ELI LILLY & Co Q3 FY2024 earnings call

• Revenue growth: 42% growth excluding olanzapine divestment, new products like Mounjaro and Zepbound drove over $3B in new product revenue.
• Pipeline milestones: Approved Ebglyss for moderate-to-severe atopic dermatitis, Kisunla for early symptomatic Alzheimer's disease in Japan and UK, positive data from tirzepatide and donanemab studies.
• Manufacturing: Invested nearly $2B in Ireland manufacturing, committed over $20B since 2020, and announced $4.5B for Lilly Medicine Foundry. Acquired Morphic Therapeutics.
• Shareholder return: Returned over $1.6B via dividends and share repurchases.

In Q3, Lilly's revenue grew 42% excluding olanzapine divestment. New product revenue, led by Mounjaro and Zepbound, was over $3 billion. Mounjaro sales were $3.1 billion globally, with nearly $2.4 billion in the US. Verzenio had worldwide sales up 32%. Jaypirca had worldwide revenue of $81 million, with sequential growth. Omvoh had worldwide revenue of $41 million, with progress in US access. Trulicity's worldwide revenue declined 22% due to lower volume. Zepbound had US sales over $1.2 billion with broad formulary coverage. Non-incretin growth was 17% in Q3.

• Revenue guidance: Updated to $45.4 billion to $46 billion.
• EPS: Reported range $12.05 to $12.55, non-GAAP range $13.02 to $13.52.
• Gross margin less OpEx ratio unchanged.
• Tax rate: Estimated at approximately 17% due to non-deductible IPR&D in Q3.

• Compounding drugs: Concerns about patient safety and potential market impact, as unregulated compounded drugs may harm patients.
• Supply chain/channel dynamics: Channel inventory decreases impacted Q3 sales of Mounjaro and Zepbound, and uncertainties in retail stocking and healthcare system adoption of new channels like LillyDirect.

Q: Can you help bridge from 3Q sales to 4Q implied results and detail demand generation efforts?

A: Patrik Jonsson mentioned strong performance of Mounjaro and Zepbound, with increased DTC effort and HCP promotional efforts, expecting a good Q4. Lucas Montarce added on acceleration in growth and OUS launches driving growth.

Q: How to frame compounding drugs impacting demand and FDA's stance?

A: Patrik Jonsson said compounding has no significant financial impact on Lilly, but concerns about patient harm. Dave Ricks mentioned FDA should address unregulated product and work with companies to speed up legitimate product delivery.

Q: Thoughts on oral small molecule resolving compounding crisis?

A: Dave Ricks said oral products are important for large-scale patient serving, but compounding isn't a crisis for Lilly, and FDA uses product-by-product analysis.

Q: Access side of demand generation for Zepbound and OUS?

A: Patrik Jonsson talked about Zepbound's access progress in commercial and Medicaid, and Ilya Yuffa discussed OUS access progress in Type-2 diabetes and chronic weight management markets.

Q: Supply capacity progress for 2025?

A: Dave Ricks and Lucas Montarce mentioned ongoing investment and CapEx, with capacities from prior announcements expected to come online, and acceleration in demand indicating supply acceleration.

Q: Inventory dynamic in Q3 and impact of LillyDirect launch?

A: Patrik Jonsson said LillyDirect self-pay launch had limited impact on TRx, with low-single to single-digit effect.

Q: DTC for Zepbound and competition concern?

A: Patrik Jonsson explained DTC now due to improved supply, not demand issues, and not related to competition concerns.

Q: Peresolimab drop due to benefit-risk ratio?

A: Dan Skovronsky said peresolimab's Phase 2b study didn't bear out the benefit-risk seen in Phase 2a, so they dropped it, with no follow-on PD-1 agonist pursued currently.

Q: Verzenio market share evolution and IRA impact?

A: Jake Van Naarden said Verzenio's position in adjuvant therapy is strong, with no significant market share shift expected, and IRA will have an impact but net neutral, with no speculation on negotiation list.

Q: Operating margin trajectory?

A: Lucas Montarce said short-term operating margin expansion expected as they ramp up investments in SG&A and R&D for long-term sustainable growth.

Q: Pricing evolution for Mounjaro, Zepbound, and OSA indication?

A: Lucas Montarce talked about Mounjaro's pricing tailwind from co-pay program sunset, Zepbound's pricing stability, and OSA indication impact on global net pricing.

Q: Orforglipron and ATTAIN-MAINTAIN trial?

A: Patrik Jonsson discussed orforglipron's potential to expand the market by being oral, and ATTAIN-MAINTAIN trial to understand weight loss maintenance for longer-term treatment.