Eli Lilly and Company (NYSE:LLY) 41st Annual J.P. Morgan Healthcare Conference January 10, 2023 6:45 PM ET
Company Participants
Anat Ashkenazi – Chief Financial Officer
Daniel Skovronsky – Chief Scientific and Medical Officer
Conference Call Participants
Christopher Schott – J.P. Morgan
Christopher Schott
Good afternoon, everybody. I’m Chris Schott at J.P. Morgan, and it’s my pleasure to be hosting this fireside chat with Eli Lilly. Lilly has obviously had a tremendous few years here and very much looking forward to the discussion today. So from Lilly, we have Anat Ashkenazi, the company’s CFO, as well as Dan Skovronsky, the Chief Scientific Officer. So Anat and Dan, thanks for joining today.
So I guess just to maybe open up with some opening comments about — as we think about 2023 and Lilly’s positioning heading into this year. Maybe just kind of set the stage of how you’re thinking about the business? And then we can obviously jump into a lot of different topics.
Anat Ashkenazi
Sure. Thanks. First, thanks everyone for joining us and having an interest in hearing more about the Lilly story. So we’re closing out 2022, we’ve shared our results through the third quarter and shortly in a few weeks we’ll share the full year result. But as we shared on our guidance call just a few weeks ago in December, we had a strong growth in 2022, our core business demonstrated robust growth, top line and bottom line. But we’ve also during this period had very meaningful progress in our pipeline, which then we’ll talk about in a little bit as well as new launches. We’ve launched Olumiant for alopecia areata, and just six months ago, little over six months ago we launched Mounjaro for type 2 diabetes, which is truly an unprecedented launch in the history of pharma.
So we are well positioned for further growth in 2023. We’re looking at another unprecedented year for Lilly. If we think about the number of launches we have ahead of us, we have the potential to launch four new molecules with dunenumab, pertibrutinib, mirikizumab and lebrikizumab, so truly across our therapeutic areas and then potentially launch a second indication for tirzepatide in obesity, potentially as early as the end of this year or early next year. And we’ve shared on the call that we will be initiating a rolling submission, which we have, I can confirm we have initiated that rolling submission in 2022, and we’ll look to complete that submission assuming we get a positive second [indiscernible] study here early this year.
So a strong year ahead of us in terms of potential launches and top line growth. It’s a year of investment as well. With the success we’ve had in our pipeline, we’re continuing to make investments in our late stage opportunities, which then will cover but several new opportunities, exciting new molecules that we’re going to be investing in. We’re also making investments in our team through additional enhanced compensation. And you’ve heard us talk about the comprehensive agenda we have across our manufacturing facilities, expanding our footprint with two new sites in North Carolina, one that’s going to be coming online this year, the second that we broke ground on two new facilities in Indiana and another one in Ireland. So we truly are expanding our footprint to ensure that we can support the demand we’re seeing for portfolio over the next decade or so.
We’re excited about what’s ahead of us. 2023 top line growth for the core business should be in the mid-teens, which is incredibly strong, but we’re expecting to see continued top line growth through at least the end of the decade at a rate that’s probably at the high end of the industry. And with that and with continued investments in our organization, we do also expect to see margin expansion over time during that period. And maybe Dan a few words about the pipeline.
Daniel Skovronsky
Yeah. Thanks, Anat, and thanks, Chris for hosting us. It’s great to be back here in person again. It’s really been a truly exciting year for Lilly and I’d mentioned that we’ve got five launches on tap for this year, which means we essentially had data readouts on all of those last year. So to be clear, it’s the tirzepatide obesity launch, the SURMOUNT data took most of the attention probably in terms of data readouts for the year. But we had so many other things behind that. Of course, continued progress with dunenumab, that’s at the FDA. Pertibrutinib, we had additional data readouts on our BTK inhibitor and that’s at the FDA. Lebrikizumab for atopic derm, which I see is a great option, potentially a first line biologic for atopic derm under review at the FDA. Mirikizumab or IL-23 for ulcerative colitis. That’s also under regulatory review. So all of those stand to launch.
But the other thing that happened in 2022 is we gained visibility to what’s next. So even though we have such a young portfolio with new launches, we already see the next generation of innovation behind that with five more molecules coming behind these big five. So the next five are once weekly insulin, which I think is a really important innovation for patients with diabetes. The next generation Alzheimer’s disease drug called Remternetug. We have an oral SERD for breast cancer. I think it’s in a Phase III trial in adjuvant breast cancer setting. And then just last month, we announced two more molecules moving into Phase III for diabetes and obesity. That’s our oral GLP-1 Orforglipron, and our triple agonist to GGG Retatrutide for obesity. So pretty exciting time to have so many new launches and then also a full pipeline of next gen molecules.
Question-and-Answer Session
Q – Christopher Schott
Great. A couple of high level questions here. I guess first is on the 2023 guidance. I think we’re seeing a fairly significant step up in OpEx supporting some of these growth drivers. Just help me understand a little bit why such a big ramp this year? And then I think some of these — [indiscernible] some of these launches, it seems like many of them are leveraging infrastructure that’s already at Eli Lilly. So just maybe a little bit of color there.
Anat Ashkenazi
Yes. So you’re right. Many of the launches we have are using and leveraging the existing infrastructure. We’re not expanding our commercial footprint by any meaningful way. The increases we’re seeing in SG&A is really coming from two main areas. One is the intense compensation, which is a one-time step up in compensation. The second is investment in marketing efforts behind these new and upcoming launches of preparation for tirzepatide obesity and four other launches that we’ve mentioned. So as we think about it, we’re not increasing the size of our infrastructure and footprint on the commercial side, but we’re investing appropriately to be able to be very successful with these drugs.
Very different on the R&D side and that’s where we’re investing behind opportunities, the largest driver of R&D cost is our Phase IIIs. And as we launch these, we tend to see a ramp up and then a decline depends on the length of these studies as these studies accrue. So really that’s the driver behind the increasing cost in R&D.
Christopher Schott
And how do we think about the cadence of margin expansion for Lilly as we think over time. I think you’ve talking about some longer term margin aspirations. Is this going to be fairly linear or is it kind of hockey stick that some of these products start to ramp?
Anat Ashkenazi
So what we’ve said a little over a year ago when we provided kind of mid-term guidance is that, we do see opportunity to expand margin as the firm grows and that revenue grows significantly. And we said mid to high 30s is probably a reasonable range for us to aspire for in that period, that hasn’t changed. When we think about you kind of go into the income statement, where is that growth coming from? In the comps line, we expect to see hover around 80% gross margin give or take a point. What we’re seeing is, we exit the COVID antibody business or the impact on gross margin, but we have investments in our new facilities and new products that should stay around 80%. So there are kind of pushes and pulls, but that should stay there.
R&D will — the number for R&D will be dependent on opportunities. If we have great opportunities, if we find the next generation for any one of these disease states that Dan mention, we will pursue them. So that could go up or down depending on the opportunity here. Where the leverage will come from is in the SG&A line. As you’ve mentioned, because we’re not expanding our footprint in any meaningful way and we’re leveraging existing infrastructure and we’re hyper focused on productivity, then we should see that leverage coming from that SG&A line. Over time, I expect it will not be linear, so it’s not — we can’t map a direct line to that number that I’ve just mentioned. There could be some ups or downs, some years are going to be stronger, some are going to be lower depending on primarily on the opportunities we see within the R&D organization.
Christopher Schott
And Dan, on the R&D front, I think you commented on the guidance call that the late stage pipeline is one of the most promising Lilly’s had in recent years. I guess I’m just trying – thinking about the broader R&D organization, what’s enabled you to kind of drive these high levels of innovation? Because that’s something I think we’ve seen the industry as a whole really struggle with and it does seem like Lilly has very much differentiated from peers on that front.
Daniel Skovronsky
Yes. Thanks for that comment. And I agree with it. I think we’re in a remarkable period of productivity for R&D at Lilly, we’re super proud of what we’ve accomplished, but we’re also paranoid about what’s next. So I highlighted the next five into Phase III, but we’re still not satisfied and we’re still pushing in the early stages to make sure we can have a sustainable growth enterprise here. We don’t take that for granted. There’s a couple of things that we do at Lilly, I think, to help drive that kind of productivity and sustainability one, and it’s sort of an obvious thing, but just to say it allowed us. We have four therapeutic areas and they’re all working right now. We’re having innovations in diabetes obesity metabolism. We’re having innovations in oncology, neuroscience and immunology. We’ve never been in a position like that before.
That’s important and we intend to sustain that by continuing to invest in those areas. Oftentimes, with multigenerational themes, like you’re seeing with obesity where we have multiple agents, or Alzheimer’s where we have multiple agents once we unlock some critical biology as we’ve done. So I think that’s one way that we think about sustainability. But at the same time, as we’re focused on those areas, we have to be open to what’s new. And it’s sort of easy to point at Lilly and say, oh, well, Lilly is in obesity, and Lilly is in Alzheimer’s, those are areas that are opening up right now. We were in these areas for decades when they weren’t open yet.
And so I think at the same time as we’re focused on these areas that are working, we’re always looking for what’s next. What are the areas that are out of favor largely from a pharmaceutical industry where we can break them open and be leaders as we have in these. And then the final piece I add to that is just an openness to different ways of making drugs. For so long, it’s been small molecules, in biotechnology large molecules and now we see the dawn of genetic medicines. And so we’re investing robustly in that area too to make sure we’re leaders in those kinds of medicines.
Christopher Schott
Great. Maybe shifting to some of the products side of things. Obviously, Mounjaro was a big focus for all of us over the last year and a pretty spectacular launch. Can you just talk about the learnings so far from the launch? I guess is there any surprises in terms of either where the patients are coming from or the cannibalization you’re seeing elsewhere in the portfolio?
Anat Ashkenazi
Yes. So we launched Mounjaro at the end of May, in June we start promoting the products. So we’re still in the learning phase of a new launch. And certainly, this had been a unique launch because I don’t think we’ve seen an uptake of this nature, just such a rapid uptake in other products, not just in diabetes, but in other disease states. So it’s certainly a very exciting launch for us and for patients. And what we’re hearing, I’m not sure if Mike Mason, who’s the head of Lilly Diabetes is here right now, but we’re hearing great feedback from patients and from prescribers who are getting experience with this product, both about the efficacy, the ease of use and the tolerability of the product. So that’s encouraging. We saw it obviously in our clinical trials, but it’s always good to see it in the real world.
What surprised us? I think the uptake was incredibly impressive. And we always have a range of scenarios, but it was at the highest end of our range of scenarios as well. I would say the viral nature of kind of the marketing not by us, but by patients of this drug is also something we have at least [indiscernible] experience at the scale where you see patients communicate with each other about the benefit of the drug. So certainly exciting early days, we’re probably going to learn more in terms of where patients are coming from. And this is a data point that we shared recent — late 2022 is that what we saw through the end of the third quarter is that about two thirds of patients had previous diabetes medication on board and about a third did not, which means they’re either newly diagnosed or something else. That’s what we saw. We have to still accumulate that data and see where we are today.
And then in terms of cannibalization, we always assume there’ll be some cannibalization of Trulicity or GLPs in general. And what we saw is Trulicity held up really well. Now Trulicity had always been a product that where patients — when patients got on Trulicity, they stayed on Trulicity, they stayed on Trulicity for a very long time, in many cases, longer than what they would be on an oral medication. So the adherence is one of the best in the industry. We know patients like Trulicity that get the benefit, it’s very easy and simple to use. And we’ve seen that cannibalization be very small. So the data point we shared the latest was about 10%, it’s probably a little different now of patients came from Trulicity. So these are patients that were on Trulicity, they’re disease progress or they needed more in terms of either weight loss or A1C level control and have shifted to Mounjaro. Patients that are on Trulicity and are doing well and are well controlled will likely stay on Trulicity. I mean, hopefully their disease doesn’t progress, but if they do and they need something else we have that product to offer to them.
Christopher Schott
How do I think about kind of coverage of the drug? And I think we’re all kind of struggling with how to think about where gross to net and when gross to net normalized. So can you help us a little bit of as we go through this year and into next how to think about that?
Anat Ashkenazi
These things always take a little bit of time because there’s lag in coverage versus what’s see in the financial results. So we’ve recently shared that in Q4, we gained about 50% access in the U.S. There is a lag to that, so I would not use if you’re thinking gross to net — 50% as the gross to net ratios by any means. And also important to remember is, we have — we launched the product with a copay card, a patient assistance program at $25. And patients that are on that copay card are going to be grandfathered through the conclusion of their card, which is mid-2023 or end of 2023, depend on their coverage. So for those patients, obviously, the gross to net looks very different.
As we continue to gain access and we shift more patients to their covered program as opposed to copay card, you’ll see improved in that gross to net rates and further monetization of scripts. So that’s what we’re expecting to see overall. We did announce we made a few changes to our copay card program at the back end of 2022. So the effect of this financially we’ll see in 2023, we’re seeing the impact on NBRx we saw a few weeks ago. But the change in design was the change in the copay card assistant amount to patients who are getting the program. So we’ve increase that amount. We expect it to see a drop in new prescription as a result of that, which we are, but overall we’re not expecting to see a financial impact over time as we’re getting more patients into the covered program.
Christopher Schott
Great. And maybe pivoting over to the obesity market as we think about kind of later this year and into next, just high level thoughts of how you see this market building up over time? Is that kind of seems like perceptions have changed about what exactly we need here, kind of what the demand is going to look. So maybe just high level, how do you think about that indication?
Anat Ashkenazi
Let me start and then maybe Dan can make a few comments. So certainly a very large market, over 100 million patients in the U.S. are obese and about 650 million patients globally. So it’s a global issue really across almost every market you look at. So there is tremendous opportunity for us to come in with a drug that can offer a long term solution for patients. But how does this — how do we build this market? There’s a product now in the marketplace that offers a solution to patients hopefully by the time we submit and we get to market either at the end of the year or early next year with a new product. And what we’re doing is, we’re also building kind of the wall of evidence behind this product. We know that there’s a benefit of just reducing the weight for someone. There are huge benefit associate with this. We all know the risks associated with being obese, but we’re going to also demonstrate beyond just our obesity studies, we’re going to demonstrate that in hard outcome studies in multiple indication, including obstructive sleep apnea, heart failure, kidney disease, and additional indications that we’re going to be — that we’re studying for Mounjaro, so for tirzepatide. So we’re going to have a wall of evidence to share with the medical community and with payers that hopefully will advance this field even further.
We know that there’s demand out there from everything we’re hearing and from our conversations externally. One important piece of legislation to watch for is the [indiscernible] Act, which could open up if this if passed could open up the opportunity for additional patients to get on the drug and get reimbursed. So hopefully that will progress as well.
Daniel Skovronsky
Just to add that we started our rolling submission to the FDA for the obesity indication. We said, we’ll complete that when we get [indiscernible], so the next Phase III trial, which should be in the beginning of this year. And then look forward to being able to launch it in obesity. As Anat was saying, we really see this as a chronic medical condition. And so, what we’d like to do over time is generate more and more evidence that obesity is a disease with severe medical consequences and that disease can be treated and those adverse medical consequences can be prevented. And we have a number of outcome trials now designed to prove just that. We’ll be at this for a while, but really excited about the benefit we can have for public health by reversing obesity.
Christopher Schott
It seems like this could potentially be a significant cash pay market here. So talk about, I guess, how are you thinking about the cash pay and how does Lilly prepare for that market that may exist until we get some of these outcome studies and reimbursement comes into place?
Anat Ashkenazi
So we still have much to learn in terms of what this market will look like in terms of reimbursement. We obviously are not having these negotiations just yet. We need to file for approval again and then have these conversations with peers. Hopefully, this will get covered and reimbursed. I think there could be interest from large employers to have this available for their employee population. Again, if [indiscernible] passes, that’s another step in that direction. So we’ll see where patients are going to come from and what we would need to do to make sure the patient can actually get access to this medication.
Christopher Schott
Another question I get often is, how do you think about duration of therapy here? So what’s your data suggesting in terms of how long the patients have to be on these drugs? And do you think the paradigm actually evolves over time that maybe different drugs are needed depending on where you are in your kind of weight loss journey?
Daniel Skovronsky
Yes, it could be the latter. I think in terms of duration of therapy, we don’t know yet, having not launched it in obesity yet. But I think there’s several data points that we can look at that make us feel pretty optimistic here. First is just the patient experience with the injectable device. So that once a week injection is the same type of experience that we’ve seen with Trulicity and we’re seeing with Mounjaro here in type 2 diabetes is very highly tolerated by patients. In fact, for Trulicity where we have more data, this is of all classes of diabetes medications or orals or injectables, this one has the single highest patient adherence. So that speaks to the patient experience.
I think that’s good for obesity and these are probably going to be a large number of patients that haven’t had a previous injectable. So having that good patient experience will be important. The second point here is, this is a chronic disease. It’s not going away on its own and we want to manage it like a chronic disease, which means, patients should be educated by their physicians and understand that this is going to be a long duration therapy.
And then finally, this is a disease where the patient experience is so integral to the mechanism of action in the treatment. People feel less hunger, people lose weight, which they can readily observe. And our data suggests that like every other medication. When you stop taking it, you stop getting the benefits of the medication. So I think it’s natural that people will experiment despite education and efforts to recommend they stay on the drug, people might come off the drug once they’ve lost some weight. And as they lose the benefit of the drug and they start to feel that appetite, the hunger again, start to see their weight come back. I think that will be a strong incentive to come back on the drug. So we’re excited to see what we can get for in terms of length of therapy.
Christopher Schott
On the pipeline assets and you’ve got an oral GLP that you’re moving into Phase III. Just talk a little bit about the profile that you’re seeing emerge there? And I guess what role do you kind of see the oral playing versus the injectables?
Daniel Skovronsky
Yes, this is really exciting molecule. It’s a true small molecule, so it should have the dosing convenience of really any other small molecule, meaning, no food or fasting restrictions once a day. But on the efficacy side, we think this can deliver similar efficacy to that which can be achieved with really high dose injected GLP-1. So we’re getting injectable like efficacy, but in an easy to use pill. It probably won’t be quite as good as tirzepatide, which is two types of ingredients, GLP and GIP, but really as good as the GLP-1 monotherapies can get. That’s really exciting. I think there’ll be some patients who are new to the class and prefer to start with an oral perhaps or even stay on an oral. I think we also just see the magnitude of the challenge in obesity. And I was saying the numbers, 100 million Americans, this is a once a week injectable is tirzepatide. So multiply that by 52, that’s 5 billion devices to make. And around the world, we’re going to have 1 billion people with obesity. So it’s not a market that can — I think, ever be addressed purely by injectable. So it’s really important to have an oral there and super excited to have that go to Phase III.
Christopher Schott
Yes. And then maybe on GGG, I guess one of the questions that I hear is like, what does this, I guess, bring beyond what we already have with [indiscernible]? Is this incremental weight loss kind of needed for as many patients? Or how do you think about that?
Daniel Skovronsky
Yes. And so I think at one level, the first benefit is that we’re expecting and we commented on December call is a step change in efficacy from tirzepatide, meaning additional weight loss. Some patients won’t need that. For many patients, the efficacy from tirzepatide may be enough to normalize their BMI. But even in our clinical trials, about half of the patients probably didn’t achieve their ultimate BMI goal and didn’t get to normal body weight. And so particularly for people who might have longer standing or higher levels of obesity, GGG could be a good alternative.
In addition, we’re starting to see some other metabolic benefits. We commented on, for example, really profound effects on liver health. So there could be different segments of the obesity population depending on their comorbidities for whom tirzepatide is better or GGG or maybe as I said the oral.
Christopher Schott
Excellent. The other I think the topic we’ve heard on this conference is just seems like this market is obviously huge. Your competitors want to get in there as well. How do you think about the market spend and I think on the GLP side is mostly a duopoly. Do you envision if we’re looking five or 10 years down the road, it’s still a duopoly or do you think this ends up being a lot more competitive and that we end up seeing maybe a bit more fragmented market share within some of the newer entrants who are targeting it?
Daniel Skovronsky
I can start from science and then I’ll come in on the commercial situation. Look, I think this is natural in the industry that when someone paves the way and shows a breakthrough in a given area, then everyone else wants to follow. I don’t think it’s a great way to run the business. We try not to do that at Lilly. It’s better to be the one who breaks open the science. But at the same time, we don’t rest on our laurels, we continue to innovate. So alone, we’ll have multiple incretins in the market and probably segmenting for different patients as I commented earlier. But it is a big opportunity. We’re talking about changing society and medical practice here and so probably welcome competitors to help us make those changes in society.
Anat Ashkenazi
It’s a large market. And just given the numbers that I’ve just shared and if you look at forecast, these numbers are what they are today and are likely going to be much, much higher by the end of this decade with no other therapy in place. So if there are options for patients, that’s probably a good thing. And then a physician can make the decision based on the best option for their patients given their characteristic, I think what Dan had shared is, we’re going to have a suite of products potentially available for patients with — that need chronic weight management, all the way from patients that may need mid-teens weight loss and would prefer to go with an oral through a tirzepatide like efficacy and then a GGG, which is much higher than that. So we’re going to cover probably most patients and their needs. But can we share in the $6 million, $7 million, 1 million patients with other companies? There’s room for other companies. Now what I will say is, never underestimate the depth of expertise and the relationship we’ve built over decades in diabetes, not in obesity, but certainly there’s overlap in the prescribers.
It doesn’t mean other companies can’t do it. I’m sure they can. But there is a huge benefit to having the reputation we have even as we’re thinking about [indiscernible] clinical trials and working with investigators and weight management centers and prescribers that know and trust our products and our teams. There’s huge benefit to that as well.
Christopher Schott
Great. Maybe pivoting over to dunenumab. Maybe just to start the conversation, we’d love just — as you think about the data we saw at CTAD with lecanumab, just the efficacy kind of you saw from the asset, the hurdle that creates. So just how does that affect your confidence in the development program?
Daniel Skovronsky
Yes, it’s really good news. You know, Chris, I’ve been working on this for a long time. And pretty much the whole time we’ve been saying for Lilly, like, what matters is removing a lot of plaque and doing it quickly and that will translate to cognitive benefits. And the problem with the previous generation amyloid long drugs is, they didn’t hit enough amyloid. So finally, I think we now have a number of data points, starting with dunenumab’s own Phase II, which looked very good. The first successful trial lowered a lot of plaque, slowed cognitive decline. And then now we have lecanumab, which is another very good plaque lowering drug, it lowers a lot of plaque, it slows cognitive decline. And then we got the data point from Roche, of course, we never hope for any drug to fail. But can dunenumab failure, even in that, there’s additional scientific evidence they lowered plaque a little bit. They had a little bit of cognitive slowing.
So I feel like this theory that we’ve been talking about and pursuing for decades now, there’s enough evidence that we should feel very confident that we’re on the right track. That doesn’t mean there’s no guarantees that our Phase III trial will be successful. We have to be humble in Alzheimer’s disease and wait for the data, but I’ve never been more excited and I can’t wait to see that data in the middle of this year.
Christopher Schott
I think the big debates we have is reimbursement and how that’s going play out and it just seems like with maybe the first asset that came with [indiscernible], there’s just a lot of scar tissue there, maybe leftovers. So how do you envision knock on wood you have successful [indiscernible] study, what that pathway looks like and when could we see reimbursement?
Daniel Skovronsky
It’s certainly a frustrating situation. You can sort of understand how it came about. In Alzheimer’s disease, there’s been no progress for so long. Everybody gave up and there is sort of sense of nihilism came over the field that nothing will ever work. And then came atakinumab and there was all of this controversy and that set us back even further, I think. So we’re building now from a deficit of credibility, dunenumab data is going to be helpful. The lecanumab data has been helpful. And of course, we have to encourage CMS here to change their position. I don’t think the accelerated approval period here is an important one. But once we have full data and full approval, our expectation should be full reimbursement. This is health insurance for Americans over the age of 65. This is the number one disease they fear. These are the first examples of drugs that have the potential to modify the disease here. This needs to be covered by Medicare.
Christopher Schott
Okay. As you think about the infrastructure that needs to be developed to support this market, what does that look like from Lilly’s perspective?
Daniel Skovronsky
Yeah. So — and of course, it starts with reimbursement if you consider that infrastructure or basic necessity. Beyond that, I think there’s probably two aspects. The most important one is diagnosis. We’ve been working hard there for quite some time as well. Certainly, their PET scans. These are great for diagnosis. But we also have a blood test that we hope to launch about the same time period as the drug. And this all — it’s really amazing science that we can potentially be able to detect the changes in the brain through a blood sample and then send those patients on to further valuation of therapy. So improving that diagnostic ecosystem is really important. The others — these are infusion drugs right now, so just making sure there’s adequate infusion capacity.
Christopher Schott
And then if I — I think there’s been some debate on the differences between the molecules and especially the dosing and frequency and maybe the duration of dosing. How are you feeling about that in terms of the kind of approach you took versus the approach your competitor took?
Daniel Skovronsky
Yeah, there are differences. Of course, the important thing here in Alzheimer’s is not competing with another company for market share. It’s building a brand new market for the benefit of patients. So we welcome their presence here. The differences I think are based on molecule properties and our understanding of the science. So our doses administered every four weeks instead of every two weeks, that’s the difference. But the bigger difference is that, we took an approach of dosing until the amyloid plaque is done and then patients no longer have to stay on drug. That means a lot of patients will require less than even a year of therapy if that bears out in our Phase III trial. That’s pretty exciting and I think that has economic benefits for society. And may be preferable for some patients. The science is still open. I think we’ll wait and see our data, but if we can have that kind of dosing paradigm, it could be an important advantage for patients.
Christopher Schott
And maybe the last one on Alzheimer’s. Just your thoughts on where this market ends up if you look eight, 10 years down the road. Like, who’s getting these drugs? What stages of disease they’re getting the drugs? What’s your sense?
Daniel Skovronsky
Yes. So I actually think the most important opportunity in Alzheimer’s disease is prevention, secondary prevention. So taking patients who are ready have pathologic changes in their brain and correcting those with plaque lowering drugs before they get symptoms. So we’re running those trials now and maybe four or five years from now, I hope we’ll have positive readouts. Alzheimer’s is a really big opportunity given the number of patients, but preventing Alzheimer’s is even larger and we think of that in the same way as we do obesity. But this is a major trend that can have a huge benefit on public health then we want to be leaders there too.
Christopher Schott
We’ve got launches of mirikizumab and lebrikizumab on the horizon as we go into this year. How do you think about Lilly’s positioning to compete in immunology. I know this is one of those sectors that they have lots of — it’s a huge category, but the payer side can be tough. Let’s talk a little bit about the opportunity there.
Anat Ashkenazi
Yeah. Let me start by saying it’s interesting that if we had been having this conversation a decade ago, we had nothing in immunology. Right? So Lilly built some of the things Dan had mentioned about excellence and innovation, focus on first in class or best in class medication. Lilly has built this presence in pipeline with immunology over years. And then we launched with Pulse, obviously, and that products doing well in the marketplace. But now we have an Olumiant and now we have the potential to bring two more market, both mirikizumab and lebrikizumab. Both are going to be launching into markets that we think have opportunity for growth in terms of use of — additional use of biologics for these disease states. We’re preparing for these launches, mirikizumab will come earlier, lebrikizumab will come later in the year just given the timeline, the approval timeline. And we do think there is a potential for a differentiation story here with these products. So we’re preparing to launch. The good thing is, this was one of your first questions. We have that infrastructure not in GI necessarily, but certainly in atopic dermatitis or in some of these disease areas with thoughts that we can leverage and we’re looking for GI, where do we need to supplement? What do we need to do to be successful in that launch as well?
Christopher Schott
And certainly I think for maybe a different time in Lilly’s history or for other companies, these might be the tire focus of the story. But I guess with these products, do you expect that there — we should expect there could be some time that these will take for reimbursement etcetera that — to evaluate how the other launch is going to be doing, it might take maybe 2023 is the best year to do that? Or is there opportunities to get –
Anat Ashkenazi
Yes. So we start with lebrikizumab, given we announced in November that we filed for approval. So just start the clock, it will launch at the end of 2023. So don’t expect to see major revenue because just the time within the year that we have for that product. Miracizumab will be earlier, but given that it will start with an infusion, it does require [J-code] (ph) that takes a little bit longer to get processed. So that will be impacting what you will see in terms of uptake of launch for that specific product. And we’ll work to build excess for both products obviously with payers.
Christopher Schott
Okay. Dan, just on the early to mid-stage pipeline, what are you most excited about?
Daniel Skovronsky
Yes. Thanks. So there’s a lot to be excited about. I mean, starting with immunology, as you said, probably for many other companies, right, launching two big biologics and immunology in a given year would be the story. And here we get to it like in the few minutes. They’re great drugs that doesn’t change the potential here to help patients or grow the company with them. And there’s more behind that in immunology. So I’m really side about the science our team has led on checkpoint agonist. So this is taking what’s worked in oncology to activate the immune system and reversing it and to turn down the immune system. We just presented late last year data, really breakthrough data, I would say, with our PD-1agonist in rheumatoid arthritis, a small proof of concept trial, but really remarkable efficacy and safety looks good so far. So super excited to move that aggressively into Phase IIb and a number of similar mechanisms right behind that other checkpoints that we’re reversing to treat immunologic disorders. So that’s really great science going on in immunology right now.
We haven’t talked about oncology at all. We’re launching pertabrutinib, our BTK inhibitor hopefully this year. And behind that, a number of really exciting things. I mentioned the oral SERD. We also have a PI3 kinase inhibitor that’s in Phase I that I have high hopes for. We’ll have to wait and see the data working on KRAS inhibitors and many more things behind that.
Christopher Schott
And maybe just the last question, as I think about the cash flow the company is generating and business development. It just feels like Lilly has made a different position in terms of its needs given this long kind of growth path you have ahead. What’s the sweet spot in terms of BD right now in terms of where do you see the most opportunity for the company to look?
Anat Ashkenazi
So the way we look at business development and that has not changed over the year in terms of our overall strategies, we’re not looking for a very large merger or acquisition to replace revenue. We don’t have that problem, so we don’t have that need. But we are looking at where can we supplement our pipeline and bring innovation in house that is best in class or first in class in our core therapeutic areas or new modalities. And it could be very early stage pre-clinical Phase I. Or if we find something that’s late phase and it fits right within our portfolio, then we’ll bring that in as well. So we’re looking across the board for opportunities. The one thing that I would say, we’re not compromising on is the level of innovation that we see the potential for in some of these transactions. And Dan you may add on what you’re seeing.
Christopher Schott
I guess it’s harder on the late stage side to find opportunity is in that, I would — it just again seems like others in the space may have more pressing needs those assets than Lilly has. So should we think about skewing more early stage because of that?
Anat Ashkenazi
I would say, think of us skewing more to early stage. On the late stage, it’s not that it’s more difficult to find opportunities. Obviously, there’s a funnel, so you’re always going to have fewer Phase IIIs and you’re going to have Phase I. But getting to value on these opportunities is even more challenging. The risk has been discharged, the Phase II data. You’re now in this Phase III, maybe you’re in advanced Phase III, maybe you’re prior to submission. So a lot of the risk has been discharged. So actually getting to — how do I add value as a company? If you have a large commercial footprint, maybe that’s where you add value. Our goal is to potentially add value through the — our development engine and the expertise we’ve built there. But again, it doesn’t mean if we see something late phase that fits right in and leverages our existing portfolio, then it doesn’t mean we’re not going to look at it. We certainly will evaluate it. But I expect that it would be more heavily weighted towards the earlier phase.
Daniel Skovronsky
I think we feel like we’re in a privileged position given the strength of our portfolio that we can afford to be picky and make sure that we’re creating value through BD, particularly late stage BD. We don’t have a need. We always have a want, though.
Christopher Schott
Great. Well, I think we’re just about the time here. Really appreciate the comments and it was an exciting time ahead for the company. So thanks for joining us today.
Anat Ashkenazi
Thank you.
Daniel Skovronsky
Thank you, Chris.
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