Memorandum

Lilly 4Q19 –Trulicity $1.2 billion (+31%), Jardiance $268 million (+41%); Total 2019 diabetes $11 billion (+14%); tirzepatide’s CVOT vs. Trulicity; initiation of phase 3 obesity and phase 2 NASH programs; insulin support detailed – January 30, 2020

Executive Highlights

  • Lilly provided its 4Q19 update this morning – see press announcement, presentation, pipeline, financial workbook and webcast info. Lilly’s overall diabetes portfolio grew 16% YOY to $3.1 billion in 4Q19 with  total 2019 diabetes revenue rising 14% to $11 billion. Quarterly performance included tremendous growth for Lilly’s GLP-1, SGLT-2, and basal insulin franchises (the last two are shared with BI).
    • Trulicity (+62% share of growth, +31% YOY to $1.2 billion)
    • Jardiance (+16% share of growth, +39% YOY to $268 million)
    • Basaglar (+16% share of growth, +32% to $307 million)
  • In the pipeline, Lilly highlighted that its phase 3 program for tirzepatide in obesity (SURMOUNT) and phase 2 program in NASH (SYNERGY-NASH) have begun enrolling. Further details were provided on the SURPASS-CVOT for tirzepatide, which will pit the dual agonist vs. Trulicity. The CVOT will exclusively enroll those with established CVD, with management calling the active comparator trial design a “bold move”. 
  • An R&D-heavy Q&A was very diabetes focused and included interesting questions regarding GLP-1 and Alzheimer’s. Prompted by Novo Nordisk’s recently publicized interest in the field, analysts asked if Lilly’s GLP-1 molecules are too large to cross the blood-brain barrier. Management acknowledged that the peptide modifications that allow for long half-lives and weekly dosing may prevent blood-brain barrier penetration, but “having said that, we don't see those attributes, blood brain barrier penetration as being important for the efficacy of this class of drugs.” We will get more opinions on this and get back to readers. 
  • SGLT-2 inhibitor Jardiance surged 41% YOY to $268 million. Total revenue in  2019 reached $944 million, up 43%. Jardiance leads the SGLT-2 inhibitor market with 55% of total prescriptions. Total US prescriptions grew nearly +20% YOY in 4Q19, boosted by an impressive +46% gain in new prescriptions.
  • GLP-1 agonist Trulicity grew 31% YOY to $1.2 billion. Total annual sales rose 29% to $4.1 billion from $3.2 billion in 2018. Trulicity leads its market with 45% share, despite the launches of Ozempic and Rybelsus. 
  • Sales of Humalog dipped 1% YOY to $763 million, while annual revenue dropped 6% YOY to $2.8 billion. Nearly 80,000 individuals filled prescriptions for Humalog’s authorized generic, Insulin Lispro, in December 2019 (up from 67,000 in November); approximately 10% of all US patients on Humalog have used this lower-priced option. 
  • Basaglar sales rose 32% YOY to $307 million, contributing to 39% annual growth to $1.1 billion. US revenue growth was driven by higher realized prices and demand, while OUS revenue growth was led by increased volume.
  • Newly launched Baqsimi (nasal glucagon) totaled $16 million in 4Q19, up 160% from $6 million in 3Q19. Lilly broke down US and OUS results for the first time, although OUS sales are a rounding error ($0.2 million). Baqsimi only received EU approval in October 2019.
  • Tradjenta: down 5% YOY in 4Q19 to $149 million. Most revenue is OUS ($96 million vs $53 million) annual revenue was up 3% in 2019 to $591 million. 
  • Notably, Lilly is clearly very serious about insulin affordability and has redoubled already-strong efforts from throughout 2019. Direct quotes from CEO Dave Ricks covered the following, including a pointed request for help (even just participation!) from payers, some of whom do not cover this more affordable insulins. This reinforces the front page of Lilly’s website, which currently only features greater affordability of insulin, as well as the recent blitz of ads throughout the mainstream press in the US. 
    • “… you’ll see the list of key events since our last earnings call. In our continued efforts to help make medicines more affordable and reduce out-of-pocket costs for patients, we recently announced plans to introduce two additional lower priced insulins, Humalog Mix75/25 KwikPen and Humalog Junior KwikPen.” 
    • “Both products will be available by mid-April and will be offered at a 50% lower list price compared to the branded versions. Once these additional options are available more than 90% of Lilly’s Humalog options will be accessible to help patients reduce their out-of-pocket costs, and we hope to see payers provide increased access to patients for these solutions.
    • “During the month of December alone Insulin Lispro helped nearly 79,000 patients in the U.S. These recent additions complement existing offerings in the Lilly Diabetes Solution Center which currently helps as many as 20,000 patients per month better afford their insulin. As a company that has been in business for over 140 years, it invests over $5 billion per year in long term research and development, we take our responsibility to pursue sustainable business, social and environmental practices very seriously.”

2019 Financial Results for Lilly’s Major Diabetes Products

Product

2019 Revenue (millions)

Year-Over-Year Reported Growth

Share of Growth

Humalog

$2,821

-6%

0%

Humulin

$1,290

-3%

0%

Tradjenta (Lilly sales only)

$591

+3%

1%

Jardiance/Glyxambi (Lilly sales only)

$944

+43%

18%

Trulicity

$4,128

+29%

59%

Basaglar (Lilly sales only) 

$1,113

+39%

20%

Glucagon

$133

-11%

0%

Baqsimi

$22

--

1%

Total Diabetes

$11,041

+14%

--

4Q19 Financial Results for Lilly’s Major Diabetes Products

Product

4Q19 Revenue (millions)

Year-Over-Year Reported Growth

Sequential Reported Growth

Share of Growth

Humalog

$763

-1%

+17% 

0%

Humulin

$348

+3%

+8%

2%

Tradjenta (Lilly sales only)

$149

-5%

-4%

0%

Jardiance/Glyxambi (Lilly sales only)

$268

+39%

+11%

16%

Trulicity

$1, 208

+31%

+19%

62%

Basaglar

$307

+32%

+17%

16%

Glucagon

$23

-33%

-46%

0%

Baqsimi 

$16

--

+160%

4%

Total Diabetes

$3,083

+16%

+15%

--

 

Pipeline Highlights

1. Tirzepatide: More Details Provided on Superiority-Powered SURPASS-CVOT (H2H vs. Trulicity)

Further details were provided, adding to the initial disclosure on Lilly’s 2020 Financial Guidance call in December. The trial will include ~12,500 patients with type 2 diabetes and confirmed ASCVD (no primary prevention population). The primary endpoint will measure time to first occurrence of the composite endpoint of CV death, MI, or stroke (traditional three-point MACE). Duration is anticipated to be “just over four years” to completion. We’re a bit surprised to see that the trial will exclusively enroll secondary prevention patients, especially in light of Trulicity’s positive results in REWIND, which enrolled a majority of primary prevention patients. However, this does align with the potential strategy that Lilly may pursue with tirzepatide, which could be aimed at “sicker” patients that are further along the trajectory of type 2 diabetes progression (while Trulicity remains viable for a broader, “less sick” type 2 population). Nonetheless, we’re thrilled to see Lilly design such an innovative trial (what they deemed as a “bold move” on the call) and look forward to the results. We’re especially hopeful for novel label indications. For example, if tirzepatide is found to be non-inferior to Trulicity, will it also garner a CV indication since Trulicity has one?

  • Lilly is confident that tirzepatide will show a cardiovascular benefit, despite potential worrisome clinical literature regarding GIP agonism increasing CV disease risk. This point came up in Q&A (see below for full transcript), with management saying that their confidence is based on positive phase 2 data of tirzepatide, which showed impressive A1c and weight reductions. Management underscored that “everything we see in those trials point to a large cardiovascular benefit for a drug like this.” For reference, the clinical literature in question was recently published in Diabetologia and found that in “two prospective, community-based studies, elevated levels of GIP were associated with greater risk of all-cause and cardiovascular mortality within 5-9 years of follow-up, whereas GLP-1 levels were not associated with excess risk.” 
  • We note that the SURPASS CVOT  expected enrolled population is similar to that of the ongoing SOUL CVOT for Novo Nordisk’s Rybelsus. SURPASS expects to enroll ~12,500 patients, compared to ~13,000 for SOUL. Both of these are large compared to completed diabetes CVOTs – from 3,300 for SUSTAIN 6 to 17,200 for DECLARE – see here for the full landscape. 
  • Of the planned eight-trial SURPASS program of tirzepatide in type 2 diabetes, four are now fully enrolled. The first topline readouts are expected “later this year.” See here for a full breakdown of this massive clinical trial program. 

2. Tirzepatide: Phase 3 Obesity Program (SURMOUNT) and Phase 2 NASH Program (SYNERGY-NASH) Initiated

SURMOUNT is “actively dosing patients.” SURMOUNT-1 (of how many?) has been posted to ClinicalTrials.gov, with completion estimated by February 2022 (there is an “extension phase” to April 2024). Target enrollment is ~2400 patients. The 5, 10, and 15 mg doses of tirzepatide will be used in separate arms of the trial. Lilly reported at EASD that the 15 mg dose achieved an unprecedented 2.4% drop in A1c (baseline 8.1%) with ~25 pounds of weight loss at 26 weeks, though one in four participants in this cohort discontinued treatment due to adverse events, and 34% discontinued overall.

  • The SYNERGY-NASH trial has also been posted to ClinicalTrials.gov; initiated in November 2019, the trial has an expected completion date of March 2022. The phase 2 trial will enroll 196 people with stage F2-F3 NASH (biopsy confirmed), with or without type 2 diabetes and with a BMI ≥27. 
  • In the past, Lilly management has exuded confidence in tirzepatide’s potential in both obesity and NASH. From their 2Q19 call: “When it comes to NASH and obesity, honestly we are betting to be best-in-class product. We're not betting to be first-in-class; we are thinking that we are going to reset the expectations of what's possible in both obesity and NASH with tirzepatide.” We’ll be excited to track both of these programs as they progress over the next few years, especially considering the relative dearth of treatment options for patients in obesity (and especially in NASH, where there are still no approved therapies). 

The table below reflects the latest information we have on Lilly’s diabetes pipeline products. Items highlighted in yellow indicate changes to the pipeline in 4Q19.

Candidate

Phase

Timeline/Notes

Baqsimi (nasal glucagon)

Approved in US and EU

Approved by European Commission in 4Q19; Positive CHMP opinion in Europe in 3Q19; Approved by FDA in July 2019; Submitted on track with 1H18 timing and as per 2Q18 update; Acquired from Locemia; Real-world data presented at ADA 2017

High-dose dulaglutide (3 mg and 4.5 mg once-weekly)

Submitted

Submitted to FDA/EMA in 4Q19; Phase 3 study (AWARD-11) launched April 2018, expected to complete October 2019, topline data anticipated in 2019; Phase 2 data presented at ADA 2018; Phase 2 trial in people with type 2 on metformin monotherapy completed August 2017

LY900014 (ultra-rapid-acting insulin lispro)

Submitted in EU, Japan, and US

Submitted in US for type 1 and type 2 in 3Q19; Submitted in EU and Japan for type 1 and 2, per 1Q19 update; Full readout and submission (US/EU/Japan) slated for 2019; Topline phase 3 results released October 2018, including PRONTO-T1D and PRONTO-T2D; Phase 2 data presented at ADA 2017 (type 1, type 2)

Fixed-dose empagliflozin + linagliptin + metformin XR

Submitted to FDA

Approved in January 2019; Joins AZ’s dapagliflozin + saxagliptin + metformin in triple-fixed dose landscape

Automated Insulin Delivery System

Submitted/Phase 2

US connected pen submitted to FDA, per 1Q19 update (type 1 and 2); AID system advanced to “phase 2” on 4Q18 call; Feasibility study with Dexcom CGM and in-house pump/closed loop algorithm completed February 2018, initiated December 2017

Jardiance (empagliflozin) in type 1 diabetes

Phase 3

FDA Advisory Committee set for November 13; Submitted to FDA as of 2Q19; EMA status unclear; Phase 3 data presented at EASD 2018; EASE-2 and EASE-3 completed October 2017 and September 2017, respectively

Jardiance (empagliflozin) in heart failure

Phase 3

EMPEROR-Preserved and EMPEROR-Reduced initiated March 2017, expected to complete June 2021 and 2020, respectively; Two EMPERIAL studies initiated March 2018 to investigate effect of Jardiance on exercise capacity in heart failure patients, expected to complete December 2019 with topline data this year

Jardiance (empagliflozin) in chronic kidney disease

Phase 3 

EMPA-KIDNEY announced June 2017 and initiated 1Q19 (delayed from November 15, 2018 start); Collaboration with University of Oxford and Duke Clinical Research Institute

Tirzepatide (GIP/GLP-1 dual agonist)

Phase 3 for diabetes/obesity, phase 2 for NASH

Phase 3 SURPASS program underway – five studies to be underway in 2019, first data expected 2021; Phase 2 in NASH (SYNERGY-NASH) initiated in 2019; Phase 3 for obesity (SURMOUNT) initiated in 4Q19

Dose escalation data presented ADA 2019; Phase 2b data presented at EASD 2018; Phase 1 trial completed June 2017

Basal insulin-FC (LY3209590)

Phase 2

Movement into phase 2 announced during 2019 Investor Day; Topline phase 1 data expected in 2020

Basal Insulin Acylated (next-gen basal)

Phase 1

Phase 1 initiated 4Q18; Announced in May 2016 R&D update; Potential for combination with Trulicity

DACRA-089 (dual amylin calcitonin receptor agonist)

Phase 1

Acquired through partnership with KeyBioscience in June 2017; No study timing shared

GDF 15 agonist

Phase 1

Added to pipeline in 4Q18

GLP-1/glucagon dual agonist (once-weekly oxyntomodulin)

Phase 1

Advanced into phase 1 in 4Q16; Oxyntomodulin analog under development for type 2 diabetes and NASH; First announced in May 2016 R&D update

Tri-agonist (GLP-1/GIP/glucagon)

Phase 1

Highlighted in 3Q19 earnings – internal readout to inform potential phase 2 start in 2020; Entered Lilly’s clinical pipeline in 1Q19

Soluble glucagon

Phase 1

Not currently listed on company’s pipeline page; Announced in May 2016 R&D update; Candidate is a short-acting, soluble, stable glucagon; Potential use in bihormonal closed loop systems

Basal insulin/dulaglutide fixed-ratio combination

Phase 1

Likely a combination of once-weekly “next-generation basal insulin” and Trulicity to support once-weekly dosing; Added to pipeline in 4Q16

Oral dual GLP-1/GIP agonist

Phase 1

Announced in 3Q19 update; Moved to phase 1 in 4Q19

OWL833 (oral GLP-1 agonist)

Phase 1

Internal readout in 2020 to inform potential phase 2 progression; Moved to phase 1 as of 2Q19; Licensed from Chugai in September 2018; Management reaffirms Lilly’s commitment at JPM 2018 and during 4Q18 call

Beta cell encapsulation therapy for type 1 diabetes

Preclinical

Lilly enters partnership with Sigilon in April 2018; Sigilon will file IND; Afterward, Lilly will lead in-human trials

Long-acting once-weekly glucagon

Preclinical

Announced in May 2016 R&D update; Potential for co-formulation with Trulicity or with GIP/GLP-1 dual agonist

Questions and Answers

On Tirzepatide

Q: There is some literature on GIP agonism could potentially be increasing cardiovascular rather than decreasing risk given its evidence as a marker for high to cardiovascular disease, as well as some preclinical data. Perhaps you could talk to your thoughts on the relevance of that literature?

Daniel Skovronsky: Look I think that there is a little bit of literature out there as you referenced about effects of GIP. But our thinking is really based on the clinical data that we've already obtained with tirzepatide in the Phase II trials. I think everything we see in those trials point to a large cardiovascular benefit for a drug like this. And so that's the driver. That's what gives us confidence is the real clinical data with this molecule. The combination of GLP-1 and GIP gives certain effects which we were able to see. So, for example, the improved A1c control and notably very dramatic improvement on weight loss which I think will drive the cardiovascular benefits even higher than we saw in Trulicity.

Q: On tirzepatide in the CVOT trial: I was wondering if you can share any more details on the stats or powering assumptions there, as well as the discontinuation rate that you're assuming in the arms of the trial.

Daniel Skovronsky: Thanks for your question asking for more detail on the tirzepatide, SURPASS CVOT trial design. I think at this moment, we don't sort of comment on any of the finer details around clinical trial design and dropout rates. But I would say that having a trial like this where it's a head-to-head with two great active drugs one on each arm, should be a very compelling opportunity for enrolling physicians and a great opportunity for treatment for patients as well. So I think that those kinds of factors should help with both enrollments and retention in the trial.

Michael Mason: I would agree. I think as we look at the opportunity and really learn from what providers and payers want they want active comparators. I think this provides a lot of value and a lot of insights into the incremental value of one product over another product. And so obviously doing a head-to-head trial versus Trulicity is a bold bet, but I think it really reinforces the confidence we have in tirzepatide in this population. So we're very excited about the study. It is a bold bet, but one that we're very excited about the product and CVOT.

On GLP-1 and Alzheimer’s

Q: First just going back to the high level on GLP-1 in Alzheimer's. Novo has recently convened enthusiasm about the potential for GLP-1 treatment in Alzheimer's, could you just comment on your view of whether GLP-1 treatment over a few years can actually change the progression of Alzheimer's? And then second with respect to high-dose Trulicity, could you please frame what we should focus on when we see the Phase III data and your planned positioning of that product? 

Daniel Skovronsky: Of course we're aware of the comments that Novo has made on GLP-1 in Alzheimer's disease and the potential there. Look forward to seeing data from that first trial. Look, I think that we know that GLP-1 treatment has beneficial cardiovascular outcomes, including we've seen reductions on stroke. Probably that's the tip of the iceberg and there's other sort of micro in-part that are decreased by GLP-1 therapy that could over time contribute to a slower rate of kind of decline. Is there a direct effect of GLP-1 on Alzheimer's pathology? I think that's not yet known. So we'll watch how the field evolves. If it turns out that there are great opportunities, I think we have a best-in-class in form of tirzepatide and we'd be open to future opportunities with it.

Michael Mason: We're still quite excited about the overall GLP market growth. The 52-week rate was at 29.7, while the monthly rate in December was at 31.5. So the market continues to grow and Trulicity continues to hold up in a very strong market share leadership position, outpacing TRS class growth in the face of semaglutide product launches.

So we expect that both the new Trulicity REWIND, as well as the high-dose label enhancements will continue to drive class growth, as well as solidify our market leadership position please. So we're excited about that. I think as you take a look at the results of there take a look at increased or the A1c results as well as the weight loss results. And what we think is the strength of Trulicity is the fact that you get real-world benefits by having powerful efficacy simply delivered. And this will just give people using Trulicity another reason to stay on it.

Q: First question is on CNS penetrance of your GLP-1. And I have two parts on the first one. So there's feedback out there that Trulicity doesn't cross the blood-brain barrier very much, perhaps in part because of its size. Can you comment on that? And in that same question I also want to ask tirzepatide does not have an IgG, so presumably it should have good CNS penetration. I just want to make sure I hear your take on the CNS penetrance of both Trulicity and tirzepatide.

Daniel Skovronsky: So with respect to CNS penetration of GLP-1's, you are right that these are large molecularly molecules actually both the Fc-fusion modules like Trulicity and also isolated peptide like tirzepatide. Those modifications of peptides are what gives them the long half-life that enables once weekly injection and molecules of that size typically don't penetrate the blood-brain barrier. Having said that, we don't see those attributes, blood-brain barrier penetration is being important for the efficacy of this class of drugs, as evidence I think by the tremendous efficacy that we've see with Trulicity and unprecedented efficacy that we've seen with tirzepatide. I think that addresses that.

On Humalog and Insulin Lispro

Q: On Humalog, I think your press release suggested that pricing in the U.S. benefit from a better segment mix. Is that because of a volume shift to the Humalog authorized generic? And that's assuming that the authorized generic is being recorded within the Humalog revenue line. I just wanted any -- if you could provide any clarity on that?

Michael Mason: Thanks for your question on Humalog. The biggest driver in Humalog segment mix is the fact that with Humalog's uptake, they are taking volume away from Humalog in Medicaid since our Medicaid rebate rates are essentially 100% that TRx decline actually doesn't have -- has a flat or positive impact on net revenues for Humalog.

On Healthcare and Drug Pricing Reform

Q: More broadly, we like to think that maybe is a better place than many of your peers in understanding the direction of this particular administration in terms of healthcare reform. There have been some discussions about whether the IPI proposal could be expanded to the Medicare Part D drugs rather than just a part B. Perhaps you could share your thoughts on what you expect in that direction? 

CEO David Ricks: So, on the policy front, we continue to advocate for a change in the U.S. system because although we're in a -- as an industry and certainly moving a deflationary price environment, those savings are not reaching consumers at the pharmacy counter. And so either through a combination of passing through or transparency of those discounts or insurance reform, we're for change. And our focus is primarily right now with the legislative pathway on both those fronts.

There's one more vehicle probably left in this Congress to work on those, but progress is difficult in Congress. So, we continue to advocate for change on behalf of patients though. As it relates to IPI, this proposal was part of the blueprint in spring of 2018. It's been sitting out there for a while. We've yet to see any draft guidance for proposed rule-making or any version of this in detail. There's always a lot of swirling rumors about it including expanding it to other parts of the government programs or changes to it in terms of the objectives.

We see it largely as misguided primarily because in Part B, patients currently have any cost-sharing to begin with. So, if we're worried about out-of-pocket costs for patients, IPI will do very little. It's mostly just a punitive measure against the industry going back to decisions made on European pricing sometimes decades ago.

It won't probably change those prices in Europe, if that's the present goal. And it certainly won't change the affordability equation for patients in the U.S. So, we oppose it for those reasons. That said, it's an administrative financial action and we'll have to read it if it comes out and decide what to do from there, but it pretty much is a difficult thing to support for our industry and you probably see pharma universally opposed it. So, we'll wait and see.

On General Financials

Q: On the quarterly progression of sales and earnings as we go through 2020. I think last year we saw depressed first quarter sales relative to the rest of the year that surprised The Street a bit. Should we expect a similar gating of sales in 2020? And are there any particular products we should be watching where, I guess 2020 kind of resets of plans could impact those first quarter results?

Joshua Smiley:  If we look at 2020, we don't provide quarterly guidance if we look at sort of the trajectory of sales that we'd expect. If you look at our guidance for the full year, we're in somewhere in the high single digits for sales growth. We'd expect that kind of growth to be pretty consistent through the year. Although keep in mind in Q1, we still will have a little bit more of the overhang from things like Cialis, so we might expect to see a little bit more sales growth through the year, but pretty consistent. On an absolute basis though we do always see sales in Q1 lower than Q4. A lot of that just has to do with shipping patterns and otherwise. So again growth should look good in Q1 relative to the year. Absolute sales will be less. I think that's a trend that you see I'm sure across almost all companies. There's nothing unique going on there other than normal shipping patterns between Q4 and Q1.

Q: Can you provide more color on what we might be driving your stronger volume growth when compared to other companies out there in the space? And if this is durable over the longer term? 

Joshua Smiley: I think in terms of volume growth what we see at a corporate level is function of our portfolio. As we mentioned about a little bit less than half of our sales are coming from new products that we've launched since 2014, 10 of those they're all still in very much in their growth phases: Trulicity growing at 31% for example; Taltz 37%. So we've got a relatively young portfolio. We expect the volume gains that we saw in Q4 to be sustainable between 2020 and 2025. As we mentioned on our guidance call, we expect to see top-tier revenue growth over that period. It will be driven by volume gains. It will be driven by that cohort of products as well as the new launches that we'll expect over this period including the three that we're planning for this year. You couple that going forward with less generic exposure than probably most of the companies that we compete against or that you cover and I think that would certainly say to us that volume gains we're seeing or something that we're planning for and think are sustainable.

Financial Highlights

1. Management lauded Trulicity and Jardiance as two key drivers of overall US revenue growth, primarily through volume, and commented on sustained market leadership in both the GLP-1 and SGLT-2 inhibitor classes.

Sales for Lilly’s emergency nasal glucagon Baqsimi were broken out for the first time – $6 million in 4Q19 and $16 million in 3Q19,. Notably, non-Baqsimi glucagon sales fell 33% YOY and 46% sequentially in 4Q19 to $23 million, and it’s clear that approval of the GVOKE set of emergency hypoglycemia treatments, as well as Baqsimi, have impacted sales quite negatively. And this is not surprising, as Baqsimi is by any definition a far better and easier to use product. We expect, as a sidenote, to see far lower glucagon sales for Novo Nordisk as well. By product, Trulicity accounted for 37% of total portfolio revenue, Humalog 26%, Humulin 12%, Basaglar 10%, Jardiance 9%, Tradjenta 5%, Glucagon 1%, and Baqsimi 0.2% in 2019.

Lilly Diabetes Worldwide Financial Results – Past Five Quarters

Overall Diabetes 

4Q18

1Q19

2Q19

3Q19

4Q19

Revenue – USD millions 

$2,649

$2,528

$2,739

$2,685

$3,083

YOY Reported Growth

+18%

+10%

+13%

+14%

+16%

Sequential Reported Growth

+13%

-5%

+8%

-2%

+15%

Lilly Diabetes – 4Q19 Geographic Results

Overall Diabetes 

Revenue – USD millions

YOY Reported Growth

Sequential Reported Growth

US

$2,142

+18%

+21%

OUS

$941

+12%

+4%

Lilly’s Overall Diabetes Sales (3Q14-4Q19)

2. Jardiance Holds Dominant Share of SGLT-2 Prescriptions with 55%.

Jardiance closed out 2019 with a total of $944 million in revenue. However, this is only Lilly’s portion of the BI-partnership, and if we assume that Lilly collects 33% of total Jardiance sales (based on data from a 2015 BI update), the implied total is $804 million Jardiance revenue in 4Q19 and $2.4 billion total in 2019. During prepared remarks, management highlighted Jardiance as one of the key company growth drivers this quarter, primarily through volume expansion. In the US, total prescriptions grew nearly +20% YOY in 4Q19, boosted by an impressive +46% gain in new prescriptions. International sales of +41% YOY to $111 million were propelled by increased volume and partially offset by unfavorable exchange rates. 

  • On the clinical front, Lilly announced neutral topline results for the EMPERIAL-Reduced and EMPERIAL-Preserved trials in December 2019, demonstrating a non-significant effect on the primary outcome of change from baseline in exercise ability (measured by a six-minute walk test). Despite an overall consensus that SGLT-2 inhibitors have a bright future in the treatment of heart failure, the six-minute walk assessment has proven to be difficult for the class overall, as the DEFINE-HF trial for AZ’s Farxiga similarly showed non-significant effects. Earlier in November 2019, Lilly/BI also launched a new phase 3 trial EMPULSE, examining the effects of in-hospital administration of Jardiance on heart failure outcomes after hospitalization for any type of acute HF event, once stabilized. Withstanding the setbacks from the EMPERIAL clinical program, Lilly and BI both seem extremely confident in the future of empagliflozin across the cardiorenal axis and announced a modernization of their partnership to further prioritize the drug in November 2019

Jardiance in Heart Failure Program 

Trial Name

Population

Completion Date/Latest Updates

EMPEROR-REDUCED

HF outcome trial of n=6,976 patients with HF with reduced ejection fraction (HFrEF)

End of 2020

EMPEROR-PRESERVED

HF outcome trial of n=5,750 patients with HF with preserved ejection fraction (HFpEF)

Early 2021

EMPERIAL-REDUCED

Six-minute walk test of ~n=300 patients with HFrEF

Non-significant topline results in December 2019

EMPERIAL-PRESERVED

Six-minute walk test of ~n=300 patients with HFpEF

Non-significant topline results in December 2019

EMPA-VISION

Mechanistic cardiac magnetic resonance study of n=86 patients with HFrEF or HFpEF

April 2020

EMPULSE

In-hospital administration of n=500 patients with acute heart failure hospitalization 

July 2021

  • Lilly/BI’s efforts in type 1 diabetes came to a halt at a November 2019 FDA Advisory Committee Meeting, and unsurprisingly, no mention of type 1 was made during today’s call. Clearly, more work is to be done on this front and we hope advocacy organizations can do more to work together to bring this important therapy to people with type 1 safely in the future. We are sure there will be many learnings from EMA activity on this front and more will continue to be learned from the US experience of patients regularly entering the ER as we know from KOLs is happening due to lack of awareness of safety protocols. At the FDA meeting, the companies debuted a novel 2.5 mg dose of the drug specifically intended for type 1, backed by evidence from the phase EASE-3 trial. Although committee members seemed enthusiastic on the unmet need in type 1 and emphasized that they saw promise for the therapy, they stressed that longer-term follow up studies in order to develop a more definitive assessment of DKA risk were needed. The session ended in a 14:2 vote against approval. 

Lilly’s Worldwide Jardiance Revenue – Past Five Quarters

Jardiance

4Q18

1Q19

2Q19

3Q19

4Q19

Lilly Revenue (Lilly+BI est.)  – USD millions 

$193 ($579)

$204 ($612)

$232 ($696)

$241 ($723)

$268 (804)

YOY Reported Growth

+35%

+35%

+58%

+44%

+39%

Sequential Reported Growth

+16%

+5%

+14%

+4%

+11%

Lilly’s Jardiance – 4Q19 Geographic Results  

Overall Diabetes 

Revenue – USD millions

YOY Reported Growth

Sequential Reported Growth

US

$158

+41%

+12%

OUS

$111

+47%

+10%

Lilly’s Jardiance Sales (3Q14-4Q19)

3. Trulicity Still Leading US GLP-1 TRx Despite Competition from Ozempic + Newly Launched Rybelsus

As in past quarters, Trulicity was cited as one of Lilly’s key growth drivers both in an outside of the US. US growth (+25% YOY and sequentially) was attributed to increased demand and offset by lower realized prices stemming from the Medicare donut hole. OUS growth was driven by increased volume and also offset by lower realized prices. Trulicity is still the market leader in the GLP-1 class at TRx 45% SOM, also driving growth of the GLP-1 class by 29% compared to 4Q18. Net price, also an issue mentioned last quarter, decreased as predicted by Lilly prediction and spurred greater demand. 

  • Notably, Trulicity submitted an application for Trulicity at high and low doses for treatment of type 2 diabetes in the US and EU. Approval of higher doses of Trulicity would be based on positive results from the AWARD-11 trial, in which both higher doses of Trulicity met superiority over the current highest available 1.5 mg dose of the therapy on endpoints of A1c lowering and weight loss at 36 weeks. Higher doses of Trulicity should allow patients to stay on the therapy longer and give more intensification options for patients and providers. More details will be shared in an upcoming company presentation, along with Lilly’s plans for regulatory action based on this and positive results from its REWIND CVOT. REWIND results are still expected to drive class growth, and given a recent positive CHMP opinion in Europe, a CV indication is expected in the coming months. 

Trulicity Worldwide Financial Results – Past Five Quarters 

Trulicity

4Q18

1Q19

2Q19

3Q19

4Q19

Revenue – USD millions

$925

$880

$1,028.50

 

$1,011

$1,208

YOY Reported Growth

+43%

+30%

 

+32%

+24%

+31%

Sequential Reported Growth

+13%

-5%

+17%

-2%

+19%

Trulicity – 4Q19 Geographic Results

Trulicity

Revenue – USD millions

YOY Reported Growth

Sequential Reported Growth

US

$942

+25%

+25%

International

$266

+36%

+4%

 

Trulicity Sales (4Q14-4Q19)

4. Humalog Drops 6% to $2.8 Billion in 2019; 4Q19 Shows First Positive Sequential Growth (+15%) Since 4Q18

We got the first revenue data on Insulin Lispro , Lilly’s half-price version of Humalog. According to the press release, nearly 80,000 individuals have filled prescriptions for Insulin Lispro in just December 2019, and approximately 10% of those on Humalog in the US have tried the lower-price option. The cost-saving injection can be “ordered by any pharmacy” and is “now distributed by all 5 major US wholesalers.” During prepared remarks, management also pointed to the company’s two newest lower-price insulins, Humalog 75/25 KwikPen and Humalog Junior KwikPen, announced earlier in January 2020. The two products will be available my mid-April (also at 50% lower list price). 

  • In the US, 4Q19 Humalog sales were boosted +3% YOY and +32% sequentially by (i) increased volume and (ii) higher realized prices due to segment mix. On the other hand, international sales declined -7% YOY but crept up +1% sequentially, spurred by (i) decreased volume and (ii) unfavorable foreign exchange rates, to a lesser extent. 
  • Earlier this week, Lilly announced plans to donate at least 200,000 Humalog KwikPens in an extension of its current US free clinic program. The company will expand to a new total of 200 US free clinics (up from 150 in 2018) through 2022. On top of the donations, Lilly will provide $2 million to fund grants available through Direct Relief and Americares. The grants will be made available to a wide array of eligible free clinics and are specifically intended to aid patients in learning how to better access medicine, medical care, and insurance. 

Humalog Worldwide Financial Results – Past Five Quarters

Humalog

4Q18

1Q19

2Q19

3Q19

4Q19

Revenue – USD millions

$770

$731

$678

$649

$763

YOY Reported Growth

-2%

-8%

-12%

-2%

-1%

Sequential Reported Growth

+16%

-5%

-7%

-4%

+15%

Humalog – 4Q19 Geographic Results

Overall Diabetes 

Revenue – USD millions

YOY Reported Growth

Sequential Reported Growth

US

$469

+3%

+32%

OUS

$295

-7%

+1%

Humalog Sales (1Q11-4Q19)

 

Number of Insulin Lispro (Authorized Generic of Humalog) Prescriptions Accessed Over Time (November 2019-December 2019)

5. Baqsimi Sales Rise 160% Sequentially, Bringing Two-Month Total to $22 Million

Despite the franchise’s game-changing status as the first nasal rescue glucagon, Baqsimi was not mentioned during the call – we imagine this is merely because it is so new and because revenue is not impacting overall financials at Lilly just yet. Regardless, it is still one of Lilly’s expected growth drivers for 2020 and we believe advocacy groups will be working hard on making sure everyone on insulin has access to next-generation glucagon and knows how to use it. Both new products are profoundly better than traditional glucagon applications and we expect many who did not have these prescriptions current will begin to.  Notably, Baqsimi made its ADA standards of care debut in December 2019, which we expect will dramatically accelerate its use over time, with appropriate awareness and access. This should be an easy one around which advocacy groups can align and we hope to see this happen. 

  • Broad market potential for Baqsimi and other next-gen glucagon products remain, and we expect to see the return of Baqsimi in earnings presentations and calls in future quarters. Overall, Lilly glucagon grossed $133 million in 2019, which we assume is near equivalent with Novo Nordisk’s unreleased GlucaGen sales. Elsewhere in the glucagon space, Xeris’ Gvoke franchise, which will likely break out earnings for the first time in 4Q19 after a 3Q19 regulatory approval, is also another treatment option for patients. Given that Xeris’ franchise is still an injectable glucagon, different patient populations are being reached compared to Baqsimi. Furthermore, Zealand’s HypoPal dasiglucagon rescue pen is also in the injectable next-gen glucagon sphere, with the HypoPal on track for an FDA submission in early 2020. We hope to eventually see a breakdown of how patient breakdowns may vary for each of these treatment options in order to better understand this emerging market.

Baqsimi Worldwide Financial Results – Past Two Quarters 

Baqsimi

3Q19

4Q19

Revenue – USD millions

$6

$16 

YOY Reported Growth

--

--

Sequential Reported Growth

--

+160%

Baqsimi – 4Q19 Geographic Results

Baqsimi

Revenue – USD millions

YOY Reported Growth

Sequential Reported Growth

US

$16

--

+158%

International

$0.2

--

--

 

6. Basaglar Up 39% YOY in 2019, Surpassing $1 Billion Mark

At $1.1 billion in revenue, Basaglar has 20% TRx market share after growing ~18% from last quarter. During its 2020 financial guidance meeting, Lilly also expressed that they anticipate more competition for Basaglar (potentially from Biocon’s Semglee). 

Basaglar Worldwide Financial Results – Past Five Quarters 

Basaglar

4Q18

1Q19

2Q19

3Q19

4Q19

Revenue – USD millions

$232

$251

$291

 

$263

$307

YOY Reported Growth

+51%

+51%

 

+44%

+31%

+32%

Sequential Reported Growth

+15%

+8%

+16%

-10%

+17%

Basaglar – 4Q19 Geographic Results

Basaglar

Revenue – USD millions

YOY Reported Growth

Sequential Reported Growth

US

$244

+41%

+20%

International

$64

+33%

+5%

Basaglar Sales (3Q15-4Q19)

7. Tradjenta Grows 3% YOY in 2019 to $591 Million Amidst Slight 4Q19 Declines

As in 3Q19 and 2Q19, Tradjenta was not mentioned in either Lilly’s press release or earnings call, despite positive CAROLINA results (non-inferiority of Tradjenta vs. the sulfonylurea glimepiride) shared at ADA 2019. Tradjenta is manufactured in partnership with BI, and we assume a 50/50 split in revenue, bringing the franchise’s total revenue for 4Q19 to $298 million. A 12% sequential drop in the US from a base of $60 million likely drove the overall quarterly drop. We are curious about how Trijardy’s (empagliflozin/linagliptin/metformin) recent FDA approval will affect sales of Jardiance or Tradjenta alone in future quarters, and are looking forward to seeing the triple therapy’s earnings broken down in 1Q20. We are also looking forward to hearing management’s thoughts then on any potential cannibalization caused by Trijardy on the original products that comprise it – such cannibalization would of course be positive from the perspective of most patients that have opportunity to use it. 

Tradjenta Worldwide Financial Results – Past Five Quarters 

Tradjenta

4Q18

1Q19

2Q19

3Q19

4Q19

Revenue – USD millions

$156

$132

$154

$156

$149

YOY Reported Growth

+20%

-7%

 

+9%

+15%

-5%

Sequential Reported Growth

+15%

-16%

+17%

+1%

-4%

Tradjenta – 4Q19 Geographic Results

Tradjenta

Revenue – USD millions

YOY Reported Growth

Sequential Reported Growth

US

$53

0%

-12%

International

$96

+3%

+1%

Tradjenta Sales (2Q11-4Q19)


--by Rhea Teng, Ursula Biba, Martin Kurian, and Kelly Close