Eli Lilly and Company Price & Performance (LLY)

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Thank you for holding. We look forward to talking with you soon. Please hold the Eli. And we'll be right back with you. Ladies and gentlemen, thank you for standing by and welcome to the Lilly Q4 twenty twenty four Earnings Call. At this time, all participants are on a listen only mode.

Later, we will be conducting a question and answer session. I would now to turn the conference over to your host, Mike Sapar. Senior Vice President of Investor Relations Eli. Mike, please go ahead. Good morning. Thank you for joining us for Ella Lilly and Company's Q4 twenty twenty four earnings call. I'm Mike Savar, Senior Vice President of Investor Relations Eli.

Joining me on today's call are Dave Bricks, Moody's Chair and CEO Doctor. Dan Skravansky Chief Scientific Officer and President of Biliary Immunology Lucas Montarsay, Chief Financial Officer Anne White, President of Lilly Neuroscience Ilya Yuffa, President of Lilly International Jake Van Arden, President of Lilly Oncology and Patrick Johnson, President of Lilly Cardiometabolic Health We're also joined by Mark Keeman, West Hall, and Wei Wang of the Investor Relations team. During the call, we anticipate making projections and forward looking statements based on our current expectations. Our actual results could differ materially due to several factors. Including those listed on Slide four Eli. Additional information concerning factors that could cause actual results differ materially is contained in our latest Form 10 ks and subsequent filings with the SEC. Information we provide about our products and pipeline is for the benefit of the investment community. It is not intended to be promotional and is not sufficient for prescribing decisions. We transition to our prepared remarks, please note that our comments will focus on our non GAAP financial measures.

Now, I'll turn the call over to Dave.

Okay.

Thanks, Mike. 2024 was a productive year for Lilly. We grew our top line, advanced our pipeline and invested in our supply chain. To meet the increasing demand for our medicines. Most importantly, we delivered for patients by bringing life changing medicines to more people around the world. In 2024, full year revenue grew 32% compared to 2023. Exceeding our first time guidance by $4,000,000,000 Revenue grew 45% in the most recent quarter as our recently launched products gained momentum.

Last year, we announced positive Phase three results [indiscernible] We also started Phase three programs for lapidiciran, [indiscernible] Based on positive earlier phase data. We continue to complement our pipeline through acquisitions and collaborations. We acquired Morphex Therapeutics, and announced a collaboration with OpenAI to invent novel antimicrobials. We opened the Lilly Seaport Innovation Center in Boston as a hub for Lilly's genetic medicines efforts.

And announced a new Lilly Gateway lab in The UK to collaborate with European research We advanced our manufacturing agenda announcing investments to expand our footprint in Indiana, in Wisconsin and in Ireland. Since 2020, our commitments to build, expand and acquire manufacturing facilities now total more than $23,000,000,000 we brought innovative new medicines to patients. In 2024, we received regulatory approvals for Kisumla, and a new indication for SEPOUND in OSA.

This progress strengthens our portfolio of new products and enhances our capacity to drive top tier growth and margin expansion. As you can see on Slide five Eli, we continue to make progress against our strategic deliverables. In Q4. Grew 45% and our new products growing by more than 3,100,000,000.0 led by a strong uptake of Manjaro and Zepow.

Q4 also saw solid performance across oncology immunology, and neuroscience. Our business excluding 20% in the quarter compared to Q4 twenty twenty three, excluding the one time benefits of business development, Since our last earnings call, we achieved several key pipeline milestones. We received approval for a new indication of zept bound at Onbo. We submitted imlimastrant for metastatic breast cancer, tirzepatide for heart failure.

We also announced positive Phase III results where ZepBound demonstrated a 47% greater relative weight loss compared to Wegovy. We strengthened our overall supply position and delivered on production target to make 1.5 times the saleable doses of INCREDA medicines in the second half of twenty twenty four compared to the second half of 'twenty three. With more patients using Lilly Direct, the uptake of single use set bound vials increased. We had no wholesaler back orders as we closed 2024.

And wholesalers have been fulfilling orders We continue to augment our internal pipeline with external innovation.

Announcing plans to acquire Scorpion Therapeutics mutant selective PI3KA inhibitor program. This transaction will add a clinical stage breast cancer asset to our oncology pipeline.

And lastly, we returned $3,000,000,000 to shareholders via dividends and share repurchase addition to that, we announced at the end of the year a $15,000,000,000 share repurchase program and the seventh consecutive 15% increase in our quarterly dividend. On Slide six, you'll see a full list of key events our Q3 call, including the milestones I mentioned here, and several other updates. Now I'd like to turn the call over to Lucas to review our Q4 and 2024 full year results and provide details on the 2025 guidance. Thanks, Dave. Slide seven summarizes our financial performance in the fourth quarter and Eli eight for the full year.

As Dave mentioned, our revenue grew 45% in Q4 primarily driven by Monjaro and ZEPPA. Performance of our non incretive portfolio was also strong as revenue grew 20% excluding one time payments related to business development.

Gross margin as a percentage of revenue increased to 83.2% in Q4 primarily impacted by favorable product mix. R and D expenses increased 18% from continued investment in our early and late stage portfolio, In total, we started eight new Phase three programs in 2024 and advanced several new assets Marketing, selling and administrative expenses increased 26% mainly driven by promotional efforts to support ongoing and future launches. This includes U. S. Direct to consumer advertising on Cepon and Moncharo. And U. S. Launch activities for Quesanla and Atlas. We also increased our commercial investment outside The U. S. To support international launches of Monjaro. Operating income more than double increasing to $5,600,000,000 driven by higher revenue from new products. The effective tax rate was 13.2%, We delivered earnings per share of $5.32 inclusive of $0.19 of acquired IPR and D charges.

This compares to $2.49 in Q4 twenty twenty three that includes $0.62 of acquired IP R and D. [indiscernible] On Slide nine Eli, we quantify the effect of price, rate and volume on revenue growth. U. S. Revenue increased 40% in Q4, driven by robust volume growth of 45%. SEBAN and MONTARO were again the largest growth contributors, partially offset by declines in Trulicity Eli. Realized prices decreased 5% in The U. S. Due to favorable changes to estimate for rebates and accounts related to Moncharo in Q4 twenty twenty three. Europe revenue grew 82% in constant currency. We continue to be pleased with the uptake of Monjaro and have now launched in all major European markets.

In addition to growth from Monjaro, European revenue benefited from one time payment associated with the amendment of our alliance with Boehringer Ingatheim.

This was recorded in Jardiance revenue in Q4.

Excluding this one time payment, Europe revenue grew 61% German revenue grew 27% in constant currency. Volume growth was driven by Monjaro, Bombard, Jardiance and Berseria. In China, revenue increased 13% in constant currency. TABIT and BERCEENIO drove volume growth. Monjaro was recently made available in China and will proceed with a limited launch as supply becomes available. We expect modest initial Monjaro sales in China due to supply limitations, a more meaningful contribution in the second half of twenty twenty five. Revenue in the rest of the world grew 46% in constant currency. Driven by volume growth of Monjaro and 10 provides an update on our performance of new and growth products. New products more than doubled in Q4 to $5,600,000,000 led by global Bonjaro sales of $3,500,000,000 and U. S. Sebum sales of $1,900,000,000 U. S. Seppant performance is going very well. We began promotional activities this quarter we continue to see strong uptake. In Q4, SEPAN became the market leader in the anti obesity market as measured by new prescriptions.

As shown on IL-eleven, We Combined U. S. In credit Eli analog market grew 45% compared to Q4 twenty twenty three. We increased three percentage points in share of market in Q4 twenty twenty four. TRYPIERCA worldwide revenue was $114,000,000 adding another solid quarter of sequential revenue growth. Worldwide on board revenue increased to $57,000,000 With the recent FDA approval in Crohn's disease, look to drive broader use in an additional patient population. The Kesanda launch is progressing well prescriptions in The U. S. Have been steadily increasing. While it is early we saw positive momentum across key indications key indicators including volume of diagnostic ordered. Access in priority integrated health systems, coverage by Medicare and commercial plans, a number of infusion sites placing orders. We are encouraged by the launch of EPLIS in The U. S. We saw early positive receptivity and high levels of physician engagement.

In addition, we expect commercial access with two of the largest Pharma benefit managers beginning in March. [indiscernible] commercial activities to drive new patient start. Growth products also performed well as revenue increased 13% compared to Q4 twenty twenty three. Fresenius growth trajectory continued as U. S. Total prescription grew by 15%. In addition to strong execution in the early breast cancer indication, Arsenio revenue benefited from increased U. S. Wholesaler stock at year end. Worldwide toolicited revenue declined 25% driven by Monjaro switches and to a lesser extent lower realized prices. On Slide 12, we provide an update on capital allocation. Moving to Slide thirteen and fourteen, I will discuss our 2025 financial guidance. As previously shared, expect 2025 revenue to be between $58,000,000 and $61,000,000 midpoint represents approximately 32% growth compared to 2024. We anticipate continued U. S. In creating class growth. Consistent with the trajectory of total prescriptions seen in 2024. We expect to launch MONTARIO in new markets outside The U. S. And Europe throughout the year. Monjjar International revenue will contribute to overall performance more significantly in the second part of twenty twenty five. Given the uptick of newer inbrittines, we expect to elicit volume to continue declining as fewer new patients are starting on Trulicity.

We expect oncology, neuroscience and immunology to also grow revenue in 2025, [indiscernible] At the portfolio level, we anticipate foreign exchange to be a headwind as the dollar has strengthened relative to other currencies. In addition, we forecast overall net prices to decline by mid to in percentage terms, including U. S. Part D changes. We continue expanding our manufacturing capacity and estimate to produce 1.6x the amount of incretin soluble doses during the first half of twenty twenty five, compared to the first half of twenty twenty four. Our facility in Concord is anticipated to begin shipping medicines this year. And we plan to make continued progress on expanding our manufacturing network. Our expected ratio of gross margin less OpEx divided by revenue is expected to be between 41.543.5%. At the midpoint, this reflects approximately three forty basis points of margin expansion compared to 2024. [indiscernible] In SG and A, we will continue to invest behind our new launches, including direct to consumer effort in The U. S. To drive new patient activation. In addition, we plan to increase investment outside The U. S. To support the launch of of Monjaro in new and existing markets. In R and D, we plan to accelerate our investment in early and late phase activities.

As Dan will share later, we started eight new Phase three programs in 2024 anticipate that investment in those programs will ramp as the studies enroll patients. We also plan to initiate new Phase three programs in 2025. While we keep a high bar for what we advance into clinical dial development, we expect to scale our investment in R and D this year. Other expenses is expected to be $600 to $700,000,000 driven by interest expense. We estimate our effective tax rate to be approximately 16 Earnings per share or EPS is a expected to be $22.5 and $24 on a non GAAP basis. This doesn't include a forecast for charges related to IP R and D. Now I will turn the call over to Dan to highlight our progress in R and D to provide an overview of potential key events we expect in 2025. Thanks, Lucas.

Lilly R and D had another productive quarter.

I'll cover pipeline progress in Q4, then the 2024 key events, and finally provide potential key events for 2025. Since our last earnings call, two new indications were approved in The U. S. ZEP bound for obstructive sleep apnea in adults with obesity and AMBO for moderate to severe Crohn's disease. Both approvals are important milestones and market expansion in the number of patients who can benefit from each of these medicines.

Moving to regulatory submissions, we completed submissions in The U. S. And EU for tirzepatide for heart failure, and global submissions for immunoestrange for metastatic breast cancer, and for J perka with the 21 data. I'm also pleased to share that we've submitted an update to the Qasumla U. S. Label to include the dosing modification data from TRYLE BLAZER L6. And the FDA has granted the submission a priority review.

In our Phase three portfolio, we initiated a new program for Orforglifron in obstructive sleep apnea This program includes two studies under the same master protocol to evaluate if people with obstructive sleep apnea and obesity can benefit from MorphoSlyphron. After ZEPHOUND was approved in The U. S. As the first and only prescription medicine for obstructive sleep apnea, We're excited to explore if an oral GLP-one can also deliver benefit in this disease.

Earlier in the pipeline, we advanced a second oral GLP-one into Phase two in obesity an advanced altracobart into Phase II for ulcerative colitis.

Three Phase two assets and one Phase one asset have been discontinued based on clinical readouts.

In Q4, we also began Phase one studies for four new molecules, one in each of our therapeutic areas.

Q4 capped off a productive year of advancing new medicines In total, over the year, we started eight new Phase three programs, We disclosed Phase three data from 21 trials including 17 major publications in top tier medical journals.

We received regulatory approvals for two new medicines, [indiscernible] well as many new indications around the world. And we added 14 new programs to the early phase pipeline. On Slide 16, we detail these outcomes for our twenty twenty four milestones.

I'm pleased that nearly all of our anticipated milestones came to fruition positively in 2024.

Turning our focus to 2025, Slide 17 shows key R and D milestones we expect this year.

Starting with our late stage portfolio, we expect to initiate two new Phase three programs this year.

First in oncology, we'll begin an adjuvant non small cell lung cancer Phase III program for our KRAS G12C inhibitor olamoracib, building on its ability to be administered with immunotherapy. Current metastatic program is progressing well.

And we've aligned with the FDA on our Phase three dose of the Project Optimus pathway.

We shared a clinical update at the World Conference on Lung Cancer last fall.

And we are encouraged by the ability to safely combine olamorast with other agents. Our new Phase three program will focus on moving to an earlier setting and combining with existing approved agents in both resectable and unresectable KOSG12C mutant lung cancer, to prevent cancer from recurring. The second program is in cardiometabolic health. Where we plan to initiate a Phase three trial for Orfel Glipron in hypertension. Adding to the ongoing trials in Type two diabetes, Obesity and obstructive sleep apnea I'm excited that this year we're looking forward to reading out multiple Orfordcliffron We expect to see data from up to five studies in Type two diabetes and two studies in OVEZIP.

Our goal is to generate efficacy, safety and tolerability profile that is similar to that of an injectable single acting GLP-one but through an orally available medicine. The first Orfagliflozin Phase III trial to readout will be ACHIEVE-one, which is a forty week study in patients with type two diabetes.

These patients have a baseline hemoglobin A1c between 79.5% and a body mass index of 23 or greater. The trial utilizes six escalating doses in four week increments to a maximum dose of thirty six milligrams.

Based on prior studies of ophroglycerin as well as other GLP-one therapies, we expect weight loss in people with diabetes to be significantly less than in people living with obesity who do not have diabetes. We anticipate ACHEVE-one will read out in Q2 this year followed by up to four additional Type two diabetes trials in the second half of twenty twenty five, and a potential submission for this indication in 2026.

The Orphagliflopharma Phase III trials in people with obesity ATTIN1 and ATTIN2 are expected to readout in Q3 of this year.

These trials will form the basis of our first Orphor Glipron regulatory submissions will be for the treatment of obesity and we expect to occur late in 2025.

This year, we also expect data from the tirzepatide cardiovascular outcome study surpass CBOT.

Of course, this is an event based trial and the timeline dependent on the accrual of cardiovascular events. We anticipate data in Q3. While designed to measure both non inferiority and superiority, compared to Trulicity, the positive outcome in either would demonstrate that tirzepatide reduces the risk of cardiovascular outcomes.

And would support a labeled indication.

Late this year, we expect to see the first data from a triple acting incretin read at TRUITIDE, which combines GLP-one, GIP and glucagon We believe this potential new medicine can deliver even more weight loss than tirzepatide. And could potentially provide additional health benefits. The initial study to readout, Triumph or is a sixty eight week study in patients with osteoarthritis of the knees.

Who have a body mass index of twenty seven or greater.

We'll also see multiple additional J perka data sets this year. Physician feedback is very positive on experience with J perka in the currently approved indication And we hope that generating data in earlier lines of therapy will enable broader use within CLL and MCL.

We could see data from additional trials in the first line or BTK naive settings this year. Moving to neurodegeneration, we don't have a key event listed in 2025 for tonenumab, we're closely watching the preclinical Alzheimer's disease study Trailblazer ALS3. This trial screened patients with a blood based diagnostic and utilized a fixed duration of treatment with lenetimab. By moving earlier in disease progression, the goal is to reduce the risks of developing any symptoms of Alzheimer's disease While the current primary completion is projected for 2027, the study will readout when the target number of progression events are accrued. A new focus area first in 2025 will be to study potential new application of encucion biology across diseases in neuroscience and immunology. With the pipeline of inkertons in clinical development, and deep scientific expertise in this space, Lilly is well positioned to match the biologic properties of specific molecules to the desired indications being studied.

We plan to start several clinical trials assessing potential benefits of our incretins in areas that could include brain health, substance use disorder, pain, neuropsychiatry, and inflammation.

We'll be prepared to move rapidly into Phase III trials based on clinical data. And where our conviction is high. Lastly, we expect a number of important regulatory submissions in 2025, including Orforgliperon for obesity as I detailed insulin FSR alpha for type two diabetes, tirzepatide for cardiovascular outcomes, and multiple potential data sets for J perka. 2025 will be another exciting year for Lilly R and D. Now I'll turn the call back to Dave for some closing remarks. Yes. Thanks Dan. So we had a strong financial performance in Q4 and throughout 2024.

We finished $4,000,000,000 above our first time revenue guide and $4 per share above our first time EPS guide.

When taking IPRD or charges into account. The encrypting market continues to grow rapidly.

And Manjaro and Zepbound are both gaining share of market.

We believe both products still very early in their launch cycle. In addition, our oncology, immunology and neuroscience therapeutic areas continue to progress.

Launching new medicines, and delivering strong revenue growth. We have an exciting outlook for growth in 2025 as well. [indiscernible] new manufacturing capacities, new access opportunities, [indiscernible] Are all tailwinds to our financial performance. We made significant advances across our pipeline in 2024 and have several exciting readouts, which Dan just highlighted expected throughout 2025.

So now let me turn the call over to Mike to moderate our Q and A session. Thanks, Dave. We'd like to take questions from as many callers as possible and conclude our call on time. So to that end, consistent with prior quarters, we will respond to one question per caller. We will end at 11AM. If you have more than one question, you may reenter the queue. And we will get to your question if time allows. Paul, please provide the instructions for the Q and A and we're ready to take the first caller.

Thank you. At this time, we'll be conducting a question and answer session. And the first question today is coming from Tim Anderson from Bank of America. Tim, your line is live.

Thanks so much.

Just a question on the guidance twenty twenty five guidance. So I think everyone knows the prescription uptake trend didn't show acceleration, hasn't shown it yet.

That's been viewed by some as a concern. Does the twenty twenty five guidance require acceleration? Or can you get their scripts just continue on the same trajectory and the slope of that line doesn't change. When I do back and envelope math, it seems like that's frankly all that needs to occur And one of your slides suggests that might be the right way to think about it as well. But can you just confirm?

Great. Thanks Tim for the question. We'll go to Lucas to talk about the guidance Yes. You mentioned in my notes that what we expect to see Tim is a continuation of basically the total prescription growth that we have seen in 2024. So that's what we built in our 2025 guide.

To the market. Great. Next question please. The next question is coming from Terence Flynn from Morgan Stanley. Terence, your line is live.

Great. Thanks so much. I was just wondering if you could maybe elaborate on your expectations for zappedbound payer dynamics and access this year, particularly the impact from the OSA label? I know you've also filed for heart failure and how you expect that to play out over the course of the year? And then anything on next steps on the compounding litigation that we should be focused on? Thank you.

Dangerously close to a two part question there, Terrence. Eli go to Patrick to talk about access and then come back to Dave to make a quick comment about compounding. Thank you very much.

We look at the commercial access, it remains strong. We have 87% coverage in the commercial space still. And of course, the employer opt in is a second step of high importance made progress in 2024, and we expect in terms of employer in that we're low for 50% today. OSA remains an opportunity for us to gain at also in the Medicare segment. And CMS confirmed recently that they will reimburse OSA if Plan D plans decides to list it. And they have one hundred and eighty days to make that decision from the FDA approval we're working with plans right now and we anticipate to get some Medicare coverage by the second half of this year. And similarly, we'll say, if also an opportunity for us to get more Medicaid states signed in. We expect FTEF, when NIIF approved, to have similar role as I would say, an access opportunity in particular in Medicare and Medicaid.

Yes. So regarding compounding, I think our position has been pretty clear. We've been in supply since August Eli FDA took us off the list formally.

Later in Q4. Of course, the compounding associations are suing to delay that.

We oppose that. I've been joined that suit. Think the next day coming up is February 18. The FDA said that's when you need to stop one form of compounding Our position has been clear all along. We don't think there's a place for this because we have full supply and there's no reason to have non approved kind of illegitimate product out there. So of course, new sheriff in town, new government and court case pending. So don't know the outcome of all that. But that all said, I mean, I think our business is growing nicely. In Q4 Eli we can see that in prescription trends early this year. It's just an unsafe practice that shouldn't exist and long term probably isn't great for innovators. So we'd like to move on from this and hope that's what the courts and the government decide to do.

Thanks, David Passcher. Next caller please. The next question is coming from Courtney Breen from Bernstein.

Courtney, your line is live.

Hi, everyone. Thanks for taking the call today.

I just wanted to zoom into all for GLP-one specifically, and I think you made took the chance to make the point about diabetes and diabetes population and their weight loss. Can you just talk a little bit more about kind of the potential positioning, particularly in the context of kind of that single injectable GLP one kind of anticipated efficacy that you're guiding to? Great. Thanks, Courtney. We'll go to Dan to talk about the right comp for both Livron.

Yes, sure. I'll start on the efficacy expectations and then maybe Patrick can talk about the market positioning here. So you're right, it's a single GLP-one and we take pains to mention that because we're not expecting those kinds of efficacy or tolerability.

But that we see with tirzepatide, which is a dual acting agent. Still as you know, monotherapy with GLP-one is providing important benefits to many patients. And so we're setting our sights there. This is a first study in type two diabetes patients where as I noted weight loss is typically quite a bit lower than see in people without type two diabetes. So we sort of indexed on the efficacy that we've seen in the past with Ozempic and Eli get that data soon and excited Patrick? From a positioning perspective, we Eli the idea of having an oral with a an Injectable GLP-one Diet Efficacy And There Is A Big Portion Of Patients That Are Have Needed Fear. It's Estimated In The U. S. To be twenty percent to twenty five percent and also a group of patients that doesn't necessarily need the amount of weight loss or HbA1c reduction as tirzepatide generates. There might be an opportunity in maintenance space as well. But lastly and very importantly, it's an opportunity to scale markets outside The U. S. Taking into account that we don't have a need for refrigeration.

Great. Thanks, Patrick and Dan. Next caller please. The next question is coming from Chris Schott from JPMorgan.

Chris, your line is live.

Great. Thanks so much. Just another orfaglifron question. You've now launched a pretty wide range of studies, I guess, say hypertension, beyond the initial obesity and type two diabetes studies. Can you just elaborate a little bit more on what gives you confidence in running such a wide range of programs without having seen those initial readouts particularly maybe some of the tolerability profiles with the drugs titration etcetera. I'm just trying to think how you balance kind of the risk taking there with the confidence in the asset you have right now?

Great. Thanks, Chris. I would like to answer that question?

Yes.

Thanks, Chris.

It's a smart question. Of course, going into Phase three with any drug, particularly a small molecule such as Orphaglippron, the biggest risk is safety. And I think as these trials proceed even though we're not seeing the safety data we grow more confident in the overall safety profile of the drug because trials continue uninterrupted. Of course, we won't know for sure until we get that first data readout and subsequent data readouts. But it's correct that we grow more and more confident in success of this molecule as each day passes. As for specifics around tolerability and titration and discontinuations. Those don't really factor in to our thinking. We haven't had a look at unblinded data for any of those things. So we can't make assumptions on that yet.

Great.

The next question will be from Jeff Meacham from Citibank. Jeff, your line is live.

Hey, guys. Thanks for taking the question.

Just had one on on commercial tirzepatide in bigger settings like diabetes prevention or if the SURPASS CVOT is successful, would these be a tipping point on broader reimbursement or excess mean, it's clear you have a benefit there, but I wasn't sure if commercial payers or Medicare are looking for yet even more data to support kind of risk benefit.

Thank you.

Great. Thanks, Jeff. We'll go to Patrick to talk about the broader landscape there. Thank you very much, Jeff. I think for someone to one extension, definitely defined as game changing at the provider level and we are in discussions of both with regulatory agencies, but there is no press for Type two prevention as an indication. But the data itself, I think we will utilize really drive increased employer opt in, seeing the benefits of outcome studies and treatment of people with pre diabetes and obesity Eli. Maybe just a broader point, which we've said before, I think a lot of investors are looking for some single event that will trigger the broad reimbursement or not. And I don't think we've ever really thought of that way, but rather an accumulation and sort of weight of everything.

That will grow reimbursement steadily over time. And I think that's actually what we've seen since we launched Upbound last year. U. S. Commercial insurance picking up several points during the year. And even ex U. S. Now we have U. K. Reimbursement, etcetera. But different payers will make different decisions at different times. And I think the data sets you mentioned will be some of the more compelling to create moves But still then the way affordability and budget constraints, etcetera, All said, by the time we get to the end of the decade, it's hard to imagine we are not using obesity medications to prevent what is the precursor condition to so many chronic diseases And already the health economics are pretty compelling There'll be more data coming beyond that. So long term, we remain really really bullish on this whole category being reimbursed like we expect to reimburse all other medications. Just a schedule for that going to be more slow and steady, I would say, to as you model expectations on a global scale and in The U. S. As well because the diversity Great. Thanks David and Patrick. Next question please. The next question will be from Seamus Fernandez from Guggenheim Securities.

Seamus, your line is live.

Hi. This is Colleen on for Seamus. Thanks for taking our question. We just wanted to ask on the sustainability of operating margin expansions. Looking at some of the longer term longer term forecasting from sell side consensus, we're seeing estimates nearing 50% by the end of the decade. Do you view this as realistic? Or how are you thinking about the balance between the margins and then also ensuring you're not under investigating on the pipeline? [indiscernible] Great. Thanks for the question, Collin. I'll go to Lucas to talk about long term operating margin philosophy.

Well, we are very pleased with the results that we seen in 2024 and Q4, and we provided a guidance for 2025 that is a continuation of that margin expansion with I mentioned three forty basis points expansion in 2025. Thinking more long term, our view is how we continue to drive growth in a sustainable manner. And in order to do so, we believe that reinvestment into the business in particular in R and D to drive that innovation and growth in the future is critical success factor for our business. So from that perspective, we mentioned before that we believe that getting into high 40s or 50% is not actually a good way to drive that sustainable growth into the future. So what we are seeing now on that low 40s is in particular at this time, the right basically finance that we have in terms of investment into the Bay.

Into the business and also the returns that we generate as well.

Great. Thanks, Lucas. Next question please. The next question will be from Evan Seagerman from BMO Capital Markets.

Evan, your line is live. Hi there. This is Connor McKay on for Evan. Thanks for taking our question. Given some of the slower launches we've seen from peers in the Alzheimer's space, can you maybe talk a bit about the lessons you've taken from those and then as well as sort of your experience early days in the Qsymia launch. Thank you.

Great. Thanks Connor for the question. We'll go to Anne to talk about Kusumwa.

Thanks so much for the question about Qasemla. And I'll tell you, we are pleased with our momentum. So so far. What our system our team is focused on really is system readiness and growth. That's significant area of opportunity in the space. So we're partnering with healthcare providers to scale and reach more patients. As far as how it's going so far, Lucas mentioned key indicators that we're watching. To date, we've achieved P and T approvals of over 80% in our key accounts, We have over 800 prescribers. And then in important leading indicator is the diagnostics front. And those results also continue to be encouraging. AMBAV use is more than doubling in the last year and the use of blood diagnostics grows significantly each month as well. The true challenge here is the systems health care systems readiness and I think most critically the capacity to detect and diagnose patients And so we have a number of solutions that we're working on with the healthcare providers to help them increase that capacity, increase the throughput for patients. A lot of educational series as well on how to quickly diagnose and treat these patients. Quarterly, I think we're hearing a lot of enthusiasm about the PRO5 CASEMMA and that actually helps with these capacity constraints, the once monthly infusions, the ability to stop dosing once BLAST is cleared, all of those positions have told us are going to help with some of these capacity constraints.

So it's been a strong start so far, we've learned lessons from the first launch that went out there and applying that learning to what we're doing now. But it's been really positive so far in the terms of the level of support and collaboration that Lilly has been able to bring with her expertise in the field and our long relationships with these customers.

Great. The next question will be from Umer Raffat from Evercore.

Umer, your line is live.

Hi guys. Thanks for taking my question. It's certainly very encouraging to see the [indiscernible] But there's one trial in particular I noticed has not been initiated or may not be in the plans, which is an outcomes trial. I'm just curious what's the thought process behind that? Thank you.

Great. Thanks, Umer, for the question. We'll go to Dan to talk about [indiscernible] Yes. Thanks, Amari. Of course, we're trying to cover a broad landscape of indications here that we think would be important and fit with the advantage an oral medication has sort of primary care broad use kinds of applications being prioritized. Outcome setting is an interesting idea. The challenges here in maintaining patients on placebo make it more and more difficult to do those kinds of studies in The U. S. But it's certainly an idea that we're exploring around the world and have more thinking to come in the future.

Great. Thank you, Dan. Next question please. The next question will be from Steve Scala from TD Cowen.

Steve, your line is live.

Thank you so much. I apologize in advance for this question, but over the past six to nine months, there has been a consistent cadence of data points questioning the size of the addressable and accessible obesity market none of which are news, but include slowing prescription trends, Lilly meeting demand at least a year early, Lilly instituting DTC and extending copay cards despite struggling to meet demand, Lilly launching in OUS markets despite struggling to meet U. S. Demand, and significant stocking fluctuations and challenges and guiding.

So taken collectively, these points are concerning. I think you will say that they all relate to the unprecedented size of the market and and meeting its demand, but can you state that there has not been any conversations within Lilly questioning whether we are all significantly over our skis on this market and that the manufacturing build out may simply be too aggressive. Thank you. Great. Steve, thanks for the apology and the question. I'll go to Dave for that one.

Steve, I think you've been calling into our calls group.

Most of my career. I've never had the apology upfront, so I appreciate that. I know why you're asking it. And I think the perspective we have is that it's early days on a very, very large opportunity. Is turbulence. I'll own that. Always seek to put projections out that we can hit with confidence but that are also within the range of possibilities And in the back half of that year, last year, we fell short of that. But everything we've said is true and we continue to believe it that this is a market with hundreds of millions of people globally. That there is a unique thing here and that we can both prevent a large portion of chronic disease with obesity drugs and last year, we saw proof points on that from Lilly and our competitor. That's not just weight loss, it translates into chronic disease outcomes. You'll hear and see more of that And people love taking these drugs. We know that because when we run out, which we did last year, they get very angry with us. And so I have been a person who represents to the Board of the CapEx decisions, have zero doubt still more building to do that the capacity we put in the ground so far is not sufficient to meet global demand.

You'll hear more about that from us Of course, as highlighting on this call, we're getting close to think, a relief valve on that, which is the idea that you can have an oral which is scalable a way that injectable systems just aren't really test the question legitimately what is the edge of the demand curve? But we don't think we're close to it right now. We're still gaining promotion and gating launches globally. That's a different thing. And we're building facilities as fast as we can to match up those two things. What we can make and what we can sell. And although we're supplying Eli U. S. Market, well right now, we'll need to do more.

And I'm pretty confident in that. So hopefully that gives you some color on the mindset here and wouldn't overread the turbulence and prediction challenges we have. But long term, we're very bullish and you'll see us act according to that belief. Thank you, Dave.

Next question please. The next question will be from Mohit Bansal from Wells Fargo.

Mohit, your line is live.

Great. Thank you very much for taking my question. And And I have a question regarding sleep apnea. Now that you have sleep apnea on Zepo on label, How have the [indiscernible] The discussions with the prescribers as well as peers have gone so far. The one pushback we hear is that these patients are often treated by sleep specialists and there is a there's general shortage of those specialists here. So could you talk a little bit about the call points and then how you're thinking about this? Great. Thanks, Mohit. We'll go to Patrick for the question on sleep apnea.

What the discussions are like with some of the prescribers and the initial experience so far. [indiscernible] Yes, you're correct. It's the first pharmacological treatment ever approved for obstructive sleep apnea. So there is a lot of lifting on our side and we will approach that as we are approaching any new disease area partnering with advocacy organization, healthcare providers and massive efforts in terms of medical education. We expect this to go beyond the sleep specialist, but of course, we are starting our efforts with the sleep specialist community. And I think that's been very well received so far. And we are meeting with them regularly, conducting speakers trainings, but with the aim to move to primary care, which is a necessity. This is also a patient population, but to a large extent remains undiagnosed. So primary care efforts are going to be required. Great. Thank you, Patrick. Next caller please.

The next question will be from Dave Risinger from Leerink Partners. Dave, your line is live.

Thanks very much. So my inquiry related questions have been asked. I wanted to just pivot to the long acting relaxant candidate FOLEN RELAXAN. And so the company had advanced it into a CKD trial in the fourth quarter, but then recently canceled both the heart failure and CKD programs Dan, I'm hoping you could provide some more color on what drove the action plus how you now view the long acting relaxin mechanism in including potential for future development in other cardiopulmonary diseases?

Great. Thanks, Dave. We'll go to Dan to talk about the full and relaxing program. Sure.

Thank you.

Was disappointed with the results from the Phase two trial for sure.

Relaxin is an interesting mechanism think, sort of validated by normal human physiology during pregnancy. But unfortunately, the results that we got in this trial didn't support proceeding with this molecule.

I read that as speaking to the mechanism, but rather than the molecule. But I know others are seeing this mechanism and I wish some success where we didn't have it. So Thank you, Dan. Next question please.

The next question will be from Akash Tewari from Jefferies. Akash, your line is live.

Thanks so much. So at JPMorgan, your team mentioned you expect GLP-one price to be relatively stable in 2025. You implying that while you'll give additional discounts to the channel to improve access, that will be offset by improved adherence or is it more Lilly's reached a steady state on discounts at least until semaglutide gets put under IRA negotiation. 2026.

Thanks. All right. Thanks, Akash. We'll go to Lucas to talk about GLP-one price insurance.

Thanks for the question. In terms of the pricing trends, that I alluded to in the JPMorgan conference and getting into 2025, First, we talk about the Q4 and into 2025, what we mentioned basically is a continuation period in 2023 an uncovered copper that basically created quite a lot of noise on the year on year comparison. We talk about basically adjusting by that There's still single digit erosion on our pricing trends and that is the same trends that I annulled that will continue into 2025. In terms of some of the dynamics on the access side, I don't know if you want to comment anything, Patrick, on your side.

I think we have really good access on the Mojave side. Over 90% in commercial and Part D. I've already covered the commercial space for a set down. We expect that to continue to improve in 2025 as well. In terms of adherence, I think we just need to reflect on the dynamics that we have experienced in this market, partly due to supply constraints constraints. But we are encouraged with what we see on Monjaro for patients that started in Q2 twenty twenty three. We actually see a longer adherence with Mondialo than we do with both Trulicity and Endocepik. And as Dave referred to earlier in terms of set bound, we expect adherence to be long here based upon the fast and experiences that consumers have.

Great.

Thank you, Patrick.

Thank you, Lucas.

Next caller please. The next question will be from Alexandria Hammond from Wolfe Research.

Alexandria, your line is live.

Thanks for taking the question.

With the Row partnership, how does Lilly envision this relationship evolving?

A follow-up, can you help frame the opportunity associated with and how is it expected to shift over time?

Great. Thanks, Alex. We'll go to Patrick talk about the Zapp bound vials and Ralph. Yes. We launched the self pay system with really direct back in late August, and we are pleased with the performance so far terms of TRx or Z bound, it's still low to mid single digit But in terms of new therapy starts, it's actually in the low teens. So a very good start. The partnership with Ro is not a financial or a market partnership at all. It's just the opportunity for eligible patients to the option of using the Row platform to purchase FDA approved approved authentic medicines. And it's really about connecting our software to really direct self pay pharmacy. We will lean into additional partnerships along those lines with partners that really want to ensure that the patients get access to authentic and FDA approved medicines.

Thank you, Patrick. Next caller please. The next question will be from Chris Shibutani from Goldman Sachs.

Chris, your line is live. [indiscernible] Apologies, I was on mute. To the Orphodlifron launch, you previously stated that you're doing manufacturing scale up to be prepared for a full launch at the potential approval. Is embedded in that assumption? Can you talk a little bit about the approach for timing of Orfaglifron in terms of diabetes versus obesity? Will it be simultaneous or one before the other? U. S. Versus international, we certainly saw the injectable business do a prioritized U. S. Launch. And then should we also expect a similar kind of new product launch cadence with patient assistance programs and the implementation of channel tools like Lillie Direct, should all those be at the outset? Thanks.

Thanks, Chris, for the very detailed question. We'll go to Dave to talk a bit about the Orphan launch Okay.

Waiting for all allowance. At some point. Yes. Look, the goal here with Orthoore because it's using different reduction systems that are available to us. It's a long cycle of processing to get a commercial product. But that's very predictable and we have access to those platforms inside and outside the company.

So we are building for a full launch in the normal pharma sense. And here pointing out maybe the flip of the earlier question about demand. We have had to gate all these things to make sure we carefully match supply and demand for the injectables as competitor. We do not plan for that with Oraphor. So we will plan to launch or submit and have approvals and then launch in a full sense including activities you're used to seeing for primary care products like sampling, copay, full formulary access and globalization.

Of or for Glupran as rapidly as possible. And we're building capacities to do that hopefully that will begin in early twenty twenty six. I think as Dan mentioned, the first complete package for submission in The U. S. Will be obesity. But we expect diabetes to shortly follow and then these other indications that have been discussed today.

Hope that answers the question.

Great. Thanks, Dave. Next question please. The next question will be from James Hsin from Deutsche Bank.

James, your line is live.

Thank you. Good morning. Thanks for the question.

Another one for DAN or FOLIPON.

Appreciate the earlier comments on indexing Orfaglifron's efficacy to sema.

And the Phase three titration schedule sorry, excuse me, But can you go over how this titration schedule may impact the Phase two weight loss, A1c and safety results published in Lancet and New England Journal? Great. Thanks, James, for the question. Eli go to Dan to talk more about Orfel.

Yes. It's a good question, James, and reminiscent of the theme we had when the tirzepatide trials were going. It was a similar transition from a faster titration in Phase two to a more gradual titration in Phase three.

Think that strategy served us well in the case of tirzepatide. I'm hopeful for the same kind of outcomes in ORF glipron, which is to say that it mitigated tolerability concerns. So the GI side effects that are just known to this class seem to be significantly mitigated by slower titration And in longer studies, and the first study, the readout is not the longest study we have here, In longer studies, we were still able to obtain sort of plateau kind of efficacy that we expect for the mechanism. So that's what we're hoping for or for a better tolerability and similar efficacy as Phase two.

Thank you, Dan. Next question please. Next question will be from Truong Hui from UBS.

Truong, your line is live. So for the first ORFO study on diabetes, thank you you so much for the level set there. I have a similar question on retagutide.

We noticed in your slides there was a Phase three readout in obesity and overweight patients with osteoarthritis of the knee.

As a potential event for 25. So one of the primary endpoints is weight loss. Could that be a reasonable comp for the obesity studies in 2026? Unlike what you've flagged with ortho and diabetes Eli? Thanks for the question, Tron. We'll go to Dan to talk about Renata Triton.

Yes. I'm glad you asked the question. It's super smart question. You're probably noticing that the YOSTARO Spanish trial is shorter than any of the other ones. We've commented before that retichutide is going to need the longer trials. Most of ours are are eighty week plus trials.

To reach maximal efficacy. This is a sixty eight week trial. I think we also know at least by analogy the semi trials that looked at osteoarthritis and obesity versus a more pure population. That even for similar length studies, there's a demuriation of efficacy in terms of weight loss in the OA population for a number of reasons. Including different baseline demographics, male, female, BMI, etcetera. So I think we know how to extrapolate out from the OA population to the general population, but I don't think you should take the OA population as a point estimate for what will be achieved in a broader obesity population. We should do quite a bit better than that.

Great. Thanks, Dan. Next question please.

The next question will be from Kripa Devarukonda from Truist Securities. Group by Your Line Eli Life.

Great. For taking our question. This is Nicole on for Kripa.

Can we see some BIMA data this year? And do you still see some benefit with a muscle preserving drug? The recent data from VERA showed preservation of lean mass, but no incremental weight loss. Athena, do you expect incremental weight loss or weight neutral but better body composition? Is that you're looking for?

Thanks for the question.

Go to Dan to talk a bit about how we're thinking about the BIMA data.

Yes. Thanks for good question on BIMAGRAMAG. I think our thesis here has been in combination with tirzepatide, that we could get incremental late loss or perhaps a similar weight loss. But as you point out, preservation of what we call lean muscle mass, I think to really show a benefit for combining the two drugs, probably going to either need to see the incremental weight loss or we're going to need to see some real functional benefits to lean mass preservation think just lean mass on its own, we don't really know how to understand that and we've previously noted that we don't see any signs that lean mass changes on tirzepatide or to my knowledge on any incretin are actually adverse in any way.

On the other hand, growing muscle could be a positive in different ways. So we're looking for new positive effects with demagramab beginning of your question, I Eli I didn't come to, which is when do we see the previous Phase two study, which was completed? We haven't been clear on exactly when we'll show that data, but this year is a safe assumption.

Great. Thank you, Dan. I think we have time for one last question. The final question today will be a follow-up from Dave Risinger from Leerink Partners.

Dave, your line is live.

Yes. Thanks very much. I was just hoping you could clarify the comment earlier. I think there was a comment about additional PBM coverage coming in March. I didn't quite catch that. If you could just provide some more color and quantify the potential impact on the opportunity for script trends following that occurring? Thank you.

Let me cover that and then I'll just close. I think, Dave, that was referred to EMGIS is very new in cycle and we do expect two of the three PPMs to cover it and that gets us excited about activating consumers and raising awareness for that brand. Zepat and Madera have full PBM coverage already. So great. Let's conclude it there. Thanks for dialing in everyone and you're interested in that. Today's earnings call and of course in everything about Eli Lilly and Company. If you've got follow-up questions or things we didn't cover in enough detail today in the Q and A, please [indiscernible] everyone have a great day.

Thank you. And ladies and gentlemen, this does conclude our conference for today. This conference will be made available for replay beginning one p.

M. Today running through March 13 at midnight.

You may access the replay system at any time by dialing (800) 332-6854 and entering the access code 443262. International dialers can call (973) 528-0005. Again, those numbers are (800) 332-6854 and 9735280005443 Thank you for your participation. You may now disconnect your lines. [indiscernible]