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Eli Lilly and Co Earnings - Analysis & Highlights for Q4 2024
Overview
PositivesNegativesOutlook
- Revenue in the rest of the world grew 46% in constant currency, driven by volume growth of Mounjaro and Verzenio.
- Revenue grew 45% in Q4 due to the momentum of recently launched products.
- The company strengthened its overall supply position and delivered on its production target to make 1.5 times the saleable doses of incretin medicines in H2 2024, compared to H2 2023.
- The company returned $3 billion to shareholders via dividends and share repurchases.
- The company brought innovative new medicines to patients, received regulatory approvals for Kisunla, Ebglyss, and a new indication for Zepbound in OSA.
- Trulicity volume is expected to continue declining as fewer new patients are starting on Trulicity.
- The company was disappointed with the results from the Phase 2 trial.
- The company expects foreign exchange to be a headwind as the dollar has strengthened relative to other currencies.
- The company expects oncology, neuroscience, and immunology to grow revenue in 2025 as Ebglyss, Jaypirca, Omvoh, Kisunla launch uptakes continue.
- The company expects data in Q3.
- The company expects Trulicity volume to continue declining as fewer new patients are starting on Trulicity.
- The company expects FX to be a headwind as the dollar has strengthened relative to other currencies.
- The company estimates its effective tax rate to be approximately 16%.
Q&A Highlights from Eli Lilly and Co Earnings Call Q4 2024
- Analyst asked about the company's expectations for Zepbound payer dynamics and access in 2023, particularly the impact from the OSA label and the expected impact of the heart failure indication.
- Management stated that Zepbound's commercial access remains strong with 87% coverage in the commercial space and that they expect to gain access in the Medicare segment and the Medicaid states. They also mentioned that the OSA label is an opportunity for them to gain access in the Medicare segment and that the heart failure indication, if approved, will have a similar rule as OSA, providing an access opportunity in Medicare and Medicaid.
- Management stated that Zepbound's commercial access remains strong with 87% coverage in the commercial space and that they expect to gain access in the Medicare segment and the Medicaid states. They also mentioned that the OSA label is an opportunity for them to gain access in the Medicare segment and that the heart failure indication, if approved, will have a similar rule as OSA, providing an access opportunity in Medicare and Medicaid.
- Analyst asked about the company's position on compounding litigation and the potential impact on the business.
- Management stated that they have been in supply since August and that the FDA took them off the list formally later in Q4. They also mentioned that the compounding associations are suing to delay that, but the company opposes that and has joined that suit. They expect the next day, February 18, to be when the FDA says that compounding needs to stop. They also mentioned that their business is growing nicely in Q4 and that they can see that in prescription trends early this year. They believe that compounding is an unsafe practice that shouldn't exist in the long term, and that it's not great for innovators.
- Management stated that they have been in supply since August and that the FDA took them off the list formally later in Q4. They also mentioned that the compounding associations are suing to delay that, but the company opposes that and has joined that suit. They expect the next day, February 18, to be when the FDA says that compounding needs to stop. They also mentioned that their business is growing nicely in Q4 and that they can see that in prescription trends early this year. They believe that compounding is an unsafe practice that shouldn't exist in the long term, and that it's not great for innovators.
- Analyst asked about the potential positioning of orforglipron, particularly in the context of its anticipated efficacy as a single injectable GLP-1.
- Management stated that orforglipron is a single GLP-1, and they take pains to mention that because they're not expecting the kinds of efficacy or tolerability that they see with tirzepatide, which is a dual-acting agent. They mentioned that monotherapy with GLP-1 has provided important benefits to many patients and that they're setting their sights on that level of efficacy. They also mentioned that this is the first study in type 2 diabetes patients where weight losses is typically quite a bit lower than in people without type 2 diabetes. They stated that they're indexed on the efficacy that they've seen in the past with Ozempic and that they'll get that data soon and are excited to see
- Management stated that orforglipron is a single GLP-1, and they take pains to mention that because they're not expecting the kinds of efficacy or tolerability that they see with tirzepatide, which is a dual-acting agent. They mentioned that monotherapy with GLP-1 has provided important benefits to many patients and that they're setting their sights on that level of efficacy. They also mentioned that this is the first study in type 2 diabetes patients where weight losses is typically quite a bit lower than in people without type 2 diabetes. They stated that they're indexed on the efficacy that they've seen in the past with Ozempic and that they'll get that data soon and are excited to see
- Analyst asked about the lessons learned from peers' slower launches in the Alzheimer's space and the company's experience with the Kisunla launch.
- Anne White, the company's Chief Commercial Officer, explained that the company is focused on system readiness and growth, and they are partnering with healthcare providers to scale and reach more patients. They have achieved P&T approvals of over 80% in key accounts, have over 800 prescribers, and the use of blood diagnostics grows significantly each month. The true challenge is the healthcare systems readiness and capacity to detect and diagnose patients, and the company has a number of solutions to help healthcare providers increase their capacity. They are hearing a lot of enthusiasm about the profile of Kisunla, which helps with capacity constraints.
- Anne White, the company's Chief Commercial Officer, explained that the company is focused on system readiness and growth, and they are partnering with healthcare providers to scale and reach more patients. They have achieved P&T approvals of over 80% in key accounts, have over 800 prescribers, and the use of blood diagnostics grows significantly each month. The true challenge is the healthcare systems readiness and capacity to detect and diagnose patients, and the company has a number of solutions to help healthcare providers increase their capacity. They are hearing a lot of enthusiasm about the profile of Kisunla, which helps with capacity constraints.
- Analyst asked about the thought process behind not initiating an outcomes trial for orforglipron.
- Dan Skovronsky, the company's Chief Scientific Officer, explained that they are trying to cover a broad landscape of indications that fit with the advantages of an oral medication and primary care broad use. They are exploring outcomes setting as an idea around the world, but maintaining patients on placebo may get more difficult in the US. They are thinking about this idea further, and more information will be provided in the future.
- Dan Skovronsky, the company's Chief Scientific Officer, explained that they are trying to cover a broad landscape of indications that fit with the advantages of an oral medication and primary care broad use. They are exploring outcomes setting as an idea around the world, but maintaining patients on placebo may get more difficult in the US. They are thinking about this idea further, and more information will be provided in the future.
- Analyst asked about the concerns regarding the unprecedented size of the market and meeting its demand, and whether the company has had any discussions questioning whether they are over their skis on this market.
- David Ricks, CEO of Eli Lilly, stated that the company has not had any discussions questioning whether they are over their skis on the market. He explained that the company is still in the early days of a very large opportunity and that there is turbulence in the market, but they are confident in their ability to meet global demand. He also mentioned that they are still gating promotions and launches globally and that they are building facilities as fast as they can to match up their capacity with what they can sell.
- David Ricks, CEO of Eli Lilly, stated that the company has not had any discussions questioning whether they are over their skis on the market. He explained that the company is still in the early days of a very large opportunity and that there is turbulence in the market, but they are confident in their ability to meet global demand. He also mentioned that they are still gating promotions and launches globally and that they are building facilities as fast as they can to match up their capacity with what they can sell.
- Analyst asked about the company's pricing trends and whether they will be offset by improved adherence.
- Michael Czapar, CFO of Eli Lilly, explained that the company has reached a steady state on discounts at least until semaglutide gets put under IRA negotiation in 2026. Lucas Montarce, Chief Commercial Officer, added that the company is experiencing single-digit erosion on their pricing trends, but that this trend will continue into 2025. Patrik Jonsson, Chief Marketing Officer, mentioned that the company has good access on the Mounjaro side and that they expect adherence to improve in 2025.
- Michael Czapar, CFO of Eli Lilly, explained that the company has reached a steady state on discounts at least until semaglutide gets put under IRA negotiation in 2026. Lucas Montarce, Chief Commercial Officer, added that the company is experiencing single-digit erosion on their pricing trends, but that this trend will continue into 2025. Patrik Jonsson, Chief Marketing Officer, mentioned that the company has good access on the Mounjaro side and that they expect adherence to improve in 2025.
- Analyst asked about the partnership between Eli Lilly and Ro and how the company envisions it evolving.
- The partnership with Ro is not a financial or a marketing partnership, but an opportunity for eligible patients to purchase FDA-approved authentic medicines through the Ro platform. The company will lean into additional partnerships with partners who want to ensure that patients get access to authentic and FDA-approved medicines.
- The partnership with Ro is not a financial or a marketing partnership, but an opportunity for eligible patients to purchase FDA-approved authentic medicines through the Ro platform. The company will lean into additional partnerships with partners who want to ensure that patients get access to authentic and FDA-approved medicines.
- Analyst asked about the approach for timing of orforglipron in terms of diabetes versus obesity.
- The company will plan to launch orforglipron in a full sense, including activities such as sampling, co-pay, and globalization of the product. The company is building capacities to do this and expects to launch in early 2026. The first complete package for submission in the US will be obesity, but diabetes is expected to shortly follow.
- The company will plan to launch orforglipron in a full sense, including activities such as sampling, co-pay, and globalization of the product. The company is building capacities to do this and expects to launch in early 2026. The first complete package for submission in the US will be obesity, but diabetes is expected to shortly follow.
- Analyst asked about the primary endpoint of weight loss in the obesity studies for 2026 and whether it could be a reasonable comparison to the results of the osteoarthritis trial.
- Michael Czapar explained that retatrutide is a longer-term trial, and the osteoarthritis trial is shorter than other trials. Daniel M. Skovronsky added that the OA population may not be a reliable point estimate for what will be achieved in a broader obesity population, and the company expects to do better than the OA population.
- Michael Czapar explained that retatrutide is a longer-term trial, and the osteoarthritis trial is shorter than other trials. Daniel M. Skovronsky added that the OA population may not be a reliable point estimate for what will be achieved in a broader obesity population, and the company expects to do better than the OA population.
- Analyst asked about the recent data from (00:56:38) showing preservation of lean mass but no incremental weight loss, and whether the company expects incremental weight loss or weight neutral but better body composition.
- Michael Czapar explained that the company's thesis is that bimagrumab in combination with tirzepatide could lead to incremental weight loss or similar weight loss, with preservation of lean mass. Daniel M. Skovronsky added that the company is looking for new positive effects with bimagrumab and that lean mass changes on tirzepatide or other incretins are not adverse. The company will show the previous Phase 2 study data this year.
- Michael Czapar explained that the company's thesis is that bimagrumab in combination with tirzepatide could lead to incremental weight loss or similar weight loss, with preservation of lean mass. Daniel M. Skovronsky added that the company is looking for new positive effects with bimagrumab and that lean mass changes on tirzepatide or other incretins are not adverse. The company will show the previous Phase 2 study data this year.
