Good afternoon, everybody. I'm Chris Schott at JP Morgan, and it's my pleasure to be hosting a fireside chat this afternoon with Eli Lilly. Lilly's obviously had a tremendous few years here, and really looking forward to our discussion with Dave Ricks, company's chairman and CEO. So Dave, Happy New Year. Thanks for joining us. I know you're gonna make some opening remarks, and then we'll jump into Q&A from there.
Super. Thanks, Chris. Good to be back. Okay, great. Thank you all for being here, and thanks for that introduction, Chris. I thought I'd give a little bit of a slide presentation, 'cause it's been a while since I did that. 2018, so I'll use that as my reference point backwards. That's also the year that Chris Schott put a buy on Lilly. Turned out to work pretty well. So, you know, really the theme of this is, like, how can we drive continued R&D and innovation excellence at scale? And if, of course, we look at... There's a beautiful safe harbor, by the way, if you want to read it. If you look at the last six years, it's been a pretty sensational run for the company.
During this period of time, revenue has increased, like, 50%, operating income about doubled, and those things don't explain the 653%. We also had a lot of margin expansion, and of course, that's driven by the promise of future growth, driven by the, the pipeline. So I want to talk a little bit about that last issue. The first two are pretty straightforward. If you say, "Well, how did you do that? What changed at R&D at Lilly?" I think there's, like, five major things that maybe differentiates us from other scaled competitors. The first is focus. Given our size, I think we do have a tighter therapeutic focus than most others. I think this gives us advantage in a number of ways. Of course, there's a portfolio effect within each one of these therapeutic areas.
We can recruit and attract expertise in a density that can allow us to make good decisions consistently. And of course, also, we become more of a target for inbound R&D, and we'll talk about that in a second. The second thing is we had a very disciplined and purposeful agenda on speed of pipeline development and preclinical speed. This originated under John Lechleiter, my predecessor, Dan Skovronsky and others led this, but you can see the results here in these time windows. We've literally cut by 50% both the drug development and drug preclinical time. And time is money, time is reward, time is lost opportunity for patients, and it is our belief that that contributes to a great part of our success.
We can start ideas at the same time as others and beat them by years in some cases. You may say, "Well, okay, maybe you sped up, but did you make more mistakes as a result? Did your outcomes diminish in terms of their hit rate?" Actually, the answer is no, the opposite. During the same period of time, we increased our probabilities of success. Our actual success metrics, which I won't show here, rose for both preclinical and clinical during this period of time, which is encouraging as we go forward. I think we also had a consistent discipline to keep investing. This is easy when you're winning. It's harder when you're not.
Of course, we had drugs that fell out during this period of time, but a steady increase in growth occurred at, you know, throughout this period. Then the final thing is we were starting from a pretty low basis on external innovation, and we increased that through the period of time here. You can see that in the acquired in-process R&D spending numbers here. Still a minority for Lilly, but another way to look at it is to look at the total pipeline. The final factor, just to raise, is, I think, our discipline on targets. Lilly is, of course, an old company. We've been around a long time, but I think if you think of us for anything, it might be that we stick on ideas when we think they're good.
I mean, here's a history of the overnight success of incretins, which started with John Eng discovering Exendin-4, which is the famous Gila monster analogue of human GLP-1 in 1996. That led to the creation of Amylin, the biotech company. Lilly partnered with Amylin. We launched the first GLP-1 in the United States in 2005, a twice-daily injectable with modest efficacy. And then we kept working. And you can see there in 2010, really the first non-human data, this in vitro, I believe, as it relates to the synergistic effect of GIP and GLP. So five years after the first GLP launched and several years before Trulicity even launched our once-weekly, which then happened in 2014.
In 2017, this chart, which is small here, but shows Tirzepatide, the single molecule with dual-action GIP/GLP, which was worked on back from 2010, with its first Phase I data. I remember when Dan called me that day when he saw the data. People ask, "When did you know Tirzepatide was gonna be big?" The answer is that day. And we chased that one hard, put our head down, and got to market in about five years. Once again, demonstrating the speed, speed to market. And of course, we're not done yet. Launched Mounjaro and Zepbound, we know about that.
We have an exciting triple-acting agonist in Phase III now, retatrutide, which promises to perhaps exceed 25% weight loss, along with an oral program and six other clinical- stage assets in weight loss and obesity, and their manifestations and other chronic diseases. So persistence over time. I think it's a different. We're not chasing fads, we're chasing science, and I think that's a difference at Lilly. Another view of that total productivity picture, other than the stock price appreciation, is a chart we look at a couple times a year here. So how do you evaluate the performance of an R&D organization? This is how we look at it, input versus output.
You can plot all the industry peers on here, and you can see where Lilly lies, which is cumulatively having spent about $50 billion in the time frame we're talking about, and producing almost $250 billion in NPV, according to Evaluate Pharma. Not a perfect measure, but one that's common across these groups. Of course, everyone asks, "Well, what happened? Is it all Tirzepatide?" No. If you remove Tirzepatide, you can see we're still above the trend line of the industry. And, you know, I think this probably more than anything, can explain the success of the company and the progression of our multiple. But we'll grow in revenue, and we'll want to spend more on R&D to keep growing in percentage terms.
You may notice in this grid, there's not that many dots on the upper right-hand corner of this chart. So that's the challenge from here for our company. How do we grow the R&D baseline investment and sustain productivity? We have some ideas about that, but I guess we have to be humble because in the history of the industry, I'm not aware of a positive example in that space. On the other hand, the only way we know to outgrow industry peers is organic R&D investment. So if we have to do an organic R&D investment and we want to be bigger, we're gonna have to figure out how to be in the upper right-hand corner of this quadrant. We have ideas about it.
We're gonna try that, and I think if you're long on Lilly today, you should be interested in how we're gonna get there. That is effectively our growth strategy from here. One key part, as I mentioned, is ramping up of external innovation, and I know a number of biotechs are in the room and at this conference, so it's worth mentioning we're open for business on external innovation. A few comments on that. In 2018, when I gave this presentation, I spent most of the time talking about the emerging portfolio of basically Lilly-derived inventions, Taltz, Trulicity, Verzenio, of course, we could talk about Tirzepatide. But now, if we look at the pipeline, more than 50% of the Lilly substrate is originally sourced outside the company. That's a very different picture than in 2018.
The composition of that is some acquisition, mostly pretty early in cycle. Lebrikizumab was acquired, going into phase, or in the middle of Phase III, I should say. But basically, everything else, pre-proof of concept, which is a hallmark of our strategy. And then you can also look at partnerships, and here there's a long list of licensing and partnership opportunities we've taken advantage of up and down the portfolio. Maybe, perhaps orforglipron, with Chugai being the most prominent example that's in the late phase, but really heavily populated with molecules that have been worked on with our collaborators. And this remains a key part of our strategy. Once again, in the same therapeutic areas, adding density and value to the work we've been doing in our own labs. So what's ahead? Well, more of this. Sure, we can do that.
That's sort of the basics of BD in our industry. But we're thinking about M&A in other ways, too. And so I'd like to share a few of those thoughts with you as we try to innovate to that upper right-hand quadrant of the input-output chart in R&D. The first is to think about M&A in a richer context. I think most of the big pharma companies in our industry, and certainly Lilly for the longest time, thought about acquisition as grabbing an asset, essentially. Go into a company, take their work, thank them very much. The people move on to the next thing, and then, as big pharma, we envelop that and prosecute it forward. Sometimes that's the right approach, but we're trying to think about that differently and more broadly. And this started with the acquisition of Loxo and has continued on.
Here, we think about our acquisition as not just assets, but people and methodologies and ways to make even more medicines. Surely, one of the ways that big pharma can grow R&D productively is by having more great minds around the table and more difference in how we think about creating drugs, and this is a strategy we'll be pursuing going forward. And you can see a lot of these entities are now operating as wholly owned companies of Lilly, with the CEO who founded the company, or at least drove some of its growth, retained within the company, excited about being part of Lilly, I think, and helping us create more innovations for the future. So here we gain satellites to the Lilly ecosystem and sustain them through time. Another way we're thinking about this is working with early-stage biotech.
Now, it's no new invention for corporate venture to invest money in biotechs. Neither it is, you know, particularly new to help with real estate and assets that they need to get going. And of course, we're doing both of those things with Gateway Labs and Lilly Ventures. I think really the new idea is to be a more comprehensive interface point for emerging biotech without having to cross the threshold of M&A or partnership. So, here in San Francisco, we launched several years ago our first Gateway Labs. We've recently added one in San Diego. We've, I think, said we're launching one in Boston. Look for more in the future.
But the general idea here is to take not startups, but more of the scale-up space and add the suite of services along with space and capital that big pharma can offer and allow the entrepreneur in the biotech to drive their idea to success or conclusion... And I think early days, this is working pretty well. So if you're a startup looking to scale up, consider working in Lilly Gateway Labs. What, what do we get out of this? We get to know them well. We get to learn about technology. Our scientists are invigorated by that interface, and we get a lot more touch points in the ecosystem for future, perhaps M&A, perhaps licensing, or maybe, just, collaboration in other sense.
So just to conclude, as we think about our future, we have to do things that haven't been done before to continue to grow the company, anything like we've done lately. We have to drive excellence at scale in R&D for patients. So that's a few things involved in that. First, I think one thing I haven't mentioned so far, but as we think about how to spend our resources going forward, seems unlikely we're gonna be able to grow rapidly by pursuing a lot of small ideas. We need a few big ideas, and I think that's what Lilly is for, is to pursue big unmet needs in very large populations. So we'll be looking in that space. Of course, we have to sustain our discipline on what is good enough to be a Lilly medicine.
That we aren't pursuing me- too, or even pretty good. We have to start with the presumption that each of our ideas will be market leading, practice changing, excellent. Sometimes we aim for that and miss, launch a medicine that's pretty good, too, but sometimes we hit it, and I think that's got to be the standard as we go forward to use investor capital appropriately. We will increase the breadth of partnerships and BD activity, along with those new strategies like Catalyze360 . And we have been very active lately in new modalities, particularly nucleic acid therapeutics, and we'll continue to want to be early in adopting new ways to make medicines. Fundamentally, that's the value add of our industry. But maybe most important is the picture on the right, to be great at scale, we need great people.
And so if you're good at what you do and wanna work with Lilly, give us a call. If you're running a biotech and we want to acquire you, think about staying on. I think this is fundamentally a human business that requires really strong people, passionate about a mission to make great medicines for big populations around the world, as we say, to make life better. Thanks for listening, and look forward to Chris's questions.
Thanks for those comments. I might just kick off here. I mean, Lilly's had clear success in R&D, and you're ramping that further. We're seeing lots and lots of activity, both internally, externally. I just maybe elaborating on the comments you made, how do you monitor and ensure that you're getting adequate return for those investments? I know it's a big focus of yours, but I was gonna think about the company's gonna have lots of cash flow, lots of, you know, kind of flexibility, I guess, in the P&L to invest things. But how do you make sure you're disciplined, that you're terminating the assets that maybe don't hit those criteria, and that you can maintain that upper quadrant you're trying to stay into?
I mean, it's the question, right? We have to hold that standard high. That's why I mentioned it.
Mm-hmm.
Of course, a lot easier in the retrospectoscope than when you're sitting in the meeting room looking at data that's a little murky and, like, is this... Is it there, there? I think... I mean, if you—there's no one answer to me. I think there's a few ingredients we've tried to put in, into our system that have been helpful. First, I think a multidisciplinary approach with the, the best minds around the table is critical.
Mm-hmm.
We don't wanna run in silos, and I think, typically, around those big decisions, we'll bring in, you know, smart, experienced people from different domains, and it helps us make good decisions. Secondly, run definitive experiments, like, don't mess around. Like, you know, I think one of the big inefficiencies that can be present in smaller companies in particular, 'cause there's, like, this survival bias on your one idea-
Mm-hmm
... is to pursue experiments that won't kill the project. I think you need to pursue experiments that can kill the project.
Mm-hmm.
You have to ask the threshold question and clear the threshold. That's not always possible due to technology, but when it is, you should do it. And I think then you can proceed with a lot more confidence, versus teasing out some signal. And here, I'm thinking about, like, our days in neuropsych, where all our experiments weren't definitive experiments. It was very fuzzy-
Yeah
... and we'd run, like, five Phase IIIs to get two that work, you know?
Mm-hmm.
That's not the world we can operate in, and it's not efficient enough. Another thing which has been, I think, a useful side effect of a much broader BD agenda, is to compete your own ideas versus the external ideas.
Mm-hmm.
So sometimes the data's already out there, some of it's in flight with yours at the same time, but understanding what the other options are for the world and making sure you're pursuing the very best one. Occasionally, that means doubling down on a target, competing to an external and an internal idea at the same time, combining those programs or just being aware of what's happening in other people's walls, which hasn't been a hallmark of the company historically, and I think we've infused quite a bit of that-
Yeah
... with the external innovation agenda.
Yeah, absolutely. I guess the one is... The company's been very active on, I'd say, smaller, earlier stage deals. Very, very active on that front. I guess there... Does there come a time where larger M&A would make sense for Lilly? And I'm not thinking about kind of big, messy integration, but thinking about if you saw a highly innovative business, a company growing that had technology that Lilly didn't have. Does that make sense for Lilly at some point down the road, or should we think about this more, you know, the deals we've been seeing recently are a pretty good proxy for what to expect going forward?
Yeah. I think... I mean, certainly, you would never say never.
Mm-hmm.
I think the big, messy ones... I mean, revenue stage companies have challenges-
Mm-hmm
... in those business cases for us, but if someone had, like, a platform or like a really strong pipeline that we could add value to, I don't think the number next to the price tag is such a big deal anymore. You know, I used to answer that differently. If you're gonna spend 25% of your market value on something-
Sure, yeah.
That's a bet-the-company move.
Yeah.
I don't think those exist for us. But yeah, we would look at that. The reality is there aren't that many companies that fit into the box you just described.
Yeah.
Most companies are in the industry, you know, very early. And we also like the idea of, I mean, what's the basis of our value add? It's, of course, doing the work and kind of the breadth and scale we can add to development in particular. So getting things before they're being developed is a good idea.
Sure.
But also in our domains of expertise, we better be able to call balls and strikes better than our competitors and maybe better than even venture capital. And if we can do that, we can pick winners. I think we have to believe we have a shot at that. Now, we don't have to pick them... They don't have to be ones. There can be zeros, too.
Mm-hmm.
But as long as we're, our batting average is something, you know, north of 50%, we're killing it. If it's even north of 30%, you're probably beating the averages.
Yeah.
You know, we can do more things that are smaller and end up with a more valuable portfolio. You can see the progression that's occurred in the early-stage deals we're engaged in.
Yeah, absolutely. Yeah. I know you're gonna provide 2024 guidance in February, but maybe just talk about some of the pushes and pulls that you're expecting this year on the P&L. Just, you know, I know you're funding a number of Phase III programs. You've always got a very important launch going on.
Yep.
So help us kind of balance how we should think about Lilly's business for this year.
Yeah. Well, I think core growth in Q3 was, like, 23%. That's pretty good.
Pretty good.
Um.
Okay.
We like the revenue line.
Yep.
But we also think, I mean, first of all, the priorities next year, like, the first priority is just execution. We've got-
Yeah
... at least, you know, 2, hopefully 3, you know, pretty significant launches for us, including Zepbound in that, but also potentially donanemab and lebrikizumab, and then the rollout of launches that just started, like, you know, Jaypirca, pirtobrutinib, and Omvoh. So, I mean, it-- we're in a launch cycle, so from an SG&A perspective, well, there's a lot of efficiency 'cause we're dense in those TAs.
Yeah.
You still have the variable spend.
Sure.
I think in R&D, as you mentioned, we have. I can't remember if we've had this many Phase IIIs running at once in the company.
Mm-hmm.
Probably not. The guy who runs our clinical portfolio told me we had 110,000 people in Lilly clinical trials right now, so that's a lot. It should be because, you know, of course, incretins are a seminal moment, and we need to take advantage of that. We have got dozens of Phase IIIs on the three incretins we're studying, which is Tirzepatide, retatrutide, and Orforglipron. That's fully loaded. And then, of course, there's other, lots of other studies. So R&D probably is growing in a healthy way. Below that, you know, we had a weird, like, tax year, abnormally high. I think that's probably, should see a little improvement next year in that.
But we'll, we'll take people through the details, and I think basically, people own us because of the revenue picture, and, we're committed to drive that and seize the moment we're in. It's a special time in the history-
Yeah
... of the company, and we can change the lives of a lot of people if we execute on Tirzepatide alone, as well as we're capable of.
Absolutely. Last big picture one. Just your thoughts on the longer-term operating margin at Eli Lilly and company. I know in the past you've talked about kind of 40% being not a ceiling, but kind of a guide point of balancing investment in R&D and SG&A. I guess the question I'm having is when you're looking at how big this incretin franchise could become, it seems like a lot of spend has to go into that to not have the margins drift above 40%. Just any latest thoughts on where those margins could go over time?
Well, I think that's why I wanted to give this talk. I mean, I, I think-
Yeah
... if you can do that math, and I think if we live in a world where R&D does not scale-
Mm-hmm
... certainly the margins could drift well north of the point you're mentioning. You know, I don't think on the gross margin side, there's a lot there.
Sure.
The mix is becoming adverse. We're investing a ton in capital that'll show up for the next 20 years in the cost of goods line. Those are good investments. We should do them, but-
Mm-hmm
... you know, they're not free. And then, you know, there's a floor on SG&A because, because you have G&A, which has got to scale at some point. So it's really about the R&D line and what happens there. And as I tried to say here, our ambition is to grow it at the scale, at the way we have.
Mm-hmm.
But the requirement is we do that productively.
Yep.
And no one's really done that before, but we're gonna try to take that on. Now, most of R&D, if you're worried about that, is actually project-based, so the vast majority of our spend are clinical trials. So it'll be very public, what we're spending the money on and why we think those are good ideas or not. But that's probably where it'll go. If we pick our heads up and, you know, a few years and we've doubled Lilly R&D, and it's kept pace with, I think we're about 24%–25% of sales right now, I think investors should be excited about future growth.
Yeah.
If we've not doubled it, then we'll return to shareholders responsibly, dividend it out or buy back shares, maybe do, you know, smart M&A, but that's, that's not the base scenario.
Yeah. Yeah, makes sense. Maybe pivoting over to Mounjaro and Zepbound. Probably a little bit of interest in the audience for those. Maybe just help set the stage here in terms of just top-
Took you 10 minutes.
I know. I thought it was pretty good.
Very disciplined, yeah.
It was. It was. Just talk about, just set the stage, key priorities for those, the, the two brands this year, and there's a lot of directions we can go, but just to kick things off with that.
... Sure. Yeah. So I mean, Mounjaro now entering its second full year, the kind of third year, so sort of starting to hit stride on access. So if you look at diabetes access, you know, you wanted to get above 80% to really sort of be competitive with the leading agents, Trulicity and Ozempic. And we have a goal to actually move incretins forward in the disease continuum. I think this is still a rather underappreciated thing, but-
Mm-hmm.
Even today, you know, most starts on incretins are not, you know, immediately after a diagnosis or even after metformin.
Yeah.
So that's an opportunity that still exists in that core franchise. And access right now is well north of 80% in commercial. It's almost 80% in the total, including Part D. So, 2024 should be a good year for Mounjaro growth and a chance to really... Because I think that drug has enough differentiation to move forward effectively, potentially even, you know, disease- modify. We haven't proven that, but, you know, that's... I think some physicians would go there, and really help people get their A1C well below target. You know, most of the patients exit our studies with an A1C below 6.
Yeah.
So that's, you know, a dramatic change. And that's the priority there. It's really execute, get to those patients, make sure we're positioning the drug appropriately. Zepbound; it's been, like, four weeks of availability.
Good four weeks.
Solid start. Yeah. We kind of all expected that maybe. We know there's all this organic demand, and we need to fill it. So really actually the top priority there are ensuring a good, smooth rollout, no surprises, good experiences that patients have in getting the drug and using it, of course, and the physicians hear back, particularly those that aren't, haven't been GLP prescribers historically. And then, you know, making sure we establish Zepbound as sort of the key marquee name in the obesity space, which, you know, isn't the case today, and it's the newcomer, and we can do that. And then, of course, executing on the manufacturing agenda.
Yeah.
because that's really the pivotal thing.
How should we think about the ramp and payer access for Zepbound as we go through 2024?
Yeah. You know, here it's a little, different than the diabetes because, I mean, we find that the large payers, scaled PBMs, and even regional, fully insured, they're pretty eager to use the product.
Mm-hmm.
But remember that the... I mean, because they're paid on volume in a sense, and they want to participate in that, just like everyone does.
Yeah.
The real decision point is at the employer level-
Yeah
... and who can opt in, and has made that decision. We've seen good growth in that year-over-year, despite, I think, a lot of noise in the lay press and so forth about employers screaming about costs. It, it probably grew 15%–20% last year. Novo did a lot of that work, and here, I think two is better than one. I think we'll lean on that. We're not seeing, like, drug-specific opt-in. It's class opt-in, which makes sense. Let the doctor and the patient decide the best drug. But it's growing, and I think if you, if you draw the line forward, this is-- that happened in the absence really, of SELECT-
Yeah
... which happened at the end of the year.
Yeah.
Next year, there's more, pivotal readouts on, you know, serious disease change. We've got heart failure and, sleep apnea coming. I'm sure Novo has their own list, and, you know, for the next few years, that's how this will go. I think those proof points will keep stacking up. Consumer demand will keep growing. Part of the employer community may look at the data and say, "Okay, this is a health economic story." I think most of the employer world doesn't look at it that way. They tend to look at it as a benefit.
Mm-hmm.
I don't know about your companies, but in my company, we have lots of benefits. We have no business case behind. It's just people want it, so we give it to them-
Mm-hmm
Because we want them to stay.
Mm-hmm.
I think that will grow as well. You have the government formularies. That's more on the health economic side and, you know, I think that will improve through time, along with the fact that, although, you know, Part D does not reimburse for weight loss, that doesn't mean they won't reimburse Tirzepatide for other medical indications.
Yeah.
They already reimburse it for diabetes, so there'll be others, and that will grow through time as well.
So kind of a steady progress. Is that what I think-
Right. And if you go ahead, I don't know, five, six, seven years, I mean, it's hard to think about a world with all that data...
Yeah
... and the shift that's already occurred just in a couple of years, and how we think about obesity as sort of a lifestyle thing to maybe one of the more important, disease precursors that we can modify, for adult health. Why, why that wouldn't be broadly used and broadly insured?
Yeah. Yeah, makes sense. Duration, I think, has been a big debate on the obesity piece of things. Maybe just talk a little bit about what you've seen in terms of real-world duration on the diabetes front and how you're thinking about duration playing out on obesity.
Yeah, there's a lot written about this.
A little bit here.
It makes me curious, though, because-
Sure
... I think maybe, you know, you model drug uptakes all the time-
Yeah
... and you would probably put something in your model for chronic drugs, and my guess is, like, for a good chronic drug, you'd say 12 months.
Yeah.
That's, like, a good duration-
Mm-hmm
... for lipid medicine or heart failure medicine or diabetes medicine. You know, when we look at the data in the U.S., the longest, not only branded but generic too, duration agent in diabetes is Trulicity.
Mm.
Which is interesting because it's not oral, and people think, well, oral is convenient. But, that's, you know, measuring, you know, beyond a year. We don't have enough data on Mounjaro yet to really say what is that duration, and that's diabetes as well. We certainly don't have data on Zepbound. That's four weeks.
Yeah.
Probably duration's been pretty good for four weeks.
Yeah.
But, you know, and Wegovy is not a great proxy. I know there were some publications about that, but here you had all these, like, supply interruptions and tons of self-pay, and-
Mm-hmm
... I don't think it's the steady state yet.
Sure.
But that said, the expectation should not be that 110 million people will take these for the rest of their life. That's not gonna happen. It doesn't happen in any other disease category. Some people will be able to take them and sustain good, healthy body weight without drug. That will happen. It's not zero, but most people will need to be on drugs to sustain healthy body weight. Some will stay on lower doses, some will switch between them. That's not included in the, in the numbers we're talking about. And some will go off and regain weight, and, and we'll have to work on that. But for the time being, this doesn't matter as to the economics for Lilly or Novo, for that matter, because probably we have, what?
Like, 500,000 people on a branded weight loss, GLP or incretin in the U.S.-
Mm-hmm.
There's 110 million. So we don't have the supply to worry about this problem.
Yeah.
We'll just add people as supply frees up.
Maybe just on the supply topic, just an update in terms of how RTP is ramping and just a bigger picture view of... I know you're investing a lot, and your competitor's investing a lot. When do you think we get to a point where capacity won't be the rate limiter for the category?
Yeah. Not anytime soon.
Okay.
Yeah.
Yeah.
I don't say that in a negative way.
Yeah.
I think that speaks to the incredible-
Yeah
-opportunity here.
Yeah.
But, you know, if you just step back, you know, why are we in this situation to begin with? You know, in 2021, probably there were 10 million people on the planet taking incretin medicines, all of them GLP-1s. We see Wegovy launch, now we have Tirzepatide and Zepbound and Mounjaro forms. And, of course, the scale of the opportunity isn't like 50% growth or 100. It's like some much bigger number.
Yeah.
The entirety of, in 2021, of the systems on the planet that can make these drugs was fixed and mostly inside Lilly and Novo Nordisk already. There is some CDMO capacity. Most of that's been contracted up already by Lilly and Novo.
Mm-hmm.
This is difficult because these are parenteral systems at massive scale, and there really hasn't been drugs like that other than maybe insulin, which is why Lilly and Novo have some of the capacity to begin with.
Mm-hmm.
So, you know, that's... We don't have slack capacity, basically, so we have to add it. And the delivery time for new assets, like RTP, we announced in January of 2020-
Mm-hmm.
right before the pandemic.
Yeah.
We built it during the pandemic, and it's just now ramping offline as we enter 2024.
Yeah.
That's about as fast as you can go. These are complicated sites, really technically demanding work, very capital intensive, populated with machines that are highly specialized and often made in not-so-big companies, so their scale-up, we're dependent on as well.
Yeah.
Then the expertise to bring them online and get them FDA approved is non-trivial. So all that adds up to, I think, a more steady growth in the parenteral volume. There are some triggers that could change that. The more once-monthly devices we get, we've announced our KwikPen strategy for that. That will expand capacity. We can use some of the insulin capital on the ground to do that.
Mm-hmm.
But the big... the bigger one would be Orforglipron, which is the oral, if that makes it through trials, and we've got lots to prove there still. That's using totally different capacity, small molecule chemistry and fill finish. That's tablets. It's a lot easier than this.
To the extent that asset delivers, as you're hoping in the Phase III, if we look out 8 or 10 years, would you expect the majority of patients who are on an incretin, are they on an oral, or are they still gonna be on, whether it's GGG or Zepbound or some sort of injectable?
If everything works the way we want?
If everything works, yeah.
I think the oral has tremendous possibility.
Okay.
The profile out of Phase II is basically like high-dose injectable GLPs-
Mm-hmm
But in oral.
Yeah.
No, no tolerability, food effects that are different, et cetera. So that's an appealing profile, but it's probably... I mean, the case now, right, is both the companies are essentially introducing and pushing volume into markets where there's good pricing.
Mm-hmm.
U.S., Gulf, Japan. But, that will expand as the capacity expands, but probably not to the satisfaction of everyone around the world.
Mm-hmm.
You can think about this as a market-level thing. When, when can you afford to have enough for Brazil or China or India?
Mm-hmm.
Right? We're a pretty long way from that with parenteral. So if you say volume share globally, it's gotta be a lot of oral.
Yep.
Small molecule oral.
Mm-hmm.
If you say volume share in the U.S. or Switzerland, maybe more of a mix because I... You know, we're not at a point now where we can combine agonism mechanisms. You know, we don't have a GIP oral agonist, we don't have a glucagon oral, and that's gonna become the standard is combinations for obese people.
Question on competition. Right now, you've got a duopoly. Both companies invested heavily for a long period of time. Seems like a whole lot of people are now chasing the opportunity as they see what's happened with the market and your stock price. How are you envisioning over this time? Do you expect that there will be meaningful incremental competition coming in, or do you expect this to be largely a two-player race?
Well, first of all, I mean, we have tremendous respect for Novo Nordisk and have competed with them for, like, 100 years and know each other pretty well.
Yeah.
They do a great job for patients, and we, I think we do. I think here's a case where probably competition spurs us both on to go faster and-
Mm-hmm
... build out more indications and really, take the, insight, which credit to Novo, was to exploit high-dose GLPs, to pursue weight loss, noticing the separation between A1C and weight loss at the higher doses. And, we're following them and driving that, and I think the world will benefit from that.... So that's the first competition we think about, but almost, you know, it, it's not the same thing where we have a fixed pie, and we're fighting over share. By far, there's a larger gain here by-
Yeah.
-expanding access, producing more product, demonstrating health, economic, and clinical benefits into serious diseases, like cardiovascular risks, et cetera. And I think that will happen. And we know them well, and I don't expect a lot of surprises there. But new—I mean, I think I said last year, if you're sitting in a boardroom of a large drug company, you're probably asking the CEO, like, "Where's our obesity program?" So, so they're getting one. Some of them will succeed, some won't. I think in our industries, you know, there's a big first mover advantage, and in this category, in particular, there's some specifics, like the parenteral manufacturing scale problem.
Like, the data set that'll be there in 2027 or whenever the next one launches, will not be just like, "Oh, we can lose 20% of your body weight." It'll be a lot of other benefits that will have to be matched up. But we should take them all seriously, and I think sometimes competition discovers new things that we didn't think of, and that's good. There is a, you know, huge addressable market here, so I'm not saying it'll be two companies that find it all. But, probably the benefit of time and experience with this platform really lends it to us and a Danish company.
Yeah. Makes sense. Maybe last question here in the last minute or so. We're gonna sneak in something that's not obesity related.
Oh, thank God.
Donanemab. I think we... You know, kind of going back a few years, Alzheimer's was, like, the big category. It seems like obesity has eclipsed that. Just overall level of enthusiasm on the data you've seen, the category over time, you know, will this be a big piece of the Lilly story if we think out 8, 10 years?
Yeah, I do. You know, top three moments in my career was looking at the TRAILBLAZER data last year. I mean, the—because so much effort in and such an unconquered space, and we took that on pretty methodically in a new way, and it worked. It's just so rewarding.
Mm-hmm.
Hats off to our whole team. I mean, there's so many people in our company who worked on that problem for so long, and it's a serious problem.
Yeah.
Lecanemab is good. I think Donanemab is better. Here, again, like two competitors, fine. There's a lot of work to do to convince the healthcare system to rearrange itself to treat people with Alzheimer's versus ignore them and then warehouse them, which is kind of what happens now.
Yeah.
You know, we'll get to that. I think the Donanemab economic story will be partly treatment, but the bigger upside is actually prevention.
Mm-hmm.
Because, people who have Alzheimer's would like to be treated and slow it down, but people who don't have Alzheimer's really don't want to get it.
Yeah.
This is not just a promise. I think the two things happened last year, which are super encouraging for the TRAILBLAZER-3 Donanemab program, which is the prevention study. One is that we learned; we didn't know the natural conversion rate of people with high amyloid and no tau and no symptoms. But we sponsored a different study with NIH and other investigators called A4, which didn't work, but it showed us what the placebo rate is, and it, unfortunately, it's steeper than we thought. So that would tune up the effect size on this, on this study.
And then on top of that, we disclosed the data, as did lecanemab, that basically in our Phase III studies in the treatment setting, the earlier you treat, whether you measure by age or degree of memory and functional problems, or by pathology, tau pathology, the earlier you go, in every case, the drugs work better. So it's an extrapolation to say, "Okay, well, the pre-symptomatic disease is the same disease without symptoms." But if it is, I think you have to be very excited about the size of effect that could occur, which means you could get a drug like Donanemab you take for a year if you have the risk factors, and your probability of getting Alzheimer's will drop dramatically. I think that's an exciting medicine.
Absolutely. Well, I think we're about out of time.
Great.
Thank you all for being here.
Thanks for the time. I appreciate it.