Lilly 4Q22 – Diabetes revenue totals nearly $4.0 billion (+11% YOY) – led by Jardiance ($612 billion, +42% YOY), Trulicity ($1.9 billion, +3% YOY), and Mounjaro ($279 million); rolling submission underway for tirzepatide in obesity - February 2, 2023

2022 Financial Result for Lilly’s Major Diabetes Products

4Q22 Financial Results for Lilly’s Major Diabetes Products

Broader Finance/Product Trends

1. Overall diabetes portfolio totals nearly $4.0 billion for the quarter (+11% YOY) and almost $14.5 billion for the year (+11% YOY)

Lilly maintains its position as a leader in the field of cardiometabolic health, and this confidence was reflected throughout all parts of the call – from product launches to regulatory submissions to early stage pipeline candidates. Sales for Lilly’s diabetes portfolio totaled almost $4.0 billion in 4Q22 (+11% YOY). By geography, sales in the US totaled $2.8 billion (18% YOY) and sales OUS totaled $1.1 billion (-4% YOY). Growth was largely driven by the diabetes products that are considered “key growth products” in Lilly’s portfolio: Mounjaro, Jardiance, and Trulicity. These products make up 5%, 12%, and 38% of the total key growth product revenue, respectively. Insulin is not listed as a key growth product, but maintains significance in the diabetes portfolio – insulin products Humalog, Humulin, and Basaglar totaled $984 million in 4Q22, down 14% from $1.1 billion in 4Q21. The declining insulin portfolio is reflected in the broader insulin market, which fell 18% in 3Q22. For the year, the overall diabetes portfolio totaled $14.5 billion, growing 11% from $13 billion in 2021. This was primarily driven by US sales, which totaled $9.9 billion (+14% YOY) and made up almost 69% of the total annual sales, up from 67% in 2021.

Lilly Diabetes Worldwide Financial Results – Past Five Quarters

Lilly Diabetes – 4Q22 Geographic Results

Lilly’s Overall Diabetes Sales (1Q05 - 4Q22)

2. Sales for Jardiance total $612 million (+42% YOY, +39% Q/Q); growth in US and OUS primarily driven by increased demand

Sales for Jardiance continued to grow steadily to $612 million in the fourth quarter (+42% YOY, +39% Q/Q), following an impressive 47% YOY growth in 3Q22. By geography, sales in the US totaled $363 million (+51% YOY), and sales OUS totaled $249 million (+30% YOY), both of which were primarily driven by increased demand, as noted in the press release. An increased 4Q22 royalty from BI for exceeding certain annual thresholds also contributed to US growth, while increased OUS demand was partially offset by the unfavorable impact of foreign exchange rates. Jardiance continues to be categorized as a “key growth driver” for Lilly, and we are curious to see how it performed against AstraZeneca’s Farxiga in the fourth quarter. In 3Q22, Jardiance held 56% of global market share, while Farxiga captured 36%. For the year in 2022, Jardiance sales totaled $2.1 billion (+39% YOY).

Management also expressed excitement for key pipeline and regulatory developments for Jardiance (empagliflozin), and we look forward to hearing more on EMPACT-MI, which is evaluating empagliflozin in people who have had a heart attack and is expected to complete in August 2023:

• Presented at ASN in November 2022, the phase 3 EMPA-KIDNEY trial showed that Jardiance led to a 28% relative risk reduction on the primary outcome of kidney disease progression or CV death compared to placebo. Management noted that the trial was the largest and broadest SGLT-2 trial in CKD to date and that it confirms the wide-ranging, disease-modifying power of SGLT-2s across the class. As highlighted in today’s call, the FDA and EMA have accepted Lilly’s regulatory submission for Jardiance in adults with CKD, and Lilly expects to make submissions to other regulatory agencies in the coming months.
• With results from the phase 3 DINAMO trial, presented at IDF in December 2022, Jardiance also became the first SGLT-2 inhibitor to show statistically significant reductions in blood sugar levels in children and adolescents with type 2 diabetes. Empagliflozin conferred a significant 0.8% reduction in A1c compared with placebo at week 26.

Lilly’s Worldwide Jardiance Revenue – Past Five Quarters

Lilly’s Jardiance – 4Q22 Geographic Results 

Lilly’s Jardiance Sales (3Q14-4Q22)

3. Trulicity revenue totals $1.9 billion in 4Q22 (+3% YOY); growth driven by increased demand, offset by lower realized prices and changing segment mix

GLP-1 Trulicity continues to make up a substantial portion of Lilly’s diabetes portfolio and is riding the wave of immense growth in the overall incretin market. Trulicity sales totaled $1.9 billion in 4Q22 (+3% YOY) - $1.5 billion came from US sales (+5% YOY) and $410 million came from OUS sales (-6% YOY). In both US and OUS, management cited increased demand that was partially offset by lower realized prices but noted that OUS sales were also affected by the “unfavorable impact” of foreign exchange rates. When assessed at a constant currency basis, revenue outside the US actually increased 8% from 2021. Also impacting Trulicity sales was a supply shortage stemming from unprecedented consumer demand that was first cited in December 2022, but is expected to be resolved by February 2023. In 2022, Trulicity sold $7.4 billion in revenue (+15% YOY) - $5.7 billion came from US sales (+16% YOY) and $1.7 billion came from OUS sales (+12% YOY).

• To mitigate future supply shortages from the rapidly growing demand across our incretin business, management announced plans to add additional substantial capacity in the years ahead. In the near term, the development of a new facility in North Carolina’s Research Triangle Park is continuing according to plan, with production expected to begin later this year. Notably, last week, Lilly announced an additional $450 million investment in this project that will be used to expand manufacturing capacity. Specifically, the funds will support additional injectable fillings, device assembly and packaging capacity to support an increased demand for Lilly's incretin products.
• In terms of prescriber base, management feels strongly that providers are continuing to write prescriptions for Trulicity. Mr. Mike Mason (EVP, Lilly Diabetes) said that this is partly because providers are more used to writing Trulicity and that they’ve already gone through the adoption curve. Moreover, coverage for Trulicity is still superior to Mounjaro, which is covered by about 50% of commercial and Medicare Part D plans.
• At first glance, the steep drop in Trulicity prescriptions shown in the graph below is concerning, but upon further investigation is in line with what might’ve been expected following the launch of Mounjaro. First and foremost, the axes on the graph are shifted so Trulicity’s market share has only actually decreased about 12 percentage points – from 46% to 34% – since December 2020. Importantly, though, the market has grown at a remarkable rate; over that same time period, the 13-week rolling average of incretin prescriptions more than doubled from 320,000 to 720,000. Thus, while Mounjaro and Ozempic are each capturing market share from Trulicity, it is of a much bigger pie. Moreover, Mounjaro is not actually eroding too much of Trulicity’s market share, as only 10% of patients taking Mounjaro switched from Trulicity.

Trulicity Worldwide Financial Results – Past Five Quarters

Trulicity – 4Q22 Geographic Results 

Trulicity Sales (4Q14-4Q22)

4. Mounjaro sales total $279 million in the third quarter of sales since June 2022 launch; Lilly remains focused on increasing capacity to meet demand

In its third quarter of sales since its June 2022 launch, Mounjaro brought in $279 million in sales globally in 4Q22, taking its total to $482 million in 2022. US sales totaled $257 million (+164% Q/Q), and OUS sales totaled $23 million (-75% Q/Q). Although total sales grew 49% sequentially and management continues to list Mounjaro as a “key growth driver”, Lilly stock remains down today as Mounjaro sales came up short of Wall Street estimates nearing $319 million. However, we imagine that the potential approval of tirzepatide in obesity this year – based on SURMOUNT-1 and SURMOUNT-2, the latter of which will complete in April 2023 – presents an opportunity for a significant surge in revenues. In today’s call, management highlighted the initiation of a rolling submission in the US for tirzepatide in obesity, following FDA Fast Track Designation granted in October 2022.

Management highlighted that for the fourth quarter, approximately 75% of Mounjaro’s new therapy starts are patients new to the type 2 diabetes injectable incretin class. Furthermore, less than 10% of patients coming from another GLP-1 are switching from Trulicity, demonstrating that the entire GLP-1 class is continuing to grow as Mounjaro is largely not serving as a substitute for Trulicity. Management also noted that just above 50% of people with type 2 on commercial insurance and Part D now have access to Mounjaro – up from 45% in October 2022 and 22% in 3Q22.

• Management emphasized that demand for Mounjaro remains strong, resulting in intermittent delays at wholesalers and pharmacies in the US. Recall that in December 2022, the FDA added Mounjaro and Trulicity to its list of drugs facing shortages, as reported by Reuters. Despite these supply challenges, Lilly management has remained quite positive across its 2023 forecast call in December 2022, its JPM 2023 presentation, and its fourth quarter earnings call today, as Lilly remains on track to expand its incretin capacity and begin production late this year at a manufacturing facility in North Carolina’s Research Triangle Park. In January 2023, Lilly announced plans to invest an additional $450 million to support production at the facility.
• On pricing and prescriptions: As shown below, total Mounjaro prescriptions have been skyrocketing, having peaked at around 180,000 prescriptions per week in December, far outpacing Trulicity’s post-launch uptake. In Q&A, Mr. Mason explained that the people on Mounjaro comprises a much broader population than those on Trulicity, and although there are more people prescribing Trulicity overall at this point, because it’s been on the market longer and has better access, Mr. Mason said that Mounjaro is “within the universe” of doctors who are prescribing Trulicity. However, new-to-brand prescriptions (NBRx) were expectedly negatively impacted starting in late November 2022 due to adjustments to the Mounjaro Savings Card program, which allows people with commercial insurance and without Mounjaro coverage to access Mounjaro for $25 a month. The November adjustments began requiring people to attest that they have type 2 diabetes and removed the $25 benefit for new patients, which reduced new patient start volume and increased the percent of patients on Mounjaro with formulary coverage and with a history of diabetes treatments. Additionally, in December 2022, Lilly and pharmacies further tightened access to Mounjaro to prioritize giving it to people with type 2 diabetes amid a surge of off-label use for weight loss. In 3Q22, management described the Mounjaro Savings Card as a "bridging program” that aims to bring Mounjaro to people for a low out-of-pocket cost until they achieved formulary access on their insurance. Today, EVP Mr. Mike Mason explained in Q&A that Lilly has “graduated from the bridging program” and now remains focused on covered patients. In the fourth quarter, management estimates that 40% of prescriptions were paid, which includes patients that are not supported by the $25 noncovered savings program. In line with Mr. Mason’s explanation, Lilly expects Mounjaro’s percent of paid scripts and net revenue per script to increase in 2023 as payer access continues to expand. Although management could not get into specifics about Mounjaro’s net price, Mr. Mason did say in Q&A that Mounjaro should have a better price for Lilly than Trulicity when negotiating with payers as they believe that Mounjaro has a better profile.

Mounjaro Worldwide Financial Results – Past Five Quarters

Mounjaro – 4Q22 Geographic Results 

Mounjaro Sales (2Q22-4Q22)

6. Baqsimi revenue totals $38 million (+23% YOY); annual revenue totals $139 million (+23% YOY)

Revenue for Baqsimi, the nasal glucagon, totaled $38 million in 4Q22 (+23% YOY). US revenue totaled $31 million (+19% YOY) and OUS revenue totaled $7 million (+41% YOY). While Lilly’s glucagon products were not mentioned in any of today’s earnings materials, we’re encouraged to see more patients gaining access to next-generation glucagons, whether they be Baqsimi, Zegalogue, or Gvoke. Ultimately, we believe that increased education and advocacy will be necessary to help Baqsimi and other next generation glucagons reach many more patients, including greater awareness of the importance of having a glucagon prescription for all people with diabetes who use insulin. Annual revenue totaled $139 million (+23% YOY) - $110 million in the US (+15% YOY) and $29 million in OUS sales (+72% YOY).

• We continue to believe that there is room for the whole glucagon market should increase in size, given the 6.8 million people with diabetes in the US who take insulin and are therefore at risk of severe hypoglycemia. A large proportion of people with insulin-dependent diabetes do not have rescue glucagon, not to mention people taking other medications associated with hypoglycemia, such as sulfonylureas. In 2021, the US had 692,000 annual glucagon prescriptions, and data from dQ&A indicates that only 65% of adults with type 1 diabetes and 13% of adults with insulin-dependent type 2 diabetes have glucagon.
• There are several factors contributing to low glucagon uptake, such as a lack of urgency to obtain rescue glucagon, lack of patient education about it from HCPs, or financial barriers. In fact, in the US less than 5% of patients with prior hypoglycemia requiring emergency healthcare actually fill their glucagon prescription. A major factor affecting glucagon fill rates is income, suggesting that high out-of-pocket costs pose a key barrier to glucagon uptake. For that reason, we were glad to see UnitedHealthcare announce in July 2022 that it will eliminate out-of-pocket costs for glucagon, and we hope to see more efforts like this to increase broad adoption of this emergency, life-saving drug.

Baqsimi Worldwide Financial Results – Past Five Quarters

Baqsimi – 4Q22 Geographic Results

Baqsimi Sales (3Q19-4Q22)

7. Revenue for DPP-4 inhibitor Tradjenta totals $91 million (-2% YOY); annual revenue totals $384 million (+3% YOY)

Revenue for DPP-4 inhibitor Tradjenta totaled $91 million in 4Q22, falling 2% from $93 million in 4Q21. Sales in the US totaled $18 million (-15% YOY) and OUS sales totaled $73 million (+2% YOY). As we’ve discussed with other DPP-4 inhibitors (Merck’s Januvia, Novartis’ Galvus, AZ’s Onglyza), many believe there is a continued role for DPP-4s in early combination therapy for people with diabetes, as demonstrated by the VERIFY trial (presented at EASD 2019). We were absolutely thrilled to hear discussion of Tradjenta in the analyst Q&A, where a question came in regarding the potential of generic DPP-4s to disrupt the oral GLP-1 market. The analyst pondered whether the safety and efficacy profile of the generic DPP-4 would preclude GLP-1s from making a dent in the oral anti-diabetes market, but Mr. Mike Mason brushed off the question, saying that “they don’t see much of an impact of DPP-4s going off patent in the US or other markets.”

Tradjenta Worldwide Financial Results – Past Five Quarters

Tradjenta – 4Q22 Geographic Results

Tradjenta Sales (2Q11-4Q22)

Pipeline Highlights

1. Rolling submission underway for tirzepatide in obesity in the US; FDA grants Fast Track Designation for tirzepatide in obstructive sleep apnea; SURPASS-SWITCH-2 trial switching from GLP-1 to tirzepatide added to ClinicalTrials.Gov

Tirzepatide, once again, was a key focus of today’s pipeline updates, headlined by the initiation of a rolling submission of tirzepatide for chronic weight management in the US in the fourth quarter. Also in 4Q22, the FDA granted Fast Track designation for tirzepatide in obstructive sleep apnea (OSA), following initiation of the SURMOUNT-OSA study in June 2022. Per ClinicalTrials.Gov, the study will enroll 412 adults and is expected to complete in 1Q24. We’d imagine that improvements in sleep apnea symptoms from tirzepatide are the results of weight loss, but we’d be curious to learn more about the mechanism of action and outcomes being evaluated here to understand whether there is also a direct effect. Discussing access to these therapies, Mr. Mike Mason (President, Lilly Diabetes) said that Lilly’s phase 3 programs for people with obesity and sleep apnea or heart failure “should unlock large segment access for people who live with obesity in commercial and we hope Part D.” Mr. Mason also highlighted the power of consumer interest in helping improve access to medications, noting that Lilly has seen high levels of engagement and willingness to take action to access treatments by people living with obesity over the past year. While we don’t believe that burden for ensuring access to these life-changing treatments should fall on patients, we hope that patient advocacy may lead to accelerated access.

• Rounding out the tirzepatide updates, the SURMOUNT-5 head-to-head study comparing tirzepatide vs. semaglutide 2.4 mg for chronic weight management is expected to initiate in 2023. Recall that tirzepatide demonstrated significantly greater reductions in A1c and body weight compared to semaglutide 1.0 mg in type 2 diabetes in SURPASS-2, so we’ll be curious to see how the two agents perform in a head-to-head comparison in obesity. Meanwhile, Lilly expects to release data for SURMOUNT-2, SURMOUNT-3, and SURMOUNT-4 in 2023. Lastly, we discovered the SURPASS-SWITCH-2 trial on ClinicalTrials.Gov, which will assess glycemic control in 150 adults switching from a GLP-1 to tirzepatide. The study is expected to commence next week and has an estimated completion date of October 2023.
• During Q&A, Dr. Daniel Skovronsky (CSO & SVP) discussed the potential of oral multi-agonist incretin therapies for obesity. Acknowledging the tremendous scope of obesity in the US (110 million people) and across the globe (650 million people), Dr. Skovronsky said that this market cannot be addressed with injectable therapies alone, and that Lilly is “working hard” to bring oral solutions to patients. Currently, oral medications are only single-mechanism (i.e. GLP-1 receptor agonists) and have conferred good weight loss, though this has of course been surpassed by the level of weight loss conferred by injectable dual-agonism therapies like tirzepatide. While Lilly doesn’t have anything ready to disclose today, Dr. Skovronsky said that “you can bet we’re working on oral solutions that can bring additional incretin activity to patients in a pill.”
• Also in Q&A, we were pleased to hear management highlight the importance of lifetime treatment of obesity as a chronic disease and advocate for Medicare coverage of anti-obesity medications through the Treat and Reduce Obesity Act (TROA). Throughout the call, management emphasized the high unmet need in obesity and emphasized that obesity is a chronic, often lifetime disease that will likely require ongoing treatment. Referencing the American Academy of Pediatrics’ recently released guideline on pediatric obesity, Mr. Mason emphasized the importance of testing tirzepatide in teens and adolescents. Indeed, the SURPASS-PEDS study is assessing tirzepatide in youth and we’ll be very eager to learn how the dual agonist performs, particularly following the strong results of the STEP-TEENS study for semaglutide 2.4 mg in this population. We were particularly encouraged by Dr. Skovronsky’s commentary that “we need to have a very high bar for the types of medicines we develop [for obesity] … we need medicines that, first and foremost, are extremely safe and are really highly well tolerated for patients.” Turning to TROA, Mr. Mike Mason said that Lilly “continues to work to advocate for it” but did not share any specific efforts on behalf of the company.

2. FDA and EMA accept regulatory submissions for Jardiance for adults with CKD following EMPA-KIDNEY readout at ASN 2022

Lilly announced that the FDA and EMA have accepted regulatory submissions for Jardiance (empagliflozin) for adults with CKD based on results of the landmark EMPA-KIDNEY trial, which were read out at ASN 2022. Recall that EMPA-KIDNEY was the largest and broadest SGLT-2 trial in CKD to date, enrolling a patient population with a much wider range of kidney function and albuminuria, along with a much larger number of patients without diabetes. Over a median follow-up of two years, EMPA-KIDNEY found that empagliflozin led to a 28% relative risk reduction on the primary outcome of kidney disease progression or CV death (HR: 0.72; 95% CI: 0.64-0.82; p<0.0001), compared to placebo. See our team’s interview with BI’s Head of Clinical Development & Medical Affairs Dr. Mohamed Eid, who provided greater color on efforts to expand Jardiance’s indication to CKD based on the EMPA-KIDNEY readout, and see below for our brief Q&A with Dr. Eid on the FDA acceptance. We’re pleased to see Lilly and BI investing in this area of high unmet need, and we look forward to forthcoming regulatory updates.

• Following the readout of the DINAMO study at IDF 2022, which demonstrated empagliflozin’s glycemic control in youth with type 2 diabetes, we are curious how Lilly and BI are thinking about a potential indication expansion to the pediatric population. Overall, the DINAMO study found that empagliflozin added to background treatment (diet, exercise, metformin, and/or insulin) led to a statistically significant reduction of 0.8% in A1c compared with placebo at 26 weeks (p=0.012), as well as a significant reduction in fasting plasma glucose. Today’s press release notes that Jardiance is the first SGLT-2 inhibitor to confer statistically significant reductions in blood glucose levels in children and adolescents with type 2 diabetes and we hope this signals continued efforts by Lilly to improve outcomes in pediatric type 2 diabetes. This represents yet another area of substantial unmet need, especially in the context of alarming increases in pediatric type 2 diabetes incidence in recent decades as well as the aggressive manifestation of youth-onset type 2 diabetes and high rates of complications.

Close Concerns’ Questions and Answers from Dr. Mohamed Eid (BI, Head of Clinical Development & Medical Affairs)

Q: What is the education/marketing plan for clinicians and patients once Jardiance gets the CKD indication expansion? Are there separate sales force teams for each indication of Jardiance or will the same teams who promote Jardiance for heart failure also promote it for CKD?

Dr. Mohamed Eid: While we do not comment on specific marketing plans for Jardiance, we are committed to supporting the appropriate educational channels and working with all stakeholders to ensure that it is available for those who need it.  

Q: What is the expected timeline for an FDA decision on the CKD indication expansion?

Dr. Eid: We expect an FDA decision in the second half of 2023.

Q: Is there a particular subset of people with CKD that BI/Lilly will initially be targeting their marketing efforts?

Dr. Eid: We do not provide guidance on marketing plans for Jardiance. The EMPA‐KIDNEY trial enrolled a wider range of patients than previous SGLT2 inhibitor trials in CKD to date, including people without diabetes, those with various underlying causes of CKD and those across the spectrum of eGFR and urine albumin‐creatinine ratio (measures of kidney function and excess albumin in the urine, respectively). Results from the EMPA‐KIDNEY trial add to the growing body of evidence for the management of CKD for the approximately 37 million adults in the U.S. living with this condition.

Q: EMPA-KIDNEY stood out by its broad participant population, including people with low eGFRs and low UACRs. We have seen many reports emphasizing a need for greater use of UACR measurements in addition to eGFR measurements. What factors do you think have contributed to low use of UACR measurements? What will Lilly do in its Jardiance marketing to encourage clinicians to measure both eGFR and UACR?

Dr. Eid: Studies show that UACR testing is underused compared with eGFR testing, which could be caused by variety of factors. Addressing this discord is important because detectable increases in albuminuria generally occur before a decline in eGFR, and early changes could indicate signs of kidney disease. As such, the Alliance is committed to advocating for increased awareness and education around early UACR testing in addition to the importance of eGFR monitoring. This will be critical to addressing the growing CKD disease burden and improve outcomes. According to the NIH, most people with CKD don't experience symptoms until their kidney disease is advanced and the majority of people living with CKD don’t even know they have it. Regular testing can help: the sooner the diagnosis, the sooner treatment can begin, potentially slowing disease progression.

3. Lilly forges ahead in cardiovascular health, with advancement of two Lp(a) molecules into phase 2 development

In 4Q22, Lilly advanced two drugs into phase 2 development that aim to lower Lp(a), a well-recognized risk factor for ASCVD. The first is an oral Lp(a) inhibitor, which inhibits interaction between the apoA protein and the lipoprotein particle. Dr. Daniel Skovronsky (CSO & SVP) described the agent as a “feat of molecular engineering” and described substantial market opportunity given that elevated Lp(a) levels are a widespread condition. According to a 2019 article published in Circulation, nearly one in five Americans have elevated Lp(a), which is the most common genetic dyslipidemia. Lilly’s second phase 2 candidate uses siRNA to inhibit production of apoA in the liver; proof of concept data was shared at Lilly’s December 2021 Investor Community Meeting. In response to a question regarding further progress on the siRNA by competitors – namely, Amgen’s recent initiation of the OCEAN(a) CVOT evaluating siRNA olpasiran – Dr. Skovronsky said that he doesn’t “see this as a winner take all space.” Lilly has also moved an siRNA asset targeting apoC-III into phase 1 development for CVD. Elsewhere in cardiometabolic health, we were disappointed to learn that Lilly has discontinued its KHK inhibitor II in diabetes/NASH.

4. With QWINT-1 initiation in January 2023, all 5 QWINT studies for once-weekly basal insulin Fc (BIF) are now underway

In January 2023, Lilly initiated QWINT-1, the final phase 3 study in the QWINT program for once-weekly basal insulin Fc (BIF). QWINT-1 will compare fixed dose escalation of BIF to insulin glargine in 670 people with type 2 diabetes who are insulin-naïve and is expected to complete in 2024. Recall that BIF is also being studied in in QWINT-2, QWINT-3, QWINT-4, and QWINT-5. In 2022, once-weekly insulins made significant progress into and through phase 3 trials. At ADA 2022, phase 2 results in people with type 2 diabetes showed that BIF conferred a similar A1c reduction (-1.2%) and Time in Range improvement (+2.5 hours/day) as insulin degludec, without increasing hypoglycemia rates. At EASD 2022, phase 2 results in people with type 1 diabetes showed that BIF and insulin degludec had similar glycemic efficacy and safety profiles. 

Lilly Diabetes-Related Pipeline Summary

The table below reflects the latest updates to Lilly’s diabetes pipeline products. Items highlighted in yellow indicate changes to the pipeline in 4Q22.

Analyst Q&A

On Mounjaro pricing and access

Q: The net price of Mounjaro dropped again from 3Q to 4Q. What factors precipitated this decrease, and how do you expect this to trend over the next year?

Mr. Michael Mason, President of Lilly Diabetes: In 4Q22, we classify 40% of Mounjaro scripts as paid, which we define as patients that aren’t supported by our $25 noncovered savings program. Our savings program was designed to increase access to those living with type 2 diabetes to access. We have adjusted a program to better ensure it's being used for people living only with type 2 diabetes.

These adjustments included removing our $25 noncovered benefit from our savings card for new patients. We didn't make any adjustments for existing patients whose savings cards are set to expire on June 30. These changes have reduced new patient start volume while increasing the percent of new patients with a history of diabetes treatments and the percent with formulary coverage. We have graduated from the bridging program and now focused on covered patients that are typical for a normal life cycle of a product.

Thus, we expect that Mounjaro's percent of paid scripts and the net revenue per script would increase through 2023 as we continue to increase access and grow new starts. We've had just over 50% access for lives in Part D in commercial segments for people living with type 2 diabetes.

Q: Is it still reasonable to think about a net Mounjaro price that could be above that of Trulicity as we look out to 2024, or whenever you achieve kind of comparable payer access?

Mr. Michael Mason, President of Lilly Diabetes: I can't get into real specifics about our net price for obvious reasons, but if you look at when we think we'll reach broad access for Mounjaro and reach similar access levels that we have for Trulicity, there's nothing differently about how we'll promote or how we'll support patients on Mounjaro versus Trulicity. It'll come down to our net price negotiations with payors. We believe that Mounjaro has a better profile. We've invested a lot of innovation in there. And we do believe that it should have a better net price than Trulicity.

Q: While much of the discussion on Medicare coverage is in Alzheimer's, we know that Medicare really doesn't pay for obesity drugs. Can you just talk about your efforts to help Medicare patients get coverage for obesity drugs, including potentially Mounjaro, if when approved? Maybe add some parameters around what that additional population could look like from a revenue opportunity perspective.

Mr. Michael Mason, President of Lilly Diabetes: It's going to take legislative action in order to allow anti-obesity medications to be covered on Medicare part D. So there is the Treat and Reduce Obesity Act (TROA). There is a large growing bipartisan support for TROA. A little over 100 Congresspeople, senators are behind the program. And it's growing more and more support across Washington. You know, we're eager to see the advancing process. It would be great for the country. America needs to take action and drastically reduce the number of people that are living with obesity, and this legislation would be an important step towards this goal.

Q: On US commercial access for GLP-1 agonists, first, could you share with us how you're thinking about modeling the impact of the IRA in terms of GLP-1 uptake increasing as a result of the co-pay cap and additionally benefiting from the reduction in free drug program? How significant is it, given the patient's still got to find $2,000 per annum?

Mr. Michael Mason, President of Lilly Diabetes: On the IRA side, it will benefit patients who live with diabetes who use GLPs and are in Medicare Part D. They're out-of-pocket costs will go down. It may have, I would say, a small to moderate impact on GLP sales or just probably lower rates of abandonment than what we'd see at higher out-of-pocket costs.

On manufacturing capacity

Q: On Mounjaro manufacturing, I was wondering if you can tell us if the FDA has completed the inspection of your new North Carolina facility yet.

Mr. Anat Ashkenazi, CFO & SVP: On the Research Triangle Park (RTP) site in North Carolina, it's progressing on schedule, as we had planned. We can't comment on specifics on the FDA interactions, but we're expecting that site to start producing this year. And it's progressing towards that goal. It’s important to think about when you talk about RTP, I think because of the proximal nature of when this site is going to come online, obviously, this is the next large node that's going to come online in terms of capacity for incretin portfolio. But we are making substantial investments beyond RTP, so we have announced a second site in North Carolina, a very large site in Concord. And we've announced the expansion of the RTP site, additional sites north of Indianapolis and a site in Ireland.

And as we look at our capital investments in manufacturing sites, this year alone it's probably the largest we've ever had, doubling what we had in 2022. We're looking at about $3.3 billion of investments just this year. So we're looking at substantial expansion of capacity really across the globe to support not just Mounjaro, obviously, but the rest of the portfolio. And we have visibility into what's coming as well as the fact that, as we talked about before, we have several products that are part of the same manufacturing network and the same auto injector platform. So that helps us kind of build that capacity across the Lilly portfolio.

On Mounjaro vs Trulicity

Q: On Mounjaro, how does the prescriber base as of today compare with Trulicity? I'm trying to get a sense for maybe the endocrinology versus primary care mix and utilization in obesity.

Mr. Michael Mason, President of Lilly Diabetes: If you look at Mounjaro's use right now and compare it to how many customers are using that versus Trulicity at this time, it's a lot broader population than we saw with Trulicity just because the market is a lot bigger, a lot more people are riding the treatment. If you compare Mounjaro to the number of Trulicity writers today, there are more people writing Trulicity just because it's been on the market longer. They've gone through the adoption curve. And Trulicity has better access, and especially in Medicaid that drives additional prescribers to use that. So overall I'd say the Mounjaro is within the universe of the doctors who write Trulicity at this point.

Q: On Mounjaro and the interplay with Trulicity, you've commented in the past that in terms of patients on Mounjaro it's been about less than 10%. That seems to be a little bit higher now. Can you share any thoughts and observations about how you see this progressing on the forward through this year?

Mr. Michael Mason, President of Lilly Diabetes: Nothing has changed over what we talked about earlier that less than 10% of our scripts we get for Mounjaro come from Trulicity. That hasn't changed over time. It's still a little bit less than 10%.

On obesity – tirzepatide and beyond

Q: Looking at tirzepatide for obesity, I was wondering if you've had any initial payer conversations yet and if you're planning to use a priority review voucher for that filing.

Mr. Michael Mason, President of Lilly Diabetes: You look at the mass and size of the obesity market, 110 million people in the US, 650 million people globally, but you really see that historically the obesity market has really been slow to develop. And it's really because the treatments haven't been adequate. So the question we had going into this market was if a safe and efficacious treatment was developed, would consumers and health care professionals and payors be interested in using it. Well, based on what we've seen in the marketplace over the past year in our market research, it's clear that consumers and health care professionals will adopt an efficacious safe obesity medication if patients can have access to it. So it does come down to payor access, and we're highly focused on doing that.

Novo Nordisk recently stated in their call that 40 million Americans have access to obesity, and the way they talked about it was payor access and then employers opting into that. We're deep into conversations with payors to understand the market. Access discussions haven't started yet but will shortly. But our focus long-term is to improve access for diabetes medications. We are investing significantly to demonstrate the potential health outcome benefits for the people using tirzepatide to deal with obesity. We're also investing in Phase 3 programs for people who live with obesity and sleep apnea or heart failure, and these should unlock large segment access for people who live with obesity in commercial and we hope Part D.

In addition, I've seen the power of consumer interest in helping to improve access for medication, and what we've seen over the last year is that people who live with obesity are highly engaged and willing to do much to access effective treatments. I'm more encouraged than ever by our potential to unlock the obesity market and help a lot of people.

Q: Where do you see the oral GLP-1 space developing and how do you believe your product is likely to be positioned. What is the unmet need outside of the very robust weight loss that we see from Mounjaro? How do you see the oral market developing in terms of other potential agonists? Is that something that Lilly is pursuing and hoping to further develop combinations there as well?

Mr. Dan Skovronsky, Chief Scientific Officer & SVP: Obesity is a huge problem in the US and around the world. I think 100 million Americans potentially with obesity and reaching 1 billion people around the world pretty soon. That's not a market that even all interested companies could address solely with injectables. So just given the scope of the problem around the world, we're going to need orals. Ultimately, it's our goal to have orals that can match the safety, tolerability and efficacy of injectables. Our oral GLP-1 is our first attempt in the space and has really good prospects for meeting that initial goal. But then noting of course that the injectables are going to get better over time and the orals will catch up as well.

The second part of your question alludes to an obvious issue which is right now our oral GLP-1 and other orals are single mechanism, single incretin agonists. With great drugs like Trulicity and competitive products, what single agonists against GLP-1 can achieve, it's not as good as what can be achieved with dual agonism for tirzepatide or hopefully even triple agonism with GGG. And so you can bet we're working on oral solutions that can bring additional incretin activity to patients in a pill. Nothing ready to disclose today, but we're working hard.

In your obesity portfolio, beyond GGG, what is your interest on mechanisms that target mitochondrial uncoupling?

Mr. Dan Skovronsky, Chief Scientific Officer & SVP: I can assure you we're not done innovating on behalf of people with obesity. Keep your eyes open for more to come from Lilly Labs on incretin and related types of mechanisms, but also broadly interested in a variety of new non-incretin patient mechanisms. You specifically asked about, one, mitochondrial uncoupling, but there's several others, I think, that also have promise for patients.

I put a note of caution, though. For treating obesity, we need to have a very high bar for the types of medicines we develop, remembering that this is a chronic, often lifetime disease and a highly prevalent population. We need medicines that, first and foremost, are extremely safe and well tolerated for patients. So that's what we're looking for in future mechanisms.

On tirzepatide, I know you have SURMOUNT-4 coming up which is the maintenance study, but how has your thinking evolved on the potential duration of tirzepatide use, either based on longer exposure from clinical studies or in the real world? And do you think that could inform payer discussions?

Mr. Dan Skovronsky, Chief Scientific Officer & SVP: Obesity is often a chronic lifetime disease, and for such diseases patients often need to take therapy for the life of the disease. A lot of times in medicine that doesn't happen; people come off of therapies because either the therapy is working and they think they don't need it anymore or there's a benefit they can't see.

I'm not sure either of those are the case for a drug like tirzepatide. People clearly can observe the benefits the drug is having on their health. And unfortunately, when you stop taking the drug, it's likely that it can no longer work. And patients may see that as well. So I think those factors will combine to have a pretty long duration of therapy. We have to wait and see in the marketplace.

Mr. Michael Mason, President of Lilly Diabetes: No hard data yet, but qualitatively, what we hear is patients who have used Mounjaro, what they like is that it really does reduce the appetite. And they enjoy the benefits of reducing appetite. It helps them lose weight and stop being as consumed as much during the day about eating. When people stop taking Mounjaro, their appetite goes back to the levels it was before. It's something that a patient values from taking the therapy, and then when they stop the therapy, they then see this reversed. So we do believe that people are going to stop and see if they can lose weight. If they can, great. But I do think that they're going to see a very powerful signal very quickly to reinforce going back on the product. So I do think that will help reinforce the chronic use of tirzepatide for type 2 diabetes and eventually for obesity if we get approved.

Q: Last month the American Academy of Pediatrics released their guidelines to treat childhood obesity. In those guidelines they recommended a lifestyle intervention, obviously, as the core component. But also, they said they would consider treatment with anti-obesity medications. So I thought what's your thoughts on anti-obesity medications in children? Is this an area that you are moving into or considering moving into? Do you have any trials with children or adolescents? 

Mr. Michael Mason, President of Lilly Diabetes: This is a significant unmet need. We have too many people who live with obesity in the US and that includes unfortunately adolescents and teens. So I think they took the right action in order to really identify this as an issue that health care professionals do need to pay close attention to. We obviously always advocate for diet and exercise as the first approach at this. But if that's not successful, then your only option at that point is medication treatment. We do think it's important and responsible for us to test tirzepatide in teens and adolescents, and we have activity ongoing to do that.

Q: What do you think is the minimum amount of relative risk reduction you'd have to see in an outcome study for obesity for payors to be convinced that there's something here?

Mr. Michael Mason, President of Lilly Diabetes: I don't think it's a binary point where all payors are looking for that outcome in order to provide access. You're already seeing a lot of payors, who provide access for that. And we have an extensive Phase 3 program only in CV outcomes but also the sleep apnea and heart failure to begin to really talk about heart outcomes for many patients who live with obesity. With the CV outcomes that we have today, I mean, we're quite confident in our program and based on what we see with surrogate risk reduction in blood pressure and in lipids. We're fairly confident in our CV profile as well with what we saw with the SURPASS data and in our meta-analysis in the SURPASS program. We’re pleased with where we're at, and I think we'll be able to demonstrate outcomes that payors will be excited about.

On DPP-4s

Q: In relation to the oral DPP-4 market which is still a very, very substantial $14 billion market, you have a category of drugs ostensibly which may offer considerable advantages and efficacy for glycemia and weight, but I'm reminded of the stickiness of the sulfonylureas in the prior period. To what extent do you think managed market is going preclude your ability to penetrate that segment with oral GLP-1s just on the basis of generic DPP-4s?

Mr. Michael Mason, President of Lilly Diabetes: The perceptions of oral DPP-4s have really declined over the last five years and really being replaced by SGLT-2s and BLP clues. So I don't see much of an impact of DPP-4s going off patent in the US or other markets.

On cardiovascular disease

Q: On LPA, Lilly is way behind. How can you catch up? Thank you.

Mr. Anat Ashkenazi, CFO & SVP: I wouldn't read too much into it. Last year, we had assumed based on very proud support for change in this 2017 tax provision that this will in fact be enacted by Congress. We assumed late in the year, but it hasn't happened. So at this point, the only thing we're doing is reflecting reality of the situation that we're in. If it does get repelled or deferred, obviously we'll update accordingly. Congress will need to act to get this going, so we're simply reflecting the current situation.

Mr. Dan Skovronsky, Chief Scientific Officer & SVP: I'll start with the LPA (a) question. We have two LPA (a) programs. First is the oral program. This is the first in class I think probably the only one in clinic here. In oral medication against this target is really a huge feat of molecular engineering. I'm super excited to see the data from this molecule develop, and obviously the market opportunity for an oral drug for such a widespread condition is very important.

In terms of the siRNA, you're right to note that a competitor is ahead of us and really just starting the CVOT study. It's a long road to get these drugs to market with outcome studies are needed here to show the benefit. I don't see this as a winner take all space.

--by Ari Kohn, Mahima Chillakanti, Claire Holleman, April Hopcroft, Ashwin Chetty, and Kelly Close