2024.

Speaker 3

The launch of the VAL and QuickPEN presentations for tirzepatide We leverage existing manufacturing assets and capacity. We're excited about the opportunity to expand the number of people we can help In the short term and long term with these additional options. On Slide 12, we provide an update on capital allocation. In the 1st 6 months of 2023, we invested $5,700,000,000 in our future growth through a combination of R and D expenditures, Capital Investments and Business Development Outplay. In addition, we returned nearly $2,800,000,000 to shareholders in dividends and share repurchases.

Speaker 3

Slide 3 presents our updated 2023 financial guidance. Given the strong performance in our underlying business As well as revenue from the sales of rights for Baximy and olanzapine, we are increasing our 2023 revenue guidance By $2,200,000,000 to a range of $33,400,000,000 to $33,900,000,000 Approximately $1,500,000,000 of this increase is driven by business development activity, including the sales of rights for the olanzapine portfolio and Baximi, While the remainder reflects strong underlying business performance, our updated FX assumptions based on recent spot rates are listed and represent a de minimis impact to the updated guidance. Our guidance for gross margin as a percent of revenue has increased to approximately 80%, driven by the sales of rights for Baximy and our Olanzapine portfolio. We're also increasing the range of operating expense guidance for the year. Marketing, selling and administrative costs are now expected to be in the range of $7,200,000,000 to $7,400,000,000 With the increase driven by additional investments in recent launches and preparation for launches of new medicine and line extensions expected later this year.

Speaker 3

The range for research and development expenses has been increased to $8,900,000,000 to $9,100,000,000 Reflecting positive dynamics across our portfolio, including success and events in our early stage assets, positive enrollment trends in our late stage studies, Broadening of the clinical program for next generation incretin and expected incremental expenses from business development activities. We have incorporated IPR and D charges that have been incurred through Q2 2023, which totaled $202,000,000 Other income and expense and tax rate guidance have also been updated. OID is now expected to be between $100,000,000 in income, up from prior guidance of $100,000,000 to $200,000,000 in expense. We've also increased our estimated effective tax rate to be in the range of 14% to 15%, up from approximately 13%, reflecting the impact of the sales of rights for our landsipine portfolio and Thanks, Simeon. Based on these changes, we have raised our full year reported EPS guidance to now be in the range of $9.20 to $9.40 per share and raised our non GAAP EPS guidance to be in the range of $9.70 to $9.90 Now I will turn the call over to Dan to highlight our progress in R and D.

Speaker 2

Thanks, Anat. It's been a productive and busy few months for Lilly R and D. Since our last earnings call, we've had a few major readouts across our therapeutic areas, and we've announced several business development transactions. Let me start with the data that we shared in June at the American Diabetes Association. We presented over 40 abstracts across our portfolio And shared data during 2 ADA sponsored symposia.

Speaker 2

The first was for the Phase 3 results from the SURMOUNT 2 study of tirzepatide adults with obesity or overweight and Type 2 diabetes, which was simultaneously published in the New England Journal of Medicine. And the second symposium was for the results from 2 Phase 2 trials of retrutide, our GIP GLP glucagon triagonist In adults with obesity and overweight as well as in people with Type 2 diabetes, the ratatrutide results in obesity and Type 2 diabetes were Simultaneously published in New England Journal of Medicine and Lancet, respectively. We also shared an oral presentation on our Phase 2 trial results These results were simultaneously published in New England Journal. We also presented results from a Phase 2 trial of morphogliprant in patients with Type 2 diabetes And these were published in The Lancet. Clearly, we're proud of all of this data in diabetes and obesity portfolio.

Speaker 2

Since we discussed the top line data for SIRMOUNT-two tirzepatide trial during our last earnings call, I'll focus my updates today on the Phase Two data shared for orforglypron and retrutide, starting with orforglypron on slide 14. The orfor Glyphron presentation highlighted safety and efficacy data across 6 dose arms in our Phase 2 study in obesity. With an overall mean body weight at baseline of 109 kilograms, orforglipron demonstrated an average of up to 14.7% body weight reduction at 36 weeks. At the 2nd highest dose tested in the study, 75% of participants reached a weight reduction goal of 10% or more. We also shared data showing a dose dependent decrease in systolic blood pressure and an overall improvement in lipid levels.

Speaker 2

The most common adverse events were GI related and generally occurred earlier in the trial during the titration phase and were mostly mild to moderate. While we've not yet shared the dosing details for our Phase 3 studies, these Phase 2 results have informed our approach on dose escalation. We also presented data at ADA from a similar Phase 2 study of oforglipron in people with Type 2 diabetes. The results of which are highlighted on Slide 15. Olforglipron demonstrated a mean reduction in hemoglobin A1c at 26 weeks of up to 2.1% and over 90% of participants on the highest three doses A1C levels less than 7%.

Speaker 2

We initiated Phase III trials for Oforglipron in both obesity and Type II diabetes in the second quarter, And we look forward to those results in 2025. For retrutide, the full results of 2 Phase 2 trials were presented during an ADA sponsored symposium, which There was also a segment at the symposium focused on liver fat and NASH related biomarker data in patients with non alcoholic fatty liver disease, which showed relative liver fat reduction of over 80% at 24 weeks for the 2 highest doses. Slide 16 highlights key results from the obesity Phase 2 trial in which retrutide met the primary endpoint at 24 weeks, demonstrating mean weight reduction up to 17.5%. The safety profile of ratatrutide was similar to other incretin based therapies. In a secondary endpoint of weight reduction at 48 weeks, Participants treated with the highest dose of retratidib demonstrated a mean rate weight reduction up to 24.2% or almost £58 If confirmed in registrational trials, we believe that magnitude of mean weight reduction would represent a new high watermark It's also worth noting that the Phase 2 retitutide trial in obesity was well balanced between genders, with females representing just under half of all participants in the trial.

Speaker 2

This was intentional and is atypical for incretin clinical trials in obesity, which often have a higher proportion of female participants, a subgroup that typically experiences greater weight loss than males. Indeed, in the reletrutide Phase 2 obesity trial, the mean change in body weight for female participants at the highest dose was 28.5%. Given these encouraging results, we moved rapidly to initiate the TRYMP Phase 3 program, which will evaluate the safety and efficacy of retrutide for chronic weight management, Obstructive sleep apnea and knee osteoarthritis in people with overweight and obesity. These four Phase 3 trials will each run between 6880 weeks. The trajectory of weight loss seen in the Phase 2 study reinforces our belief The retrutide can potentially represent a further improvement and additional option for patients seeking pharmacological treatment for obesity and its complications.

Speaker 2

While retrutide's Phase 2 results in obesity garnered much attention at ADA, the Phase 2 results in patients with Type 2 diabetes Are also very encouraging, with participants receiving retrutide achieving a hemoglobin A1c reduction of up to 2% on average, In addition to meaningful levels of weight loss, I'm pleased to share that we plan to advance retrutide into Phase 3 for Type 2 diabetes. Moving to tirzepatide on Slide 17. We were delighted to announce in late July that SURMOUNT 3 and SURMOUNT 4 trials of tirzepatide In obesity met all primary and key secondary objectives. In key secondary objectives for both these studies, participants achieved similar mean weight reduction, 26.6 percent in Surmount 3 and 26.0 percent in Surmount 4. While these two trials were not required for our chronic weight management submission to the FDA.

Speaker 2

They provide important additional information regarding the more role tirzepatide plays in maintaining or adding to the weight loss achieved with either intensive lifestyle intervention or pharmacotherapy in adults living with obesity or overweight. Surround 3 evaluated tirzepatide following an intensive lifestyle modification program and demonstrated that even in people who have a weight loss response to lifestyle intervention, Tirzepatide provides significant additional weight loss. SURMOUNT-four was a randomized withdrawal study in which all participants received tirzepatide for a 36 week lead in period, at which point half the participants were switched to placebo and the other half continued treatment with tirzepatide. This study demonstrated that those participants who continued on tirzepatide experienced continued weight loss, while those who switched to placebo started to regain weight. These data reinforce our understanding that obesity is a complex chronic disease for which multiple treatment approaches, including lifestyle modification and Effective medications are needed.

Speaker 2

We believe tirzepatide is well positioned to be one such treatment option. Accordingly, we submitted an application for tirzepatide for chronic weight management to the FDA during Q2. The FDA granted this application priority review designation and we anticipate FDA action by year end. Slide 18 shows select pipeline opportunities as of August 4th, and Slide 19 shows potential key events for the year. I've covered the major updates in diabetes, including the advancement of O4, Glypron and Reditrutide into Phase 3 since our learning last earnings call.

Speaker 2

Turning then to our neuroscience portfolio. 3 weeks ago at the AIC meeting in Amsterdam and simultaneously published in JAMA, We were excited to share the detailed results from the trailblazer ALT2 study, highlighting denenemab's robust efficacy profile Across a number of new analyses that reinforce our belief in the medicine's ability to meaningfully slow the progression of Alzheimer's disease, especially in patients earlier in disease progression. We covered the results in some detail during our AAIC investor call, so I won't cover that again, except to note We submitted dinedamab to the FDA and to the EMA for approval, and we look forward to FDA action before the end of this year. Shifting to oncology. Launch progress continues with J Perka and mantle cell lymphoma, and we were pleased to have the detailed chronic lymphocytic leukemia results from the Bruin Phase onetwo trial published in New England Journal in early July.

Speaker 2

Following discussion with the FDA, We've now submitted an application for accelerated approval for J Perka in CLL patients previously treated with both the covalent BTK inhibitor and venetoclax Based on the results from the Bruin Phase onetwo study, we expect FDA action by year end. Also during the quarter, we completed the regulatory submission in Japan for perturbrutinib for patients with MCL. We continue to study protobrutinib in multiple Phase III trials and look forward to the results from the BRUIN-three twenty one trial in CLL, ASCO in June, we presented new data from the Verzenio Monarch E trial in high risk early breast cancer. For the first time, We believe that the ability to manage Verzenio's side effects, while preserving efficacy, could be very important to ensuring that patients complete their 2 years of therapy. This is an emerging part of Verzenio's differentiation in this class.

Speaker 2

We're also very excited about last week's announcement regarding the randomized trial of RATEVMO In treatment naive RET fusion positive lung cancer, as we communicated in the press release, this randomized trial was declared successful on its primary endpoint of progression free survival, The first time any targeted therapy in lung cancer has ever shown superiority to a PD-one plus chemotherapy regimen. While we remain disappointed by the low levels of genomic profiling done at the time of lung cancer diagnosis, we're hopeful that these data will continue to advance the practice We look forward to sharing the full results of the study at an upcoming medical meeting. In our earlier stage oncology portfolio, the combination experiment of our KRAS G12C inhibitor with pembrolizumab continues And we're now working to initiate Phase III trials in first line G12C mutated lung cancer in the next 6 to 9 months. More broadly, we're excited to see the overall progress of our oncology portfolio. In addition to last week's ROTEVMO announcement, We expect another 7 randomized trial readouts and 4 to 6 new first in human trials across small molecules and biologics In oncology over the next 12 months.

Speaker 2

With the acquisition of Loxo Oncology 4 years ago, we catalyzed a change in the strategy and direction of oncology at Lilly, And we're seeing the fruits of these efforts. Finally, in immunology, we have several updates related to mirikizumab. At Digestive Disease Week in May, we presented new analyses from the Phase 3 LUCENT 1 and LUCENT 2 studies demonstrating that remission of key symptoms of ulcerative colitis, Including viral urgency was associated with significant improvement in the quality of life assessment in adults with UC. In Q2, we launched mirikizumab, marketed as OmbHile in Japan as a treatment for adults with moderately to severe active UC. In late May, we received approval for Amvio in the EU and have subsequently launched Amvio in Germany and plan additional launches in the EU later this year.

Speaker 2

In the U. S, we've resubmitted our application to the FDA. We now expect regulatory action by the end of this year. For lebrikizumab, our IL-thirteen monoclonal antibody under regulatory review for atopic dermatitis, We presented a new secondary analysis of the Revolutionizing Atopic Dermatitis Conference in May. This post hoc analysis demonstrated improvement or clearance Face or hand dermatitis in adults and adolescent patients treated with lebrikizumab.

Speaker 2

These are parts of the body that are highly visible We expect regulatory action for lebrikizumab in both the U. S. And EU Later this year, together with Almirall, our development and commercialization partner in Europe, we look forward to potentially bringing this important medicine to patients who suffer from this chronic Looking earlier in our immunology pipeline, we're pleased in May to have the detailed results from our Phase IIa study of parisolumab in rheumatoid arthritis Published in the New England Journal. These data were first presented as a late breaking abstract at the American College of Rheumatology Annual Meeting in late 2022 and represent the first clinical evidence that stimulating the endogenous PD-one inhibitory pathway could be an effective approach to treat rheumatologic disease. As you can see, Q2 was another productive quarter for Lilly R and D with important progress in each of our therapeutic areas.

Speaker 2

Now I'll turn the call back to Dave for closing remarks. Thank you, Dan. Before we go to Q and A, let me briefly sum up our progress in the Q2. This quarter saw an acceleration of revenue growth as our recently launched product portfolio gathers momentum. Excluding COVID-nineteen antibodies and vaccines revenue, we grew 22% driven by Manjaro, Verzenio and Jardiance.

Speaker 2

The quarter also saw a continuation of investment in our future growth, in our manufacturing expansion, in late stage medicines, In early phase capabilities and in business development, notwithstanding these long term investments, We continue to expect our revenue will grow more rapidly than our expense base in the coming years and see significant opportunity for margin expansion. We also achieved meaningful advances in our near term pipeline with positive face positive top line results, detailed data disclosures and submission of donatumumab For traditional approval to the FDA and EMA and completion of the tirzepatide submission in chronic weight management alongside Positive top line results from 2 more Phase 3 trials for the SIRAMOUNT program. We also shared data From 4 mid stage clinical trials for orforglipron and ritatretide and initiated Phase III trials for both assets. Lastly, we announced several targeted business development moves intended to bolster our early and mid stage portfolio and our R and D capabilities. And we returned over $1,000,000,000 to shareholders via the dividend.

Speaker 2

Now I'll turn the call over to Joe to moderate the Q and A session.

Speaker 1

Thanks, Dave. We'd like to take questions from as many callers as possible and conclude our call in a timely manner. We will respond to one question per caller, so ask that you limit to one question per Caller, as we'll end the call at 10:15 a. M. If you have more than one question, you can reenter the queue and we'll get to your question if time allows.

Speaker 1

Paul, please provide the instructions for the Q and A session and then we're ready for the first caller.

Operator

Thank you. At this time, we will be conducting a question and answer session. The first question today is coming from Louise Chen from Cantor. Louise, your line is live.

Speaker 4

Hi. Thank you for taking my question. Just wanted to ask you about the Novo Select study that came out this morning.

Speaker 1

Thanks, Luis. We'll go to Mike for that question on the recent Select news.

Speaker 5

Thanks, Luis. I assume we probably would get a question on the Select trial and thanks for The select trial read out as we expected. I think the results are great For the anti obesity medication class, it should really support access for any payers who are on the fence of whether they should That anti obesity medications are not. I think importantly, it should turn the conversation on the benefits of weight loss, a weight from aesthetics And more toward the health benefits of people living with obesity. When you look overall, there are 236 ABC Related Health Complications.

Speaker 5

To name a few, obesity increases the risk of type 2 diabetes By 2 43%, coronary heart disease by 69%, hypertension by 113%, Dyslipidemia by 74%. The overall cost of obesity related complications and comorbidities are massive, Accounting for $370,000,000,000 in direct medical cost, over $1,000,000,000,000 in indirect annual cost in the U. S. People living with obesity or overweight drive 2.7 greater healthcare costs than normal weight individuals. The global health stakeholders really needs to be moved beyond the debate and really moved to action on the AOM class.

Speaker 5

With tirzepatide's potential to provide over 20% weight loss, it should provide great value for payers. We have a comprehensive evidence plan and clinical plan to demonstrate tirzepatide's value, including our MMO outcomes trial. Based on the We can't wait to see the results of tirzepatide's MMO study. We do believe that additional weight loss will matter. This is a fantastic day for people living with obesity.

Speaker 5

Now do I think most payers will adopt AOMs overnight because of select trial? I don't think so. I think as I said earlier, those who are on the fence, this will push them over. But I think it is an important milestone in a long term goal to get broad access for anti VISA medications.

Speaker 1

Thank you, Mike. Paul, next question.

Operator

Thank you. The next question is coming from Geoff Meacham from Bank of America. Geoff, your line is live.

Speaker 1

Hey, guys. Thanks for the question.

Speaker 2

I know that we're a year into the majority launch, but I wanted to get a view of persistent rates. The question is, are you seeing drug holidays after weight loss troughs? And I wasn't sure if there were Differences between diabetes and obesity indications at this point just with regard to duration of use? Thank you.

Speaker 1

Thanks, Jeff. I'll go back to Mike for that question on persistence rates, Manjaro.

Speaker 5

Okay, Jeff. Thanks for your question. Right now, we only market Manjaro for type 2 diabetes. So the only end market real world persistency rates that we have are for Manjaro in the type 2 diabetes patients. What we do know is that people living with type 2 diabetes have had good experiences with LNGARO.

Speaker 5

In the first launch, like at the first phase of launch before we've made savings card and experienced supply spot outages, Hi, 2 diabetes patients, UTM Manjaro, did have better persistency than Trulicity, which is important because Trulicity historically has had The best compliance in the diabetes market. So we're confident in the experiences that people We use Vonjara for Type 2 Diabetes Hub, and we're excited to see what that will be for people living with chronic pain management when and if we get Approved by the FDA.

Speaker 1

Thanks, Mike. Paul, next question.

Operator

Thank you. The next question is coming from Tim Anderson From Wolfe Research, Tim, your line is live.

Speaker 6

Thank you. So just going back to Select, A commonly held view is that positive results benefits every company in the category and that's our view as well. But Of course, Novo will be able to make the claim for quite some time that they're the only drug to have a proven cardiovascular benefit. So could that actually give them a big commercial advantage in the marketplace on things like payer coverage that would actually be to Lilly's That's right. Thank you.

Speaker 1

Thanks, Tim. I'll go back to Mike for that question and follow-up on Select.

Speaker 5

No, it's a good question. I don't think that'll be the case. What we've seen is payers opt into the class, not a particular drug. So I don't think that'll give them a differential Impact within payer access, I think commercially, typically healthcare professionals when they see results like this, It really helps the class more than any one individual product.

Speaker 1

Thanks, Mike. Paul, next question.

Operator

Thank you. The next question is coming from Kerry Halford from Berenberg. Kerry, your line is live.

Speaker 7

Hi, there. Thanks for taking my question. On the guidance, please, and OpEx. So clearly, operating costs higher And at least a market anticipated in Q2 and you are now guiding to spend more on SG and A R and T So I'm just interested to know more about what has changed through this quarter to come due to raise that OpEx

Speaker 3

G and A increases are primarily as a result of continued investment in the upcoming launches we have yet this year. As we're seeing the opportunities, we're excited to invest efficiently behind these opportunities and make them a reality for patients and for Lilly. On the R and D side, Dan provided a robust outline of the progress we've seen in our pipeline. And there are really, I would say, 3 to 4 Key drivers of that increase. One is additional new studies that we've announced primarily in Phase 3 and you've seen the broadening Of the investments we're making in our incretin portfolio initiating multiple Phase 3 studies for both orfagliopron and ritutide and announcing new studies, Coupled with continued advancement, we're seeing great success in our early stage pipeline, and we're investing behind that.

Speaker 3

We're also seeing continued success in our enrollment rates for currently for our Phase 3 programs. So that's continued to enroll well. And Then the 3 business development transactions, the inbound that we've announced are now going to be incorporated in our second half R and D run rate. So All these combined are the drivers of the increase this year. So they represent really a tremendous opportunity for continued investments in a very Pipeline.

Speaker 1

Thank you, Anat. Paul, next question.

Operator

Thank you. The next question is coming from Chris Schott From JPMorgan, Chris, your line is live.

Speaker 8

Great. Thanks so much for the question. Can you just walk through expectations for Monjaro volumes and ASP as we move through 3Q and 4Q, just given the change in the patient assistance program on June 30, as well as the North Carolina facility coming online. I guess specifically, I was Wondering, do the IQVIA scripts we're now seeing largely reflect the change to the patient assistant program? And then should we volumes from North Carolina to be a meaningful contributor to capacity this year or is that more 2024?

Speaker 8

Thank you.

Speaker 1

Close to multiple questions there, Chris. But let me hand over to Mike to provide expectations on Manjaro volume and Gross to net dynamics as we move in the second half given the RTP news and then also given the changes to the co pay program at the end of June. Mike?

Speaker 5

Hey, Chris. Thanks for those questions. Yes, we did make the change and the $25 savings program did expire At the end of June 30, so anything that you see in IQVIA is post that change, And you'll see that volume of those individuals who were using an uncovered plan no longer in our trends. We were very happy with what we saw with ManjaroPay TRxs in the quarter as they grew nearly 60% in the quarter. As we go forward, our manufacturing team is working on bringing on new capacity at North Carolina And then a few more areas.

Speaker 5

And as that production comes on and ramps up, We will see some benefit from that supply. I mean, ultimately, that will help build inventories up and help eliminate Any spot outage that we see, in the short term, because we're seeing really unprecedented demand, we do still expect to see tight Supply and some spot outages on Manjaro through the end of the year. But I think ultimately, as that manufacturing capacity ramps up, We will be out of the spot outages that we see in the next couple of months and quarters. I think we'll still see tight inventory.

Speaker 1

Thanks, Mike. Paul, next question.

Operator

Thank you. The next question is coming from Terence Flynn from Morgan Stanley. Terence, your line is live.

Speaker 1

Great. Thanks so much for taking the question. I was just wondering if you could provide any perspective on how you're thinking about the potential For a single brand, for Manjaro or a split brand ahead of the potential FDA action on the obesity indication. Thank you. Thanks, Terrence.

Speaker 1

Mike, I'll hand that over to you for commentary on single brand versus multiple brands for tirzepatide.

Speaker 5

Yes, thanks for the question. We're evaluating all alternatives and we'll announce our decision at approval.

Speaker 1

Thanks, Mike. Next question, Paul.

Operator

The next question is coming from Colin Bristow from UBS. Colin, your line is live.

Speaker 9

Hey, good morning and congrats on the quarter. I heard the sort of positive commentary regarding the commercial supply coming online at RTP. And just as we think about 2024, how likely is it? And what do you foresee in terms of supply potentially capping The sales potential in 2024 and is the decision to move forward with the vial and multidose pen in any way related to delays at the RTP side? Thank

Speaker 1

you. Thanks, Colin. I'm going to hand to Anat to talk a little bit about the RTP commercial supply and Supply dynamics in near term.

Speaker 3

Collyn, so let me first start with the end of your question on just to clarify RTP. So RTP is now live I've been producing for commercial purposes and it's online in line with our expectations. So there are no delays. It's progressing As we had expected and incredibly proud of the work that the manufacturing team have done to get us to this point. As Mike alluded, there will be a gradual Increase in available capacity coming out of that site, we've mentioned in the past, it's a large site with multiple lines.

Speaker 3

They'll come online Gradually and provide more products into the marketplace. As we think about 2024, I suggest we Of high interest just because of the proximal nature and that's the first one that's launched out of the number of sites we have under construction. In parallel, we have been working and continue to work to expand capacity in existing sites. We're working with Partners and CMOs to supplement capacity. Our strategy is 1st and foremost to have an internal build, but then we supplement externally as needed.

Speaker 3

But we're also progressing rapidly with our site in North the second site in North Carolina and Concord, which you recall we've announced last year And that could potentially go live in terms of production in the second half of twenty twenty four, again gradually. So we will see some Relief of supply at the end of or towards the end of next year and then continue to grow from there. And as you know, these are not the only two nodes of capacity. We're also adding outside of Incretin and for Incretin API capacity in Ireland as well as 2 large sites in Indiana. So we're Spending capacity broadly to support both the Incredent portfolio, but then the broader Lilly portfolio and managing a broad set of networks outside of Lilly.

Speaker 3

So complex Manufacturing set of nodes that we're working towards, we'll comment on specifically on 2024 when we provide guidance in terms of Internal capacity elsewhere as well as CMOs. The additional presentation is meant to provide options for patients. As we've said, we'll start launching outside the U. S. With these presentations.

Speaker 3

We'll which should provide additional capacity as well. And as I stated earlier, the manufacturing facilities in line already exist within Lilly for example, the vial production. We have those facilities. We don't need to construct new ones. So that provides us with the option to start with these As early as the end of this year and then going into next year.

Speaker 1

Thank you, Anat. And Paul, next question.

Operator

Thank you. The next question is coming from Steve Scala from Cowen. Steve, your line is live.

Speaker 2

Thanks so much. How should we think about the MACE reduction powering in Surmount MMO now that we have the select results? Surmount MMO likely won't be as robust given the population studied, but would Lilly consider a win Something half of Select's 20% MACE reduction or would that be viewed as disappointing? Thank you.

Speaker 1

Thanks, Steve. I'll hand over to Dan for that.

Speaker 2

Yes. Thanks, Steve, for your provocative question here. Actually, of course, we expect tirzepatide to Show a very important benefit. I think on the M and O study, there's several important differences as you're alluding to. I think for the most part though, they run-in the opposite direction as you're suggesting, which would indicate a potential for an even larger effect size for Samana MMO.

Speaker 2

The most important difference is the drug itself. Remember that tirzepatide is a GLP, GIP coagness And GIP has some very significant benefits on weight loss and metabolic health overall. We've seen that in a number of different trials and confirm that with some interesting experiments on GIP monotherapy as well. So given the properties of this drug, given the level of weight loss we've seen in previous trials, given the important effects on blood pressure, On lipid profiles and on other biomarkers that indicate lower cardiovascular risk, we should be very confident in a large effect size Coming out of the MMO study, there are some differences in the population. Our study includes both primary and secondary Cardiovascular risk population, we also have a different primary endpoint, although of course, we have the 3 point base as a Secondary endpoint, our primary includes 2 other events related to cardiovascular risk.

Speaker 2

Other than that, I would say that many of the patient characteristics are going to be quite similar. Our study is obviously much earlier. And as an event driven study, it's going to take some time to read out. I think you were also asking about What would be considered a victory here? And I think we'll just sort of wait and see the data and understand it As it comes, but no reason to expect anything less than what we're seeing today.

Speaker 1

Thanks, Dan. And thanks, Steve, for the question. Paul, next one.

Operator

Next question is coming from Umer Raffat from Evercore. Umer, your line is live.

Speaker 10

For taking my question. I wanted to zoom in on orforgliparron and specifically on the case of liver enzymes above 5x and a case above 10x, As well as the treatment of emergent hepatic disorders, I know the slides mentioned safety was similar to other ingredients. And my question is, Is your opinion on liver safety driven by the fact that these liver enzymes self resolve or is it some preclinical data like the GSS adduct formation etcetera?

Speaker 1

Thanks, Umer, for the question. I'll hand over to Dan for that question on orfagliopron liver dynamics.

Speaker 2

Of course, there's been more attention on liver safety for Orfogliperon following the competitor announcement from Pfizer on one of their 2 oral GLP So we don't see any read through from that. But of course, we've looked very carefully at liver safety. And maybe just starting at a high level, if you look The supplementary data from the in the journal publication or you can see in the obese population that, in terms of group averages, there's actually an improvement On liver enzymes, with treatment of ovorglipron, that's not surprising. We know that this Disease obesity is characterized in many patients by excess liver fat, which can cause inflammation and liver abnormalities. And when you reverse that, You see an improvement in liver function.

Speaker 2

Of course, when people come off the drug that they could get fat in their liver again and liver enzymes could go up. What we saw in this trial were a couple of patients scattered across arms, including placebo, With excursions in liver enzymes, as you point out, I think there was one patient with a bit of a higher excursion in liver enzymes on overglypron That return to normal levels while maintaining on therapy, That's generally not a pattern that we see in drugs that cause liver injury. But surely, In Phase 3, we'll keep an eye open for all possible safety consequences. I think I've frequently cautioned investors on all of our molecules that Phase 3 is really the place where you can get surprised by any new safety findings. So we'll be watching liver safety closely, but not with any Particularly heightened concern versus other adverse events that we'll also be watching carefully.

Speaker 2

This is a new molecule. This is the first time that we're exposing large, large numbers of patients to it for many years, many, many months, I should say, and We'll be monitoring safety carefully.

Speaker 1

Thanks, Dan. Paul, next question.

Operator

Thank you. The next question is coming from David Risinger

Speaker 1

How are you thinking about whether future orthogonal mechanism weight loss drugs can deliver the cardiovascular outcomes of incretins Even if they match weight loss on a pound for pound basis. Thank you.

Speaker 2

Dan? Yes. Thanks, David. It's a very good question, of course, particularly today. We think we understand how the biomarkers from incretin therapy translate into cardiovascular benefits.

Speaker 2

Some of those biomarkers should be translatable to other mechanisms, But depending on how orthogonal those other mechanisms are, there could still be some uncertainty. One, I think, important understanding though is that obesity itself, including, I think Particularly where the fat is deposited in the body. So for example, visceral fat particularly is It contributes to adverse health outcomes, including adverse cardiovascular outcomes. And therefore, reversing that Should provide cardiovascular benefits across mechanisms. But obviously, when we get to the orthogonal mechanisms, each one will need its own data to demonstrate that.

Speaker 2

Recently, our focus has been on mechanisms that could stack on top of incretin therapy to give additional benefits, in which case there could be Good read through from the Incretin trials. Thanks, David.

Speaker 1

Thanks, Dan. Next question, Paul.

Operator

Thank you. The next question is coming from Chris Shibutani from Goldman Sachs. Chris, your line is live. Great. Thank you very much.

Operator

Trulicity and Manjaro, can you talk a little bit about the dynamics there? In particular, are you seeing switching? Just trying to get a sense for how you're seeing the supply and then the revenue dynamic?

Speaker 1

Thanks, Chris. I'll hand over to Mike to talk about Trulicity and Manjaro and any switching dynamics or observations we have. Mike?

Speaker 5

Yes. No, good question. Obviously, it's something we've taken a look at since the launch. Really haven't seen any trend breaks in what we've seen and how much Trulicity is being converted over to Manjaro. We see about 13% to 14% of patients Coming on to Monjaro, come on from Trulicity, so really no changes from what we've seen at launch.

Speaker 5

Overall, our goal is to grow the entire Lilly Encratrin franchise, and we did that well in Q2 by We're on revenue by over 58%. So we're pleased where we're at with our early Accrington pipeline, our portfolio And are excited to grow it further in quarters to come.

Speaker 1

Thanks, Mike. Paul, next question.

Operator

The next question is coming from Mohit Bansal from Wells Fargo. Mohit, your line is live.

Speaker 11

Great. Thank you for taking my question Congrats. I have a comment and a question. Comment from my associate that lady needs to have 2 calls, one for Munjaro and one for everything else. So my question is, the question is basically, how should we think about the long term supply now that the The eventual supply of Munjaro and Tulicity combined.

Speaker 1

Thanks, Mohit. We'll take your comment under advisement. It's a fair point. To your Question on long term supply, I'll maybe hand back to Anat to talk a little bit more about manufacturing dynamics and plans.

Speaker 3

Yes. So Mohit, I would echo a few of the things I said earlier. I outlined the expansion we are going to be seeing in our manufacturing footprint support our Inpritin portfolio, they're both large site. We did not provide the specific quantities, but we said that once RTP comes online, By the end of the year, we expect to double capacity from where we were last year. So just use that kind of as a reference point.

Speaker 3

Trulicity and Monjaro, as you know, are both utilized the same auto injector. So they run on the same platform. And these lines are interchangeable, which allows us to manage production plans across our sites based on where we want or need to produce Product or market demand, etcetera. So we're going to be expanding our internal footprint To support the Incretin portfolio as well as continue to leverage external partners to supplement that capacity.

Operator

The next question is coming from Evan Seigerman from BMO. Evan, your line is

Speaker 2

Hi, guys. Thank you so

Speaker 12

much for taking the question. I'm going to ask one on denanimab, shake it up a little bit. So in submitting for denanimab full approval, Are there any nuances that you needed to discuss with the agency following this CRL earlier this year? Or does FDA have everything that they need based on the data that we saw Last month. Thank you so much.

Speaker 3

Thank you so much for the question on denanumab. And just to refresh everyone's memory, we had submitted accelerated approval submission, was designated as a priority review. We did receive a CRL just based really on wanting more exposure. So it's a pretty simple request. Our resubmission was Treblazer ALT 2, the Phase 3 study, which certainly fulfilled any expectations on the CRL.

Speaker 3

As well as good news, I think going through the accelerated approval, the FDA had the chance to review all the aspects of the submission, preclinical manufacturing and others. Action by the end of the year.

Speaker 1

Thank you, Anne. Paul, next question.

Operator

The next question

Speaker 13

I guess I have big picture question. So you're in payer discussions right now ahead of approval for weight loss from Manjuro. For those payers that are not willing to cover, not on the fence, What do they need to see as you expect the cadence of supply versus access to shift In 5 years, can you give us a sense of what that looks like and what they really need to see? Thanks.

Speaker 1

Thanks, Robin. I'll hand over to Mike because it

Speaker 2

sounds like the question is

Speaker 1

more around Payer discussions longer term and for those that are more, maybe reticent, what might eventually move some of these payers? Mike, do you want to comment?

Speaker 11

Yes, I think there's

Speaker 5

a couple of dynamics that will play out. I mean, first of all, we need to build A long term clinical and real world evidence to support payers' decisions and we're doing that. We're spending literally 1,000,000,000 of dollars in clinical evidence to show what tirzepatide and our pipeline Can offer patients who have obesity and payers with regards to medical cost savings. We're confident in our modeling that payers We'll see medical costs offset with tirzepatide. And so I think that'll be an important piece of it.

Speaker 5

I think the other dynamic is a lot of times we focus on the clinical story, but there is things beyond the economic Analysis that I think will play a role. If you go and really discuss with people who live with obesity, Improving their health is a top personal goal. Sadly, when we look at the data, 82% of people living with obesity experience Physical functioning, reductions, while 77% experience reduced mental and emotional well-being. Patients using tirzepatide showed significant improvements in physical, mental and emotional well-being in the SMART-one trial. And it's clear from the patient testimonies that we had in our Symantec clinical trials that tirzepatide can meaningfully improve the lives of people With obesity, the massive interest that we see in obesity medications is really driven by the fundamental desire for people living with obesity improve their health, people living with obesity should have a loud and powerful voice in this debate.

Speaker 5

And I think that's going to be a big component of Payer decision, whether that be an employer or be a state or federal government. And so

Speaker 2

I think what you're going

Speaker 5

to see is over time, You're going to see data like select data, data like MMO or other clinical trials, continuing to build the case On economic side for these, while you're going to see the voice of people living with obesity, who really want a better life, more hope for the future, We will be demanding access for these agents. I think both over time, we'll continue to build access Across the U. S. As well as globally.

Speaker 1

Thank you, Mike. Paul, next question.

Operator

The next question is coming from Andrew Baum from Citi. Andrew, your line is live.

Speaker 14

Thank you. A non munjaro, nondanumab question coming up. We estimate there's about $2,000,000,000 of Dupixent In the U. S. From adults with atopic dermatitis, when you are thinking about the launch of lebrikizumab, Given the relatively little clinical differentiation and therefore the need to place Dupixent, Could you just comment on how you're thinking about the launch?

Speaker 14

I'm assuming similar to a GOVI or to Sartiktu, similar to Manjaro or Sartiktu, The obvious thing will be to launch a very, very large bridge program in order to secure formulary access tapping into that High deductible patient population, just interested in your thoughts here please.

Speaker 1

Thanks Andrew for diversifying the question set. I'll hand over to Patrick, President of Lilly Immunology to weigh in on lebrikizumab and how we're thinking about positioning. Patrick?

Speaker 15

Thank you very much for the question on lebrikizumab. Based upon the data we have seen, we realize it's not a head to head, We're extremely encouraged by the maintenance data, having more than 80% of patients achieving skin clearance at week 16 and maintaining it at week 52. We really believe that we are positioned to launch a first line biologic that actually has less frequent dosing than Dupixent. So that's a big differentiator And targeting the most relevant cytokine for atopic dermatitis being IL-thirteen with a slow off rate and high potency. From an access perspective, we see the topic dermatitis market growing significantly, And we know that payers are looking forward to options here.

Speaker 15

As we are believing that PBMs are willing to enter into And of course, here we can capitalize on the strong footprint we have in dermatology

Operator

Thank you. The next question is coming from Carter Gould from Barclays. Carter, your line is live.

Speaker 12

Great. Good morning. Thanks for taking the question. I appreciate all the color on the manufacturing side. At the same time, Anat, a lot of those sites you talked about, those were sort of in your plans to start the year.

Speaker 12

So I guess My question is, as we think about sort of derisking of orforglucron, the move to Phase 3, has that in any way changed your sort of expected build out for your longer term

Speaker 1

Thanks, Carter. Great question. I think Dave wants to maybe jump in on this one.

Speaker 2

Yes, sure. I'll jump in. I mean, just as we think about this over the long term, first of all, versus where we started the year, The strain we experience now is in the parenteral auto injector space. So the degree we move outside of that using our Multi dose pen that's currently developed for insulin and we're redeveloping for tirzepatide or certainly the vial, which is Quite accessible and high volume systems available. We'll be able to make more than we had planned previously, just to be clear.

Speaker 2

That's on top So I think that's good news for Montero. That all said for the prior questions here, will that be enough to meet demand? I'm not so sure. So while the volume is moving up into the right, we need more and news like today's news We'll only expand the opportunity. So you're right to point out that other molecules, and orforgopron in particular, Could play a big role in meeting global demand for OBC treatment and all the related complications because it's a completely different Technology in that it's using oral solid, and there's quite a bit of capacity around the globe for that.

Speaker 2

Now Orforglipond is a complicated molecule to make. It's got many steps, but it puts us in using a different set of assets and Processes than the current ones we're using. So that's an important program, particularly for global access and availability over the long term. Just to remember as well, 2 years ago, we were probably treating 10,000,000 people globally with incretins And the WHO is estimating there'll be 1,000,000,000 people with obesity and related conditions by 2,050, I believe. So, A long way away from getting all the way to that, we need things like oforglebron to work for us to meet the needs of all the patients

Speaker 1

in the world. Thanks, Dave. Paul, next question.

Operator

The next question is coming from Trung Huynh from Credit Suisse. Trung, your line is live.

Speaker 16

Thanks for squeezing me in guys. Just one on IRA. So one of the components that's Being implemented in the part is the Part D redesign that starts impacting in 2024 and then there's going to be some more Meaningful changes in 2025. On our calculations, we think it should benefit products under $25,000 a year, Like your GLP-one portfolio, but a negative for drugs priced above $25,000 a year. So given the mix of products you have in your portfolio at Various different price points directionally, how do you see that impacting earnings in the next few years?

Speaker 1

Thanks, Trung. I'm going to hand to Nhat for that comment for that response on the IRA and potential impacts.

Speaker 3

Yes. So If we I think you were referring to the Part D redesign associated with removing the coverage gap, But I'll also mention the negotiation. I wouldn't necessarily look at what the dollar amount is, but rather you're right, there are going to be varying degrees of impact On product, based on how quickly they move through the catastrophic phase. So just to give an example from Lilly, If you're thinking about an oncology product where patients get to the catastrophic phase very quickly, there is probably an additional cost associated with that For us, moving from the previous 70% coverage gap to the 10% participation in the initial phase and then 20% in the catastrophic phase. For other indications, it might be the opposite.

Speaker 3

So there is a mix there. But then important to think about the fact that given that patients are now going to have a limit of out of pocket When they get to the pharmacy counter, hopefully that should improve adherence and compliance to medication, which should drive obviously better health outcomes for these patients, But also as we're thinking about medication kind of adhering. So there's going to be some pushes and pulls of that part of the IRA. The more significant one that I would refer to is the so called negotiation that we have as part of that, That's going to come later in 20262028 with the first cohort of products to be announced this year. Think that could have quite a meaningful impact on the drugs that are going to be negotiated in terms of the price discounts That the government is going to arrive at as part of that process.

Speaker 1

Thanks, Anat. I We've only got about a minute left. So maybe just one last question, Paul, that's in the queue and then we'll wrap up.

Operator

Certainly, the last question is a follow-up from Kerry Halford from Berenberg. Kerry, your line is live.

Speaker 7

Well, lovely. Thank you. Just a quick one on the ZENIO. Just interested to see whether you can tell us what proportion of those drug sales now Are represented by use in the early breast cancer setting. And given we've now seen the Kisqali Natalie data at ASCO, Just interested to hear how you're thinking about competition coming into that space.

Speaker 1

Thanks, Carrie. All right, I'm going to hand over Jake, for that last question on Verzenio and the proportion of sales in early breast versus metastatic and maybe some commentary on Natalie. Jake?

Speaker 12

Yes. Thanks for the question. So I answered the proportion of sales really on new patients are NBRx. TRx is Sort of a lagging indicator, of course, that takes into account different durations of therapy. But what we're seeing on the NBRx side is about, Call it between 30% 45% of prescriptions are in early breast cancer versus metastatic and obviously that number bounces around sort of week to week, month to month.

Speaker 12

So that's more or less in line with what we expected. So that's what's happening there. On the competitive dynamics in the adjuvant setting, Now that we've seen the NATALY data from Kisqali at ASCO, which by the way were not really surprising to us. I think when you take a step back and This is sort of both our opinion as well as what we've heard from thought leaders. We just really don't see, what The KESQALI 3 year regimen is giving to patients to justify the additional year of therapy relative to the 2 year regimen That we've offered patients with Verzenio.

Speaker 12

Obviously, cross trial comparison notwithstanding, if anything, you see a marginally larger with the 2 year Verzenio regimen in high risk patients. Obviously, the NATALY study started studied a larger population. The node negative patients are at lower risk and frankly not part of our indication. We didn't study those patients. I think to the extent that prepared remarks.

Speaker 12

There's been a lot of talk in the past, of course, about the differences in the tolerability of these two agents. And I think One of the things that perhaps was somewhat surprising in the data we saw at ASCO was the high rate of discontinuations for toxicity of Kisqali, Especially with many patients still on therapy, so that number of course will go up with more follow-up. So I think these two drugs, while they have different tolerability profiles in terms of what the side effects are, they actually have Profiles in terms of what the side effects are, they actually have somewhat similar overall tolerance profiles. And importantly, The Verzenio tolerability can actually be managed with dose reductions without sacrificing efficacy. It's not clear that the same is true for Kisqali Given the nature of those adverse events.

Speaker 12

So we continue to feel really good about what Verzenio can offer to patients and its competitive profile in the marketplace. And that's been validated by in talks with prescribing physicians. So we continue to feel good and we just got to make sure that all

Speaker 2

Great. Well, we appreciate your participation in today's earnings call and your interest in the company. It's been a very productive first half of the year for Lilly, We look forward to continuing our momentum into the second half. Thanks again for dialing in. And as always, please follow-up with the IR team if you have questions we have not addressed on today's call.

Speaker 2

Have a great day.

Operator

Thank you. Ladies and gentlemen, this does conclude our conference for today. This conference will be made available For replay beginning at 1 pm today running through August 21 at midnight, you may access the replay system at any time by dialing 800-332-6854 and entering the access code 213,952. International dialers can call 973-five twenty eight-five. Again, those numbers are 800-332-6854 and 973-five twenty eight-five with the access code 213,952.

Operator

Thank you for your participation. You may now disconnect your lines.

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Earnings Conference Call
Eli Lilly and Company Q2 2023
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