Q2 2024 Earnings Summary
- Eli Lilly's Phase II data for tirzepatide in NASH showed profound effect size, and the company is excited about the opportunity to help patients suffering from NASH. They are working on non-invasive biomarkers that could be suitable for accelerated approval, potentially leading to a significant new market.
- Mounjaro and Zepbound are experiencing an inflection point upwards, which is leading Eli Lilly to reach the upper end of its operating margin range (mid- to high 30% range). This indicates strong operating leverage and financial performance.
- Eli Lilly expects stronger sales and marketing growth in the second half of 2024 due to new product launches and increased promotional activities, which should further enhance revenue and profitability.
- Lilly's OGA inhibitor for Alzheimer's disease failed to meet the primary endpoint in Phase II trials, resulting in a negative outcome for their neuroscience pipeline.
- The company anticipates supply constraints and variability in patient experience due to complex supply chain issues, which may result in periodic tightness for certain products and potentially impact sales.
- Operating margins may decrease as Lilly plans to increase spending on promotional activities and R&D, which could affect future profitability.
-
Operating Margins Outlook
Q: Will margins exceed 40% mid-term?
A: Lilly expects to end this year with operating margins in the upper 30% range. While revenue is increasing due to strong sales, expenses in promotional channels and R&D are also rising. Longer-term margin projections will be discussed when 2025 guidance is provided. -
Competition in Obesity Market
Q: How will Lilly defend against new obesity competitors?
A: Lilly acknowledges the influx of emerging competitors but highlights significant barriers to entry. Success requires advancing drugs through Phase III trials and securing approvals, which is challenging. Lilly is investing heavily in indications and access, boasting 93% commercial access for Mounjaro and 83% for Zepbound within seven months. The company is confident in its robust pipeline and market position. -
Manufacturing Capacity and Supply
Q: What's the status of manufacturing progress?
A: Lilly reiterates the 1.5-fold increase in sellable doses as a floor for second-half volume. The introduction of vials will add capacity, with the most meaningful impact in early 2025. Progress at RTP and Concord manufacturing sites is on track, expected to produce product by year-end or early next year. -
Ex-U.S. Sales and Reimbursement
Q: How are ex-U.S. incretin sales performing?
A: Mounjaro's ex-U.S. sales grew to $677 million from $286 million. The growth is driven by strong launches in markets like the UK, UAE, and Saudi Arabia, achieving leading market shares. Reimbursement has been secured in the UK and Germany, with both reimbursed and out-of-pocket sales contributing to momentum. -
Compounded GLP-1 Safety Concerns
Q: What is Lilly doing about compounded GLP-1s?
A: Lilly is concerned about patient safety from compounded GLP-1 products, which often are not tirzepatide and may contain impurities or contaminants. The company is engaging with regulators and considering legal actions, emphasizing the risks to patients and the importance of scaling manufacturing to meet demand. -
Muscle-Preserving Obesity Drugs
Q: How important are muscle-preserving obesity drugs?
A: Lilly finds this an interesting area of science but notes it's too early to predict patient benefits. The company is exploring multiple mechanisms, including amylin agonists and myostatin antibodies, to potentially preserve lean mass during weight loss. -
Engagement in NASH Trials
Q: Plans for pivotal NASH trials?
A: Lilly is excited about helping NASH patients and is in discussions with regulators about potential pivotal trials. Challenges include the invasive nature of liver biopsies, and the company is working on non-invasive biomarkers. Decisions on investing in one or both molecules will depend on the regulatory path. -
Pricing Dynamics and ASP Movements
Q: What are the pricing trends for Mounjaro?
A: Initial pricing favorability driven by Mounjaro's co-pay program in the first half will diminish in the second half. Pricing is expected to remain stable sequentially across quarters in 2024, with second-half pricing similar to the prior year. -
FDA Shortage Definition
Q: Does Lilly agree tirzepatide is no longer in shortage?
A: Lilly agrees that tirzepatide is now available in all dosage forms in the U.S. and can fill orders as received. While not every pharmacy may have all doses in stock at all times, the company continues to work with partners to improve the consumer experience. -
Manufacturing Concerns with Catalent
Q: Are you still concerned about Novo's acquisition of Catalent?
A: Lilly remains concerned about the transaction, highlighting the conflict of having a main competitor also be a contract manufacturer. The company emphasizes the importance of independent CDMOs for the industry and notes that their primary strategy is to build and operate their own sites. -
Persistence with Zepbound Therapy
Q: How is Lilly encouraging persistence with Zepbound?
A: Lilly focuses on ensuring patients experience the benefits of Zepbound over time. Efforts include improving consumer platforms, digital channels, and value-based agreements with payers to demonstrate benefits like reduced absenteeism and increased productivity. -
Oral GLP-1 Mechanisms
Q: Basis of competition for oral GLP-1s?
A: Lilly expects that efficacy among oral GLP-1 agonists will be similar, with tolerability being a key differentiator. Longer half-life molecules may offer better tolerability. Lilly is developing next-generation molecules, including those combining multiple incretins.