The paragraph is an introduction to the Eli Lilly & Company's Q1 2025 earnings conference call. The operator welcomes participants and mentions that a question-and-answer session will follow. Mike Czapar, Senior Vice President of Investor Relations, introduces key figures from the company who are present on the call, including Dave Ricks, the CEO, and other senior executives. Mike notes that the call will involve projections and forward-looking statements, with actual results potentially differing due to various factors. The focus will be on non-GAAP financial measures before handing over to Dave Ricks for further discussion on the quarter's performance.

The company has significantly increased its revenue and advanced its pipeline, highlighting progress in its GLP-1 trial for orforglipron, which shows promise for treating Type 2 diabetes with an oral medication. The company expects further Phase 3 trial data in the coming year and plans regulatory submissions for obesity treatments by 2025. Revenue has grown by 45% compared to the previous year, with key products contributing significantly to the company's earnings. Recent milestones include various product approvals and the initiation of a new cancer trial. Additionally, the company plans to more than double its U.S. manufacturing investments, with plans for four new facilities, signaling a continued focus on growth and innovation.

In the first quarter, $1.3 billion was distributed in dividends and $1.2 billion was spent on share repurchases. The company, Lilly, supports increased domestic investment goals but disagrees with using tariffs as a tool, preferring tax incentives instead. Although current tariffs do not impact Lilly's financial outlook for 2025 significantly, additional tariffs could negatively affect the company and its industry. Lilly is working on expanding its U.S. manufacturing capabilities to meet domestic and export demands and urges the U.S. government to negotiate better trade deals. The paragraph ends with a transition to Lucas Montarce, who reports that Q1 showed strong financial results with a 45% revenue increase, improved gross margins due to better production costs and product mix, despite lower prices.

In the reported quarter, marketing, selling, and administrative expenses rose by 26% due to increased promotional activities for new product launches, and R&D expenses grew by 8% due to higher development costs and investments in early-stage research. The acquisition of Scorpion Therapeutics' PI3Kα inhibitor program led to a $1.57 billion charge, negatively impacting earnings per share by $1.72. The company's non-GAAP performance margin improved, reaching 42.6% of revenue. The effective tax rate for the quarter was 20.2%, influenced by non-deductible acquired IP R&D charges, resulting in an earnings per share of $3.34. Revenue in the U.S. rose by 49%, driven by volume growth of key products, but was slightly offset by a 7% price decline. European revenue increased by 71% in constant currency, aided by a one-time benefit from restructuring an alliance with Boehringer Ingelheim and significant contributions from Mounjaro. Japanese revenue rose by 15% on strong sales of Mounjaro and Jardiance, while Chinese revenue grew by 21%, also driven by Mounjaro.

The paragraph discusses the commercial progress of several medical products. Mounjaro is being gradually launched in China with expectations for expanded commercial activities in 2025. Global revenue has increased due to volume growth from Mounjaro and Verzenio. Ebglyss, for atopic dermatitis, is seeing increased uptake and reimbursement coverage in the U.S., with further improvements expected. Omvoh has gained global approval for Crohn's disease, with new patient activities underway. Jaypirca was approved in Europe for relapsed or refractory CLL, with launches anticipated in Q2, alongside upcoming trial readouts. Verzenio's global sales grew, maintaining market share despite competition, with U.S. prescriptions increasing but partly offset by inventory adjustments. Internationally, Verzenio volumes grew 30%. Kisunla is now approved in 12 countries.

The paragraph discusses the growth in the use of blood-based biomarkers and the increase in new patient treatments in both the U.S. and Japan, with expectations for further market development. U.S. regulatory action on Kisunla's modified dose enrichment is anticipated soon. In cardiometabolic health, both Mounjaro and Zepbound have shown strong revenue growth. Mounjaro's sales reached $3.8 billion, becoming the market leader in new diabetes prescriptions in the U.S. and expanding into over 40 countries. Zepbound's sales increased by $1.8 billion to $2.3 billion, leading the U.S. branded anti-obesity market in prescriptions. Higher dose Zepbound vials were introduced, making up a significant portion of new prescriptions. Overall, the U.S. incretin analog market experienced a 46% growth in total prescriptions in Q1.

The paragraph discusses the company's strong performance, highlighting a significant increase in market share and reaffirmation of financial guidance for 2025. Despite dynamic trade and tariff issues, the financial impact is expected to be limited. Dan Skovronsky then presents promising results from the orforglipron Phase 3 trial, showing effective and tolerable outcomes with notable reductions in hemoglobin A1c levels. Over 65% of patients achieved A1c levels below the American Diabetes Association's threshold for diabetes, supporting the hypothesis that orforglipron could match the efficacy of existing GLP-1 monotherapy injectables.

The paragraph discusses the results of a study on orforglipron, a drug for diabetes and obesity, highlighting its efficacy and safety. At the highest dose, it helped participants with diabetes lose around 16 pounds or 7.9% of their body weight over 40 weeks, aligning with existing GLP-1 drugs. The study showed promising results as participants had not reached a weight plateau, and the drug displayed a favorable safety profile with low discontinuation rates due to adverse events, primarily gastrointestinal. Orforglipron is being tested in multiple Phase 3 trials, including comparisons with insulin and other oral diabetes medications, with future results expected in both diabetes and obesity patients.

The paragraph outlines several updates on various Phase 3 clinical programs and regulatory developments at a pharmaceutical company. Key highlights include plans to submit orforglipron for obesity later this year and for Type 2 diabetes by the first half of 2026. There's an ongoing Phase 3 trial for obesity, with another set to start for hypertension. The company's application for Tirzepatide in treating heart failure with preserved ejection fraction in the U.S. was withdrawn after FDA requested additional trials, though positive results were seen in the SUMMIT trial. New Phase 3 trials are also planned for Retatrutide in obesity and chronic low back pain, and muvalaplin in atherosclerotic cardiovascular disease to target lipoprotein (a) levels. In oncology, a new Phase 3 study for Olomorasib in lung cancer has begun. Additional progress has been made with five new medicines advancing to Phase 1 trials.

In the given paragraph, Dave Ricks, following his closing remarks, hands over the call to Mike Czapar, who will moderate the Q&A session. Asad Haider from Goldman Sachs poses a question about the CVS formulary announcement favoring Wegovy over Zepbound and expresses concerns about the PBM dynamics in the obesity market, where PBMs might position companies against each other. Haider inquires about Lilly's expectations on market share dynamics following the CVS formulary loss and their strategy for navigating potential PBM restrictions between Zepbound and Wegovy. Dave Ricks responds that the announcement was expected.

The paragraph discusses the current market dynamics in the obesity treatment sector, particularly focusing on the medicine Tirzepatide, which is gaining significant market share. The company is aiming to expand the private pay market by enhancing choice and access for doctors and patients, rather than reducing it through exclusive deals. They are also developing orforglipron, an oral treatment with a GLP-1 profile, which could potentially reach a wider distribution. The company remains focused on advancing combination therapies like Tirzepatide. The paragraph mentions issues with CVS and lower opt-in rates while emphasizing the company's commitment to maintaining brand preference and anticipating upcoming data on orforglipron. The following is a question from Geoff Meacham from Citibank about the future positioning of orforglipron compared to Tirzepatide.

In the paragraph, the discussion revolves around the development and potential applications of orforglipron, an oral medication. Mike Czapar and Dan Skovronsky discuss the flexibility and broad applications of orforglipron beyond just weight loss, suggesting possible uses in immunology and neuroscience alongside primary care indications like Type 2 diabetes and obesity. Dan emphasizes the potential for combinations with other treatments to maximize efficacy, expressing confidence in the future prospects and innovation pipeline. Later, Chris Schott from JPMorgan inquires about the role of orforglipron in the obesity and diabetes markets compared to injectable treatments, with Patrik Jonsson highlighting the significant opportunities for orforglipron in these areas.

The paragraph discusses the preference for oral medication among patients with Type 2 diabetes and obesity, highlighting that approximately 50% of Type 2 patients prefer oral treatments, and 25% of U.S. obesity patients have needle phobia. The introduction of orforglipron, an oral medication, presents opportunities for broader patient reach and easier scalability in the U.S. and global markets, compared to injectables. The paragraph also mentions ongoing studies to switch patients from injectables to orals for weight maintenance, addressing a market need for easier, science-based solutions. Additionally, the focus includes targeting populations with overweight conditions who may not qualify as obese but could benefit from sustained lower body weight for long-term health benefits.

The paragraph discusses the pricing strategy and market positioning for orforglipron, a weight loss medication. Although specific pricing details are not disclosed, the conversation suggests that having a portfolio of weight loss medications could provide leverage in discussions with Pharmacy Benefit Managers (PBMs). Patrik Jonsson mentions that the company aims to treat patients with a BMI above 27 and potentially target those with a BMI above 35 with advanced treatments. Additionally, Dave Ricks highlights a shift from high list prices with deep discounts to a more transparent pricing strategy that aligns list and net prices more closely.

The paragraph discusses pricing strategies in the pharmaceutical industry, focusing on the efforts to narrow the gap between gross and net prices, reduce rebates, and offer more transparent pricing. The context involves a discussion around a CVS announcement related to drug pricing, with potential implications of a price war between Zepbound and Wegovy. The conversation suggests that CVS might be aiming to provide more affordable access to medication for smaller employers whose opt-in rates for certain formularies have been low. The belief is that if prices are reduced, more employers may choose to opt-in, which is seen as a positive development. However, the responsibility for clarifying details lies with Novo and CVS.

The paragraph discusses a study by Aon highlighting a significant return on investment and a 40% reduction in major adverse cardiovascular events within two years. The speaker emphasizes the importance of expanding, rather than reducing, choice in medication access, expressing concern about potential limitations starting July 1, affecting patient options. Another topic addressed is the TRAILBLAZER-ALZ 3 study on Alzheimer's. The team has completed enrollment, and the trial outcomes depend on the occurrence of specific progression events. Although the projected completion date is 2027, earlier results are possible. The study focuses on patients with high amyloid levels but no Alzheimer's symptoms, aiming to prevent symptom onset.

The paragraph discusses the goals and observations from a study focused on preventing the progression of a disease to its symptomatic stage, with significant positive results noted in early symptomatic patients. The conversation then shifts to a question about the launch of a medication called Ebglyss. Dan Skovronsky expresses optimism about Ebglyss’s market potential, citing strong clinical trial data and positive early uptake. He notes that physicians initially use it for severe cases but are increasingly considering it for first-line treatment as they observe good outcomes. The paragraph highlights Ebglyss's strong market entry and its potential to compete in the atopic dermatitis market.

The paragraph discusses the competitive dynamics in the obesity treatment market, specifically focusing on formulary positioning and the growing use of the product. It mentions that Novo is losing market share, and price adjustments might be their strategy. Some payers are adopting a "one of one" formulary approach to manage costs, although it's still not common in the obesity sector. The conversation then shifts to the performance and strategy of Zepbound, which is gaining significant momentum. The speaker emphasizes ongoing efforts to maintain strong market presence through negotiations and strategies involving PBMs, Medicaid, and self-pay initiatives.

In the paragraph, Evan Seigerman from BMO Capital Markets asks about the FDA's request for additional data on Tirzepatide and HFpEF after the SUMMIT trial. Dan Skovronsky explains that although the trial showed a significant benefit, the FDA wants multiple trials to support the indication. He mentions that patients in the trial are already covered under the obesity indication, which could hinder investment in HFpEF research, despite its medical importance. Additionally, James Shin from Deutsche Bank inquires about revenue guidance and pricing headwinds after CVS's decision on Zepbound and foreign exchange movements.

In the paragraph, Lucas Montarce reaffirms the company's annual guidance, noting that the midpoint remains around 32%, driven by strong first-quarter growth. He acknowledges a mid to high single-digit price erosion, specifically a 6% decrease in the first quarter, consistent with previous reports, and emphasizes that these expectations have been factored into their forecasts. The discussion then shifts to Umer Raffat from Evercore, who congratulates the company on recent updates regarding orforglipron and inquires about its safety profile, particularly concerning hepatic safety signals and the incidence of diarrhea in trials. Mike Czapar and Dan Skovronsky respond to the inquiry, with Skovronsky admitting uncertainty about the specific details.

The paragraph discusses the liver safety profile and diarrhea rates observed in a study. The liver safety profile showed no concerning issues, similar to placebo results. However, diarrhea rates were higher in this study compared to previous ones, including in the placebo group. It suggests assessing diarrhea as a drug-to-placebo ratio due to variability by country and study methods. The main concern for real-world tolerability is discontinuation due to adverse events. The paragraph then shifts to a discussion between Steve Scala and Dave Ricks regarding Lilly's historical use of aggressive formulary positioning with Taltz, questioning its impact on market share and sales and how this might apply to future drugs like Zepbound and Wegovy.

The paragraph discusses a company's strategy and experience in the pharmaceutical market, particularly concerning payer behavior and competition within therapeutic categories. Initially, they were followers but managed to establish themselves over a few years. With the introduction of new competitors like IL-23s and IL-17s, there is more competition, which is common when multiple players are involved with similar clinical profiles. However, in the obesity space, differentiation is more pronounced, leading to a need for more choices in the market. The company has historically not relied solely on the payer channel to drive market share, even with advantageous clinical profiles. Instead, they prioritized providing multiple options, as seen with Jardiance, and didn't favor exclusive agreements for Taltz. They continue to advocate for more choices and innovation, stating it's not in their interest to limit options. The section ends with an operator's transition to a question from Courtney Breen regarding patient coverage for Zepbound by CVS Caremark, but Dave Ricks' response is not included.

In the paragraph, Patrik Jonsson discusses the CVS Zepbound initiative, emphasizing that it only involves a subset of CVS plans with a low level of employer opt-in. He suggests that efforts will continue to increase employer participation. Then, David Risinger asks about discussions with the Trump administration on tariffs, specifically regarding Lilly's drug manufacturing and profit repatriation to the U.S. Dave Ricks responds by acknowledging the national security aspect of Section 232, the administration's agenda to repatriate the supply chain, and the possibility of raising revenue through reconciliation.

The paragraph discusses the 232 review's relevance in examining the reliance on offshore and single-source suppliers for generic medications, which may pose problems in future conflicts. The branded pharmaceutical industry may assist in addressing this issue, recognizing it as a market mechanism problem largely influenced by pricing. There's uncertainty about whether tariffs can shift the supply chain effectively. The review should focus on this question and consider the broader trade imbalance. Lilly has been working to shift its sourcing strategy from purely tax and cost efficiency to resilience, particularly by reducing dependency on foreign sources, mostly in Ireland, through strategic decisions made several years ago. The company believes tax reform, especially addressing disparities in income tax rates between the U.S. and countries like Ireland, is crucial to solving these problems long-term.

The paragraph discusses issues related to the pharmaceutical industry's tax obligations and the impact of the 2017 Tax Cut Jobs Act, which includes provisions for a minimum global tax on foreign-sourced income. This has led to increased income taxes in third countries over the past seven years. The industry, including Eli Lilly, is in the process of re-domesticating, which the speaker hopes will lead to normalization and avoid tariff discussions. The text then shifts to a question from Kerry Holford about the availability of Eli Lilly's Zepbound cash pay vials in U.S. pharmacy chains, similar to CVS's stocking of Wegovy cash pay pens. Dave Ricks and Patrik Jonsson from Eli Lilly address future possibilities for cash pay distribution through different channels outside the online LillyDirect portal and the potential for offering Zepbound pens via the cash pay route. Eli Lilly is pleased with its performance in the self-pay segment.

In the paragraph, a company executive discusses the recent financial performance and strategy concerning Zepbound, noting that in Q1, they achieved over $200 million in revenue with 25% of new prescriptions (NBRx) initiated through self-pay. The executive emphasizes the role of LillyDirect in reducing patient friction and highlights that recent price changes and the launch of high-dose vials have accelerated market growth. During a Q&A, Akash Tewari from Jefferies inquires about the company's strategy targeting overweight and obese Americans and the feasibility of pricing approaching insulin levels. He also questions the sustainability of projected long-term margins. In response, executives detail their disciplined pricing approach and mention a potential gap between list prices and net prices for patients, indicating an evolving strategy focused on maintaining margins while expanding access.

In the paragraph, Trung Huynh from UBS inquires about expectations for the ATTAIN obesity studies concerning orforglipron, comparing them to the ACHIEVE diabetes data, particularly regarding weight loss and gastrointestinal tolerability. Dave Ricks and Dan Skovronsky discuss that orforglipron is a GLP-1 monotherapy, different from dual agonists like Tirzepatide, and reference the SURMOUNT-5 trial, where a similar drug achieved around 13.7% weight loss. They also mention that in that study, about 21% of participants experienced vomiting, which serves as a reliable marker for GI tolerability, helping to set expectations for orforglipron in the ATTAIN studies.

In the paragraph, a discussion is held about discontinuations and tolerability events in a trial involving orforglipron, compared to previous injectable drug trials. It was noted that these events typically occur early in studies during dose escalation and are not concerning unless they happen later in the study. The conversation then shifts to Dave Ricks, who discusses the drug pricing risks that the industry might face, particularly concerning potential MFN (Most Favored Nation) legislation. He points out the importance of considering real net pricing versus European pricing and suggests that tackling this issue would require addressing PBM reform and the 340B program, noting that there is bipartisan interest in pursuing these discussions.

The paragraph discusses the pharmaceutical industry's focus on addressing issues related to drug pricing and the Inflation Reduction Act (IRA), particularly concerning small molecule medications. There's a long-term goal to improve trade relations with Europe, aiming for fairer R&D cost distribution between Europe and developed economies. In the meantime, the industry is concentrating on policy changes to fix the IRA-related problems. The focus is also on managing risk while avoiding simplistic price comparisons between the U.S. and Europe. The conversation shifts to an update on the progress of Zepbound's access and coverage in the U.S., with Patrik Jonsson noting significant improvements in employer opt-in rates and Medicaid coverage from 2024, with additional states newly covered.

The paragraph discusses updates on various medical and pharmaceutical developments. It mentions that the Centers for Medicare & Medicaid Services (CMS) has issued guidance for reimbursement of Obstructive Sleep Apnea (OSA) with a 180-day timeline since approval in late December. Progress in Medicare related to this is expected in the second half of the year. In terms of anti-obesity treatments, a significant portion of patients are starting with Zepbound, which has a competitive price point. The conversation then moves to Bimagrumab, a drug undergoing two Phase II trials. The first trial, already completed, involves combination with semaglutide, with data potentially revealed at a conference in June. The second trial, involving Tirzepatide, is of greater interest, aiming to evaluate effects on lean and fat mass. However, there is no specified timeline for its data release.

The paragraph details the closing remarks of an earnings call. Mike Czapar thanks Dave Ricks for his closing comments, and Dave Ricks expresses gratitude to the participants, encouraging them to reach out to the Investor Relations team if they have questions. The operator then concludes the conference, noting that a replay will be available from 1:00 p.m. to June 5 at midnight, and provides phone numbers and an access code for accessing the replay.

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