Eli Lilly and Company Q4 2023 Earnings Call Transcript

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Provided by Quartr
February 6, 2024

There are 17 speakers on the call.

Operator

thank you for standing by, and welcome to the Lilly I would now like to turn the conference over to your host, Joe Fletcher, Senior Vice President of Investor Relations. Please go ahead.

Speaker 1

Good morning and thank you, Paul, and thanks for joining us for Lilly and Company's Q4 2023 Earnings and 2024 Guidance Call. I'm Joe Fletcher, Senior Vice President of Investor Relations. And joining me on today's call are Dave Ricks, Lilly's Chair and CEO Anat Ashkenazi, Chief Financial Officer Doctor. Dan Skovronsky, Chief Scientific Officer and President of Lilly Immunology Ann White, President of Lilly Neuroscience Ilya Yuffa, President of Lilly International Jake Van Naarden, President of Loxo at Lilly and Patrick Johnson, President of Lilly Diabetes and Obesity and Lilly USA. We're also joined by Michaela Irons, Mike differ materially due to several factors, including those listed on Slide 3.

Speaker 1

Additional information concerning factors that could cause results to 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. It's not intended to be promotional and is not sufficient for prescribing decisions. As we transition

Speaker 2

our prepared remarks, please note that

Speaker 1

our commentary will focus on non GAAP financial measures. Now, I'll turn the call over to Dave.

Speaker 2

All right. Thanks, Joe. 2023 was a year of advancement across our company. We grew our top line, we progressed our pipeline, Advanced our external innovation agenda through partnerships and collaborations. We continue to invest in quality, the reliability and the resilience of our company's manufacturing infrastructure, and most importantly, delivered new life saving and life changing medicines to more patients.

Speaker 2

In 2023, revenue grew 20% for the full year and 28% for the most recent quarter as our newly launched portfolio continued to gain momentum. This past year, we announced positive Phase 3s for dononamab, tirzepatide, mirikizumab and perturbutinib. We also announced a positive Phase 2 result for Orforglopron as well as ritatutide and moved these 2 important molecules into Phase 3. In terms of external innovation, in 2023, we continue to complement our pipeline through acquisitions and collaborations. These transactions included the acquisition of Dice Therapeutics, Point BioPharma, Versanis Bio, Emergence Therapeutics, Mavalink Biosciences, ImmunoTrack as well as Sigolon Therapeutics.

Speaker 2

We announced several significant investments in manufacturing, including plans to expand capacity at the company's Research Triangle Park facility and the 2 manufacturing sites within the LEAP Innovation Park in Boone County, Indiana. Most recently, we announced plans to construct a new high-tech manufacturing site in Germany. This facility will further expand the company's global injectable product and device manufacturing network, including for our diabetes and obesity portfolio. Most importantly, this past year, we brought innovative new medicines to patients. 2023, we received regulatory approvals for ZEPBOUND, JAPERCA, AMVO, EBLIS in the U.

Speaker 2

S. In the EU rather and an expanded label for Verzenio and 2 new indications for Jardiance. This progress will serve as a foundation to drive top tier revenue growth and margin expansion over time. As you can see on Slide 4, we continue to make progress against our strategic deliverables in Q4. Revenue grew 28% with our new products growing by over $2,000,000,000 Since our last earnings call, we achieved several key pipeline milestones.

Speaker 2

In addition to the ZEPBOUND and JAYPRCUS CLL approvals, Today, we announced top line results for the tirzepatide Phase 2 SYNERGY NASH trial as well as the Verzenio Phase 3 cyclone 2 trial. Dan will talk more about these update in his update. In terms of business development, in Q4, we completed the acquisitions of Mavalink Bioscience and Point BioPharma, the latter of which expands our capacity and capability into radioligand therapies. Lastly, we announced a 15% dividend increase for the 6th consecutive year and distributed over $1,000,000,000 in dividends in the 4th quarter. On Slide 5, you'll see a list of key events since our Q3 earnings call, including several important regulatory, clinical and other updates.

Speaker 2

Now I'll turn the call over to Anat to review our Q4 results.

Speaker 3

Thanks, Dave. Slide 6 summarizes financial performance in the Q4 of And I'll focus my comments on non GAAP performance. We are pleased with the strong financial performance in the Q4 and for the full year. Our performance was highlighted by continued acceleration of revenue growth, driven by our new products and growth products. Q4 revenue increased 28% compared to Q4 2022.

Speaker 3

Excluding divestiture, this represents a quarter over quarter acceleration in revenue growth driven by Manjaro, Verzenio, Jardiance and the recent launch of ZEPBOUND. For the full year, revenue increased 20%, driven by robust volume growth of 16%. Gross margin as a percent of revenue increased to 82.3%. Gross margin in the quarter benefited from higher realized prices, partially offset by higher manufacturing expenses. Marketing, selling and administrative expenses increased 17%, primarily driven by higher expenses associated with launches of new products and additional indications as well as higher incentive compensation costs.

Speaker 3

R and D expenses increased 28%, primarily driven by higher development expenses for late stage assets and additional investments in early stage research as well as higher incentive compensation costs. In Q4, we recognized acquired IP R and D charges of $623,000,000 which negatively impacted EPS by $0.62 In Q4 2022, acquired IPR and D charges totaled $240,000,000 or $0.23 negative impact to EPS. Operating income increased 29% in Q4, driven by higher revenue from new launches, partially offset by operating expense growth. Operating income as a percent of revenue was approximately 28% for the quarter and included a negative impact of approximately 7 percentage points attributable to acquired IPR and D charges. Our Q4 effective tax rate was 13.1% compared to 7.3% in Q4 2022.

Speaker 3

The higher effective tax rate for Q4 2023 was primarily driven by a lower net discrete tax benefit compared to the same period in 2022 and the new Puerto Rico tax regime. At the bottom line, we delivered earnings per share of $2.49 in Q4, a 19% increase compared to Q4 2022, inclusive of the negative impact of $0.62 from acquired IP R and D charges compared to $0.23 in Q4 2022. On Slide 8, we quantify the effect of price, rate and volume on revenue growth. US revenue increased 39% in Q4, driven by robust growth of Manjaro, Verzenio and Zethbound. Net price in the U.

Speaker 3

S. Increased 27% for the quarter, driven by Monjaro Access and Savings Parts dynamic, as well as the one time favorable change in estimates for rebates and discounts. Excluding Montreal, net price in the U. S. Decreased by high single digits.

Speaker 3

Europe continued its trend of strong growth in Q4, Excluding $65,000,000 revenue associated with milestones received for the EU approval and launch of Eglis, revenue was up 11% in constant currency, driven primarily by volume growth of Fresenio, Jardiance and Taltz. For Japan, we were pleased to see robust growth in Q4 as revenue increased 15% in constant currency, driven primarily by volume growth of Verzenio and Manjaro. Moving to China, Q4 revenue increased 7% in constant currency, with volume growth of 10%, partially offset by price declines. Decline growth in Q4 was primarily driven by private. We are pleased to see China return to growth in 2023.

Speaker 3

Revenue in the Rest of the World decreased 10% in constant currency. However, when you exclude the impact Of the Q4 2022 sales of rights for Limtan Korea and Taiwan, sales grew 9% in constant currency, driven primarily by volume growth of Monjaro and Verzenio. Slide 9 shows the contribution to worldwide volume growth by product category. As you can see, the new product and growth product categories combined contributed approximately 15 percentage points of volume growth for the quarter. Slide 10 provides additional perspective across our product categories.

Speaker 3

First, I would like to highlight Verzenio, which saw worldwide sales growth of 42% in Q4, driven by robust demand growth and to a lesser extent, high realized prices. The continued positive momentum is driven by the early breast cancer indication with steady performance in the metastatic indication. Jardiance continued its strong 2023 performance with worldwide revenue growth of 30% for the quarter. In the U. S, Jardine revenue increased 29% driven by increased demand.

Speaker 3

In Q4, Worldwide Trulicity revenue declined 14%. U. S. Revenue decreased 18%, driven by lower volume and lower realized prices. We experienced intermittent delays for filling orders of Trulicity.

Speaker 3

Starting in early December and going through January, All dose strengths of Trulicity were indicated as having limited availability on the FDA drug shortage site. We expect to experience intermittent delays fulfilling orders of certain doses in the coming months. In international markets, Trulicity volume continued to be affected by measures we have taken to minimize potential disruption to existing patients, including communications to healthcare professionals, not to start new patients on Trulicity. Moving to Slide 10, Monjar continued its robust growth As more Type 2 diabetes patients benefited from the medicine, Q4 revenue grew to over $2,200,000,000 globally, up from $1,400,000,000 in Q3 2023. In the U.

Speaker 3

S, Manjarra revenue of $2,100,000,000 In Q4, up from $1,300,000,000 in Q3 2023, benefited from a one time change in estimates for rebates and discounts. Adjusting for this one time change, sequential net sales in the U. S. Would have grown approximately 30% in Q4. Since our last call, we further expanded patient access to Manjaro.

Speaker 3

As of February 1, access for patients with type 2 diabetes in the U. S. Was 90% in aggregate across commercial and Part D, including 92% access for commercial patients. This expanded access puts Manjarra near parity with established injectable incretins and gives more patients the opportunity to start therapy and monitor for type 2 diabetes. Since the $25 non covered co pay card program expired on June 30, we now consider all prescriptions paid.

Speaker 3

Compared to Q4 2022, Manjarra net price in Q4 2023 benefited from this change to the co pay card program in the U. S. Recall that after a change to the non covered co pay program in late 2022, patients already started on the $25 co pay card could remain in the program until June 30. Today, commercial insured patients without coverage utilize the current non covered co pay program and pay roughly half the list price from Manjaro prescription. Turning to Slide 12.

Speaker 3

In November, we received FDA approval for ZEPTOWN for adults with obesity for those who are overweight and have weight related comorbidities. We then announced on December 5 that ZEPHAN was available at U. S. Pharmacies and we started building commercial formulary access before the end of the year. We are pleased with the early access of approximately 1 third of commercial lives covered as of February 1.

Speaker 3

Access in this market will be more gradual as individual employers need to opt in to coverage after the typical formulary contracting takes place. We are focused on building formulary access and employer opt ins, We expect that it will take some time before we reach broad open access in this market. Meanwhile, a commercial savings card program is available at U. S. Pharmacies for those who do not yet have coverage.

Speaker 3

In Medicare Part D, weight loss drugs are still prohibited from reimbursement. In Q4, we recognized $176,000,000 in sales for Zetbound, with approximately 3 fourth of that coming from initial channel stocking. The initial prescription trends we have seen are encouraging. On slide 13, we provide an update on capital allocation. Looking forward to 2024 and beyond, We have confidence in our existing commercial portfolio, bolstered by the recent launches of MANJARO, JAY PERCKA, AMVO and ZEBOUN and the potential launches of danevaeb and lebrikizumab, all of which we expect to serve as drivers for continued growth through the balance of the decade.

Speaker 3

On slide 14, you'll see a summary of our outlook outline our capital deployment decisions in relation to achievement of our strategic deliverables. We will invest in our current portfolio and in future innovation through R and D, business development and a comprehensive manufacturing expansion agenda designed to drive revenue growth and speed life changing medicines to patients. We will continue to return capital to our shareholders through dividend increases in line with earnings growth over time and share repurchases with Access Capital. Moving to Slide 15, we highlight some of the dynamics that may impact our 2024 financial results. We expect continued robust revenue growth with revenue from our core business, which excludes revenue from divestiture, growing nearly 30% at the midpoint of our guidance range, driven by positive momentum of recently launched products.

Speaker 3

In Incraton's anticipated growth will be led by Monjaro and Zebbound. In 2023, we made tremendous strides in expanding access from Manjaro and we entered 2024 with 90% of commercial and Part D lives covered. ZEP bound coverage is off to a good start since its early December launch, and we expect both tirzepatidebra to contribute substantially to Livy's revenue growth in 2024. While we expect Monjaro and ZEPDAU to be drivers of revenue growth, This will be partially offset by an expected continuation of the softer Trulicity sales trends that we saw in the second half of twenty twenty three. Recent revenue declines for Trulicity in the U.

Speaker 3

S. Have been driven by supply tightness. Volume has been impacted by our actions outside the U. S. As for supply outlook for April 10, our manufacturing organization continues to execute well on the most ambitious expansion agenda in our company's long history.

Speaker 3

Given strong demand and time required to bring capacity fully online, We continue to expect demand to outpace supply in 2024. In late 2022, we shared our expectation that by year end 2023, our capacity for inkling onto injector pens would double. This goal was achieved through significant efforts from our manufacturing colleagues and partners around the globe. In 2024, our capacity expansion efforts will continue with equal urgency and will be accomplished not just through increased ion vector capacity, but also through alternative presentation like our multi use QuickPen, which received regulatory approval in the U. K.

Speaker 3

In late January. We expect our Perenno manufacturing site in Concord, North Carolina will initiate production as early as the end of 2024 With product available to ship in 2025, New York pursuing a host of other projects, internal and external, large and small to further expand capacity. Now I'll provide a bit more context on the timing and pace of our ink return supply plans in 2024. While we're continuing to expand supply every quarter, we expect the most significant production increases to come in the second half of the year. We expect our production of soluble doses in the second half of twenty twenty four will be at least 1.5x the production in the second half of twenty twenty three.

Speaker 3

Note that while last year our commentary focused on capacity of auto injectors devices compared to 2022, We are now referring salvo doses produced, which is more relevant to patients and investors. Beyond Incretin, we look forward to progressing our launch trajectory for 2 other Lilly medicine approved and launched in 2023, JAYPRCAD and ENVOVES. JAYPRCAA was initially approved by the FDA in January 2023 for adult patients with relapse or refractory mental cell lymphoma under the accelerated approval program received FDA approval also under the accelerated approval program In December 2023, for adults patients with CLL or SLL that have received at least 2 prior lines of therapy. We look forward to the ongoing opportunity to help patients with this medicine as our best Phase 3 program continues. Enviva was approved in October 2023 in the U.

Speaker 3

S. And earlier that year in Japan, Europe and other markets and represents compelling new options for patients struggling with moderate to severe ulcerative colitis. And in 2024, we look forward to We continue to expect FDA regulatory actions on dananomab in Q4 and remain confident in the substantial potential for DanoMab to benefit patients with Alzheimer's disease. Due to the current state of diagnostic and treatment readiness, initial uptake will be somewhat limited and we expect ANONIMATE to contribute only modestly to growth in 2024 once approved. Lebrikizumab, which last was approved and launched in Europe under the brand name Eglis by our partner Almirall.

Speaker 3

We're seeing regulatory approval in Japan in January. As for the U. S, we look forward to the potential approval of lebrikizumab by the end of the year. We believe the efficacy, safety and dosing of lebrikizumab can make it a compelling option for patients and prescribers in a large and growing market for the treatment of moderate to severe atopic dermatitis. Given the expected timing of FDA regulatory action, we expect lizumab to contribute only modestly to revenue growth in 2024.

Speaker 3

Beyond our recently launched portfolio of medicine, we expect continued growth from Verzenio driven by the early breast cancer indication, where the magnitude and maturity of our clinical data reinforces it as a standard of care treatment in node positive high risk early breast cancer. Geradiance has been another outstanding contributor to growth and we expect revenue growth to continue in 2024, Though at a slower price, a strong strip growth may be dampened by pricing dynamics in the U. S. Outside the U. S, we expect an acceleration of growth in every major geography, led not only by the anticipated launches of tirzepatide, but also continued strong growth of Verzenio, Jardins and TOLFS.

Speaker 3

Lastly, we seek to create long term value beyond this decade. We will continue to invest across our value chain in our recent and upcoming potential launches, in our pipeline and in our manufacturing footprint. Slide 16 summarizes our initial 2024 financial guidance. Starting at the top line, revenue is expected to be between $40,400,000,000 $41,600,000,000 Using the midpoint of the 2024 range, this represents roughly 20% growth or 29% growth for our core business, which excludes the impact of divestitures that took place in 2023. In terms of phasing of our revenue growth throughout 2024, While we don't provide quarterly guidance, we expect revenue growth to accelerate in the second half of the year, consistent with the increased availability of pincretendosis.

Speaker 3

In terms of pricing for our core business, which excludes divestitures, we expect a high single digit percent price decline in 2024. The lingering base period impact of the Manjaro non covered copay card dynamics will dampen these price declines in the first half of twenty twenty four with more significant price declines expected in the second half of the year. During this year, we are taking a streamlined approach To our guidance line items relating to expenses, rather than providing 3 separate guidance line items for gross margin, research and development costs In marketing and sale and administrative costs, we are presenting a single new ratio representing our margin after plant costs calculated by subtracting R and D costs and marketing, selling and administrative costs from gross margin and dividing that figure by revenue. We expressed this ratio as a percentage and for 2024, we expect it to be in the range of 31% to 33% on a non GAAP basis. While we are not providing a specific guidance number for gross margin as a percent of sales, Our expectations remain consistent that we will maintain gross margin of approximately 80% On a non GAAP basis, productivity gains and volumes are offset by pricing pressures and the cost of new manufactured facilities.

Speaker 3

As for our expense growth across key categories, we expect marketing, SON and administrative expenses to again grow in 2024, though at a slower pace than revenue, with growth driven by marketing investments in our recently launched and upcoming launch products. We also expect R and D expenses in 2024 to increase, driven by growing investments across all phases of our pipeline As we invest for the future, with the majority of dollar growth driven by ongoing and new late phase opportunities, We expect R and D expense to increase at a higher rate than marketing, selling and administrative expenses. Other income and expense is expected to be between $400,000,000 $500,000,000 of expense, primarily driven by higher interest expense. Turning to taxes, we expect our 2024 non GAAP effective tax rate to be approximately 14%. Note that this rate does not assume deferral or repeal of the provision in the 2017 Tax Act Requiring capitalization and amortization of research and development expenses for tax purposes.

Speaker 3

Should such a change take effect, our effective tax for 2024 would be moderately higher. Earnings per share is expected to be in the range of 12 $0.20 to $12.70 on a non GAAP basis. Consistent with our prior practice, We're not including any potential or pending acquired IPR and D and development milestone charges in our 2024 guidance, And we will provide updates each quarter on the impact of IPR and D on earnings per share if acquired IPR and D development milestone charges are incurred. For guidance modeling purposes, we're currently estimating diluted weighted average share outstanding for 2024 to be approximately $903,000,000 We entered 2024 with strong momentum and a remarkable opportunity to help millions more patients with our medicines. For our investor, 2024 should be another exciting year, driven by expected revenue growth in our core business near an approaching 30% and continued investment to drive future growth.

Speaker 3

Our outlook for top tier revenue growth and operating margin expansion remains on track. Now, I'll turn the call over to Dan to highlight our continued progress in R and D.

Speaker 4

Thanks, Anant. I'll start with our progress against diabetes, obesity and complications thereof. Today, we announced positive results from Synergy NASH, a Phase 2 study of tirzepatide in adults with biopsy proven metabolic dysfunction associated steatohepatitis, also known as MASH. As shown on Slide 17, the study met its primary endpoint with up to 74% of participants achieving an absence of MASH with no worsening of fibrosis at 52 weeks, compared to less than 13% of participants reaching this endpoint on placebo. We are equally encouraged by results seen in the secondary endpoint evaluating improvement in fibrosis.

Speaker 3

While the

Speaker 4

study was not designed to be statistically powered to evaluate improvement in fibrosis, The study results showed a clinically meaningful treatment effect across all doses on the proportion of participants achieving a decrease of at least 1 fibrosis stage with no worsening of MASH to placebo. The adverse events were consistent with those observed in other clinical trials that intersepatide in living with obesity or type 2 diabetes. The full Synergy NASH results will be presented at a medical congress later this year. As you know, late last year, we received FDA approval of ZEPTOUND, which marks Lilly's first approved treatment for obesity. Is a landmark occasion for patients and for the field as ZEPBOUND is the 1st and only approved treatment activating 2 incretin hormone receptors, GIP and GLP-one to tackle an underlying cause of excess weight.

Speaker 4

Also in early stage development, We have now advanced our glucose sensing insulin receptor agonist for the treatment of diabetes into Phase 1 and our long acting atrial natriuretic peptide for treatment of heart failure into Phase 1. We've advanced mazotide into Phase 2 for obesity as we began to dose patients in that study. We are pleased that early this year, our partner Innovent reported positive results in the Phase 3 GLORY-one study of mastatide in Chinese adults with obesity. INNOVENT holds the development and commercialization rights for mastatide in China and Lilly retains the rights in the rest of the world. Moving to oncology.

Speaker 4

Today we shared that in the Phase 3 CYCLONE II trial, Verzenio added to epiraterone did not meet the primary endpoint improved radiographic progression free survival in men with metastatic castration resistant prostate cancer. For the study we employed an adaptive Phase twothree design And while the Phase 2 stage met the pre specified threshold for the independent data monitoring committee to recommend initiation of Phase 3, The signal was not confirmed in the Phase 3 portion in a larger sample size. The overall safety and tolerability profile was consistent with the known profiles of the medicines. We anticipate sharing full results from the SYCLIN-two study at a future medical meeting. Since our last earnings call, J.

Speaker 4

Perka received approval under the FDA's accelerated approval program for the treatment of adult patients with CLL or SLL who have received at least 2 prior including a BTK inhibitor and a BCL2 inhibitor. We also reported that the Phase 3 confirmatory trial intended to convert this approval to traditional known as Bruin CLL321 met its primary endpoint and we plan to present these data at an upcoming medical meeting. With the CLL and SLL approvals, J Perka is now the 1st and only FDA approved non covalent BTK inhibitor They can extend the benefit of targeting the BTK pathway in CLL and SLL patients previously treated with a covalon BTK inhibitor and a BCL-two inhibitor. This was the 2nd approval for J Perka in 2023 with the first in patients with MCL. We believe these two indications only represent the beginning of the eventual impact J Perka can have for patients.

Speaker 4

And we look forward to seeing the data from the rest of the Phase 3 program across CLL, SLL and MCL. In Q4, we completed the acquisition of Point Biopharma, which begins Lilly's entry into radioligand therapy, a promising technology with potential to deliver meaningful advances against a range of cancers. We welcome our new point colleagues to Lilly. We look forward to building on their work to grow this capability at Lilly. 2024 is also poised to be a particularly productive year for new clinical starts in oncology.

Speaker 4

As we begin to see the results of the new oncology R and D strategy that we implemented about 4 years ago after Loxo acquisition. Through a combination of internal discovery efforts and business development, we expect to put at least 5 new molecules into the clinic this year. A wild type selective KRAS G12D inhibitor, a pan KRAS inhibitor, 2 antibody drug conjugates with topoisomerase payloads, one against Nekton-four and one against folate receptor alpha and an actinium PSMA radioligand therapy. I'll speak in a moment about our clinical KRAS G12C program, But you can see that we're putting real effort into developing a suite of RAS directed therapeutics and we're excited to see those discovery efforts resulted in 3 potential medicines so far. Of course, we'll have to see which of these deliver on our target clinical profiles, but we're optimistic about this early phase portfolio We've certainly diversified the modalities in our pipeline.

Speaker 4

In addition, we're excited that elomorassib, our KRAS G12C inhibitor As progressed into Phase 2, as we're finalizing dose selection under Project Optimus for the Phase 3 program, which we plan to start later this year. You can now see the full design of that study on clinicaltrials.gov. By way of reminder, we started this program years behind our competitors And through focused effort behind what looks like a great molecule to us, we've made up the vast majority of that time. We believe we're now neck and neck with our close competitors for the medicine that we hope to show combines better with PD-one. Lastly, in oncology, we terminated development of our RET inhibitor 2 as it did not meet our to move forward with internal development.

Speaker 4

In immunology, we moved 2 new assets into Phase 1 And we advanced our KV1.3 antagonist for psoriasis into Phase 2. Lebrikizumab was approved in the EU for atopic dermatitis under the brand EPCIS, which is marketed by our partner Almirall there. In January this year, we were pleased to have EPCIS approved in Japan. In neuroscience, in January, our wholly owned subsidiary of Kuos announced positive clinical results For the Phase onetwo AK OTOF-1 hundred and one study, which demonstrated hearing restoration within 30 days of a single administration in the first participant, an individual with more than a decade of profound hearing loss. The surgical administration and the investigational therapy were well tolerated and no serious adverse events were reported.

Speaker 4

These results highlight our commitment to help solve some of humanity's most challenging healthcare problems and make life better for individual patients. We now show OTOF gene therapy in Phase II on our pipeline chart as we've begun enrolling younger patients in the Phase II portion of the study. On Slide 18, we highlight our select pipeline assets with updates since the last earnings call and Slide 19 summarizes our key events for 2023. I noted the key updates on each of these slides in my therapeutic area comments. Turning to Slide 20, we'd like to highlight potential key events for 2024.

Speaker 4

As you can see, this year will be another important year as we look to progress our late stage pipeline. In 2023, we initiated Phase 3 development for our next generation of incretins, which are our oral agent or glipron and our novel weekly injectable triagonist retratide. These programs are progressing and enrolling well. We look forward to seeing the first set of Phase 3 results on orforgliprot next year. This year, we're planning to initiate a Phase 3 program in Type 2 diabetes for retatrucide, complementing the ongoing trials in obesity and related complications.

Speaker 4

Also this year, we are planning to initiate a Phase 3 program for lepidisiran, our LPA lowering siRNA therapy cardiovascular disease. On tirzepatide, we're looking forward to a number of additional key data readouts this year. Beyond Synergy NASH, we expect to see results from the Phase 3 obstructive sleep apnea and Phase 3 heart failure studies this year. We note increased investor interest in the timing of SURPASS CVOT and we can reiterate that we expect the data in 2025, Notwithstanding the clinicaltrials dot gov listing, which will be updated soon to reflect our current assumptions based on event rate. By the end of 2024, we expect to have results of SURMOUNT-five, which is our head to head study of tirzepatide compared to high dose semaglutide in participants with obesity.

Speaker 4

We also expect the full Phase 3 program readout on our weekly basal insulin, insulin fsatara alpa later this year. Moving to neuroscience, we're looking forward to FDA action and the potential launch of tuzanumab in Q1 of this year. And we are progressing with regulatory reviews around the world. We've now launched our PTOT-two seventeen blood based diagnostic test and we will continue to scale this throughout 2024. We'll also continue to partner with others in the field to ensure physicians have multiple tools to aid in timely and accurate diagnosis of Alzheimer's disease.

Speaker 4

In immunology, following the mirikizumab positive Phase 3 data at Crohn's disease, we plan to submit to the FDA for this indication this year. Additionally, following the U. S. FDA complete response letter on lebrikizumab, we expect regulatory action by the end of the year in the U. S.

Speaker 4

Finally, in oncology, as I mentioned before, we look forward to moving our KRAS G12C inhibitor along erasib into Phase 3 later this year following Phase 2 dose selection. Lastly, we're looking forward to seeing the results of our Imlanesterin Phase 3 study, EMBER3, in patients with metastatic breast cancer in both monotherapy and in combination with Vircedium. This past year was busy and productive and we expect more of the same in 2024 as we make meaningful progress advancing our pipeline for the benefit of patients. And I'll turn the call back to closing remarks.

Speaker 2

Thanks, Dan, and congrats to

Speaker 1

you and the LORL team for

Speaker 2

a big year. Before we go to Q and A, let me briefly sum up our progress in the Q4. Q4 revenue growth accelerated as our recently launched product continued to gain momentum. We achieved meaningful advances in our late stage pipeline with the FDA approvals of ZEPT bound and JAY PERCKA. We continue to invest in recent and upcoming launches, late stage medicines, early phase capabilities and in business development, all of which will serve as a foundation for future growth.

Speaker 2

In Q4, we completed the acquisition of Point Biopharma announced plans to build a new manufacturing site in Germany. We returned over $1,000,000,000 to shareholders via the dividend. Lastly, in January, we announced that Jonna Norton, our Executive Vice President of Global Quality will be retiring at the end of July

Speaker 4

after 34 years of service.

Speaker 2

During her tenure, Jana has overseen significant expansion, modernization and improvements in our quality and manufacturing processes. I'd like to thank her for her many years of outstanding service to Lilly. Now I'll turn the call over to Joe to moderate our Q and A session.

Speaker 1

Thanks, Dave. Before diving into the Q and A, I want clarify one point. We may have had some muffled sound during Anat's prepared remarks regarding the timing of regulatory action on denanumab. As Dan mentioned that timing is expected to be Q1 of 2024 this year, received some notes that there were some muffled sounds. So just wanted to clarify from that important point.

Speaker 1

Now for Q and A, we'd like to take questions from as many callers as possible and conclude the call in a timely manner. So consistent with prior quarters,

Operator

Thank you. At this time, we will be conducting a question and answer session. And the first question today is coming from Terence Flynn from Morgan Stanley. Terence, your line is live.

Speaker 2

Great. Thanks so much for taking the question. Congrats on the progress. Just wondering for your GLP franchise ex U. S, you under indexed versus your key competitor.

Speaker 2

Just wondering what are some of the hurdles to closing that gap, as we think about the ramp in 'twenty four, but also into 2025? Thank you.

Speaker 1

Thanks, Terrence for the question. I'll hand over to Ilya Yuffa, President of Lilly International for that question.

Speaker 5

Great. Thanks, Terrence. As we think about, Magginal launches outside the U. S, we have already launched in a number of select markets. We have Foundation to be competitive in many of our markets and we anticipate continued launches.

Speaker 5

We've just launched in file format In select markets outside of the U. S, namely in Australia, Canada, Germany and Poland, and we just received QuickPen approval in the U. K. And so we're anticipating launch there as we get additional regulatory approvals for our multiuse QuickPen And we monitor our ramp up and capacity for supply. We'll continue to launch in other markets throughout the year.

Speaker 5

And so we anticipate further growth, anticipated for launches of Manjaro outside of the U. S. And continue with that throughout the year as well as into 2020.

Speaker 1

Thanks, Ilya. Paul, next question.

Operator

Next question is coming from Chris Schott from JPMorgan. Chris, your line is live.

Speaker 6

Great. Thanks so much. On ZEP bound, it seems like you're making strong progress on coverage, but just interested in expectations for the remainder of this year as we think about just where coverage could go and just how to think about ASP. I guess the core question is, is it reasonable to think that most payers who cover Wegovy will add ZEP bound this year? Thank you.

Speaker 1

Thanks, Chris. I'll hand over to Patrick to comment on that question about zetbound coverage.

Speaker 7

Yes. Thank you very much, Chris. As I stated, we are Pleased, we are also early in launch with 35% commercial access having contract reset and seeing now. Our efforts moving forward would really be to continue to expand payer access, but not only we will do that with a very disciplined approach as in her prepared remarks, that's going to take some time, but we are assuming that with the current access we have, that our access will be along the lines of what the competition has referred to around 50%. Let me just emphasize that when it comes to employer opt in, There is not one reliable source for employer opt ins.

Speaker 7

I think that's something that we need to continue to monitor, and we'll come back with more data during coming earnings calls. So overall, a good start and we will continue our efforts to increase payer access. I think we're quite encouraged with what we have heard from the marketplace so far. Employer opt in will take longer, but we believe that we are well positioned in that regards as well.

Speaker 1

Thanks, Patrick. Next question, Paul.

Operator

The next question is coming from Seamus Fernandez from Guggenheim. Seamus, your line is live.

Speaker 8

Thanks very much and congrats on all the progress and the success here. But just wanted to get a quick sense From Dan, do you see a prospect from Synergy NASH for stage improvement was not statistically significant? Thanks.

Speaker 1

Thanks Seamus for the Dan?

Speaker 4

Yes. Thanks Seamus. This day is really quite new to us, but we're really excited about it. We haven't had a chance yet to talk to the FDA here at all about next steps, but we're looking forward to having that opportunity. Of course, this was a small trial, about 190 participants, but it did use liver biopsies, of course, to assess the endpoints here.

Speaker 4

With respect to the improvement in fibrosis, I think I probably previously stated that I was unsure whether it would be possible for incretin based therapies to reverse fibrosis in patients based on competitor re outs in the field, but really excited to see this data with clinically meaningful improvement in fibrosis. There's different doses, there's different statistical methods that can be applied here accounting for dropouts particularly in the placebo group. So we'll have to wait for the scientific presentation to see all the P values there. But we're pretty positive on this data package as a whole. And what this could mean for patients both in terms of stopping progression of NASH and reversing fibrosis.

Speaker 1

Thanks, Dan. Paul, next question.

Operator

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

Speaker 9

Hi, guys. Thanks for taking my question. Dave, as you think about manufacturing build out in various sites, which is obviously very important for all the existing GLP demand. I'm curious how are you balancing that dollar investment with your probabilities on orphagliplirond clinical and commercial especially with all the blinded data that's coming in?

Speaker 1

Thanks, Umer. Dave?

Speaker 2

Yes, happy to answer that. Of course, As we enter this phase of really strong growth in the Inkertons, we're very focused on allocating capital, but top priority is creating new capacities. The gating factors are not really financial for us right now. So you can expect us to be investing fully. We're not slowing down because of cash flow or whatever.

Speaker 2

It's really a function of the technical capacities both in people and in suppliers to be able to bring facilities online. That's particularly true in the parenteral side. Now you're referencing orforglipron here, we do plan to build ahead of Phase 3 at risk. I think given the probability we assess internally as well as the opportunity on the other side of a positive Phase 3, We see that as a wise investment. And as we've commented on before, it relies, as you may would know, on very different assets inside Lilly as well as outside of Lilly.

Speaker 2

So here you have organic chemistry API and Tablets and capsules, so pretty different setup. So we can we're paralleling that with our robust injectable investments. And if we're wrong, okay, we'll have to eat that in the end if Fozapron isn't a strong product. But if it is, I think it does begin to change the math on supply in this category and I think that's about worth taking.

Speaker 1

Thanks, Dave. Paul, next question.

Operator

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

Speaker 8

Thanks. On surpass CVOT, You mentioned it slipped to 2025. I assume that implies the one interim look has come and gone. And then you're evaluating both non inferiority and superiority, would you agree that superiority is really what you need to show here and what's your confidence in achieving that?

Speaker 1

Thanks, Tim, for those couple of questions. Maybe we'll field the one on the interim look, Dan?

Speaker 4

Yes, sure. Well, thanks for that question, Tim. As you know, Lilly doesn't comment on interims. Probably most trials in our portfolio do have opportunities for interim looks. But that has is not, I think, germane at all to the question on the timing on clinicaltrialsgov, which was before and continues to be the time point at which we'll have final data.

Speaker 4

When we initially put that time point in clinicaltrials dot gov, it was in Early 2020, we hadn't started enrolling the trial yet. So that was based on our assumption on enrollment rates, but Probably more importantly on event rates. And as the trial matures, we get a view on event rates. I know it's Frustrating for investors and for us perhaps to wait longer time to get events, but of course that's great news for patients when the event rates are slower, remembering that this is a trial with a drug, Trulicity, that we already know is active in preventing maintenance. Thanks, Dan.

Speaker 4

Paul, next question.

Operator

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

Speaker 10

Great. Thank you very much for taking my question and congrats on the progress. I have a question regarding your sleep apnea study. How much benefit do you think from baseline is required for this to be clinically meaningful? Is it 50% or more?

Speaker 10

And do you think the trial is big enough to seek a label in Cpap? Thank you.

Speaker 1

Thanks Mohit for the question. Dan, back to you.

Speaker 4

Thanks. There isn't really a well established threshold for clinical meaningfulness in sleep apnea. Of course, commonly used measure here is index of how many apneic or hypoxic events a patient has while sleeping. Certainly drugs in this category, I think have great potential to improve that. We're excited to see what tirzepatide can see.

Speaker 4

Probably in addition to the absolute percent improvement in AHI that we'll be looking for, I'd also like to see patients switching from one category, for example, intermediate to mild disease or things like that. So we'll be looking at a number of things to assess clinical meaningfulness here, but I'm quite optimistic.

Speaker 1

Thanks Dan. Paul, next question.

Operator

The next question is from Louise Chen from Cantor. Louise, your line is live.

Speaker 11

Hi, thanks for taking my question. I wanted to ask you how you think about sizing the downstream opportunities for GLP-one such as tirzepatide, maybe in NASH, some of the other indications that you're going after as Thank you.

Speaker 1

Thanks, Luis, for that question. So about the downstream opportunities in NASH and elsewhere. Patrick, do you want to peel that?

Speaker 7

Well, thank you very much. I think there are 2 important aspects. The first one is when we refer to employer opt in. I think employees are really looking actively into benefits of listing anti obesity medications. And whatever data we can generate here being in the cardiovascular base being in OSA or being in national average indications will be extremely important for increased employer opt in.

Speaker 7

The second piece will be in Medicare Part D. As long as troa is not passed, I think data in those co morbidities will be critical to enable access for patients in Medicare Part D. So those are truly the key drivers for those indications.

Speaker 1

Thanks, Patrick. Paul, next question.

Operator

The next question is coming from Keri Halford from Berenberg. Keri, your line is live.

Speaker 12

Thank you for taking my question. It's on to zepatide obesity. I'm interested to hear why you've taken the decision not to launch under the ZEPTAN brand outside the U. S. For RanaSeq enable expansion for weight loss Does that relate to simplicity, perhaps faster reimbursement access?

Speaker 12

And I wonder if you foresee any risk here that ex U. S. Governments

Speaker 1

Thank you, Carrie for the questions. I'll hand over to Ilya to talk about the branding of tirzepatide OUS. Sure. Yes. So

Speaker 5

the for tirzepatide outside of the U. S, it depends on a number of different factors, whether it's regulatory or competitive market dynamics, there are some payer dynamics as well. We don't anticipate that being a challenge in terms of negotiating reimbursement either for type 2 diabetes or for chronic wound management, we continue to have those discussions in a number of markets and are optimistic about our ability to commercialize under different brand scenarios.

Speaker 1

Great. Thank you, Elliot. Paul, next question.

Operator

The next question is from Geoff Meacham from Bank of America. Geoff,

Speaker 1

Good morning, guys. Thanks so much for the question. Dave, I know you guys formally announced Lilly Direct last fall, but Should we view it as a platform that just streamlines access to providers in Lilly Meds or is there a monetization model or some market differentiation that could also play out over time? Thank you.

Speaker 2

I can start Patrick jump in. Yes, thanks for the question. The idea was really actually born out of the challenges patients face Every day in the U. S. And sometimes seeing doctors, and you'll know we have a doctor finder tool as well as telehealth partners on the platform for Migraine, diabetes and obesity, finding medicines in their pharmacies, that's been a challenge.

Speaker 2

And I think particularly as Supplies are tight, many patients report driving to 5, 6, 7 pharmacies to find the medicine they need. This simplifies that process. And then I think in addition, there's been a lot of noise about Drugs that are illicit or copies or compounded versions of ZEP bound or other weight loss drugs. And that's concerning to us and I think it's concerning to patients. So by going to Lilly Direct literally they have confidence in the supply.

Speaker 2

And finally, application of our savings programs has also been a challenge at the pharmacy counter and that happens 100% of the time on Lilly Direct. We haven't thought about it as a way to create some new retail distribution business. It's a way to serve the patients want our medicines better. That's sort of the frame we're in now. Early days, we're trying to develop it to be smoother, better, include more products over time, have better information about physicians and telehealth providers.

Speaker 2

So look for more developments there, but good start so far, a lot of Energy and enthusiasm from the patient community. Thanks, Dave.

Speaker 1

Paul, next question.

Operator

The next question is coming from David Risinger from Leerink.

Speaker 11

So my question is for Dave and Dan on lean muscle loss associated with incretin use. Could you help us understand Lilly's take on this debate and comment on tirzepatide's data to date relative to semaglutide. What I've observed is that SURMOUNT-one showed a 3:one to lean muscle loss ratio, whereas Sema's STEP 1 trial showed a 1.5:one ratio, albeit with slightly different assessment. Thank you.

Speaker 1

Thanks, Dave. I'll talk Dan to field that.

Speaker 4

Yes. Thanks for your question. Maybe just starting with our take on Lean versus fat mass, I think the ratio of lean to fat mass is an important thing to think about. Body composition, not just body weight matters to patients, for example, in risk of type 2 diabetes or cardiovascular disease that Body ratio seems to be important. The good news is that for patients on tirzepatide that ratio appears to improve.

Speaker 4

As you pointed out, they lose far more fat mass than lean mass. And so in every trial we've done at the end of the trial, if you measure body composition, it's better, higher ratio of lean to fat than at the beginning of the trial. So we see this changing body composition as a benefit, potential benefit of tirzepatide to be further explored. Of course, it's also a benefit we want to further extend. You've seen us try to improve the total amount of body weight loss.

Speaker 4

We're also trying to improve The further improvement, I should say, the change in body mass composition and that's why you saw us acquire RASENCE and experiment with drugs like bimagramab. The numbers you quote from the tirzepatide and semaglutide studies Seem right to me, of course, they're not head to head studies, but it does raise a question here Whether there's a potential benefit of GIP agonism here in addition to GLP-one agonism, that's probably the way I would interpret this data.

Speaker 1

Thanks, Dan. Paul, next question.

Operator

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

Speaker 1

Hi, all. Thank you for taking my question. I would love to get your take on how you're thinking about the opportunity for the oral GLP-1s. You've seen some mixed data from competitors and I just would love to get how you see this evolving in context of your investment in or for Glipron? Thank you.

Speaker 1

Thanks, Evan, for the question. Patrick, maybe I'll maybe you talk about how we think about an oral agent.

Speaker 7

Well, thank you very much. When we look at the opportunity in obesity, we have more than €110,000,000 in the U. S, we have €650,000,000 globally. I think taking into account the current supply constraints across markets, it's impossible to reach all of those with injectables. So I think that's the big opportunity we bought forglipron.

Speaker 7

And what we have seen so far in Phase II, if we can replicate those data in Phase III, we have an oral Medicine here with a weight loss along the lines of the best competitive ink protein, not at the level of tirzepatide, at the level of the best ink protein in the marketplace and with no food or water restrictions. So we really see the opportunity here with Orfolgipron to reach patients across the globe. And there is another component as well. If we look at the current market, approximately 20% of patients with obesity are actually concerned to take an injectable. So that's another opportunity with our Folgepron.

Speaker 7

So we believe that's a really strong part in our hands moving forward in the space of chronic weight management.

Speaker 1

Thank you, Patrick. Paul, next question.

Operator

Next question is from Steve

Speaker 11

1st, Lilly believes it has better molecules. 2nd, there's something in the Phase 2 data, which is less than ideal. Or 3rd, Lilly will do a Phase 3. It just hasn't gotten around to finalizing plans. But that really can't be it.

Speaker 11

To draw a parallel, You're starting a Phase 3 with LPA without even telling us the Phase 2 is positive. So what would be best for us to conclude about tirzepatide in NASH? Thank you.

Speaker 4

Thank you, Steve. Thanks Steve for the clever analysis here. So first of all, I should just say we Literally just got the Space 2 data, so give us a chance to determine our next steps on plans. Probably I debunk at least one of the hypotheses here. There's nothing bad in the data that would stop us from going to Phase 3.

Speaker 4

In terms of having a better molecule, probably we do in retrutide. Of course, we don't have that kind of Phase 2 data here for retrutide. And so that's based on liver fat reduction, which was just incredible in the Phase 2 trial. Still though, I think having a positive Phase 2 trial here with Really a meaningful data in NASH obligates us to think about next steps. As I said, that's going to the FDA to talk to them.

Speaker 4

I would say in terms of planning a Phase 3 for any drug in NASH, the really important priority for us is to move away as much as we can from liver biopsies and replace them with non invasive testing. I think we and others in the field have made a lot of progress there. We see analogies here to other disease areas And we hope that in the future it will be possible to conduct Phase 3 NASH trials without relying on biopsies. That would really have A profound effect on the feasibility of running these trials quickly, but also in the clinical application of NASH drugs where there was non invasive biomarkers could be identified by patients for treatment and monitor their response to therapy rather than biopsy.

Speaker 1

Thank you, Dan. Paul, next question.

Operator

The next question is from Chris Shibutani from Goldman Sachs. Chris, your line is live.

Speaker 11

Thank you. Duration of use of the GLP-1s across the diabetes and obesity populations, Previously, you've characterized the duration in the range of 15 months for diabetes and have commented that you don't believe we have enough experience. Any updates there? And when do you think we will have enough experience to be able to get a better gauge of duration of use median in the obesity population, at least initially?

Speaker 1

Thanks, Chris. Patrick, do you want to comment on duration of therapy?

Speaker 7

Yes. Thank you very much, Chris. I think you're right. It's quite Challenging, it's still early days with both Mondjaro and particularly Zetbound, and we have been facing some specific dynamics in terms of supply and also changes to the co pay program. However, when we look at the recent data for Monjaro, it's encouraging and it suggests that patients that start therapy back in Q1 2023 are having a persistency at least along the lines of other injectable link routines.

Speaker 7

For Cephal, definitely too early, but we strongly believe that patients will be motivated when they see the benefits of the drug. And that will, of course, be many factors impacting both supply, macroeconomic and microeconomic. We are convinced that there will be a final duration of treatment also for obesity since when we look into even heart failure and Type 2 diabetes, More than a 12 months period of adherence is considered long, but encouraging data in type 2 diabetes so far. And with the set down, we will see that will for sure be an end of duration based upon what we have seen in other chronic diseases. We believe that the features itself will be motivating for patients.

Speaker 1

Thanks, Patrick. Paul, next question.

Operator

The next question is coming from Akash Tewari from Jefferies. Akash, your line is live.

Speaker 11

Hey, thanks so much. So David, at JPMorgan, you made an interesting comment on orthogliopron you mentioned the molecule has lots to prove here. Can you elaborate a bit on what you mean by this? And what's your confidence on Orfo's DDI profile? It seems to have a bit of CYP3A4 inhibition.

Speaker 11

So will this drug be able to get dosed with SGLT2s given they were excluded in some of your earlier studies? Thanks.

Speaker 1

Sorry, that was for me. I don't

Speaker 2

know I could frame like

Speaker 1

why I said that, but maybe Dan, why don't we comment on the specific DDI questions

Speaker 2

I just said that because we're just starting the Phase 3 and we all know small molecule, there's a bit of empiricism in terms of eliminating safety risks. And of course, every day as we expose more patients to the drug and we have higher doses, That's a good day, where we don't announce that the drug has a problem. At some point, we reach a lot of confidence. We just weren't at that point. We're not at it now.

Speaker 2

I think we're running the Phase 3 experiment and we need to discharge The off target safety that is I think inherent in small molecule discovery and we've seen in this class from others, but nothing specific on my mind. Maybe Dan can

Speaker 4

Further reassure us. Yes. Thanks, Dave. Of course, it's just the normal Phase 3 types of risk, new safety signals, which could always I think with respect to DDI and coadministration with SGLT2, we expect that to be possible and we have that ongoing in our 3 trials, there are patients who achieve that will be just with or being just with orphaglutide as well as other drugs like SGLT2s.

Speaker 1

Thanks, both. Paul, next question.

Operator

The next question is from Trung Huynh from UBS. Trung, your line is live.

Speaker 13

Hi, guys. Thanks for taking my questions. Can I just ask your thoughts on GIP agonism versus antagonism given data yesterday from a competitor suggesting more limited effects on things like blood pressure and lipid modifications? Just How differentiated do you think an agonism approach is versus antagonism? And why you think agonism is the way forward?

Speaker 13

Thank you.

Speaker 1

Dan? Yes. Well, first of

Speaker 4

all, the non fair comparison. We've so much data now on the benefits of GIP agonism from Tens of thousands of participants in randomized clinical trials for tirzepatide. So we're extremely confident here about the benefits of GIP agonism. Adding to that data, we have experimented with a pure GIP-one agonist that doesn't have any GLP-one and we reported the benefits there in our Phase 1 study. We're contrasting that here to a small Phase 1 study that was recently published With a drug that has both GLP-one agonism and GIP antagonism, I noted in that publication that GIP antagonism is at a much lower affinity.

Speaker 4

So it probably only starts to antagonize GIP at very high doses. That's probably a Question for that company, but I noted that the high doses, actually an increase in free fatty acids and complete attenuation of the decrease in triglycerides in the clinical trial. Those are some effects we attribute to GIP and so I'm not surprised that antagonism of GIP is starting to have some negative effects once that kicks in. We also see GIP agonism is having positive benefits on tolerability, Reducing potentially nausea and vomiting. And again, I think maybe at the higher doses, you could probably see some hints of the opposite effect with antagonism.

Speaker 4

So Pretty glad with the decision we took and let's see how the field continues to evolve.

Speaker 1

Thank you, Dan. Paul, next question.

Operator

The next question is Carter Gould from Barclays. Carter, your line is

Speaker 6

live. Great. Good morning. Thanks for taking the questions. I over the prior two earnings calls, there would have been at least an acknowledgment that CMOs were going to be part of the equation going forward for supply on the Incredence side.

Speaker 6

I guess, does developments yesterday have any sort of direct or indirect impacts as you think about that part of the equation going forward?

Speaker 1

Thanks, Carter. Anat, do you want to field that? Sure.

Speaker 3

So we've and I've mentioned on this call as well that we have a very expensive many agenda, which does include 3rd parties, while our strategy is and had always been to develop more internally, we do have 3rd parties as well. So we saw the announcement that came out from Novo yesterday regarding the intent to acquire Catalent and we certainly have questions about that transaction and need to learn more. And we don't know Catalent is An integral part or manufacturer of both commercial and pipeline products for the industry, especially in diabetes and obesity, and we have products with these sites as well. So our focus today is on ensuring that continuity of supply of medicine for patients is uninterrupted, as well as we intend on holding Cadlin accountable to their contract with us as we look And we gain more information on this proposed transaction.

Speaker 1

Thank you. Paul, next question.

Operator

Next question is coming from James Shinn from Deutsche Bank. James, your line is live.

Speaker 14

Hi, good morning. Thanks for taking

Speaker 15

the question. I just want to circle back to Carter's question. Given Lilly is well capitalized and manufacturing capacity being the priority, I mean, could you expect more buy versus build to get around some of the technical bottlenecks and the non trivial FDA process? Just want to get your thoughts there.

Speaker 7

Dave?

Speaker 2

Yes, maybe I'll give it a shot. Thanks for the question, James. As I mentioned, on the earlier question related to Orfavorably Prime, we are not We don't think of ourselves as capital constrained buying or building in the space. The reality is there just isn't built capacity That's available. Most of it that's being used is already deployed against the leading products in the GLP-one space, at least any of scale.

Speaker 2

And new capacity has a lead time of 3 to 4 years. So all of the things that are coming online now, like we mentioned today, are very large site in Concord, North Carolina. That's a big note of capacity for the sector and certainly for Lilly. I mean that was announced 2.5 years ago and it will just begin production at the end of this year. So That's the problem.

Speaker 2

And why is that? Well, of course, greenfield building is difficult, repurposing is difficult, but also these are technically complex Facilities, there's not an infinite number of people who know how to set them up. And the supply chain for the machines that make the products is also constrained. So at this point, I don't think there's an easy way forward. And I think even in Yesterday's announcements, we have a lot of questions about that.

Speaker 2

But I think even the purchaser or our competitor said it will take many years for them to be able to increase capacity within that purchase. So, it's just not an easy problem to solve. I think Over time, it will ease. There'll be more capacity brought online by us, our competitor and maybe others, including third parties. And New technology will emerge like for Gopron or other oral options that tap into different asset bases.

Speaker 2

So I know it's frustrating For investors, it's frustrating for us. It's even more frustrating for patients. But it's just sort of the situation we're in is that we steady gains in manufacturing over the coming several years and perhaps bigger gains after that.

Speaker 1

Thank you, Dave. Paul, next question?

Operator

Next question is from Rajesh Kumar from HSBC. Rajesh, your line is live.

Speaker 14

Hi, there. Can you give us some color on how the access with employers is playing out? Are you getting exclusive access for your drugs or you're being added to the existing access your competitors' drugs have? And what is the nature of discussion, especially given that the pound is priced at a more attractive lift price. I'm assuming with rebate, the difference might be a bit smaller, but Any color there might be super helpful.

Speaker 1

Yes. Thanks Rajesh. I think we covered that in Chris Schott's question earlier, I don't know if Patrick, I have anything to add or if we could just move on.

Speaker 7

No, I think the only addition would be that we are always Same for open access. We believe that's important for the providers and the patients we are serving. So that's going to be our aim when it comes to employer opt in as well. We believe the move by pricing set down 22% below the competition despite launching with a best in class profile It's also a good signal for increased and enhanced employer opt in.

Speaker 1

Thanks. Thank you, Patrick. Paul, next question.

Operator

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

Speaker 16

Thank you. Could you talk to your scenario planning for post-two thousand and thirty two when the potential exists for generic somaglutide to be launched? There seems to be significant interest in investment in capacity expansion. Now obviously, this is complex, as you outlined, given not just API, but fit and and IP and the rest of it. But I'm just curious how you think about that in terms of future proofing your business against step edits and other thinking about your broader

Speaker 1

Thanks, Andrew. So the very long term question, I'll pass over to enough to talk about 2,032 and beyond.

Speaker 3

We do look at 2,032 and we actually do look beyond. And the way we look at our business, it is a long term business. It's not a business that changes every year or 2. So we do look at the long term horizon, both in terms of the commercial products as well as what's coming through the pipeline. And as we think through the events of patent expiries, whether for our products or those of competitors, our way of managing through that is to bring new breakthrough innovation to the marketplace.

Speaker 3

So to raise the bar on our own innovation, we don't wait for that to or happen by competition, but to bring something into the market that provides a meaningfully improved outcome for patients. So in This specific example to use the GLPs, surely tirzepatide brought in a higher bar for weight loss for patients with chronic weight management And retotrutide that Dan referenced in his comments currently in Phase 3 has the potential to bring even further improved outcome for patients. So that's how we see that. In terms of capacity and what are the question is on whether We do look at that and we look at the long term horizon. But certainly the investments in a manufacturing facility, for example, the ones we've just mentioned, whether it's in Concord, North Carolina or Research Triangle Park the two of them is about a $4,000,000,000 investment or certainly good investments of our capital given that size of opportunity over the long term.

Speaker 3

I will say that as you think about potential for the generic ribosome or entry in this space in general, It will require quite a massive investment in capital. Just the sites that I've mentioned today on the call and we've talked about for the past year or so, Total about $11,000,000,000 and that's on top of already substantial network that we have around the globe, primarily in the U. S. And Europe for production. So as you think about entering into that space, it will require some significant capital commitments.

Speaker 1

Thank you, Anat. Maybe final question, Paul, and then we'll wrap up.

Operator

Certainly. The next question is from Tim Anderson from Wolfe Research. Tim, your line is live.

Speaker 8

Thank you so much. So one of the competitive data sets, obviously everyone's watching is the Amgen data this year and their messaging is around longer dosing frequency, monthly dosing and then possibly a greater effect of weight loss off therapy. So can you comment on your views of the value of extended dosing like monthly or longer? And then do you believe in that argument about efficacy being sustained off therapy or is that just a function of the fact that this drug lasts longer?

Speaker 1

Dan? Yes. I'll start with

Speaker 4

the second and then maybe Patrick will weigh in on potential value here, but although that could be a good question for Amgen. Look, I think the sustainability data I saw in that publication are a bit underwhelming. It's a very high dose drug at Half life of an antibody, so just based on plasma concentrations that would be extended to expected to remain there after A month or 2. It doesn't surprise me, but what we're seeing is that doses that are reasonably well tolerated, if there were any doses that are reasonably well tolerated, Weight loss is lower than what we would need to see to take a molecule to Phase 3 for sure and sustainability doesn't appear to be at all differentiated.

Speaker 7

My only addition would be that when we look at the market research, of course, convenience is one factor, it's not necessarily the most important factor when it comes to provider and consumer selecting treatments. So I'm really excited about the cost we have in our hands. Of course, Sepatide remaining a foundational treatment for obesity, but also with the additional retracrutide and nifogliprant. And also the opportunities here to look into options with additional non weight loss dependent pharmacology to complement the assets we have in the pipeline.

Speaker 1

Thank you both. Dave, do you want to wrap

Speaker 2

this up? Yes, absolutely. That's good, Joe. Thanks. We appreciate everyone participating today and of course your interest in the company.

Speaker 2

2023 was a Really productive year for Lilly and we look forward to continued momentum in 2024 with a strong guide today. Thanks again for dialing in and please follow-up with Joe and the IR team if you have additional questions that weren't answered. Thanks.

Operator

Thank you. Ladies and gentlemen, this does conclude our conference for today. This 800-332-6854 and entering the access code 1,800,000,000 International dialers can call 973-five twenty eight-five. Again, those numbers are 80033 to 6,854 and 973-five twenty eight-five with the access code 1,800,000,676. Thank you for your participation.

Operator

You may now disconnect your lines.

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Earnings Conference Call
Eli Lilly and Company Q4 2023
00:00 / 00:00