Eli Lilly and Company, Q2 2020 Earnings Call, Jul 30, 2020 - NYSE:LLY

NYSE:LLY

Here is a detailed list of what Kevin Hern, the Vice President of Investor Relations at Eli Lilly, has said during the earnings call:

1. Introduction and Welcome:

   • Thanked participants for joining the Q2 2020 Earnings Call.
   • Introduced himself and the executives present on the call.
   • Mentioned that the call would include projections and forward-looking statements based on current expectations, with a disclaimer about potential differences in actual results due to various factors, including COVID-19.

2. Transition to Prepared Remarks:

   • Reminded participants that the commentary would focus on non-GAAP financial measures, excluding the financial contribution from Elanco during 2019.

3. Q&A Session Instructions:

   • Provided instructions for the Q&A session, inviting analysts to ask questions.

4. Moderation of Q&A:

   • Moderated the Q&A session by directing questions to the appropriate executives based on the topics raised by analysts.
   • After each analyst's question, he would prompt the relevant executive to respond, such as:
     • "Thanks, Seamus. Dan and then Josh."
     • "Thanks, Geoff. We'll go to Anne for the question on Verzenio and then Dave on IPI."
     • "Thanks, Tim. We'll go to Anne for the question on the CDK4/6 class and then Mike for the question on tirzepatide."
     • "Thanks, Umer. Dan, you'll take both of those?"
     • "Thanks, Louise. We'll go to Josh for the first question and then Mike for the second one."
     • "Thanks, Terence. We'll go to Anne for the question on monarchE and then Josh around the contracting."
     • "Thanks, Chris. We'll go to Anne for Verzenio and then to Dave on the international question."
     • "Thanks, Navin. We'll go to Anne for the question on Retevmo and then Patrik on migraine."
     • "Thanks, Dave. We'll go to Dan and then Josh."

5. Closing Remarks:

   • Thanked participants for their participation in the earnings call.
   • Encouraged follow-up with the IR team for any additional questions not addressed during the call.
   • Wished everyone well and indicated that they would talk again soon.

This summary captures Kevin Hern's contributions and interactions during the earnings call, focusing on his role in facilitating the discussion and guiding the Q&A session.

Here is a detailed list of the comments made by David A. Ricks, Chairman, CEO & President of Eli Lilly and Company, during the earnings call on July 30, 2020:

1. Opening Remarks:

   • Acknowledged the significant changes in the world since the last earnings call, particularly due to COVID-19.
   • Highlighted the advancements in science and the rapid progress in developing treatments and vaccines for COVID-19.
   • Expressed pride in Lilly's resilience and resourcefulness in continuing to serve patients during these challenging times.

2. Business Impact of COVID-19:

   • Discussed the economic uncertainty and high unemployment rates affecting many countries.
   • Noted that Lilly experienced headwinds due to patients being unable to see doctors or access healthcare during shutdowns.
   • Mentioned the decline in patient visits to physicians, which dropped to about 50% of pre-COVID-19 levels, impacting new prescriptions.

3. Access to Medicines:

   • Emphasized Lilly's efforts to ensure patients have access to their medicines and to advance critical research.
   • Stated that manufacturing facilities were staffed with essential personnel to prevent disruptions in the supply of medicine.

4. Clinical Trials and Promotions:

   • Announced the resumption of most clinical trials that had been paused and the gradual return to in-person promotional activities.
   • Highlighted the increase in virtual interactions with physicians and the expectation of a hybrid model of engagement moving forward.

5. Product Launches and R&D Progress:

   • Celebrated the launch of two new medicines in the U.S.: Retevmo and Lyumjev, along with several other approvals.
   • Mentioned positive Phase III readouts for several products, including Verzenio, mirikizumab, and Jardiance.

6. COVID-19 Therapies:

   • Discussed Lilly's ongoing efforts to develop treatments for COVID-19, including multiple clinical trials for neutralizing antibodies.
   • Expressed confidence in the company's ability to execute these projects rapidly.

7. Financial Performance:

   • Acknowledged that Q2 results were negatively impacted by COVID-19 but expressed confidence in the underlying fundamentals of the business.
   • Provided insights into revenue trends and the impact of reduced patient visits and inventory dynamics.

8. Executive Orders on Drug Pricing:

   • Shared concerns about the executive orders announced regarding drug pricing, particularly international price indexing and reimportation.
   • Stated that these policies could have negative consequences for patients and the future of innovation in the pharmaceutical industry.

9. Closing Remarks:

   • Concluded with a summary of the company's progress in the first half of the year, emphasizing strong volume-driven revenue growth and optimism for recovery in healthcare activity.
   • Expressed pride in Lilly's efforts to combat the global health crisis and the commitment to continue delivering value to shareholders.

10. Final Acknowledgment:

    • Thanked participants for their interest in Eli Lilly and encouraged them to reach out to the Investor Relations team for any additional questions.

This summary captures the key points made by David A. Ricks during the earnings call, reflecting his insights on the company's performance, challenges, and strategic direction amidst the COVID-19 pandemic.

Here is a detailed summary of the comments made by Joshua L. Smiley during the Eli Lilly Q2 2020 Earnings Call:

1. Q2 Financial Performance:

   • Joshua discussed the impact of COVID-19 on Eli Lilly's financial performance, noting that revenue declined 2% compared to Q2 2019.
   • He explained that the decline was primarily due to the reversal of COVID-related stocking from Q1 and reduced patient visits leading to lower new prescriptions.
   • He estimated that the impact of these factors was approximately $250 million in Q2.

2. First Half Performance:

   • He highlighted that the first half of 2020 showed a 7% sales growth in constant currency, which he considered a more accurate reflection of underlying performance.

3. Gross Margin:

   • Gross margin as a percentage of revenue in Q2 was reported at 79.6%, a decline of 140 basis points compared to Q2 2019, primarily due to price impacts.

4. Operating Income:

   • Operating income decreased 2% compared to Q2 2019, but increased by 14% during the first half of 2020 as revenue growth outpaced operating expense growth.

5. Other Income and Expense:

   • He reported other income of $447 million in Q2, compared to an expense of $32 million in Q2 2019, driven by the increase in value of investments in biopharma companies.

6. Tax Rate:

   • The tax rate was reported at 13.4%, an increase of 340 basis points compared to the same quarter last year.

7. Earnings Per Share:

   • Earnings per share increased 26% in Q2, driven by gains on public equities that offset the decline in operating income.

8. Revenue Breakdown:

   • He provided insights into the revenue dynamics, noting that worldwide revenue declined 2% in Q2, with volume growth of 6% offset by price declines.

9. U.S. Revenue:

   • U.S. revenue declined 3% compared to Q2 2019, with volume growth of 4% led by specific products, but impacted by destocking and reduced new prescriptions.

10. European and International Revenue:

    • He discussed revenue trends in Europe and Japan, noting declines in revenue due to price and volume impacts, while China saw revenue growth driven by volume.

11. Key Growth Products:

    • He highlighted that key growth products generated nearly $3 billion in revenue in Q2, making up 54% of total revenue.

12. Capital Allocation:

    • He provided an update on capital allocation, noting over $4 billion invested in growth and nearly $2 billion returned to shareholders through share repurchase and dividends.

13. 2020 Financial Guidance:

    • He discussed the updated 2020 financial guidance, maintaining revenue ranges and adjusting gross margin expectations due to changes in geographic mix and pricing.

14. Operating Margin Target:

    • He reaffirmed the non-GAAP operating income as a percentage of revenue goal of 31% for the year.

15. COVID-19 Impact:

    • He acknowledged the ongoing uncertainty due to COVID-19 but expressed confidence in the underlying business fundamentals and the ability to adapt to the changing environment.

16. Business Development:

    • He stated that the strategy for business development remains unchanged, focusing on acquiring first- or best-in-class projects in therapeutic areas.

17. Contracting for 2021:

    • He provided insights into contracting discussions for 2021, indicating expectations of modest net price declines and a focus on maintaining access.

18. Modeling Other Income:

    • He advised on modeling other income, indicating that it would primarily reflect the net debt position and any unusual items would be reported as they arise.

This summary encapsulates the key points made by Joshua L. Smiley during the earnings call, reflecting on financial performance, operational insights, and strategic outlook.

Here is a detailed summary of the comments made by Daniel M. Skovronsky, EVP, Chief Scientific Officer and President of Lilly Research Laboratories & Lilly Immunology, during the Eli Lilly Q2 2020 Earnings Call:

1. COVID-19 Antibody Development:

   • Discussed the ongoing efforts to develop treatments for COVID-19, particularly focusing on neutralizing antibodies.
   • Mentioned the initiation of multiple clinical trials for neutralizing antibodies, both as monotherapy and in combination.
   • Highlighted the progress of LY-CoV555 and LY-CoV016, both of which have completed Phase I studies. LY-CoV555 is further along, moving to a large dose-ranging Phase II study in ambulatory patients recently diagnosed with COVID-19, with data expected by Q4.
   • Emphasized the importance of reducing viral load as a key indicator of potential efficacy in the Phase II trial.

2. Baricitinib Trials:

   • Provided an update on the two ongoing Phase III clinical trials for baricitinib in hospitalized COVID-19 patients, one in combination with remdesivir and the other as monotherapy.
   • Expressed optimism about the potential benefits of baricitinib based on its anti-inflammatory activity observed in other diseases, despite mixed results from other repurposed agents.

3. N3pG Antibody:

   • Confirmed that the timeline for the N3pG antibody study remains intact, with data expected to be available early next year.
   • Discussed the high hurdle rate for the study, emphasizing the importance of achieving a large effect size based on plaque clearance.
   • Mentioned that the trial is designed to select a careful patient population based on tau levels at baseline, which should help in observing a more uniform progression of the disease.

4. KRAS Program:

   • Addressed the challenges faced with the first-generation KRAS G12C molecule, indicating that unexpected toxicity precluded further development.
   • Clarified that the toxicity was related to off-target effects rather than the KRAS target itself.
   • Stated that they are exploring a backup program to understand the mechanistic basis for the toxicity.

5. General Comments on R&D:

   • Highlighted the commitment to advancing the rest of the pipeline, including treatments for diabetes, immune disorders, neurodegeneration, and cancer.
   • Expressed confidence in the differentiation of Lilly's products from competitors, particularly in the context of ongoing clinical trials and data readouts.

6. Response to Analyst Questions:

   • Responded to questions regarding the rationale for pursuing a single antibody therapy versus combination therapies, explaining that a single antibody can be as effective as combinations in neutralizing the virus and that manufacturing capacity is a significant consideration.
   • Discussed the importance of monitoring for resistance in patients treated with the antibody therapies.

Overall, Daniel M. Skovronsky provided insights into Lilly's ongoing research and development efforts, particularly in the context of COVID-19, while also addressing specific questions from analysts regarding the company's pipeline and strategic decisions.

Patrik Jonsson discussed the performance and strategies for two of Eli Lilly's products, Emgality and Reyvow, in the migraine market. He highlighted that the CGRP market continues to grow significantly, with a 64% year-over-year growth, while Emgality outperformed the market with a 151% growth. Despite the decline in new-to-brand prescriptions due to COVID-19, the CGRP market still grew 12% in the last quarter. Jonsson expressed confidence in Emgality's future, aiming for market leadership, especially in primary care, where they have expanded efforts.

Regarding Reyvow, Jonsson acknowledged dissatisfaction with its performance so far. The product had only about one month in the market before the impact of COVID-19, leading to a reduction in promotional efforts. They have since restarted virtual proactive detailing and remain confident in Reyvow's unique value proposition, particularly its ability to relieve the most painful and troublesome symptoms of migraines. They noted a significant unmet need, with 35% to 40% of the 6 million people treated for migraines in the U.S. not responding to current treatments.