ELI LILLY & Co Q1 FY2025 earnings call

Management Statement and Operational Highlights

• Product Pipeline: Orforglipron Phase 3 data for Type 2 diabetes met expectations, Phase 3 trials for obesity to read out in Q3, potential regulatory submissions for obesity by end 2025. Other milestones: Jaypirca EU approval, Omvoh global Crohn's approval, Olomorasib Phase 3 start, 5 new medicines in Phase 1.
• Manufacturing: Over $50B in U.S. manufacturing investments since 2020, plans to double U.S. manufacturing investment, 10 active projects ongoing.
• Dividends and Share Repurchase: Distributed $1.3B in dividends, executed $1.2B share repurchase.
• Tariffs and Trade: Support U.S. domestic investment but oppose tariffs, urge negotiation of deals to remove harmful tariffs and barriers.

Segment Performance

• Immunology: Ebglyss has increasing new patient starts in atopic dermatitis, covered by two large PBMs and to be reimbursed on 60% of commercially insured plans by May 1. Omvoh approved for Crohn's disease globally, driving new patient starts.
• Oncology: Jaypirca approved in Europe for relapsed/refractory CLL, with launches in Q2 and expected Phase 3 readouts. Verzenio global sales grew 10%, U.S. prescription up 7%, international volumes up 30%.
• Neuroscience: Kisunla approved in 12 countries, with steady increase in use, expecting U.S. regulatory action on modified dose enrichment in the next few months.
• Cardiometabolic Health: Mounjaro sales $3.8B, double Q1 2024; Zepbound revenue strong, U.S. market leader in new diabetes prescriptions, launched in over 40 countries.

Guidance

• Reaffirmed revenue and performance margin guidance, non-GAAP EPS guidance unchanged except for Q1 IPR&D charges. Announced tariffs not materially affecting 2025 outlook, but expansion or retaliatory tariffs could have negative effect.

Risks

• Tariffs and trade dynamics: Expansion of tariffs or retaliatory tariffs could negatively impact Lilly.
• PBM dynamics: Potential restrictions on formulary access between Zepbound and Wegovy.
• Regulatory uncertainties: Uncertainties in trade, tax, and international relations affecting business operations.

Question and Answer

Q: Thanks for taking the question. Dave, just in light of the CVS formulary announcement this morning, favoring Wegovy over Zepbound, there are clearly some investor concerns about the PBM dynamic in obesity given what we've seen in other big healthcare markets in the past where two PBMs -- where PBMs fit two companies against each other. So two part question. Number one, what is your expectation on market share dynamics in the next weeks and months from the CVS formulary loss? And then second, can you talk to your strategy on how you're going to be navigating an environment where we could see PBMs continue to try and restrict formulary access between Zepbound and Wegovy.

A: Yeah. Thanks for the question. We're not surprised that this kind of thing was announced. If we look at what's happening in the market, we're pretty deep into a replacement cycle, particularly on obesity and Tirzepatide, as we've highlighted on this call, is gaining a lot of market share, basically most of the growth in the categories happening with our medicine. Of course, the private pay market is an important segment. We'd like to grow that segment and we'd like to grow Choice and Access in that segment. So we're not interested at all in one of one deals of reducing access and choice for doctors and patients. We want to expand it. So this type of thing isn't too interesting to us, but it's understandable that it can happen and obviously, in this one case did. Our focus is on making better medicines and more accessible medicines. So our orforglipron is a topic today, excited by the possibility of an oral that could be more widely distributed around the world and here in the U.S. With GLP-1 injectable GLP-1 like profile like Dan highlighted and of course, on driving more advanced therapies as well, a combination or triple acting agents like Tirzepatide. So that's our focus. It doesn't surprise me that this happened, and we'll work through it recognizing in this case as well we're talking about the, the templated lives at CVS and probably opt in rates for employers in the templated part of their book are pretty low compared to the national average, just to maybe inform your analysis, and we'll work through it. Our job will be to continue to drive share and preference for our brand. I think the team has done a great job of that year to date, and we'll continue to focus on that while we wait for the or for launch and read the data later this year.

Q: Just another orforglipron data. Just post the data we've seen here, can you just elaborate a bit more on the role you see orforglipron playing in the core obesity and diabetes market relative to injectables? And maybe as part of that, any thoughts on what type of share you would envision orals taking in the market over time?

A: Thanks a lot, Chris. I think a significant opportunities here for orforglipron. Just looking at the Type 2 market today, we know that approximately 50% of patients have a preference for an oral, giving everything as equal on the efficacy and the safety side. And similarly on the obesity side, we know that we have approximately 25% of the patients in the U.S. suffering from needle fear. So I think that position us very nicely to be a first line in routine for both Type 2 and chronic weight management. The other benefits as well, I think with an oral here, we can scale and reach patients that is more or less impossible with only injectables. So I think it provides a huge global opportunity for us with orforglipron and also from a manufacturing side, probably a significant benefit as well. So overall, I think tremendous opportunities here with orforglipron Type 2 and obesity in the U.S. and other markets where we have launched, but also to scale globally to an extent we can't do with injectables.