The operator introduces the Lilly Q3 2023 Earnings Call and hands it over to Joe Fletcher, Senior Vice President of Investor Relations. Fletcher introduces the other participants on the call and mentions that projections and forward-looking statements will be made. He also mentions potential factors that could affect actual results. He then hands it over to CEO Dave Ricks, who discusses the progress made by Lilly in Q3.

In the second paragraph, the company discusses their strong financial results and progress in their R&D pipeline. They also mention their recent FDA approval for a new treatment for ulcerative colitis and updates on other pipeline products. Additionally, they mention a recent FDA approval for a chronic kidney disease treatment and positive Phase 3 results for a Crohn's disease treatment. However, they also mention a setback with a third party manufacturer for another product, lebrikizumab. The company also completed a divestiture of a portfolio and the financial impact is reflected in their Q3 results.

In the third quarter of 2023, the company experienced strong financial performance, with a 37% increase in revenue and a gross margin of 81.7%. This was driven by the divestiture of the olanzapine portfolio and the absence of COVID-19 antibody sales, as well as higher realized prices. Marketing, selling, and administrative expenses increased by 12%, while R&D expenses increased by 34% due to investments in late stage assets and early stage research.

In the fourth quarter, we experienced a significant decrease in EPS due to acquired IP R&D charges. Operating income also decreased, mainly due to these charges. Our effective tax rate increased, primarily due to the non-deductible acquired IP R&D charges. However, we were able to deliver earnings per share of $0.10, with a significant increase from the divestiture of the olanzapine portfolio. In the U.S., revenue increased by 21%, driven by Mounjaro, Verzenio, and Jardiance. Net price in the U.S. also increased due to Mounjaro and access and savings cards, while Europe continued to show strong growth.

In the third quarter, revenue increased by 7% excluding the olanzapine divestiture, driven by volume growth from Verzenio, Jardiance, and Taltz. Japan saw a decrease in revenue, but excluding a one-time upfront payment, revenue only decreased by 3%. China saw a 20% increase in revenue, driven by Tyvyt and Verzenio. The rest of the world saw a 23% increase in revenue, with significant contributions from Mounjaro, Verzenio, and Jardiance. New and growth products contributed 17 percentage points to the overall volume growth, while the absence of COVID-19 antibody sales was a headwind of 6 percentage points. The sale of rights to the olanzapine portfolio also contributed significantly to growth. Verzenio saw a 68% increase in sales, driven by the early breast cancer indication. Jardiance also saw strong performance with a 22% increase in revenue.

In the third quarter, Trulicity revenue declined due to lower prices and higher rebates. However, Mounjaro revenue saw strong growth and expanded access for type 2 diabetes patients. The company expects continued growth in prescription trends for Mounjaro, but also faces a headwind from rebated volume. They are also making progress in their manufacturing expansion to meet the demand for Mounjaro.

In the third quarter of the year, there was a high demand for our products, causing supply constraints. However, we have increased production and are on track to double our capacity by the end of the year. We are also focusing on improving other parts of the supply chain to meet the high demand. We have launched a single dose vial of Mounjaro in Australia and plan to launch in other markets soon. We are also preparing for the potential launch of tirzepatide for obesity in the US this year. In the first nine months of 2023, we have invested $12 billion in R&D, capital investments, and business development, and returned $4 billion to shareholders. Our updated 2023 financial guidance is presented on slide 13.

The guidance for the first four line items in the financial report remains unchanged, with the company trending towards the higher end of its estimates. Updates have been made for acquired IP R&D charges, OID, tax rate, and EPS, but do not include potential charges from future business development transactions. Progress has been made in R&D, with significant pipeline progress and presentations at major medical conferences. Notably, top line results from the LIBRETTO-531 study showed a 72% improvement in progression-free survival for Retevmo compared to other treatments, establishing it as the standard of care for RET mutant medullary thyroid cancer. The company will continue to work towards identifying and properly diagnosing all patients in need of this treatment.

At the ESMO conference, we presented data from the Phase 3 LIBRETTO-431 study, showing that Retevmo improved progression free survival compared to chemotherapy plus Pembrolizumab in patients with RET fusion positive non-small cell lung cancer. We also shared data from the Phase 3 monarchE study, which showed that Verzenio in combination with endocrine therapy reduced the risk of recurrence by 32% at five years for high risk early breast cancer patients. Additionally, we presented data on imlunestrant, our oral SERD being studied in Phase 3, which showed its potential as an important endocrine therapy backbone in certain settings of breast cancer.

In Q3, we shared preclinical data on three new pipeline agents for oncology, including a highly potent KRAS inhibitor and a monoclonal antibody conjugated to a topoisomerase I inhibitor. These programs are expected to enter clinical trials in the next year. In diabetes and obesity, we received FDA approval for Jardiance to treat chronic kidney disease and presented positive results from Phase 3 trials of tirzepatide, showing up to 26.6% total weight loss.

The company has conducted studies showing the importance of continued therapy for sustained weight management and is exploring higher doses of tirzepatide for those with type 2 diabetes and obesity. They have also presented Phase 1 data on Muvalaplin, a potential treatment for lowering Lp(a) levels, and have advanced their SCAP siRNA and acquired NASH Bimagrumab for NASH treatment. The Retatrutide TRIUMPH Phase 3 trials are actively enrolling for multiple indications. In the neuroscience portfolio, the FDA has extended the review for Donanemab and submissions to other regulatory authorities are underway. New insights from the Donanemab development program were presented at a recent conference.

At the symposium, data was shared on the effects of donanemab on ARIA and its association with baseline variables such as amyloid levels, prior bleeds, and high blood pressure. The use of antihypertensives was found to decrease the risk of ARIA. Results from the open label addendum and post hoc analysis showed promising biomarker results and preservation of daily living abilities in patients with early symptomatic Alzheimer's disease. An update on the validation of the Plasma P tau 217 test was also shared, with plans to make it commercially available by the end of the year. The Otoferlin Gene therapy asset from Akouos has also begun dosing patients in a Phase 1/2 trial for hearing loss.

In this paragraph, the speaker discusses recent developments in the field of immunology, including FDA approval for Omvoh for the treatment of ulcerative colitis, positive results for mirikizumab in a Phase 3 trial for Crohn's disease, and the acquisition of DICE and two new molecules beginning Phase 2 studies for atopic dermatitis and rheumatoid arthritis. The speaker also mentions the complete response letter issued for lebrikizumab and the inclusion of two oral IL-17 assets in the company's pipeline. These developments offer new hope for patients and reinforce the company's pursuit of effective treatments for inflammatory bowel disease.

In the third quarter, Lilly saw accelerated revenue growth driven by recently launched products, including Mounjaro, Verzenio, and Jardiance. They also made progress in their late stage pipeline with FDA approvals for Omvoh and Jardiance, and positive Phase 3 results for mirikizumab. They are expecting regulatory responses for pirtobrutinib and tirzepatide before the end of the year. They made targeted acquisitions and announced a leadership change.

Mike Mason, Executive Vice President and President of Lilly Diabetes and Obesity, will be retiring from the company at the end of 2023 after 34 years of service. He will be succeeded by Patrick Johnson, who will also take on the additional role of President of Lilly Immunology. Dan Skovronsk, Chief Scientific Officer and President of Lilly Research Labs, will also take on the role of President of Lilly Immunology. David Hyman will become the Chief Medical Officer for the company, and Leigh Ann Pusey, Executive Vice President for Corporate Affairs and Communications, will be leaving the company at the end of 2023. The company is confident in the leadership team's experience and is looking forward to continued growth and innovation. The Q&A session will be limited to one question per caller.

The speaker addresses a question about the persistence of therapy on obesity and mentions that the company does not have enough data to make a prediction. However, they do have data for tirzepatide in Type 2 diabetes patients which shows higher persistence compared to other drugs. The speaker also mentions that it is too early to project the average length of therapy for obesity and that the data from Wegovy is not a suitable benchmark due to supply constraints.

The speaker discusses the market for anti-obesity medications and the importance of treatment adherence for chronic conditions. They mention the potential for tirzepatide to have a good length of therapy for obesity patients, based on the results of clinical trials. The question then turns to orforglipron and its Phase 3 programs, with a question about monitoring for liver enzyme elevations. The speaker expresses excitement for this molecule and its potential moving forward.

Anat Ashkenazi, the Chief Financial Officer of the company, addressed concerns about liver safety in Phase 2 trials and reassured investors that there are no special precautions being taken for the Phase 3 trials. She also explained that the decision to move the 2024 guidance call to align with the Q4 earnings call was due to the desire to have the full data set for 2023 before providing guidance for 2024. This decision was made in line with the company's internal planning processes and is not indicative of any issues with tirzepatide OBC review or manufacturing.

Mohit Bansal asked a question about the P documents and biomarker data presented at CTAD. Anne White and Joe Fletcher responded by discussing the progress in blood biomarkers for Alzheimer's disease and their strategy for making the test available. They also mentioned their goal to set a standard for high-quality blood tests in the field.

Louise Chen from Cantor asks if the approval of additional oral diabetes drugs could impact the pricing for injectables. Michael Mason does not believe it will have an impact. Geoff Meacham from Bank of America asks about tirzepatide supply and if there is a threshold of treated patients that will inform the decision on adding manufacturing capacity. David Ricks mentions that they are working on this daily and have made progress with their manufacturing agenda. They are on track to deliver on their goals and have a replica site coming online in 2024.

The company is expanding its production capacity for its auto injector, which is used to administer a medication called Trulicity. This includes new greenfield sites and partnerships with third party manufacturers. They are actively working to increase supply and are not relying on one single solution.

The company is optimistic about the potential of its medicines to treat global obesity, especially with the introduction of solid oral medication. They acknowledge the work that still needs to be done and are focused on the progress of Mounjaro. The question of ex-U.S. contributions for Trulicity is addressed, with the company stating that they have been transparent about supply constraints and are working to increase capacity and introduce Mounjaro in more markets.

In response to a question about the potential pricing for Mounjaro in the obesity market, the company representatives declined to comment and stated that they will make the best decision for patients. They also discussed the need to inform payers about the health economics benefits of incretins for non-diabetic obese patients ahead of the results from the drug's outcomes trial in 2027.

Mike discusses the long-term benefits of medicines like tirzepatide and how the company has done extensive research to support this. Payers understand the intuitive benefits of weight loss and the high costs associated with obesity-related comorbidities. The company will continue to provide health economics data, but the voices of those living with obesity will also be important in advocating for access to these medicines. Mike is confident that over time, there will be an increase in access to these medicines.

The recent report shows that 50 million people in the U.S. have access to obesity medication, and there is potential for more payers to appreciate the value of these medications. There have been executive changes in the immunology business, but the company remains focused on advancing new treatments and potentially acquiring new assets to improve the standard of care in tough immunology diseases. The company is excited about the future opportunities in this space.

In response to a question about the potential for upcoming drugs in the field of immunology, the speaker expresses optimism about bringing new drugs to market, citing the success of mirikizumab and the potential for Lebrikizumab. In regards to the upcoming launch of tirzepatide for obesity, the speaker anticipates a gradual ramp up of commercial coverage over time, similar to the launch of their previous product, Mounjaro. They emphasize the importance of being disciplined and ensuring long-term success rather than a quick initial launch. The speaker also compares the anticipated ramp up of access and volume to the launch of Wegovy last January.

Steve asks why Lilly is evaluating higher doses of tirzepatide and expresses concern about the risk and potential negative impact on their franchise. He also questions the safety and development timeline of other molecules in Lilly's pipeline. Daniel Skovronsky responds by stating that there is no hesitation or trepidation in exploring higher doses and that they have enough data to minimize the risk of uncovering new safety signals. Joe Fletcher adds that Lilly is pursuing all possible ideas in obesity research and there is no read through to other projects. The next question is from Chris Shibutani from Goldman Sachs.

Chris Shibutani asks the Lilly team about their thoughts on the upcoming detailed results from the SELECT cardiovascular outcomes trial. Daniel Skovronsky is excited to see the data and believes it will fit well on a line connecting weight loss to cardiovascular benefits. Michael Mason is interested in seeing how much of the effect was driven by the drug versus weight loss. Carter Gould asks about the impact of the flow data and Lilly's approach to targeting the population. The Lilly team believes the benefits will accrue to the class and Dan comments on kidney disease.

The speaker discusses the potential benefits of incretin drugs on the kidneys in addition to weight loss and A1C control. This has been observed in multiple class members and is expected to extend to their incretin drugs as well. The next question is about the pricing of Mounjaro in the US, and the speaker explains that the gross to net rate for the drug has normalized in Q3 after several changes to the saving card. Going forward, there may be some pricing pressure as the company pursues gaining access, but there are no other copay card changes planned in the near future.

During a question and answer session, an analyst from Truist Securities, Nicole, asks about the potential impact of competing obesity treatments on Eli Lilly's product, Mounjaro, in the future. Joe Fletcher, a representative from Eli Lilly, responds by stating that it is too early to predict the impact of these treatments, but that they are confident in the unique profile of their product, tirzepatide. Another analyst, Seamus Fernandez, follows up by asking about the company's strategy for promoting their oral treatments and ensuring a maintenance regimen for patients.

The speaker asks about the potential use of oral therapies for maintenance and combination therapy for metabolic set point. The response is that there are opportunities for all of these uses, and that the oral GLP1 monotherapy will likely be combined with other drugs in the future. The speaker also asks about the difference between GLP1 agonism and antagonism, and the response is that both approaches have potential and genetic analyses have been used to inform decision-making.

The speaker discusses their company's extensive research on GLP agonism, particularly focusing on their drug tirzepatide, which combines GLP1 and GIP agonists. They have seen positive results in human trials, with high efficacy and tolerability. They also created a pure GIP agonist, which also showed promising results. The speaker acknowledges that they cannot predict the effects of GLP antagonism, but believes that their human data supports the effectiveness of GLP agonism. They conclude by thanking participants and expressing their excitement for future developments.

The replay system can be accessed by dialing 800-332-6854 or 973-528-0005 with the access code 544467. International callers can use the second number. The participants can now disconnect their lines.

This summary was generated with AI and may contain some inaccuracies.