January 25, 2022

The World Stock Markets Tips & Targets, News, Views & Updates

The World Stock Markets Tips & Targets, News, Views & Updates

Eli Lilly and Company (LLY) Presents at 40th Annual JP Morgan Healthcare Conference (Transcript)

Eli Lilly and Company (NYSE:LLY) 40th Annual JP Morgan Healthcare Conference January 11, 2022 4:30 PM ET

Company Participants

Dave Ricks – Chairman and CEO

Conference Call Participants

Chris Schott – JP Morgan

Chris Schott

Good afternoon, everybody. I’m Chris Schott at JP Morgan. It’s my pleasure to be hosting this fireside chat with Dave Ricks, Chairman and CEO of Eli Lilly. Dave, welcome, and great speaking with you today.

Dave Ricks

Good to be here.

Chris Schott

Yes. Last year, we had the big talk about update and I think we’re hot off the presses on some CMS decision, which we won’t spend too much time on today, given time to digest that. But we’d love to hear some opening remarks, just if you think about Lilly’s positioning heading into 2022, the Company’s obviously incredibly well positioned, has been a big outperformer versus peers. And we’d just love to hear how are you thinking about the business as we start the New Year?

Dave Ricks

Yes. Thanks Chris. I mean, over the last several years, we’ve had a good run. And certainly 2021 was not an exception to that good top-line growth and bottom-line growth as well. And so many important readouts for the Company. So, tirzepatide program rolled in and I think ended up in a very strong case. You mentioned donanemab, last year, we had that discussion here at JP Morgan. But we launched follow-on trial and several other studies since then and talk about that today.

And then, important new indications for big medicines for us Verzenio and high risk breast cancer Jardiance in a whole suite of heart failure. And we spent a lot of time on all this with our R&D update December. So, I’ll keep my preamble short, because we used a lot of our material at that point. But there are a few updates actually since that point. I’ll just kick off with first, related to Alzheimer’s, we did receive breakthrough designation for our follow-on antibody, the N3pG4 program. This promises to have a lower dose. It reduces immunogenicity and has the potential for subcutaneous route of administration. And we do expect to start pivotal trials by the end of ’22 now for that program. And in addition to that our sNDA, supplemental NDA for baricitinib, or Olumiant, in hospitalized patients with COVID-19 went in. And so, that’s the really the whole suite of data to make that permanent indication for baricitinib.

And then finally, last week, we did initiate an EUA request for bamlanivimab, [ph] that’s the third antibody from Lilly for COVID-19 that retains very strong neutralization against Omicron and actually all other variants of concern and is also a highly potent antibody with a much lower dose than the others. So, some good progress there over the holidays.

And then finally, just looking at ’22, we — excluding the antibodies, which are hard to predict the sales of as well as the Alimta patent expiry we expect in second quarter, we will be having top line growth, expand margins by about 200 basis points and then really focus the Company on executing against the enormous opportunities we have. We’ve talked about many today already and five new launches in the next two years. So, exciting time for us, and we’re focused on getting all that work done in ’22 and sustaining the strong performance we’ve enjoyed.

Question-and-Answer Session

Q – Chris Schott

Yes. Lots to jump into there. I guess, a bigger picture question for me though is when I think about Lilly, the Company is fairly uniquely positioned in terms of having consistent new product flow, kind of lacking a major kind of LOE cycle looking out really over the next decade or so. I guess, what’s, in your view, enabled the Company to get to this position? And probably more importantly, how do you sustain this type of profiles that we don’t kind of run into some of the same challenges that many of your peers are kind of facing as we look out to the next five or seven years?

Dave Ricks

Yes. I mean, I think a lot about this question. And I think how we got here is a little easier to explain than how we stay here, because we went through a difficult period. My predecessor, John Lechleiter, chose to invest in organic R&D and really pull through a pipeline, which is launched in 2015 to 2020 and is driving a lot of our revenue growth now. We enjoyed good success with those products, both technical success, but also in the marketplace, and that’s been important.

I think a lot of the decisions we’ve made is not to harvest that, but rather to put that kind of seed back into the ground. And we’ve invested very aggressively in R&D organically and with some nice organic — inorganic tuck-ins over the last five years to set ourselves up for a productive decade ahead. And I think as we look at the results, really with some of these marquee readouts I just mentioned, we see this substrate to drive growth on top of growth. And I think that’s kind of a rare situation in our sector where often companies have the spurts and then face loss of exclusivity and then contract or do other things.

The trick now is how can we make this a sustainable engine? And it has to be driven by capital allocation into our own income statement into productive R&D at the Company, supplemented by select acquisitions and probably moderation in all those things being careful about that and will be key for the long term.

With ex Q2, we can get tripped up on things, regulatory problems, manufacturing problems, commercial launches that don’t go as planned, but those have all become sort of table stakes. And I think the real thing is what can we produce next from our labs. And that was the reason for the December 15th to get together was to really do a much deeper dive on that early-stage pipeline that could — products launched in ‘25, ‘26 that could drive yet another decade of growth on top of growth.

Chris Schott

Yes. And one of the questions, it seemed like you’re targeting this kind of R&D growth maybe in line with the top line. I guess, to me, it points to a much larger R&D budget than we’re seeing today. I guess, the pleasing point, how do you make sure you don’t see diminishing returns as we ramp R&D? I know you laid a lot of really interesting pipeline assets. But as I just think about how much top line growth you have, it seems like it’s a big step up in spend we’re going to be thinking about over the next six or eight years?

Dave Ricks

It could be. And of course, we think about R&D spend as the combination of both, balance sheet cash that you’re spending outside the Company as well as internally. But as a capital allocation matter, yes, we expect that to grow markedly.

It will only grow the substrates there. And I think we’ve been successful at maintaining a disciplined approach, saying no to our own good ideas at some rate, so we take the great ideas. And I think that’s a management judgment that we’re going to have to maintain over time to pursue the kind of growth we’re after.

But right now, I think we see plenty to invest in. We cover five therapeutic areas. We’re not super interested in expanding boundlessly outside those in part because we think there’s a huge unmet needs there and in part because we know what we’re doing. And executing with speed and clinical differentiation, that’s a different — that creates advantage later on, and we want to keep that.

But, I think, the other big change that’s occurred in the last two or three years in the industry is really the emergence of newer modalities, which will give us more opportunities, more platforms to invest in to create new or better medicines. And we’ve talked a lot about our nuclease-based medicines and siRNA is sort of the leading part, but also some gene therapy approaches. We continue to want to invest in that. And I think that will give us another sort of plank to productively allocate capital to create important medicines, again, across the diseases we care a lot about.

Chris Schott

Yes. And then maybe follow-up, a bigger picture one. As I think about 2022, I guess, when I look at approvals with tirzepatide, I look at donanemab, I think about a big new indication for Verzenio, I know they’re all different divisions of the Company, but how does the organization prepare for that many really substantial launches all in a pretty short period of time is — how do you make sure that all those get the right focus and resource within the broader organization?

Dave Ricks

Yes. It’s a great question and one we worry a lot about. Of course, a lot of the trick on commercial execution is understanding when you can do things in a common way, so it’s easily scalable and efficient and when you need to be much more focused and customized to market. Each one of those present sort of different opportunities for both of those. But I think we’ve built a pretty productive, both U.S. and in major markets like Germany, Japan and China, commercial engine that has a lot of shared properties. So, we don’t ask franchise leaders to go invent their own sales force training or to invent a digital go-to-market strategy. A lot of those things are built and then just dropping content through it so that it becomes a more scalable, efficient way to work. At the same time, what they need is very strong intimacy with thought leaders, making sure that formulary placement and payer dynamics are extremely well managed, and then responding to competitive threats as they might emerge.

We also have a business unit structure, which now has five groups based on the therapy areas. And it just — it’s a little bit luck maybe, but they’re pretty evenly spread across those. So each one of my direct reports that runs a therapeutic area pretty much has like a number one priority that’s pretty clear. For Jake, it’s Verzenio launch; for Mike, it’s tirzepatide. And there aren’t that many competing other things they have to do. So that org structure sets us up well to generate the kind of focus we need while leveraging a central platform that can kind of do the work without them thinking too hard about it.

Chris Schott

Yes. That makes sense. Maybe pivoting into individual products, maybe first on donanemab. I know you’re going to be launching into Alzheimer’s market that maybe is less developed than you probably would have anticipated with a competitor launching last year. I guess, how has that changed your priorities and focus as you think about the way you’re going to address donanemab post-approval and then as we think about probably TRAILBLAZER-2?

Dave Ricks

I’m not sure it’s a change of focus, and I’ll go through what those items have been, but it might change the time scale by which we had expected them to play out. And we’ll have to digest today’s CED decision, but that’s one factor is the payment and reimbursement. And it looks like they’re calling for a coverage with evidence development, which isn’t one of those middle scenarios that we had talked about with investors before. So, I have to read the fine print. These things often do change before the final form. But I’m not super surprised at that because what’s missing, and I think a primary driver for the under development of this market is really a conviction that treatment will matter for patients and that the risk is worth the benefit. And that’s a point of view we have, and it’s why we’ve launched the Phase 3 program, pretty large one, immediately, actually prior to the Phase 2 results being available, but scaled it immediately thereafter to really make sure we definitively show that rapid and deep clearance of plaque will slow the Alzheimer’s progression. So, that’s problem number one.

I think the second one is patient identification. Of course, in clinical trials, Lilly’s had a lot of innovation to better refine who gets these drugs so that you can maximize the benefit. And we’ve invested in PET scanning for a decade, and now we have a P-tau217 blood-based biomarker that detects both amyloid and PET, and maybe could be super important for expanding into primary care and geriatricians and other busier practices that aren’t focused on neurology. So, we need to pull those through as well.

Of course, the PET scan for amyloid and tau are both approved. Interestingly, the tau one is reimbursed, the amyloid one is not, although I saw some brief language in this CED about that. So we’ll look at that carefully. But the blood-based biomarker really holds a promise of being a much lower cost, easier method to screen out patients who aren’t eligible and maybe then go to a PET scan afterward, saving resources and speeding up the process. So, that’s quite important.

And then, finally, just the care delivery model, which will take a little more time. But Alzheimer’s is a fatal condition, 100% fatal, and it’s a seven-year disease course. And you can imagine, without really any solution available, the healthcare practitioners are reluctant to set expectations or even rush to action of any sort. But we then contrast that with what happens in oncology. I mean, there’s tumor types that also are fatal universally and take about seven years to progress. But nobody hears from the doctor, you have cancer and then go home and let’s just see what happens. But that is what happens with Alzheimer’s. You would expect to get worked up, to get drug treatment, to go into a care model that takes care of your needs and route you to the right healthcare facilities. All that sort of needs to be developed in a parallel way, so we can care for our seniors with dementia the same way we do for people with cancers. We’ll invest in that along with healthcare provider networks. And I suspect there’ll be kind of fits and starts to that, but that’s important to build out for the long term.

Chris Schott

Yes. And I know this trough NCD hit just as we were starting. So I know you’ve not had a chance to look at the details. But I guess, just bigger picture, how important, I guess, is this initial decision in your view as you think about donanemab, or I think you’ve kind of talked about a fairly limited commercial opportunity from approval for TRAILBLAZER-2.

Dave Ricks

Yes.

Chris Schott

I guess, as you look at the details here, do you feel like — is this going to be — is this going to shape in a meaningful way, how do you think about the product, or is the view that TRAILBLAZER-2 hits, it’s just kind of — it doesn’t really matter…

Dave Ricks

We always thought that the real thing is TRAILBLAZER-2. And when you get there, that’s great. Now, but being in the market, you can go out and do things such as the — get the PET and blood-based diagnostic system up and running to try it now, to get experts comfortable with it and to get these care models built, and we’ll be doing just that.

Under a CED model, there will be reimbursement if patients are in a study. We have to look at what the details of that will be eventually. But, it will allow for some use in practice. At the end of the day, when there’s full on Phase 3 data, I would expect the field will shift, and we’ll need to shift with it. That will be in spring of ’23 for us and for a few other competitors before that.

Chris Schott

Yes. And maybe on that point of the other competitors, how relevant do you think those readouts are from a Lilly perspective in terms of either informally more about the mechanism or just the competitive landscape, how closely you’re watching those readouts?

Dave Ricks

We’re watching them closely. But heretofore, there really hasn’t been an amyloid-directed antibody that was on the wrong side of the efficacy line here shortly. Mostly, the problem has been the sort of signal strength or the ability to tease apart signal from noise, so you didn’t have stat sig or the effect size is small, so. But we don’t have one that’s missed. So, I think if you have a hit or miss on those, and it’s on the right side of the line, meaning patients are improving, but maybe didn’t get full demonstration, I think that’s kind of expected, I would guess, for one or both of those in front of us.

On the other hand, I’d be surprised if they didn’t land on the right side of the line. So, if this really were shown to do nothing, that would be I think more damaging to long-term confidence in the mechanism. If they’re consistent with past practice and maybe one or both of them hit their endpoint, then great. I think that will help accelerate change and improve dementia care.

Chris Schott

Great. Well, I think it’s time we’ll pivot on to tirzepatide. I won’t push you too much more on the coverage decisions…

Dave Ricks

Thanks. We get a chance to pivot.

Chris Schott

Because I just came out here. And so, in terms of tirzepatide, so the other major launch this year, if we talk first about diabetes. I guess one of the questions I have is the GLP-1 market, I think it’s always this debate of at what point does it start to slow down or plateau? And it seems like just year in, year out, it ends up just being an incredibly healthy growth outlook. How much more runway is there for the class as a whole in your view?

Dave Ricks

Yes. Well, of course, we’ve been saying for some time that in the space where the current GLPs are conditioned or positioned, which is really after oral failure before insulin, there was still quite a bit of room to run. And I think that’s played out over the last couple of years. Today, about half of the patients who are eligible for an injection, get a GLP. So, could it be — could it double again? Unlikely. I think some of those patients will be candidates for insulin, but it certainly could grow incrementally in that space quite a bit longer.

I think, what we’re also seeing now with the existing GLPs, and we hope that this would accelerate with tirzepatide, would be use of these agents earlier in the disease course, particularly for patients who clearly are affected more by weight and have those cardiovascular risk factors one would worry about and can benefit with the insulin resistance benefits GLPs have, et cetera with earlier treatment, tirzepatide even more.

And right now, in the U.S., we see 1 out of 4, 1 out of 3 patients who fail metformin go right to a GLP. So, that’s telling you that that’s already beginning to happen, but that will be another tranche of growth. And then, of course, long term, we’re pretty bullish on the opportunity to really unlock the potential of really aggressive weight management to reduce many, many causes of suffering heart failure, major cardiovascular events, NASH; we’ve talked about sleep apnea and others, which are really this under the surface risk in Western health systems of obesity thought to drive 1 in 3 healthcare dollars today. So, that’s the long-term opportunity. So, the runway is why that the runway is long, thinking about it.

Chris Schott

Yes, absolutely. Yes. When I actually think about the obesity opportunity long term, can you talk about the similarities and differences about how the market is going to evolve versus mainly what we saw with the GLP-1s in diabetes? And it seems like in diabetes, we end up with a duopoly. Is that a similar situation? It seems like you have the same competitor you had before, and you guys — seem like they’re kind of leapfrogging each other one after another. But I guess, if this market, diabetes — or obesity market’s as big as you’re thinking it is, is there going to be others that are jumping in here in your view, or can you kind of talk us to — yes, it’s — you’ve got enough of the lead here that that’s unlikely?

Dave Ricks

Well, I mean, I would be surprised if we didn’t have more R&D portfolios become populated within cretin mechanisms in the hopes to participate in what is probably one of the most important new markets for the industry, but even more important for healthcare systems to take out costs and improve the health of people around the world, probably will rival the PD-1 situation? I mean, maybe. But I would expect, there will be many people who have got to have approach here, especially as this market begins to really take off. But, the two companies in the lead have a pretty big lead, not just in time, but in the go-to-market apparatus and how to do clinical trials and the wall of data that’s being produced and will be produced, certainly by us, our idea of really pulling down, not just the cosmetic weight-loss market, which will be large, but is limited by payment and some patient selection into treatable conditions that are driven by obesity.

And I think once those studies are done, it’s often difficult to run head to heads or whatever against those. So, I think that’s all going to play in our favor. And we have a good understanding in early-stage biology of what’s driving obesity now. As you saw in our December 15th meeting, we had many early-stage pipeline assets, which could complement each other and add to each other to really tweak and fine-tune that impact. I think we’re in a very good position. But of course, competition is part of the industry, and we might face it. So, we’ll have to see how that plays out. Next year or two is pretty clear. It’s a two-horse race. And here, unlike maybe diabetes, which sometimes we might feel it’s more of a zero-sum game, I think actually having the two competitors talk about do studies in and broaden access for obesity-related treatment is a real medical problem, will be good for everybody.

Chris Schott

Yes. And one of the debates we have here is, it seems your competitor has taken an approach of separate brands going after the two opportunities. You’ve got doses that seem — they line up and that’s the same doses. How are you thinking about the pros and cons of going with a two-brand strategy versus just having this all under a single umbrella?

Dave Ricks

Yes. We’re having those discussions. I can see pros and cons on all sides. As you — the history, the reason why the competitors have done it in the past is more clear. You had a pretty different market for those obesity treatments than diabetes. You had payers willing to pay for diabetes at a price point that they wouldn’t pay for obesity at. And that’s because obesity meant weight loss, not medicalization of that important modifiable risk factor, which is now modifiable because we have these medicines.

And so, I think some of those things come apart a little bit when payers are going to be much more interested in treating obesity, particularly commercial payers when you have insured population, self-insured large employers, this is a huge part of their health cost structure. And then, as you turn, say, tirzepatide into a heart failure drug, into a NASH drug, it’s not really different from diabetes.

So, I think the dosing is the same because we think it’s the right way to dose the drug, and the titration already is slow and a little bit complicated, so we didn’t want to make that more difficult than it needed to be. But we’ll think about whether there’s some benefit to us or healthcare providers of having more than one brand. And if not, it’s okay, too. I think there’s plenty of opportunity to expand use, whether we have two brands or one. And we’re focused on really the ultimate benefit to the healthcare system here.

Chris Schott

Okay, great. A couple more here. Just with the SURMOUNT data expected this year, I know it’s a couple of years before you actually get an approval on the full data set. But if I take that coupled with the supply issues your competitor is running into, I guess is there a potential that we could see accelerated adoption or even some off-label usage of tirzepatide as we look at the approval? Because the weight-loss data will be out there for folks, the drug will be available. Just how do you think about that in terms of the impact that could have on the launches here?

Dave Ricks

Yes. I mean, well, first of all, I think it depends on the top line number out of SURMOUNT. So, right now, even we have about 15% nominal weight loss with our high dose, one would expect that increases a little bit and will be subject. If it’s — what we don’t know is GLP plus GIP and what that does in obesity. But let’s just say it’s a higher number, yes, I mean, I think you’ll see people trying to use a drug for a purpose that’s not indicated for it. That won’t be our focus. Our focus will be launching in diabetes. But sure, that could happen.

As it relates to supply, I mean, number of those confident organization, I’m sure they’ll get this addressed. We’re taking good notice though, of course, in investing ourselves to make sure we have good control over that variable and don’t run into problems.

Chris Schott

So, on the capacity side, you have no concerns in terms of Lilly’s ability to supply the market?

Dave Ricks

I wouldn’t say we have no concerns. I mean, we always consider. But probably we’re all a little surprised, Street analysts included, about the uptake of Wegovy, right? And what we want to do is build in resilience. So, I mean, one thing is we use common materials, parts, et cetera, across tirzepatide and Trulicity. So, it’s really predicting the mix in terms of what you decide to make that day versus real supply chain gaps. We also are relatively, almost exclusively basically in-sourced in terms of device nearly exclusive on parenteral and totally exclusive on API. So, we have a lot of control. That can be good when you want to move things around and adjust. It takes longer to add capacity in that world. But we sell a lot of Trulicity pens today, a couple hundred million a year. And we want to — we’re preparing to sell more with TZP plus Trulicity. And hopefully, we won’t run into a problem. But that — I think it’s something we think a lot about.

Chris Schott

Maybe last question on this topic. You’ve got obviously a number of next-generation [indiscernible] in development. Do you see that as one of these is like the next tirzepatide, or is this from here, more of a fragmentation where you can design products to maybe work better in certain populations, others that have profiles that were better in other populations? I’m trying to get a sense of the goal of GGG and some of these other programs that you’re running?

Dave Ricks

Yes. So, I mean, there’s sort of like two more waves here. The GGG and oxyntomodulin. Oxyntomodulin is a GLP plus glucagon, whereas GGG is glucagon and GIP and GLP. And we’re kind of competing those, if you were, to see if you can get more trend break on weight loss. And if we can, then I think those will make for interesting improvements on tirzepatide.

If it looks like they can’t be much better, then I think you can ask the question, well, why don’t we just use tirzepatide? But that’s — I think our job is to create better and better products. So, we’ll have to see. I think we’ll get data yet this year on those programs and be in a position to make a decision about a new Phase 3 and what the target indication set would be based on that weight profile, recognizing for A1C control, there’s not a lot of room left to go beyond tirzepatide. There’s some people who don’t have — don’t get below target, but it’s a few percentage points. It really is a remarkable A1C controlling drug.

Then the next way beyond that are our early-stage projects, which include long-acting Amylin PYY, which is a different peptide that plays a role in appetite; and DACRAs, which are dual-acting calcitonin receptor agonists. And those are thought to be potentially additive. So you could see some of those being added or deleted for different therapy regimens, maybe for more rapid weight loss initially and then withdrawn. So, we’re looking at those development options for those drugs as well.

Again, I think the most important thing for all this is well, what’s the top line tirzepatide 15-milligram number? And if it’s strong, then there’ll be room for development. If it’s extra strong, then we’ll have to think about how many of these can we take forward and what’s the chance that could be just to deal with which is a pretty outcome.

Chris Schott

Yes, absolutely. Good problems to have, I guess.

Dave Ricks

We’re not going to lose for effort on next generation obesity therapies.

Chris Schott

Maybe pivoting over to oncology, Verzenio in adjuvant breast cancer. I guess, my question is just on this initial label. How challenging is this from an uptake perspective, or is this something you can manage through? And then, say about the longer-term opportunity, is this something you saw as excited about as you were when you saw the initial data, or has there anything changed in terms of the longer term outlook for that one?

Dave Ricks

I mean, it’s been an interesting period because, of course, our business Chris, has been that for the intent-to-treat population was the right target here and that the use of the Ki-67 marker is prognostic in terms of the trajectory of these patients, but it doesn’t predict drug response. And I think that’s played out in the data presentation we gave at ESMO. And it’s probably the reason why some groups, European medical agencies, still chewing on this. Japan has approved the drug actually with the full intent-to-treat population. And ASCO and other national cancer guideline groups have sort of recommended broader use in the label. It’s an interesting situation.

I think the FDA’s concern was, look, we haven’t crossed to less than one on survival, but the survival events themselves are rather small compared to the study population. So, we just think it’s immature. It needs to develop. That said, we have a path to submit the full population and early uptake looks pretty good. I was just looking at the last week of the year, and we have almost half new starts in the category now on Verzenio. And it’s jumping nicely, and we haven’t even started the commercial launch yet. So, that’s kicking in, in Q1. And I think even within the Ki-67 population, there’s a big opportunity. And then, as soon as that data matures further, we’ll go back to the FDA for the full ITT.

Chris Schott

Okay. So longer term, view hasn’t really changed. And so, of course…

Dave Ricks

Yes, maybe because it’s more staggered, but our view hasn’t changed, and there’s nothing in the data that’s changed our perspective.

Chris Schott

Okay. And then on pirtobrutinib, the BTK, it seems like the organization across the board pretty excited about this asset. I think, the question we still get here is just it’s a very competitive space, a lot of development going on. So, I guess, how do you position the product in the market just given you guys have entrenched competition? I know some of the competitions is — there’s some share gains going on. But just with the time lines you’re going to be launching, how do you think about the ramp of a drug like this? And what it’s going to take to really differentiate yourself?

Dave Ricks

Yes. Well, I mean, obviously, it is a crowded market. And one of the things that is a hallmark of BTK inhibitors and particularly, in CLL is I mean people do pretty well, right? And so, the efficacy hurdle is high. Now, in the real world, we know a few things from doing our studies and from watching this market. Both MCL and CLL, you have — and MCL will be the first regulatory action we expect. You do have a lot of cycling. And patients — I think we were surprised. This whole molecule started with this focus on this cysteine mutation that happens in BTK-treated patients, and we could overcome that sort of a targeted oncology move.

But, I think because the drug is just cleaner and more specific, we also attracted into our studies a lot of patients who didn’t have that mutation, but it “failed” frontline BTK for other reasons. A very common reason is just tolerability. And so, I think there’s a little more churning in this market than you might expect. And the relapsed/refractory segment is probably a little bit bigger over time than we would have originally anticipated.

And then, as you know, we’ve launched a head-to-head, which is powered for efficacy against the market leader, ibrutinib. And that will take some time to play out. But I think it’s what you have to do if you want to be the leading agent in the category. I think we feel confident that we can win that, but it will take years to enroll and complete.

And then, I think the other thing, which we’re thinking about as combinations, BCL-2 inhibitors have found good success here of Venetoclax in particular, and we have a BCL-2 in our pipeline. Part of the thinking here is can we put rational sequencing and combination together for these patients in a way that makes more convenient and kind of a better profile for them? So, that’s another kind of life-cycle play that we’re contemplating.

Chris Schott

Yes, excellent. And then, just moving over to immunology. We’ve had a positive Phase 3 data, both from mirikizumab and lebrikizumab. Can you just talk a little bit about your positioning in immunology? There seems like a market where you’ve got some players with very, very large franchises. It makes it maybe a more challenging space from a reimbursement standpoint than maybe other categories. So, as you think about Taltz, some of these two new assets coming in, just talk a little bit about how you feel the Company is positioned in that vertical?

Dave Ricks

Well, I think we’ve been in a group of companies that have great drugs and immunology that really have been a narrower portfolios, and it’s a little bit of a tough going based on the way the payer dynamic sits at, and to some degree, in the physician’s office. These are drugs people on for a long time, the kind of the high touch kind of white glove care model is a big part of it. And there is a lot of synergy in having a portfolio. So, we’ve constructed that, and it’s taken a little while to play out. But I think by the end of ’23, we should have four important medicines in autoimmune diseases. And in the derm office, in particular, we probably have three pretty important, if not leading medicines with, of course, Taltz, which is really the number one prescribed non-TNF for psoriasis, PSA and ankylosing spondylitis. We’ll be launching Olumiant in alopecia areata, which is very strong data. We have not yet finalized the atopic derm indication for Olumiant. There’s some challenges there with the JAK inhibitors, but we have lebrikizumab in biologic coming as well in ’23. So I think we’ll have a lot of density, not only in immunology, but in the derm office as well. And I think that’s pretty significant for us and then coming into the GI space with mirikizumab.

So, I think it’s only additive to have more in your portfolio, and these drugs by themselves would be highly competitive in their spaces, but even more so when we can kind of leverage the infrastructure and the weight of that portfolio with the payers.

Chris Schott

I know you’ve got some earlier stage pipeline assets, but is this an area that you would look to expand even further? I think about maybe IBD as an example, where you’re going to have a single asset. Does that same portfolio opportunity exist in that setting?

Dave Ricks

It does. I mean IBD is a relatively less mature space than the others. I mean I’d put sort of psoriasis as the most mature and saturated.

IBD, there’s still a lot of TNFs used, but there’s a lot of cycling. And the data generated for TNFs in UC and Crohn’s is pretty old. I think if we did a real-world assessment of like your third TNF, I’m sure the data would not be particularly good. Entyvio’s played an important role there, and it was a real important medicine from Takeda. And now IL-23 is coming. We’ll have the first data in UC. I think risankizumab will beat us in Crohn’s, but that data has been released and looks pretty good. So I think IL-23s have played a very important role in these disease states, and will be right there.

Would you like to add to that? Sure. Of course, we have some pipeline assets that could fit that bill, but always looking at other things as well outside the Company. That was a big deal. I know a competitor announced in Q4…

Chris Schott

Yes. And then just maybe a bigger R&D picture. I mean, R&D Day in December, I think you highlighted three big areas of focus for biopharma innovation. I think we talked about obesity. We talked about neuro generation. I think the other one was medicines based on nucleic acid. Just can you talk a little bit about where Lilly is here? Why you think Lilly is the right company to compete in this space? And it’s a pretty competitive space overall. So, how do you just envision kind of the Company’s portfolio evolving over time?

Dave Ricks

Yes. I think what we’re trying to say there is how can we grow further from here having all the success. And I think we see obesity as a natural fit with what we do, sort of underlying pathology of diabetes, and we have a lot of strength as well as assets in that space and is — in many ways, sort of the largest unaddressed opportunity in healthcare. 110 million Americans would qualify for these therapies, for instance. 15% of them have diabetes. So, it’s really quite a large opportunity to take out cost to improve people’s lives.

Dementia, we’ve talked a lot about through the years. Of course, we’ve been investing there extensively for a long time, and I think we have a natural position and what we think are leading assets. We still are waiting for that moment where the great asset collides with great data to really flip the field and can cause a big change. But we think we’re set up to do that also with having invested in diagnostics.

Probably the new one is the nucleic acids. And of course, I was talking about mRNA these days, and we watch that space. Our primary focus has been more on what we see as long-term drugs for chronic diseases in siRNA, coupled with some targeted gene-therapy efforts. And we started 3.5 years ago, investing in this and building out a portfolio. And I think we’ve had some impressive results of two clinical stage assets now. 20% of our preclinical portfolio is based on nucleic acid therapeutics.

And if we think about how we make drugs today with amino acids, proteins or atoms in small molecules, we see this as like the natural third step of the industry. Some companies will really run into gene therapy. And I think in compartments where you can really deliver the gene to the right tissue, that’s been successful. It’s been difficult to think about how do you get that to any tissue you want. And then also safety is very important. So that’s been isolated to conditions that are really fatal if unaddressed or otherwise massively debilitating. So, that will need to play out. I suspect it will take more time.

Whereas we’re targeting, of course, mRNA’s proven a great vaccine platform. We’re very focused on siRNA because we see it as a great therapeutics platform for monogenetic diseases that are common and you can treat for six months or three months at a time, and then you can remove the treatment, which might be desirable. But very clean profile and really knock down a bad actor protein. And there’s lots of those in metabolic disease, and there’s lots of those in neuroscience in neurodegenerative disease, and those are natural places for us to want to be.

Chris Schott

Great. Well, I think we’re just about out of time. Dave, as always, I really appreciate the conversation and obviously, best of luck with what seems like a pretty important year for the Company in 2022.

Dave Ricks

Absolutely. Thank you so much. Take care.

Chris Schott

Thanks. Bye, bye.

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