Eli Lilly and Co Q2 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Terence Flynn - Morgan Stanley - Analyst : Congrats on all the progress on the manufacturing. Maybe just a two-part for me on that one. Just wondering if you're initial guidance for the at least 1.5-fold increase in sellable doses include the Zepbound bound star vials that you're rolling out in the US or if that's a potential driver of upside? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 08, 2024 / 2:00PM, LLY.N - Q2 2024 Eli Lilly and Co Earnings Call And then as we think about RTP, I know you continue to make progress there. The scripts suggest you're at about one-third of the way through the ramp to peak. But this inventory restock that you talked about today suggests maybe more of a meaningful step-up. So just can you quantify for us where you are in the ramp in RTP?

Question: Christopher Schott - JPMorgan Chase & Co - Analyst : Congrats all the progress. There seems to be a broader debate on the role emerging earlier-stage competition in the obesity market could play where that fits in the market broadly. I'm sure you're not surprised by the breadth of agents being developed in the space. But just interested in your latest views in terms of barriers to entry you see for some of these newer competitors and how you think about defending Lilly's market position over time?

Question: Timothy Anderson - Wolfe Research - Analyst : I have a question on compounders of GLP-1s, including, but not limited to, your tirzepatide. So companies like hims or anyone else. How can this not infringe patent protection? And is this something that is likely to get adjudicated in the courts, meaning that you and presumably Novo, too? So an article just yesterday in New York Times talked about patients getting upside down with compounded GLP-1s. I think they used the term overdosing on these compounded formulations. So not only do compounders take away sales from you guys, but it could also ¡tarnish the reputation of the class. So what can we expect Lilly to do about it?

Question: Umer Raffat - Evercore ISI Institutional Equities - Analyst : I want to ask on operating leverage, if I may. I know in the first quarter, when you guys raised the guidance by $2 billion on top line, it dropped down to EPS by $1.30. This quarter, guidance went up by $3 billion, but it dropped down at a much higher leverage at $2.16 EPS, almost a 90% incremental margin. And my question is not so much what your operating leverage is going to be in 2025 or a forward year guidance. But instead, I'm basically asking if you annualize the momentum of your 4Q numbers per this year's guidance, the EPS upside implied to consensus could be almost as much as half of Lilly's entire full year EPS where it stands right now. So I'm just trying to think through, how do you plan on spending on various functions and what the incremental margins could look like as the revenue momentum really kicks in with the improving supply? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 08, 2024 / 2:00PM, LLY.N - Q2 2024 Eli Lilly and Co Earnings Call

Question: Mohit Bansal - Wells Fargo Securities - Analyst : Congrats on the quarter. My question is regarding the rest of the world sales for incretins. It seems like Mounjaro is doing quite well there. And if I take out the -- like 15% or so for stocking in the US, it seems like ex-US is already about 33% this early in the launch. So I would love to understand how has been your experience so far? And is there going to be any different uptake for ex-US versus your prior generation incretins for both Mounjaro and Zepbound given that these are really efficacious drugs?

Question: Alex Hammond - BofA Securities - Analyst : In the prepared remarks, Dan mentioned engagement with regulatory authorities on a potential pivotal trial in MASH. Can you provide any color on these discussions and how Lilly is thinking about tirzepatide versus retatrutide for this indication? When could we receive updates?

Question: Evan Seigerman - BMO Capital Markets Equity Research - Analyst : I wanted to touch on manufacturing and specifically, on the concern that you raised back in February around the proposed acquisition of Catalent by Novo Holdings and the subsequent sale to Novo Nordisk. Are you still as concerned as you were in February? Or given what you've been able to do with your own footprint? Is this less of an issue? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 08, 2024 / 2:00PM, LLY.N - Q2 2024 Eli Lilly and Co Earnings Call

Question: David Risinger - Leerink Partners LLC - Analyst : Let me add my congrats on the results as well and the corporate updates. So Zepbound's breadth of health and work or productivity benefits seem to be underappreciated by many. There are articles from time to time, let's say, that patients need an off-ramp from therapy, et cetera. And my question is, what is Lilly doing to encourage patients to stay persistent with therapy? And how does Lilly intend to better communicate not just Zepbound's health benefits, but its worker productivity benefits to employers in order to drive much greater employer inclusion of obesity drugs as part of employee benefits?

Question: Kerry Holford - Joh. Berenberg, Gossler & Co. KG - Analyst : Just coming back to the margin question earlier, given another expense in the 2024 --

Question: Chris Shibutani - Goldman Sachs Group, Inc. - Analyst : With all the different oral mechanisms in particular, variations on it from yourselves as well as competitors, can you update us on your thinking on what the basis of competition is going to be? And what kind of opportunities do you really envision? I think there has been for a while now a comparison on the basis of percent weight loss, particularly for the injectables. But as we move into orals, it seems as if tolerability profiles really matter. So how are you thinking about it? And how do you recommend investors think when we compare datasets across these other oral products in development? Even if the mechanisms are different, how do we get smarter about differentiating and interpreting data.

Question: Kerry Holford - Joh. Berenberg, Gossler & Co. KG - Analyst : Hopefully, you can hear me better this time around.

Question: Kerry Holford - Joh. Berenberg, Gossler & Co. KG - Analyst : Lovely. My question was on margins. So given you are now landing, expecting to land in that mid- to high 30s range this year, so soon after tirzepatide launches, where can we expect your midterm operating margin to land? Is the margin in the mid-40%, perhaps higher, achievable? And Dave, I know you previously suggested that an operating margin above 40% is not sustainable from an innovation-focused company. But given your progress so far, I wonder if you've changed your view on that.

Question: Akash Tewari - Jefferies LLC - Analyst : So we're starting to see that myostatins may not be the only way to kind of preserve lean muscle mass. In particular, it looks like amylin GIP/GLP combos are showing the potential for maybe 90% versus 10% fat versus muscle loss. Can you talk about what you think eloralintide/tirzepatide combo could show both in terms of absolute weight loss, but also the quality of that weight loss? And then where would myostatins fit in a world where next-gen amylin triplets could show that level of muscle preservation?

Question: Trung Huynh - UBS Investment Bank - Analyst : Just following on from the previous question on ex-US GLP-1. You saw Mounjaro ex-US sales this quarter jumped to $677 million from $286 million. Can you give us some color on how ex-US reimbursement is going with the bigger countries? And is this more of an out-of-pocket drug in these countries? And what percentage of the $677 million is obesity sales versus diabetes?

Question: Stephen Scala - TD Cowen - Analyst : The FDA definition of shortage seems clear and tirzepatide no longer meeting the definition of shortage seems to imply Lilly is meeting demand. I assume you will say that that's not the case, but the definition at least in black and white is quite clear. I assume this is FDA's determination. So does Lilly agree with FDA's conclusion? How is demand being met? How is demand being measured? And what does demand look like?

Question: Louise Chen - Cantor Fitzgerald & Co - Analyst : I wanted to ask you how excited you are about these muscle preserving obesity drugs and if you see that as a true unmet need?