Lilly(LLY) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics - Revenue grew 42% excluding the impact of the divested olanzapine portfolio, driven by new products like Mounjaro and Zepbound [7] - New product revenue grew by over $3 billion, with U.S. prescription volume growth of 25$1.8 billion, driven by higher revenue from new products [18] - Earnings per share (EPS) was $1.18, up from$0.10 in Q3 2023, despite a negative impact of 3.08 from acquired IPR&D charges [18] Business Line Performance - Mounjaro sales were 3.1 billion globally, with $2.4 billion in the U.S. and$728 million outside the U.S. [23] - Verzenio sales increased 32% worldwide, driven by strong execution in early breast cancer [23] - Jaypirca revenue was $81 million, showing sustained uptake in MCL and CLL patient populations [24] - Omvoh revenue increased to$41 million, with first-line access at two out of three major PBMs expected by January 2025 [24] - Trulicity revenue declined 22%, driven by lower volume partially offset by higher realized prices [25] Market Performance - U.S. revenue increased 46%, with volume growth of 35% driven by Zepbound and Mounjaro [19] - Europe revenue grew 39% in constant currency, driven by Mounjaro, Verzenio, and Jardiance [21] - Revenue in the rest of the world grew 45% in constant currency, led by Mounjaro [21] - China revenue increased 17% in constant currency, driven by volume growth of Tyvyt and favorable pricing for Humalog [22] - Japan revenue grew 17% in constant currency, with volume growth of 20% driven by Mounjaro, Verzenio, and Jardiance [22] Strategy and Industry Competition - The company invested nearly $2 billion in manufacturing expansion in Ireland, bringing total commitments since 2020 to over$20 billion [11] - A separate 4.5 billion investment was announced for the Lilly Medicine Foundry, focusing on R&D for manufacturing process design [12] - The acquisition of Morphic Therapeutics added oral integrin assets to the early-phase immunology portfolio [13] - The company returned over 1.6 billion to shareholders via dividends and share repurchases [13] Management Commentary on Operating Environment and Future Outlook - The company expects to exceed the production target of at least 1.5 times the saleable doses of incretin medicines in the second half of 2024 compared to the second half of 2023 [8] - Management is confident in the company's future, with a cohort of medicines expected to drive growth through the balance of the decade [63] - The company plans to scale R&D and increase investments in manufacturing and commercial operations to support successful launches in 2025 [63] Other Important Information - The company updated its full-year revenue guidance to $45.4 billion to$46 billion, representing approximately 50% growth in Q4 2024 compared to the same quarter last year [28] - The expected effective tax rate was updated to approximately 17%, driven by the impact of non-deductible IPR&D in Q3 [32] - EPS is now expected to be in the range of $12.05 to$12.55 on a reported basis and $13.02 to$13.52 on a non-GAAP basis [32] Q&A Session Summary Question: Bridge from Q3 sales to Q4 implied results - The company expects a 50% growth in Q4 compared to Q3, driven by accelerated demand generation efforts and improved capacity [66][70] Question: Q3 volatility and demand trends - The company attributed Q3 volatility to channel stocking dynamics and supply constraints, but underlying demand remains strong [72][77] Question: Impact of compounding on demand - The company does not see a significant financial impact from compounding but is concerned about safety and quality issues [79][81] Question: Resolution of compounding crisis with oral small molecules - The company believes oral products like orforglipron could help address the compounding issue in the long term, but it is not a crisis for Lilly [86][88] Question: Access and demand generation for Zepbound - The company has made significant progress in access for Zepbound, with 87% commercial access and ongoing efforts to expand employer opt-ins [91][93] Question: Supply capacity for 2025 - The company expects strong growth in supply capacity for 2025, driven by previous investments in manufacturing [100][102] Question: Inventory dynamics and LillyDirect launch - The launch of LillyDirect self-pay had a limited impact on Q3 sales, but the company expects it to be an important channel for future growth [105][107] Question: DTC for Zepbound and competition - The company is initiating DTC efforts to drive consumer awareness, as unaided awareness for Zepbound remains low [111][115] Question: Peresolimab and PD-1 agonist development - The company discontinued peresolimab due to an unfavorable benefit-risk profile in Phase 2b and does not currently have a follow-on PD-1 agonist in development [118][121] Question: Verzenio market share and IRA impact - The company expects Verzenio to maintain its position in the high-risk adjuvant setting, with Part D reform likely having a neutral impact [123][126] Question: Operating margin trajectory - The company expects operating margin expansion in the short term, with continued investments in SG&A and R&D driving long-term growth [130][134] Question: Pricing evolution for Mounjaro and Zepbound - The company expects stable pricing for Mounjaro and Zepbound, with potential impacts from new indications like obstructive sleep apnea [136][138] Question: Long-term obesity market and orforglipron - The company sees significant potential for orforglipron to expand the obesity market, particularly as an oral option with efficacy comparable to injectables [141][145]