PWW

Portfolio AI Insights

pww.comEli Lilly & Co., Q2 2010 Earnings Call, Jul-22-2010 - NYSE:LLY

NYSE:LLY

Ronika Pletcher [Executives] 💬

During the Eli Lilly & Company's Q2 2010 Earnings Call, Ronika Pletcher provided updates on the investigational product exenatide once weekly, also known by the proposed trade name of Bydureon, and offered insights into the company's pipeline.

Here is a detailed summary of her remarks:

Investigational Product Exenatide Once Weekly (Bydureon)

  • Importance and Potential: She described Bydureon as one of the company's most important pipeline molecules and noted its proximity to potentially reaching the market, as it was under active regulatory review in the U.S. and Europe.
  • Clinical Data: Based on the clinical data generated, she expressed excitement about the potential of Bydureon to help people with type 2 diabetes. She mentioned that over time, the GLP-1 class of drugs will play a significant role in treating these diseases, and Bydureon has set a high bar for drugs in this class.
  • Clinical Trial Results:
    • Reduction in A1C: Across the Phase III program, Bydureon consistently showed clinically meaningful reductions in A1C.
    • Weight Reduction: While not studied as a weight-loss product, Bydureon also showed reductions in weight as a secondary endpoint, as well as a lower incidence of mild to moderate hypoglycemic events compared to comparative drugs.
    • Adverse Events: Common treatment-emergent adverse events included injection site reactions, nausea, vomiting, diarrhea, and constipation.
  • Cardiovascular Outcome Study (XCEL): She reported that the company had recently begun enrolling patients in the XCEL trial, a cardiovascular outcome study for Bydureon, which aims to determine whether treatment with Bydureon reduces cardiovascular events. The trial is expected to include 9,500 patients and provide results in 2016.
  • DURATION-2 Extension Phase Data: Data were presented at the American Diabetes Association (ADA) conference on the extension phase of the DURATION-2 trial. When patients switched from sitagliptin or pioglitazone to Bydureon, they maintained HbA1C improvements and nearly all of the weight gain seen in the initial 26 weeks was reversed by 52 weeks. Patients who started on sitagliptin experienced a further reduction in weight and an additional reduction in HbA1C.

Pipeline Update

  • Pipeline Overview: As of July 20, 2010, the clinical stage portfolio stood at 69 distinct new molecular entities (NMEs), including 29 compounds in Phase II and Phase III.

  • Biotechnology Focus: The company's focus remained on developing a robust biotech portfolio, with biotechnology molecules representing nearly half of the late-stage Phase II and Phase III assets, as well as over a third of the overall clinical portfolio.

  • Recent Developments:

    • New Oncology Biologics: Four new oncology biologics had entered clinical trials, as highlighted with green arrows on the pipeline slide.
    • Phase Progressions: Since the last formal portfolio update, the company had advanced six assets into Phase I, promoted two assets to Phase II, and progressed liprotamase, which was under regulatory review in the U.S.
    • Terminations: The development of two Phase I assets and three Phase II assets had been terminated.

  • Late-Stage Pipeline Progress:

    • JAK1/JAK2 Inhibitor: Partner Incyte disclosed top-line three-month Phase IIa data on the JAK1/JAK2 inhibitor in early May and planned to present more detailed three-month data and six-month data at the American College of Rheumatology (ACR) conference in November. Development efforts remained focused on initiating a Phase IIb study later that year.
    • BAFF Antibody for Rheumatoid Arthritis: Two Phase II trials for the BAFF antibody for rheumatoid arthritis had been completed, and data from both trials would be presented at the ACR conference in November. The company expected to start Phase III trials in late 2010 or early 2011.
    • Other Clinical Trials: Phase II trials for NERI for depression, OpRA for alcohol dependence, and Hypnion for insomnia had been completed. The company was reviewing the data and planned to disclose them at an upcoming medical meeting.

  • Future Outlook: The company had eight molecules in Phase III and was on track to have at least 10 molecules in Phase III by the time the Zyprexa patent expired in late 2011, if not sooner. The goal was to launch two novel molecules per year beginning in 2013, providing the foundation for future growth as the company emerged from the patent expiration period.

Phil Johnson [Executives] 💬

During the Q2 2010 Earnings Call for Eli Lilly and Company, Phil Johnson, Vice President of Investor Relations, provided the following statements:

Opening Remarks

  • Introduction:

    • Welcomed everyone to the Q2 earnings conference call.
    • Introduced himself as Phil Johnson, Vice President of Investor Relations.
    • Mentioned the presence of John Lechleiter, Chairman and CEO; Derica Rice, Chief Financial Officer; and Ronika Pletcher and Nick Lemen for Investor Relations.

  • Forward-Looking Statements:

    • Anticipated making projections and forward-looking statements based on current expectations.
    • Noted that actual results could differ materially due to various factors, including those listed on Slide 3 and those outlined in the latest 10-K and 10-Q filings.
    • Clarified that the information provided about products and the pipeline is for the benefit of the investment community and not intended to be promotional or sufficient for prescribing decisions.

  • Financial Performance:

    • Highlighted strong financial results, including robust volume-driven revenue growth.
    • Noted the leveraging of high single-digit revenue growth into double-digit growth in operating income and earnings per share.
    • Mentioned strong operating cash flow and the raising of full-year 2010 EPS guidance despite negative effects from recent pricing actions in Europe.

  • Business Development:

    • Announced the completion of two more deals:
      • Acquisition of Alnara Pharmaceuticals and its lead asset, liprotamase, which is under FDA review for treating exocrine pancreatic insufficiency.
      • Development and exclusive license agreement for Marcadia Biotech's preclinical short-acting glucagon program.

  • Regulatory Progress:

    • FDA confirmation of an advisory committee meeting on August 19 to discuss the chronic pain indication for Cymbalta.
    • Submission of a response to the FDA's complete response letter for Bydureon, with a new PDUFA date of October 2.
    • Receipt of a positive final appraisal from NICE in the UK for the use of Alimta as a maintenance therapy for non-squamous, non-small cell lung cancer.

  • Commercial News:

    • Launch of Livalo in the US, a statin licensed from Kowa.
    • Agreement with Wal-Mart to make Humulin available under the dual-branded name Humulin ReliOn in Wal-Mart pharmacies across the US.
    • Mentioned that a number of European governments announced measures to reduce pharmaceutical expenditures.

European Pricing Actions

  • Overview:

    • Described the typical yearly average price decreases of 1% to 2% across Europe.
    • Noted that occasional more substantial measures, such as across-the-board price cuts, have been prompted by acute budget issues in specific countries.
    • Discussed the economic downturn causing budget pressures and forcing several European countries to introduce austerity measures to reduce public spending, including measures to reduce pharmaceutical expenditures.

  • Germany:

    • Temporary measures taking effect on August 1, 2010:
      • Increase in the rebate paid to sick funds from 6% to 16% for products not subject to reference pricing.
      • Price reset to August 1, 2009, levels and held flat going forward.
    • Both measures to expire at the end of 2013.
    • Noted that not all German business is exposed to these actions, with some products subject to reference pricing and others benefiting from higher rebates already in place.
    • Mentioned that a portion of German demand for many products is satisfied through imports by wholesalers from other markets, for which Lilly is not liable for German rebates.

  • Spain:

    • Government introduced a 7.5% rebate on public sector purchases of most branded products.
    • Generics faced a larger reduction of 25%, while orphan drug prices were reduced by only 4%.
    • Reductions to remain in place through the end of the year, with the government deciding later about 2011.
    • Measures leading to a more rapid decline in prices post-patent expiration were also passed.

  • Greece:

    • Temporary price reduction of up to 27% implemented on May 1, 2010.
    • Lilly's average reduction was roughly 23%.
    • Temporary price reduction to be replaced by a reference price system pegging the Greek price to the average of the three lowest prices in the EU by August 31, 2010.
    • Expected impact of the new reference pricing scheme to be roughly half that of the May 1 price cuts.

  • Other EU Countries:

    • Mentioned pricing actions in smaller EU countries like Romania.
    • Estimated that the price cuts announced by these governments would reduce Lilly's European revenue by approximately $90 million in 2010 and approximately $150 million in 2011.

  • U.K., France, and Italy:

    • No anticipation of additional significant price reductions in these major European countries.
    • Discussed the U.K.'s implementation of a revised PPRS agreement, with average prices reduced by 3.9% in early 2009 and an additional 1.9% in early 2010.
    • Mentioned the French government's intention to take actions to reduce pharmaceutical spend by 100 million euros, with last year's actions directed at statins and proton pump inhibitors.
    • Noted that the price cuts announced by the Italian government did not affect patented products but led to a 12.5% reduction in generic prices.

Outlook

  • European Market Fundamentals:
    • Remained optimistic about the strong demand for Lilly's products and the benefits they offer patients.
    • Expected governments to increasingly look to reduce the prices they pay for generic drugs to create room to pay for patented drugs, which is crucial to maintain incentives for companies to develop innovative branded drugs.

Handover

  • Transition to Derica Rice:

    • Passed the call to Derica Rice to discuss Q2 financial results and 2010 guidance.

Feedback