Q3 2024 Earnings Summary
- Payer access issues: Some employers are opting out of coverage for obesity medications, which could limit market growth for Zepbound, despite close to 90% commercial access.
- Potential impact of the Inflation Reduction Act (IRA): The IRA's Part D reforms could affect products like Verzenio, and inclusion in price negotiations may impact profitability, although the exact impact is uncertain.
- Competition from compounded drugs: Compounded versions of incretin medicines could impact demand for Lilly's products, and the FDA's stance on enforcing regulations adds uncertainty to the market.
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Persistent incretin therapy demand | Consistently mentioned in Q2, Q1, Q4 with double-digit prescription gains. | Maintained strong Mounjaro/Zepbound volume and sales growth. | Recurring emphasis on core growth driver. |
Ongoing supply constraints | Discussed in Q2, Q1, Q4 as tight supply persisting into 2024. | Not explicitly stressed, with improved supply noted. | Less focus in Q3; easing constraints. |
Manufacturing capacity expansions | Featured in Q2, Q1, Q4 (RTP/Concord expansions ongoing). | No specific Q3 details on RTP or Concord. | Ongoing, but no new Q3 updates. |
Orforglipron pipeline advancing | Cited in Q2, Q1, Q4 as a major future growth driver. | Seen as a key asset with Phase III trials and significant global potential. | Continued positive momentum. |
Catalent acquisition concerns | Raised in Q2 only about potential conflict of interest. | No mention in Q3. | Dropped; no follow-up. |
Favorable Mounjaro pricing dynamics | Q2, Q1, Q4 referenced co-pay benefits but noted eventual phase-out. | Co-pay program sunsetting provided a year-on-year price tailwind in Q3. | Pricing now stabilizing. |
DTC advertising for Mounjaro | Not mentioned in Q2, Q1, Q4. | Introduced in Q3 to drive demand after supply improved. | New initiative. |
Discontinuation of parasolimab | Not mentioned in Q2, Q1, Q4. | Stopped in Q3 due to unfavorable risk-benefit profile in Phase IIb. | New negative development. |
Compounding/unregulated competition | Noted in Q2, Q4 with focus on risks and regulatory action. | Acknowledged in Q3 with minimal financial impact; main concern is patient safety. | Revisited topic, lower perceived impact. |
International expansion of Mounjaro | Ongoing in Q2, Q1, Q4 for global rollout and market share gains. | Expected to boost Q4 revenue with new country launches. | Consistent global rollout. |
Synergy-NASH (tirzepatide) results | Highlighted in Q4, Q1 with promising Phase II findings. | No Q3 updates on NASH data. | Not referenced in Q3. |
Continued R&D & SG&A spending | Similar theme in Q2, Q1, Q4 with increased spend on pipeline and launches. | Investments remain high, pressuring margins in Q3. | Ongoing margin impact. |
Competition (Novo Nordisk, Amgen) | Discussed in Q1, focusing on Cagri sema and AMG 133. | No mention in Q3. | Ended after Q1. |
Obesity & diabetes pipelines | Emphasized in Q2, Q1, Q4 as critical for sustained expansion. | Continues as a long-term growth pillar, with strong focus on tirzepatide and Orforglipron. | Recurring strategic priority. |
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Supply and Demand Dynamics
Q: What's driving the acceleration from Q3 to Q4 sales?
A: Sales are expected to accelerate in Q4 due to increased investments in direct-to-consumer efforts and healthcare provider promotions, as supply constraints have eased. We are confident in continued growth for Mounjaro and Zepbound, projecting a midpoint of 50% growth in Q4 compared to 42% prior, even exceeding that as we enhance demand-generating activities. This acceleration is supported by both U.S. demand and new country launches. -
Supply Capacity Expansion
Q: How is supply capacity progressing for 2025?
A: We are bringing online capacities announced in 2021-2023, expecting significant growth next year. Investments from previous years are coming to fruition, enabling increased supply of auto-injectors. We see acceleration in demand and anticipate strong growth, aligning with our capacity expansion efforts. -
Compounding Impact
Q: Is compounding affecting demand and FDA's stance?
A: We do not estimate a significant financial impact from compounded drugs on our business. Our major concern is patient safety, as unapproved medications pose risks. We believe the FDA is aware of the regulatory risks and is working to address the issue. We continue to collaborate with the FDA to expedite legitimate product delivery. -
Access and Payer Restrictions
Q: How are access issues affecting growth into 2025?
A: For Mounjaro, we have 93% access across commercial and Medicare plans. With Zepbound, we've achieved close to 90% commercial access. While some employers opt out, the overall trend favors opting in. We are optimistic about improved access in 2025, with continued progress in Medicaid—gaining six incremental states, including California and Massachusetts. Potential approvals in sleep apnea and other indications will further enhance employer opt-in and Medicare access. -
Operating Margin Outlook
Q: Clarify the operating margin trajectory under your guidance.
A: In the short term, we have grown our ratio due to significant growth and are ramping up investments in SG&A and R&D, which will continue into Q4 and 2025. We expect operating margin expansion in the short term, while justifying investments that drive long-term sustainable growth. -
Direct-to-Consumer Advertising
Q: Why initiate DTC advertising for Zepbound now?
A: With supply constraints easing, we are investing in DTC efforts to drive consumer awareness. Despite strong performance, obesity treatment penetration remains at a low 4–5%, indicating substantial growth potential. Increasing patient activation will serve us well. Unaided awareness for Zepbound is not very high, as we have done no advertising since launch nearly a year ago. -
Parasolimab Discontinuation
Q: Why discontinue parasolimab development, and plans for a new PD-1 agonist?
A: The Phase IIb study for parasolimab did not replicate the benefit-risk seen in Phase IIa. Based on the overall profile, including efficacy and safety, we decided not to pursue it further. Currently, we are not pursuing another PD-1 agonist for immunology and inflammation. -
Verzenio's Market Share and IRA Impact
Q: How will you protect Verzenio's position given competitor approvals and IRA impact?
A: Our expectations for Verzenio's market share in the adjuvant setting remain unchanged due to robust clinical data and treatment guideline preferences for high-risk patients. Part D reform may have a neutral net impact, balancing increased catastrophic coverage contributions and patient out-of-pocket caps. It's too early to speculate on inclusion in the negotiation list for 2027. -
Obesity Market Expansion with Orforglipron
Q: How will orforglipron expand the obesity market?
A: We see significant opportunity with orforglipron as the first oral treatment matching injectable efficacy, allowing for global scaling by avoiding cold chain requirements and addressing needle aversion in 20–25% of patients. We aim to expand treatment duration understanding through trials like ATTAIN-MAINTAIN, recognizing obesity as a chronic disease needing long-term management. -
Pricing Evolution
Q: What's the outlook on pricing for Mounjaro and Zepbound?
A: For Mounjaro, as we sunset last year's co-pay program, we see expected tailwinds on price year-over-year, stabilizing into Q4. With Zepbound, pricing remains stable, but increasing access and global launches may impact net pricing dynamics moving forward.