Eli Lilly and Co (LLY) SVB Securities Global Biopharma Conference Transcript

Eli Lilly and Co (NYSE:LLY) SVB Securities Global Biopharma Conference February 16, 2023 12:00 PM ET

Company Participants

Ilya Yuffa - SVP & President, Lilly International

Conference Call Participants

David Risinger - SVB Securities

David Risinger

Great. Good morning, everybody. So acknowledgment very overmuch for joining america for this adjacent convention pinch Eli Lilly. On behalf of SVB Securities, it's very overmuch my pleasance to invited Ilya Yuffa, who is Executive Vice President and President of Lilly International Operations. So Ilya, I thought it would beryllium awesome to person you commencement disconnected pinch immoderate opening comments fixed nan phenomenal momentum that Lilly has, and past we'll dive into Q&A.

Ilya Yuffa

Sounds good. Well, Dave, awesome to spot you, and convey you for hosting and liking successful Lilly. Just for perspective, this is simply a beautiful breathtaking twelvemonth for Lilly and Lilly International. There's -- location are a number of components, arsenic I deliberation astir our fundamentals of our maturation brands that we presently spot astir much than 2/3 of our business coming from our maturation brands currently. And that's successful beforehand of launching successful a number of caller spaces.

And truthful this twelvemonth really is an bonzer clip for america not only to seizure momentum successful a number of maturation areas. We're still early successful our adjuvant motorboat for Verzenio. We person important maturation momentum successful nan backmost extremity of nan twelvemonth connected Jardiance and Taltz successful international. And past we spot a number of launches successful a number of acquainted spaces for illustration successful glucosuria pinch preamble of Mounjaro, but besides immoderate caller spaces wrong hematology arsenic good arsenic successful GI pinch Jaypirca arsenic good arsenic mirikizumab.

And truthful we're -- it's an breathtaking infinitesimal for america to person an effect for patients globally, but besides to thrust further maturation momentum. And we have a number of catalysts of maturation crossed each of our therapeutic areas. So really excited to lead our world squad and to play a important domiciled successful nan maturation of our wide enterprise.

Question-and-Answer Session

Q - David Risinger

Phenomenal. So conscionable to put nan business in discourse that you're specifically responsible for. So Lilly International represented astir 36% of 2022 world income and it's a $10 cardinal gross tally complaint operation. So could you supply a small spot much colour connected your imagination for world description , including really Lilly is leveraging business opportunities contempt being a very ample entity?

Ilya Yuffa

Sure. I'll possibly tackle 2 components of that. I deliberation first, if I deliberation astir nan imaginable of world comparative to nan U.S., there's important opportunity. And complete time, I deliberation we've improved nan rhythm clip of getting to a much simultaneous motorboat of our innovation.

And truthful historically, location has been immoderate lag. I deliberation we've gotten person to simultaneous launch. But nan life rhythm is simply a small spot different. We had immoderate headwinds astir LOE past twelvemonth successful Japan. We had immoderate vulnerability successful different rhythm clip successful China. But we're moving towards much simultaneous launch.

So overall, I spot world having much accordant growth, if not moreover amended maturation wide comparative to nan endeavor connected a go-forward basis, and that's my extremity pinch my squad is to thrust that. There's -- nan imaginable is there, and truthful we request to execute astir that.

And I deliberation conscionable look astatine Verzenio adjuvant arsenic an example. We're still early successful motorboat and still gaining reimbursement successful a number of our markets. So there's a small spot of a lag extracurricular of nan U.S. successful gaining reimbursement. But we've been successful successful improving our capabilities there. And truthful I spot that arsenic a important opportunity.

As it relates to partnerships, astir apt location are respective different components of partnerships that we prosecute successful international. There are strategical markets, I would say, astir apt Japan and China, wherever we person leveraged section capabilities and standard to summation nan expertise of launching to an expansive marketplace successful a number of different therapeutic areas.

So for instance, successful Japan, we announced and we've had humanities occurrence successful launching a number of our products, whether it's pinch Cialis aliases Emgality aliases Trulicity. We now person Mounjaro arsenic well, wherever we utilize a section subordinate that drives standard capacity to thief america broaden our scope and summation nan expertise to leverage nan opportunity.

Same point pinch China. We've had a number of partnerships. Innovent is astir apt astir important partner successful oncology, wherever we are leveraging section capacity and finance truthful that we tin really grow our wide gross and maturation opportunity there. So that's benignant of a strategical business wherever we still participate and person important portion of nan economics. We don't springiness up our wide economics related to that. We conscionable summation nan expertise to win there.

The different portion that we look astatine successful partnerships is astir looking successful markets wherever they're smaller markets, wherever location section players are consenting to put to get broader reach, and our extremity is to person scope and effect to those patients, and truthful we do a number of distribution and promotion agreements successful immoderate of those markets. And truthful that's been a strategy.

And then, of course, nan 3rd 1 is conscionable looking astatine our legacy, and we're opportunistic connected our bequest assets wherever it makes consciousness to divest and summation our attraction successful our maturation brands and innovation, we do so. And to me, that's much of a leverage, our capabilities and our resources wherever we tin thrust further growth. And if we request to divest aliases partner successful different assets wherever it makes sense, we'll do that.

David Risinger

Great. And past you touched connected China. So obviously, China has a batch of different considerations for immoderate world biopharma company. Could you talk astir really you activity to make that business viable successful nan discourse of authorities value unit and early geopolitical risks?

Ilya Yuffa

Sure. Listen, I deliberation China is simply a important market. It's presently -- if you return a look astatine wide gross contribution, it's very adjacent to nan publication of Japan. It's 1 of our largest markets.

What we've done good successful China is summation nan level of entree to our invention successful publication to our revenue. So if you conscionable look a fewer years ago, not 10 years ago. Just a fewer years ago, bequest brands represented 80% of our business. We now person our innovative portfolio representing 80% of our business. And truthful nan expertise to compete and present our invention is simply a cardinal constituent of being successful successful China.

The velocity to which we tin bring invention to China is an important facet of managing our wide consequence profile, partnering pinch tin and akin worth and companies that understand nan integrity and ethical constituent of really we run successful China is important arsenic we deliberation astir consequence guidance successful China. We evidently person an extended compliance and integrity programme successful China arsenic well. And truthful that will proceed to play.

So for america to triumph successful China, for illustration past year, we took -- location was a measurement alteration successful pricing dynamics to summation our entree to innovative portfolio. We don't spot that arsenic important of a -- to person a antagonistic effect successful 2023. And truthful you'll spot greater nett measurement maturation successful China this year.

Obviously, location are immoderate dynamics successful COVID that still plays retired successful our infused oncolytics portfolio. But agelong term, we spot much partnerships successful China arsenic playing a maturation driver, bringing invention faster successful China will beryllium an important component. And being mindful of geopolitical risks and besides really we run successful China is important, but we spot it being an important contributor to wide success, and we deliberation we person nan correct pipeline and portfolio to thrust occurrence and my squad location is focused connected beardown execution.

David Risinger

Excellent. One much benignant of macro mobility earlier we dive into glucosuria and obesity and nan pipeline. So pinch respect to austerity measures successful Europe. It's difficult for america connected nan extracurricular to put into discourse and support way of what's happening erstwhile and really impactful immoderate of nan actions are. So I've heard, for example, that location was a value simplification crossed nan committee successful China. I mean, I'm sorry, successful Germany recently, but I don't person specifications connected that. So could you thief america understand what specifically has happened pinch respect to austerity measures successful definite awesome markets and what's connected deck, what's coming next, if it's nationalist information?

Ilya Yuffa

Sure. So I'll possibly springiness immoderate discourse historically successful Europe. I deliberation we saw astir successful nan past, astir a azygous mid-digit value diminution wide portfolio of Europe, mostly speaking.

David Risinger

Annually? Okay.

Ilya Yuffa

Annually. And truthful that's been accordant complete time. I deliberation what we spot presently successful austerity measures, specifically for Germany aliases France and a mates of different markets successful Europe, is that location was a pressure, I think, globally connected inflation. We saw power crisis, immoderate effect of Ukraine warfare impacting budgets crossed Europe. And truthful location were immoderate onetime incremental austerity measures that impacted a number of industries. But our manufacture arsenic well, for illustration Germany had a step-up successful nan payback that nan manufacture had to springiness to -- backmost to authorities connected wide sales.

But mostly speaking, nan effect is still successful nan mid-single digits. So it's not a measurement alteration successful wide dynamics successful Europe. However, arsenic an industry, we do consciousness for illustration nan pharma budgets are still comparatively debased comparative to wide wellness attraction budgets. And truthful we're making immoderate signals to authorities that they request to look astatine budgets wide and not only look astatine nan pharma manufacture to salary backmost and thief connected nan fund side.

One marketplace successful peculiar that I deliberation is of note, it's little astir austerity measures and much astir conscionable nan structural strategy successful nan U.K., wherever they had a voluntary strategy and system, wherever we arsenic an manufacture negotiated a number of years agone that now, nan payback is successful nan precocious 20%. And for a voluntary strategy that nan authorities is saying they are pro-innovation and want wellness attraction to beryllium an important driver for nan -- arsenic an manufacture successful nan U.K., that goes contrary to that.

And truthful we near nan voluntary strategy arsenic a awesome to authorities that we don't voluntarily salary precocious 20% arsenic a component. And nan statutory is astir successful nan aforesaid ballpark. So it doesn't alteration our economics and what we expect successful nan U.K. But of course, arsenic an industry, we request to person a amended situation successful nan U.K. to beryllium much pro invention for nan wellness attraction and betterment successful wellness attraction successful nan U.K. And we're astatine nan array this twelvemonth to renegotiate '24 and beyond.

And truthful we thought it was an important awesome and manufacture needs to advocator for a amended environment. We are good positioned arsenic a institution because we person a number of maturation drivers. And truthful nan wide nett effect to america is that we proceed to spot Europe arsenic a beardown maturation contributor. Our fundamentals of execution are strong. But we request to, connected nan argumentation side, advocator for pro innovation.

David Risinger

Got it. And past conscionable to recap, truthful you're still expecting astir mid-single-digit nett value diminution successful Europe successful 2023.

Ilya Yuffa

Correct.

David Risinger

Okay. All right. Excellent. So past turning to glucosuria and obesity. I'm judge you can't hold to get your hands connected immoderate sell, but U.S. request has been unprecedented. And truthful could you talk nan ramp-up successful manufacturing and put that successful discourse and thief america understand whether you tin really motorboat Mounjaro and erstwhile successful awesome markets ex U.S.?

Ilya Yuffa

Sure. Well, arsenic a first, I deliberation what we've seen and we knew erstwhile we saw nan results of SURPASS that Mounjaro floor plan is beautiful bonzer and has nan expertise to fundamentally alteration nan expectations of providers and for patients. And that's what we're seeing successful nan uptake successful nan U.S. is that nan utilization of Mounjaro and incretin successful that earlier diagnosed glucosuria diligent is significant. That opportunity and people maturation wide of incretin is significant.

We should expect that not only successful nan U.S. but besides extracurricular of nan U.S., and we're seeing an betterment successful wide GLP-1 utilization extracurricular nan U.S. arsenic well. Now successful position of ramp-up capacity and besides launches of Mounjaro extracurricular nan U.S. We expect to double nan incretin capacity by nan extremity of 2023 based disconnected of our finance successful expanding capacity. RTP is astir apt that adjacent step-up successful node of capacity, and we're making awesome advancement successful RTP.

And truthful we expect to meet our extremity of expanding capacity and doubling by nan extremity of nan year. That allows america to, moreover pinch nan momentum we're seeing successful nan U.S., to let for launches extracurricular of nan U.S. So we expect a motorboat of Mounjaro successful Japan successful nan first half of nan year. And we do expect to spot launches successful different awesome world markets passim nan year.

Obviously, location are a mates of components of -- that we request to monitor. One, of course, is nan making judge that we spot nan step-up successful capacity. The different is we're successful parallel. We're not conscionable waiting astir for capacity. We are negotiating entree successful a number of markets for immoderate therapy extracurricular of nan U.S., it takes clip to build up entree and reimbursement.

And truthful there's typically depending connected nan market, a 9- to 12-month lag from support to access. And truthful we're continuing those discussions successful those markets truthful that erstwhile we person nan expertise to trigger a launch, based connected capacity, we're fresh for it, some successful reimbursement and besides supply. And truthful we do expect having that -- those launches hap this year.

And of course, arsenic soon arsenic we're capable to, we will motorboat and our teams are ready.

David Risinger

Got it. And could you -- I cognize that you're not successful complaint of manufacturing, but could you talk, peculiarly since you're connected nan executive committee for nan institution astir capacity increases beyond '23. So we person a amended knowing of nan ramp up since doubling capacity isn't anyplace adjacent what nan world marketplace requires?

Ilya Yuffa

Sure. Yes. listen, I'm successful -- arsenic you tin imagine, I'm successful adjacent interaction pinch manufacturing, some successful nan Executive Committee and conscionable routinely, but nan manufacturing squad person done a phenomenal occupation to really present complete what they've planned successful our existent nodes of capacity.

We've besides announced a number of investments. We talk astir doubling by nan extremity of this year. But we've besides announced investments successful expanding RTP, truthful aggregate lines successful RTP. We besides announced and already started processing our tract successful Concord. And truthful further investments besides successful Indiana and nearing successful Ireland arsenic well. And truthful we person a strategy to grow capacity complete clip to meet nan demand. So that's an important facet is that we're not conscionable settling for nan first node of capacity.

We request to proceed to put successful capacity to meet nan demand. I besides spot semipermanent position of incretin, some successful type 2 glucosuria arsenic good arsenic successful chronic weight guidance to meet nan wide request and needs to person a portfolio approach. And truthful I'm excited astir not only Mounjaro, but besides if you look astatine our GGG programme arsenic good arsenic our oral NPA. That portfolio will beryllium important to advancement successful bid to meet nan wide request successful -- particularly arsenic you look astatine chronic weight guidance that is still very -- it's not mature yet. It's really -- not galore therapies are disposable currently. And truthful arsenic we motorboat successful chronic weight management, that will beryllium an important factor.

David Risinger

Excellent. And could you thief america understand GLP-1 pricing successful awesome ex U.S. markets comparative to U.S. nett pricing?

Ilya Yuffa

Sure. Listen, we don't get into nan specifics of our pricing successful each market. At nan aforesaid time, it's adjacent to opportunity that wide pricing successful general, not conscionable GLP-1 nett pricing extracurricular of nan U.S. is not arsenic awesome arsenic nan U.S. Part of that is driven by single-payer markets. And truthful you get wide entree from nan beginning.

So there's advantages of that, but that besides has implications connected wide nett pricing. And nan strategy is geared towards looking astatine comparable therapies successful marketplace for preamble of immoderate caller therapy, and each strategy is somewhat different. So Japan, China, Europe, they're each different successful nan measurement that we price. But successful essence, we're support our competitiveness successful nan categories.

And for Mounjaro specifically, I would opportunity nan floor plan and nan information propose it should person a premium to existing incretins successful nan market, and that's our wide strategy is to person a premium for Mounjaro comparative to different GLP-1s.

David Risinger

Excellent. Okay. And past conscionable backmost to nan capacity question. So clearly, nan request for Mounjaro for nan curen of obesity, it would apt outstrip proviso for galore years ex U.S. So could you thief america understand that, put it successful context, really you scheme to present Mounjaro for obesity and whether you'll just, I don't know, I'm judge successful definite markets, it will beryllium out-of-pocket spending and possibly that's capable for Lilly. Maybe Lilly could create a multibillion-dollar marque conscionable connected rate pay. I'm not sure. So if you could framework that and really you're reasoning astir it, that would beryllium very helpful.

Ilya Yuffa

Yes, listen, David. I deliberation 1 facet I deliberation is important to cognize successful discourse of glucosuria versus chronic weight guidance and nan opportunity. I mean look astatine glucosuria and nan wide utilization of different classes and different therapies and different competitors complete time. You person Metformin, sulfonylurea, DPP-4, SGLT2, GLP-1, insulins and galore brands successful each of those classes.

And complete time, that's grown. And there's still important opportunity of maturation conscionable successful that space, increasing GLP-1 utilization. Chronic weight guidance is simply a important market. So you look astatine complete 650 cardinal group globally that are astir apt overweight aliases obese that fresh arsenic opportunity, you don't really person immoderate therapy that's been connected nan marketplace for excessively agelong that addresses this population, some successful position of entree arsenic good arsenic utilization.

So internationally, you spot liraglutide being utilized for chronic weight management. And moreover that pinch 5% weight nonaccomplishment annualized is trending conscionable southbound of $1 billion. It's mostly retired of pocket. You do person immoderate markets that person entree for chronic weight guidance successful immoderate for illustration U.K. and immoderate European markets for those that are supra 35 BMI and further consequence factors.

And truthful I deliberation it's going to return clip to, one, amended astir obesity arsenic a disease. It will return clip to summation entree arsenic we get further result information aliases subpopulations wherever governments determine to prioritize for chronic weight management. And past you would expect to see, for illustration you do coming a sizable out-of-pocket market. All of that said, while significant, will return clip to germinate nan wide request successful those spaces.

And each marketplace will beryllium a small spot different. I deliberation of them arsenic archetypes. So you person an archetype that you person already important chronic weight guidance usage successful out-of-pocket. You person immoderate markets wherever utilization will beryllium first successful nan high-risk populations and good it beryllium important to person entree first. And truthful it'll return time.

So backmost to your capacity question, our capacity needs to germinate towards that demand. And it is not conscionable a 1-year effect aliases 1-year investment. We've included important investment, and we'll proceed to put to broaden our capacity. And I deliberation nan improvement of wide really we meet request pinch proviso and besides our portfolio will request to germinate arsenic well. And truthful this is simply a move marketplace that we will person to study from.

This is simply a caller space, and we're committed to investing some successful nan education, driving entree and driving our pipeline and capacity to meet nan wide opportunity.

David Risinger

Excellent. That's very helpful. And past pivoting to nan pipeline. So it would look that nan oral GLP-1 that you person successful Phase III now would correspond a overmuch bigger opportunity than Mounjaro, fixed nan truth that it could beryllium manufactured overmuch much easy and astatine a little value and thus, possibly a much important merchandise for you internationally successful 5 years than Mounjaro. But would emotion to get your thoughts connected being capable to return that globally successful a overmuch bigger mode than you tin return Mounjaro fixed its proviso constraints.

Ilya Yuffa

Yes. Yes. Listen, David, I deliberation location are respective components there. One, nan floor plan matters. So it's not conscionable being an oral, but an oral that has a floor plan that is competitory to fundamentally immoderate of nan starring injectable therapies that are presently connected market. And truthful that floor plan is important. We cognize from our acquisition pinch Trulicity that once-weekly injectable is sometimes really preferred versus oral. And truthful I deliberation location will beryllium a move wherever you person physicians arsenic good arsenic patients having penchant for different therapies depending connected what is amended for them to incorporated successful their life, whether that's type 2 aliases chronic weight management. And truthful I deliberation what's important is that there's a important opportunity. There are immoderate markets that are much oral-based.

Japan is simply a greater oral marketplace successful diabetes, especially. And we spot a fewer different markets being similar. And I deliberation it will -- what will play retired is that we'll person aggregate therapies that person a assortment of benefits, either from a compliance aliases efficacy aliases both. And I deliberation having nan portfolio to person an reply for nan continuum of attraction and life rhythm of nan marque aliases maintenance, that's nan important piece.

And for international, it's important to person each of those options available.

David Risinger

Great. Very helpful. And past turning to neuroscience and specifically donanemab. Could you talk astir nan opportunity for donanemab ex U.S., if it's successful, and if you could weave successful immoderate comments connected factors specified arsenic testing requirements, ongoing monitoring for ARIA, imaginable IV bottlenecks, et cetera, that would beryllium very helpful.

Ilya Yuffa

Yes. I would possibly put donanemab successful Alzheimer's successful general. And I deliberation location are 3 components that are important successful bid to really make a people and person an effect successful Alzheimer's. It's a devastating disease, some for those that are impacted straight aliases it's astir apt 1 of nan astir impactful for caregivers arsenic well.

And location are 3 areas that are important to thrust ecosystem wise. The first 1 is diagnosis. So nan diagnostic ecosystem is different and adaptable successful each of their markets. So Europe, for instance, nan modular presently is CSF arsenic a diagnosis. That's different successful different markets. I was conscionable successful Netherlands recently, and location are a number of representation clinics that thrust benignant of centrally immoderate of nan diagnosis. That doesn't beryllium everywhere. So nan test portion is an important component.

The 2nd is driving access, having access, being -- and you spot this successful nan U.S. arsenic good is CMS. That's nary different successful a azygous payer environment. Access is important. But moreover if you get those first 2, nan 3rd constituent is nan acquisition and knowing of wherever donanemab aliases different treatments tin person nan top use fixed immoderate of nan consequence parameters they mentioned, whether it's ARIA aliases conscionable successful general, wherever do you spot nan top use for therapies.

And I deliberation it's going to return immoderate clip to thrust nan ecosystem successful each 3 parameters, and there's going to beryllium variability successful each marketplace wherever we are. And truthful we request to put successful that successful nan agelong term. Long term, it's a important opportunity. I look astatine Japan. Japan successful absolute numbers has nan aforesaid number of patients that suffer from Alzheimer's arsenic nan U.S. And truthful it's a important opportunity, but we request to thrust each 3 components successful bid to person success. Long term, I deliberation it's there. It's going to return clip to germinate because nan ecosystem is conscionable nonexisting.

David Risinger

Got it. And since you mentioned Japan, I'm assuming that if nan ALS2 proceedings is successful that you'd beryllium filing successful Japan?

Ilya Yuffa

Yes. No, we person plans and we person successful discussions to prioritize Alzheimer's. It's a ace aging society. And truthful it's -- Japan is an important marketplace for america for donanemab. So arsenic we get TB2 data, our scheme is to record arsenic portion of a afloat package for donanemab successful Japan and besides nan remainder of nan globe based disconnected of TB2. That was nan original scheme to statesman with.

David Risinger

Got it. Okay. Very helpful. And past 1 last question. So you person tremendous acquisition and inheritance astatine Lilly successful galore different roles. And I thought since we person you coming pinch us, it would beryllium a bully opportunity for you to talk astir imaginable underappreciated opportunities up that whitethorn not beryllium connected people's radar screens.

Ilya Yuffa

Yes. And Dave, I've been pinch nan institution 26 years. And I've seen america successful a number of different therapeutic areas person spot successful 1 and possibly immoderate catch-up successful others to thrust pipeline and person catalysts for growth. We're presently successful a shape astatine nan institution wherever each therapeutic area has some near-term maturation catalysts and agelong term.

So if I deliberation astir underappreciated assets, I besides deliberation there's underappreciated communicative astir Lilly is astir spot successful nan wide endeavor pinch each therapeutic area driving into immoderate caller fields and catalysts for growth.

Look astatine oncology. We person Verzenio being a important driver of maturation adjacent term, particularly pinch adjuvant and increasing our MBC. But we besides are increasing successful hematology pinch Jaypirca has a important opportunity to beryllium competitory successful a caller abstraction and turn wide oncology.

In immunology, we person spot successful dermatology and rheumatology pinch Taltz and Olumiant, but now we person nan opportunity to participate a caller section pinch mirikizumab successful GI and turn our wide immunology portfolio and besides present lebrikizumab to leverage our already beardown footprint successful dermatology.

And past we person diabetes. And we have, of course, Mounjaro and our wide incretin portfolio, we besides person a once-weekly basal and increasing pipeline down Mounjaro. And past neuroscience, I deliberation this is going to beryllium a important section to create complete clip and having not conscionable donanemab, but besides a follow-on for donanemab already successful Phase III.

And truthful we person important catalysts for maturation successful nan adjacent term. And we are building retired our pipeline successful each therapeutic area truthful that we are not conscionable limited connected immoderate 1 plus to grow. We person each engines really fresh to execute crossed nan pipeline and commercially. So excited astir nan maturation opportunity we person up of us.

David Risinger

Excellent. Well, that's a awesome measurement to decorativeness up. We are retired of time. Thank you truthful overmuch for joining us, Ilya, and dream you person a awesome remainder of nan conference.

Ilya Yuffa

Thank you. Always a pleasure, David.

David Risinger

All right. Much appreciated.

Ilya Yuffa

Okay, bye, bye.