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Eli Lilly (LLY) Q4 2023 Earnings Call Transcript


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Eli Lilly (LLY -0.17%)
Q4 2023 Earnings Call
Feb 06, 2024, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by and welcome to the Lilly Q4 2023 earnings call. At this time, all participants are on a listen-only mode. Later, we will be conducting a question-and-answer session, and instructions will be given at that time. [Operator instructions] I would now like to turn the conference over to your host, Joe Fletcher, senior vice president of investor relations.

Please go ahead.

Joe FletcherSenior Vice President, Investor Relations

Good morning and thank you, Paul, and thanks for joining us for Eli Lilly and Company’s Q4 2023 earnings and 2024 guidance call. I’m Joe Fletcher, senior vice president of investor relations. And joining me on today’s call are Dave Ricks, Lilly’s chair and CEO; Anat Ashkenazi, chief financial officer; Dr. Dan Skovronsky, chief scientific officer and president of Lilly immunology; Anne White, president of Lilly neuroscience; Ilya Yuffa, president of Lilly international; Jake Van Naarden, president of Loxo at Lilly; and Patrik Jonsson, president of Lilly diabetes and obesity and Lilly USA.

We’re also joined by Michaela Irons, Mike Springnether, and Lauren Zierki of the investor relations team. During this conference call, we anticipate making projections and forward-looking statements based on our current expectations. Actual results could differ materially due to several factors, including those listed on Slide 3. Additional information concerning factors that could cause actual results to differ materially is contained in our latest Form 10-K and subsequent Forms 10-Q and 8-K filed with the Securities and Exchange Commission.

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The information we provide about our products and pipeline is for the benefit of the investment community. It’s not intended to be promotional and is not sufficient for prescribing decisions. As we transition to our prepared remarks, please note that our commentary will focus on non-GAAP financial measures. Now, I’ll turn the call over to Dave.

Dave RicksChairman and Chief Executive Officer

All right. Thanks, Joe. 2023 was a year of advancement across our company. We grew our top line, we progressed our pipeline, advanced our external innovation agenda through partnerships and collaborations.

We continue to invest in quality, the reliability and the resilience of our company’s manufacturing infrastructure, and most importantly, delivered new lifesaving and life-changing medicines to more patients. In 2023, revenue grew 20% for the full year and 28% for the most recent quarter as our newly launched portfolio continued to gain momentum. This past year, we announced positive phase 3s for donanemab, tirzepatide, mirikizumab, and pirtobrutinib. We also announced a positive phase 2 result for orforglipron, as well as for retatrutide, and moved these two important molecules into phase 3.

In terms of external innovation, in 2023, we continued to complement our pipeline through acquisitions and collaborations. These transactions included the acquisition of DICE Therapeutics, POINT Biopharma, Versanis Bio, Emergence Therapeutics, Mablink Biosciences, Immunitrack, as well as Sigilon Therapeutics. We announced several significant investments in manufacturing, including plans to expand capacity at the company’s Research Triangle Park facility and the two manufacturing sites within the LEAP Innovation Park in Boone County, Indiana. Most recently, we announced plans to construct a new high-tech manufacturing site in Germany.

This facility will further expand the company’s global injectable product and device manufacturing network, including for our diabetes and obesity portfolio. Most importantly, this past year, we brought innovative new medicines to patients. In 2023, we received regulatory approvals for Zepbound, Jaypirca, Omvoh, and Ebglyss in the U.S. and in the EU, rather, and an expanded label for Verzenio, and two new indications for Jardiance.

This progress will serve as a foundation to drive top-tier revenue growth and margin expansion over time. As you can see on Slide 4, we continue to make progress against our strategic deliverables in Q4. Revenue grew 28%, with our new products growing by over $2 billion. Since our last earnings call, we achieved several key pipeline milestones.

In addition to the Zepbound and Jaypirca CLL approvals, today, we announced top-line results for the tirzepatide phase 2 SYNERGY-NASH trial, as well as the Verzenio phase 3 CYCLONE-2 trial. Dan will talk more about these updates in his update. In terms of business development, in Q4, we completed the acquisitions of Mablink Biosciences and POINT Biopharma, the latter of which expands our capacity and capability into radioligand therapies. Lastly, we announced a 15% dividend increase for the sixth consecutive year and distributed over $1 billion in dividends in the fourth quarter.

On Slide 5, you’ll see a list of key events since our Q3 earnings call, including several important regulatory, clinical, and other updates. Now, I’ll turn the call over to Anat to review our Q4 results.

Anat AshkenaziChief Financial Officer

Thanks, Dave. Slide 6 summarizes financial performance in the fourth quarter of 2023, and I’ll focus my comments on non-GAAP performance. We are pleased with the strong financial performance in the fourth quarter and for the full year. Our performance was highlighted by continued acceleration of revenue growth, driven by our new products and growth products.

Q4 revenue increased 28% compared to Q4 2022. Excluding divestiture, this represents a quarter-over-quarter acceleration revenue growth, driven by Mounjaro, Verzenio, Jardiance, and the recent launch of Zepbound. For the full year, revenue increased 20%, driven by robust volume growth of 16%. Gross margin as a percent of revenue increased to 82.3%.

Gross margin in the quarter benefited from higher realized prices, partially offset by higher manufacturing expenses. Marketing, selling, and administrative expenses increased 17%, primarily driven by higher expenses associated with launches of new products and additional indications, as well as higher incentive compensation costs. R&D expenses increased 28%, primarily driven by higher development expenses for late-stage assets and additional investments in early stage research, as well as higher incentive compensation costs. In Q4, we recognized acquired IPR&D charges of 623 million, which negatively impacted EPS by $0.62.

In Q4 2022, acquired IPR&D charges totaled $240 million or $0.23 negative impact to EPS. Operating income increased 29% in Q4, driven by higher revenue from new launches, partially offset by operating expense growth. Operating income as a percent of revenue was approximately 28% for the quarter and included a negative impact of approximately 7 percentage points attributable to acquired IPR&D charges. Our Q4 effective tax rate was 13.1%, compared to 7.3% in Q4 2022.

The higher effective tax rate for Q4 2023 was primarily driven by a lower net discrete tax benefit compared to the same period in 2022 and the new Puerto Rico tax regime. At the bottom line, we delivered earnings per share of $2.49 in Q4, a 19% increase compared to Q4 2022, inclusive of the negative impact of $0.62 from acquired IPR&D charges, compared to $0.23 in Q4 2022. On Slide 8, we quantify the effect of price, rate, and volume on revenue growth. U.S.

revenue increased 39% in Q4, driven by robust growth of Mounjaro, Verzenio, and Zepbound. Net price in the U.S. increased 27% for the quarter, driven by Mounjaro access and savings cards dynamic, as well as the one-time favorable change in estimates for rebates and discounts. Excluding Mounjaro, net price in the U.S.

decreased by high single digits. Europe continued its trend of strong growth in Q4. Excluding 65 million revenue associated with milestones received for the EU approval and launch of Ebglyss, revenue was up 11% in constant currency, driven primarily by volume growth of Verzenio, Jardiance, and Taltz. For Japan, we were pleased to see robust growth in Q4 as revenue increased 15% in constant currency, driven primarily by volume growth of Verzenio and Mounjaro.

Moving to China. Q4 revenue increased 7% in constant currency, with volume growth of 10%, partially offset by price declines. Slowing growth in Q4 was primarily driven by Tyvyt. We are pleased to see China return to growth in 2023.

Revenue in the rest of the world decreased 10% in constant currency. However, when you exclude the impact of the Q4 2022 sales of rights for Alimta in Korea and Taiwan, sales grew 9% in constant currency, driven primarily by volume growth of Mounjaro and Verzenio. Slide 9 shows the contribution to worldwide volume growth by product category. As you can see, the new product and growth product categories combined contributed approximately 15 percentage points of volume growth for the quarter.

Slide 10 provides additional perspective across our product categories. First, I would like to highlight Verzenio, which saw worldwide sales growth of 42% in Q4, driven by robust demand growth and, to a lesser extent, higher realized prices. The continued positive momentum is driven by the early breast cancer indication, with steady performance in the metastatic indication. Jardiance continued its strong 2023 performance with worldwide revenue growth of 30% for the quarter.

In the U.S., Jardiance revenue increased 29%, driven by increased demand. In Q4, worldwide Trulicity revenue declined 14%. U.S. revenue decreased 18%, driven by lower volume and lower realized prices.

We experienced intermittent delays for filling orders of Trulicity. Starting in early December and going through January, all dose strengths of Trulicity were indicated as having limited availability on the FDA drug shortage site. We expect to experience intermittent delays fulfilling orders of certain doses in the coming months. In international market, Trulicity volume continued to be affected by measures we have taken to minimize potential disruption to existing patients, including communications to healthcare professionals not to start new patients on Trulicity.

Moving to Slide 11. Mounjaro continued its robust growth as more Type 2 diabetes patients benefited from the medicine. Q4 revenue grew to over 2.2 billion globally, up from 1.4 billion in Q3 2023. In the U.S., Mounjaro revenue of 2.1 billion in Q4, up from 1.3 billion in Q3 2023, benefited from a one-time change in estimates for rebates and discounts.

Adjusting for this one-time change, sequential net sales in the U.S. would have grown approximately 30% in Q4. Since our last call, we further expanded patient access to Mounjaro. As of February 1st, access for patients with Type 2 diabetes in the U.S.

was 90% in aggregate across commercial and Part D, including 92% access for commercial patients. This expanded access puts Mounjaro near parity with established injectable incretins and gives more patients the opportunity to start therapy on Mounjaro for Type 2 diabetes. With the $25 noncovered co-pay card program expired on June 30th, we now consider all prescriptions paid. Compared to Q4 2022, Mounjaro net price in Q4 2023 benefited from this change to the co-pay card program in the U.S.

Recall that after a change to the noncovered co-pay program in late 2022, patients who already started on the $25 co-pay card could remain in the program until June 30th. Today, commercially insured patients without coverage utilize the current noncovered co-pay program and pay roughly half the list price for Mounjaro prescription. Turning to Slide 12. In November, we received FDA approval for Zepbound for adults with obesity or those who are overweight and have weight-related comorbidities.

We then announced on December 5th that Zepbound was available at U.S. pharmacies, and we started building commercial formulary access before the end of the year. We are pleased with the early access of approximately one-third of commercial lives covered as of February 1st. Access in this market will be more gradual as individual employers need to opt in to coverage after the typical formulary contracting takes place.

We are focused on building formulary access and employer opt-ins, but we expect that it will take some time before we reach broad open access in this market. Meanwhile, a commercial savings card program is available at U.S. pharmacies for those who do not yet have coverage. In Medicare Part D, weight loss drugs are still prohibited from reimbursement.

In Q4, we recognized $176 million in sales for Zepbound, with approximately three-fourths of that coming from initial channel stocking. The initial prescription trends we have seen are encouraging. On Slide 13, we provide an update on capital allocation. Looking forward to 2024 and beyond, we have confidence in our existing commercial portfolio, bolstered by the recent launches of Mounjaro, Jaypirca, Omvoh, and Zepbound and the potential launches of donanemab and lebrikizumab, all of which we expect to serve as drivers for continued growth through the balance of the decade.

On Slide 14, you’ll see a summary of our outlook outlining our capital deployment decisions in relations to achievement of our strategic deliverables. We will invest in our current portfolio and in the future innovation through R&D, business development, and a comprehensive manufacturing expansion agenda designed to drive revenue growth and speed life-changing medicines to patients. We will continue to return capital to our shareholders through dividend increases, in line with earnings growth over time, and share repurchases with excess capital. Moving to Slide 15.

We highlight some of the dynamics that may impact our 2024 financial results. We expect continued robust revenue growth with revenue from our core business, which excludes revenue from divestiture, growing nearly 30% at the midpoint of our guidance range, driven by positive momentum from our recently launched products. In incretins, its anticipated growth will be led by Mounjaro and Zepbound. In 2023, we made tremendous strides in expanding access for Mounjaro, and we entered 2024 with 90% of commercial and Part D lives covered.

Zepbound coverage is off to a good starts in its early December launch, and we expect both tirzepatide breaks to contribute substantially to Lilly’s revenue growth in 2024. While we expect Mounjaro and Zepbound to be drivers of revenue growth, this will be partially offset by an expected continuation of the softer Trulicity sales trends that we saw in the second half of 2023. Recent revenue declines for Trulicity in the U.S. have been driven by supply tightness.

Volume has also been impacted by our actions outside the U.S. As for supply outlook for incretins, our manufacturing organization continues to execute well on the most ambitious expansion agenda in our company’s long history. Given strong demand and time required to bring capacity fully online, we expect — we continue to expect demand to outpace supply in 2024. In late 2022, we shared our expectation that by year-end 2023, our capacity for incretin auto-injector pens would double.

This goal was achieved through significant efforts from our manufacturing colleagues and partners around the globe. In 2024, our capacity expansion efforts will continue with equal urgency and will be accomplished not just through increased auto-injector capacity, but also through alternative presentation like our multiuse KwikPen, which received regulatory approval in the U.K. in late January. We expect our parenteral manufacturing site in Concord, North Carolina will initiate production as early as the end of 2024, with product available to ship in 2025, and we are pursuing a host of other projects internal and external, large and small to further expand capacity.

Now, I’ll provide a bit more context on the timing and pace of our incretin supply plans in 2024. While we’re continuing to expand supply every quarter, we expect the most significant production increases to come in the second half of the year. We expect our production of sellable doses in the second half of 2024 will be at least 1.5 times the production in the second half of 2023. Note that while, last year, our commentary focused on capacity of auto-injectors devices compared to 2022, we’re now referring sellable doses produced, which is more relevant to patients and investors.

Beyond incretins, we look forward to progressing our launch trajectory for two other leading medicines approved and launched in 2023, Jaypirca and Omvoh. Jaypirca was initially approved by the FDA in January 2023 for adult patients with relapsed or refractory mantle cell lymphoma under the Accelerated Approval Program, received FDA approval also under the Accelerated Approval Program in December 2023 for adult patients with CLL or SLL that have received at least two prior lines of therapy. We look forward to the ongoing opportunity to help patients with this medicine as our best phase 3 program continues. Omvoh was approved in October 2023 in the U.S.

and earlier that year in Japan, Europe, and other markets and represents a compelling new options for patients struggling with moderate to severe ulcerative colitis. And in 2024, we look forward to potential U.S. launches of two more medicines, donanemab and lebrikizumab. We continue to expect FDA regulatory actions on donanemab in Q4 2024 and remain confident in the substantial potential for donanemab to benefit patients with Alzheimer’s disease.

With the current state of diagnostic and treatment readiness, initial uptake will be somewhat limited, and we expect donanemab to contribute only modestly to growth in 2024 once approved. Lebrikizumab, which, last year, was approved and launched in Europe under the brand name Ebglyss by our partner Almirall, received regulatory approval in Japan in January. As for the U.S., we look forward to the potential approval of lebrikizumab by the end of the year. We believe the efficacy, safety, and dosing of lebrikizumab can make it a compelling options for patients and prescribers in a large and growing market for the treatment of moderate to severe atopic dermatitis.

Given the expected timing of FDA regulatory action, we expect lebrikizumab to contribute only modestly to revenue growth in 2024. Beyond a recently launched portfolio of medicine, we expect continued growth of Verzenio, driven by the early breast cancer indication where the magnitude and maturity of our clinical data reinforces it as a standard of care treatment in node-positive high-risk early breast cancer. Jardiance has been another outstanding contributor to growth, and we expect revenue growth to continue in 2024, though at a slower pace as strong strip growth may be dampened by pricing dynamics in the U.S. Outside the U.S., we expect an acceleration of growth in every major geography, led not only by the anticipated launches of tirzepatide, but also continued strong growth of Verzenio, Jardiance, and Taltz.

Lastly, we seek to create long-term value beyond this decade. We will continue to invest across our value chain in our recent and upcoming potential launches, in our pipeline, and in our manufacturing footprint. Slide 16 summarizes our initial 2024 financial guidance. Starting at the top line.

Revenue is expected to be between $40.4 billion and $41.6 billion. Using the midpoint of the 2024 range, this represents roughly 20% growth or 29% growth for our core business, which excludes the impact of divestitures that took place in 2023. In terms of phasing of our revenue growth throughout 2024, while we don’t provide quarterly guidance, we expect revenue growth to accelerate in the second half of the year, consistent with the increased availability of incretin doses. In terms of pricing for our core business, which excludes the divestitures, we expect a high-single-digit percent price decline in 2024.

The lingering base period impact of the Mounjaro noncovered co-pay card dynamics will dampen these price declines in the first half of 2024, with more significant price declines expected in the second half of the year. During this year, we’re taking a streamline approach to our guidance line items relating to expenses. Rather than providing three separate guidance line items for gross margin; research and development costs; and marketing, selling, and administrative costs, we are presenting a single new ratio, representing our margin after planned costs, calculated by subtracting R&D costs and marketing, selling, and administrative costs from gross margin and dividing that figure by revenue. We expressed this ratio as a percentage.

And for 2024, we expect it to be in the range of 31% to 33% on a non-GAAP basis. While we are not providing a specific guidance number for gross margin as a percent of sales, our expected — our expectations remain consistent that we will maintain gross margin of approximately 80% on a non-GAAP basis as productivity gains and volumes are offset by pricing pressures and the cost of new manufacturing facilities. As for expense growth across key categories, we expect marketing, selling, and administrative expenses to again grow in 2024, though at a slower pace than revenues, with growth driven by marketing investments in our recently launched and upcoming launch products. We also expect R&D expenses in 2024 to increase, driven by growing investments across all phases of our pipeline as we invest for the future, with the majority of dollar growth driven by ongoing and new late-phase opportunities.

We expect R&D expense to increase at a higher rate than marketing, selling, and administrative expenses. Other income and expense is expected to be between $400 million and $500 million of expense, primarily driven by higher interest expense. Turning to taxes. We expect our 2024 non-GAAP effective tax rate to be approximately 14%.

Note that this rate does not assume deferral or repeal of the provision in the 2017 Tax Act requiring capitalization and amortization of research and development expenses for tax purposes. Should such a change take effect, our effective tax rate for 2024 would be moderately higher. Earnings per share is expected to be in the range of $12.20 to $12.70 on a non-GAAP basis. Consistent with our prior practice, we’re not including any potential or pending acquired IPR&D and development milestone charges in our 2024 guidance, and we will provide updates each quarter on the impact of IPR&D on earnings per share if acquired IPR&D and development milestone charges are incurred.

For guidance modeling purposes, we’re currently estimating diluted weighted average shares outstanding for 2024 to be approximately 903 million. We entered 2024 with strong momentum and a remarkable opportunity to help millions more patients with our medicines. For our investors, 2024 should be another exciting year, driven by expected revenue growth in our core business, near an approaching 30%, and continued investment to drive future growth. Our outlook for top-tier revenue growth and operating margin expansion remains on track.

Now, I’ll turn the call over to Dan to highlight our continued progress in R&D.

Dan SkovronskyChief Scientific Officer and President of Lilly Immunology

Thanks, Anat. I’ll start with our progress against diabetes, obesity, and complications thereof. Today, we announced positive results from SYNERGY-NASH, the phase 2 study of tirzepatide in adults with biopsy-proven metabolic dysfunction-associated steatohepatitis, also known as MASH. As shown on Slide 17, the study met its primary endpoint with up to 74% of participants achieving an absence of MASH with no worsening of fibrosis at 52 weeks, compared to less than 13% of participants reaching this endpoint on placebo.

We are equally encouraged by results seen in the secondary endpoint evaluating improvement in fibrosis. While the study was not designed to be statistically powered to evaluate improvement in fibrosis, the study results showed a clinically meaningful treatment effect across all doses on the proportion of participants achieving a decrease of at least one fibrosis stage with no worsening of MASH compared to placebo. The adverse events were consistent with those observed in other clinical trials studying tirzepatide in people living with obesity or Type 2 diabetes. The full SYNERGY-NASH results will be presented at a medical congress later this year.

As you know, late last year, we received FDA approval of Zepbound, which marks Lilly’s first approved treatment for obesity. This is a landmark occasion for patients and for the field as Zepbound is the first and only approved treatment activating two incretin hormone receptors, GIP and GLP-1, to tackle an underlying cause of excess weight. Also, in early stage development, we have now advanced our glucose-sensing insulin receptor agonist for the treatment of diabetes into phase 1 and our long-acting atrial natriuretic peptide for treatment of heart failure into phase 1. We’ve advanced mazdutide into phase 2 for obesity as we’ve begun to dose patients in that study.

We are pleased that early this year, our partner Innovent reported positive results in the phase 3 GLORY-1 study of mazdutide in Chinese adults with obesity. Innovent holds the development and commercialization rights for mazdutide in China, and Lilly retains the rights in the rest of the world. Moving to oncology. Today, we shared that in the phase 3 CYCLONE-2 trial, Verzenio added to abiraterone did not meet the primary endpoint of improved radiographic progression-free survival in men with metastatic castration-resistant prostate cancer.

For this study, we employed an adaptive phase 2/3 design. And while the phase 2 stage met the pre-specified threshold for the independent data monitoring committee to recommend initiation of phase 3, the signal was not confirmed in the phase 3 portion in a larger sample size. The overall safety and tolerability profile was consistent with the known profiles of the medicines. We anticipate sharing full results from the CYCLONE-2 study at a future medical meeting.

Since our last earnings call, Jaypirca received approval under the FDA’s Accelerated Approval Program for the treatment of patients with CLL or SLL who have received at least two prior lines of therapy, including a BTK inhibitor and a BCL-2 inhibitor. We also reported that the phase 3 confirmatory trial intended to convert this approval to traditional approval known as BRUIN CLL-321 met its primary endpoint, and we plan to present these data at an upcoming medical meeting. With the CLL and SLL approvals, Jaypirca is now the first and only FDA-approved noncovalent BTK inhibitor that can extend the benefit of targeting the BTK pathway in CLL and SLL patients previously treated with a covalent BTK inhibitor and a BCL-2 inhibitor. This was the second approval for Jaypirca in 2023, with the first in patients with MCL.

We believe these two indications only represent the beginning of the eventual impact Jaypirca can have for patients, and we look forward to seeing the data from the rest of the phase 3 program across CLL, SLL, and MCL. In Q4, we completed the acquisition of POINT Biopharma, which begins Lilly’s entry into radioligand therapy, a promising technology with potential to deliver meaningful advances against a range of cancers. We welcome our new POINT colleagues to Lilly, and we look forward to building on their work to grow this capability at Lilly. 2024 is also poised to be a particularly productive year for new clinical starts in oncology as we begin to see the results of the new oncology R&D strategy that we implemented about four years ago after the Loxo acquisition.

Through a combination of internal discovery efforts and business development, we expect to put at least five new molecules into the clinic this year: a wild-type selective KRAS G12 inhibitor — G12D inhibitor; a pan-KRAS inhibitor; two antibody drug conjugates with [Inaudible] summaries payloads, one against Nectin-4 and one against folate receptor alpha; and an actinium PSMA radioligand therapy. I’ll speak in a moment about our clinical KRAS G12C program, but you can see that we’re putting real effort into developing a suite of RAS-directed therapeutics, and we’re excited to see those discovery efforts result in three potential medicines so far. Of course, we’ll have to see which of these deliver on our target clinical profiles, but we’re optimistic about this early phase portfolio, and we’ve certainly diversified the modalities in our pipeline. In addition, we’re excited that olomorasib, our KRAS G12C inhibitor, has progressed into phase 2 as we’re finalizing dose selection under Project Optimus for the phase 3 program, which we plan to start later this year.

You can now see the full design of that study on ClinicalTrials.gov. By way of reminder, we started these program years behind our competitors. And through focused effort, behind what looks like a great molecule to us, we’ve made up the vast majority of that time. We believe we’re now neck and neck with our closest competitors with the medicine that we hope to show combines better with PD-1.

Lastly, in oncology, we’ve terminated development of our RET inhibitor II as it did not meet our threshold to move forward with internal development. In immunology, we moved two new assets into phase 1 and we advanced our KV1.3 antagonist for psoriasis into phase 2. Lebrikizumab was approved in the EU for atopic dermatitis under the brand name Ebglyss, which is marketed by our partner Almirall there. In January this year, we were pleased to have Ebglyss approved in Japan.

In neuroscience, in January, our wholly owned subsidiary Akouos announced positive clinical results for the phase 1/2 AK-OTOF-101 study, which demonstrated hearing restoration within 30 days of a single administration in the first participant, an individual with more than a decade of profound hearing loss. The surgical administration and the investigational therapy were well-tolerated, and no serious adverse events were reported. These results highlight our commitment to help solve some of humanity’s most challenging healthcare problems and make life better for individual patients. We now show OTOF gene therapy in phase 2 on our pipeline chart as we’ve begun enrolling younger patients in the phase 2 portion of the study.

On Slide 18, we highlight our select pipeline assets with updates since the last earnings call. And Slide 19 summarizes our key events for 2023. I noted the key updates on each of these slides in my therapeutic area comments. Turning to Slide 20.

We’d like to highlight potential key events for 2024. As you can see, this year will be another important year as we look to progress our late-stage pipeline. In 2023, we initiated phase 3 development projects for our next generation of incretins, which are our oral agent orforglipron and our novel weekly injectable, tri-agonist retatrutide. These programs are progressing and enrolling well.

We look forward to seeing the first set of phase 3 results on orforglipron next year. This year, we’re planning to initiate a phase 3 program in Type 2 diabetes for retatrutide, complementing the ongoing trials in obesity and related complications. Also this year, we are planning to initiate a phase 3 program for lepodisiran, our Lp(a)-lowering SiRNA therapy in cardiovascular disease. On tirzepatide, we’re looking forward to a number of additional key data readouts this year.

Beyond SYNERGY-NASH, we expect to see results from the phase 3 obstructive sleep apnea and phase 3 heart failure studies this year. We note increased investor interest in the timing of SURPASS-CVOT, and we can reiterate that we expect the data in 2025, notwithstanding the ClinicalTrials.gov listing, which will be updated soon to reflect our current assumptions based on event rate. By the end of 2024, we expect to have results of SURMOUNT-5, which is our head-to-head study of tirzepatide compared to high-dose semaglutide in participants with obesity. We also expect the full phase 3 program readout on our weekly basal insulin, insulin efsitora alfa, later this year.

Moving to neuroscience. We’re looking forward to FDA action and the potential launch of donanemab in Q1 of this year, and we are progressing with regulatory reviews around the world. We’ve now launched a P-tau217 blood-based diagnostic test, and we will continue to scale this throughout 2024. We’ll also continue to partner with others in the field to ensure physicians have multiple tools to aid in timely and accurate diagnosis of Alzheimer’s disease.

In immunology, following the mirikizumab positive phase 3 data in Crohn’s disease, we plan to submit to the FDA for this indication this year. Additionally, following the U.S. FDA complete response letter on lebrikizumab, we expect regulatory action by the end of the year in the U.S. Finally, in oncology, as I mentioned before, we look forward to moving our KRAS G12C inhibitor, olomorasib, into phase 3 later this year following phase 2 dose selection.

Lastly, we’re looking forward to seeing the results of our imlunestrant phase 3 study, EMBER-3, for participants with metastatic breast cancer in both monotherapy and in combination with Verzenio. This past year was busy and productive, and we expect more of the same in 2024 as we make meaningful progress advancing our pipeline for the benefit of patients. And I’ll now turn the call back to Dave for closing remarks.

Dave RicksChairman and Chief Executive Officer

Thanks, Dan, and congrats to you and the team for a big year. Before we go to Q&A, let me briefly sum up our progress in the fourth quarter. Q4 revenue growth accelerated as we — as our recently launched product portfolio continued to gain momentum. We achieved meaningful advances in our late-stage pipeline with the FDA approvals of Zepbound and Jaypirca.

We continue to invest in recent and upcoming launches, late-stage medicines, early phase capabilities, and in business development, all of which will serve as a foundation for future growth. In Q4, we completed the acquisition of POINT Biopharma and announced plans to build a new manufacturing site in Germany. We returned over $1 billion to shareholders via the dividend. Lastly, in January, we announced that Johna Norton, our executive vice president of global quality, will be retiring at the end of July after 34 years of service.

During her tenure, Johna has overseen significant expansion, modernization, and improvements in our quality and manufacturing processes. I’d like to thank her for her many years of outstanding service to Lilly. Now, I’ll turn the call over to Joe to moderate our Q&A session.

Joe FletcherSenior Vice President, Investor Relations

Thanks, Dave. Before diving into the Q&A, I wanted to clarify one point. We may have had some muffled sound during the announced prepared remarks regarding the timing of regulatory action on donanemab. And as Dan mentioned, that timing is expected to be Q1 of 2024 this year.

We received some notes that there were some muffled sounds. I just wanted to clarify from that important point. Now, for Q&A, we’d like to take questions from as many callers as possible and conclude the call in a timely manner. So, consistent with prior quarters, we’ll respond to one question per caller.

So, I’ll ask that you limit to one question per caller, and we’ll end the call at 11:15 a.m. If you have more than one question, you can reenter the queue, and we’ll get to your question if time allows. Paul, please provide the instructions for the Q&A, and we’re ready for the first caller.

Questions & Answers:

Operator

Thank you. At this time, we will be conducting a question-and-answer session. [Operator instructions] And the first question today is coming from Terence Flynn from Morgan Stanley. Terence, your line is live.

Terence FlynnMorgan Stanley — Analyst

Great. Thanks so much for taking the question. Congrats on all the progress. Just wondering for your GLP franchise, ex U.S., you under-indexed versus your key competitor.

Just wondering what are some of the hurdles to closing that gap as we think about, you know, the ramp in ’24 but also into 2025? Thank you.

Joe FletcherSenior Vice President, Investor Relations

Thanks, Terrence, for the question. I’ll hand it over to Ilya Yuffa, president of Lily international, for that question.

Ilya YuffaPresident, Lilly International

Great. Thanks, Terrence. As we think about Mounjaro launches outside of the U.S., we have already launched in a number of select markets. We have a foundation to be competitive in many of our markets, and we anticipate continued launches.

We’ve just launched in vial format in select markets outside of the U.S., namely in Australia, Canada, in Germany, and Poland. And we just received KwikPen approval in the U.K. And so, we’re anticipating launch there. As we get additional regulatory approvals for our multiuse KwikPen and we monitor our ramp-up and capacity for supply, we’ll continue to launch in other markets throughout the year.

And so, we anticipate further growth anticipated for launches of Mounjaro outside of the U.S. and continue with that throughout the year, as well as into 2025.

Joe FletcherSenior Vice President, Investor Relations

Thanks, Ilya. Paul, next question.

Operator

The next question is coming from Chris Schott from J.P. Morgan. Chris, your line is live.

Chris SchottJPMorgan Chase and Company — Analyst

Great. Thanks so much. On Zepbound, it seems like you’re making strong progress on coverage, but just interested in expectations for the remainder of this year as we think about just where coverage could go and just how to think about ASP. I guess the core question is, is it reasonable to think that most payers who cover Wegovy will add Zepbound this year? Thank you.

Joe FletcherSenior Vice President, Investor Relations

Thanks, Chris. I’ll hand it over to Patrik to comment on that question about Zepbound coverage.

Patrik JonssonPresident, Lilly Diabetes and Obesity and Lilly USA

Yes. Thank you very much, Chris. As we stated, we are pleased with where we are so early in launch with the 35% commercial access having contract with ESI and Cigna. Our efforts moving forward would really be to continue to expand payer access.

But not only, we will do that with a very disciplined approach, as we did with Mounjaro, but also to make sure that we get to employer opt-in. And as Anat alluded to in her prepared remarks, that’s going to take some time. But we are assuming that with current access we have that our access will be along the lines of what the competition has referred to, around 50%. Let me just emphasize that when it comes to employer opt-in, there is not one reliable source for employer opt-ins.

I think that’s something that we need to continue to monitor, and we’ll come back with more data during coming earnings calls. So, overall, a good start, and we will continue our efforts to increase payer access. I think we’re quite encouraged with what we have heard from the marketplace so far. Employer opt-in will take longer, but we believe that we’re well-positioned in that regards as well.

Joe FletcherSenior Vice President, Investor Relations

Thanks, Patrik. Next question, Paul.

Operator

The next question is coming from Seamus Fernandez from Guggenheim. Seamus, your line is live.

Seamus FernandezGuggenheim Partners — Analyst

Thanks very much and congrats on all the progress and the success here. But I just wanted to get a quick sense from Dan. You know, do you see a prospect from SYNERGY-NASH for accelerated approval and can you confirm that while clinically significant, the secondary endpoint of fibrosis stage improvement was not statistically significant? Thanks.

Joe FletcherSenior Vice President, Investor Relations

Thanks, Seamus, for the question. Dan.

Dan SkovronskyChief Scientific Officer and President of Lilly Immunology

Yeah. Thanks, Seamus. This data is really quite new to us, but we’re really excited about it. We haven’t had a chance yet to talk to the FDA here at all about next steps, but we’re looking forward to having that opportunity.

Of course, this was a small trial, about 190 participants, but it did use liver biopsies, of course, to assess the endpoints here. With respect to the improvement in fibrosis, I think I probably previously stated that it was unsure whether it would be possible for incretin-based therapies to reverse fibrosis in patients based on competitor readouts in the field, but really excited to see this data with clinically meaningful improvement in fibrosis. There’s different doses, there’s different statistical methods that can be applied here, accounting for dropouts, particularly in the placebo group. So, we’ll have to wait for the scientific presentation to see all the p values there.

But we’re pretty positive on this data package as a whole and what this could mean for patients, both in terms of stopping progression of NASH and reversing fibrosis.

Joe FletcherSenior Vice President, Investor Relations

Thanks, Dan. Paul, next question.

Operator

The next question is coming from Umer Raffat from Evercore. Umer, your line is live.

Umer RaffatEvercore ISI — Analyst

Hi, guys. Thanks for taking my question. Dave, as you think about manufacturing build-out in various sites, which is obviously very important for all the existing GLP demand, I’m curious how are you balancing that dollar investment with your probabilities on orforglipron clinical and commercial odds, especially with all the blinded data that’s coming in?

Joe FletcherSenior Vice President, Investor Relations

Thanks, Umer. Dave.

Dave RicksChairman and Chief Executive Officer

Yeah, happy to answer that. Of course, as we enter this phase of really strong growth in the incretins, we’re very focused on allocating capital. But top priority is creating new capacities. The gating factors are not really financial for us right now.

So, you can expect us to be investing fully. We’re not slowing down because of cash flow or whatever. It’s really a function of the technical capacities, both in people and in suppliers, to be able to bring facilities online. That’s particularly true in the parenteral side.

Now, you’re referencing orforglipron here. We do plan to build ahead of phase 3 at risk. I think given the probability we assess internally, as well as the opportunity on the other side of a positive phase 3, we see that as a wise investment. And as we’ve commented on before, it relies, as you would know, on very different assets inside Lilly, as well as outside of Lilly.

So, here you have organic chemistry, API, and tablets and capsules. So, pretty different setup. So, we can — we’re paralleling that with our robust injectable investments. And if we’re wrong, OK, we’ll have to eat that in the end if orforglipron isn’t a strong product.

But if it is, I think it does begin to change the math on supply in this category, and I think that’s a bet worth taking.

Joe FletcherSenior Vice President, Investor Relations

Thanks, Dave. Paul, next question.

Operator

The next question is coming from Tim Anderson from Wolfe Research. Tim, your line is live.

Tim AndersonWolfe Research — Analyst

Thanks. On SURPASS-CVOT, you mentioned it’s slipped to 2025. I assume that implies the one interim look has come and gone. And then you’re evaluating both noninferiority and superiority.

Would you agree that superiority is really what you need to show here and what’s your confidence in achieving that?

Joe FletcherSenior Vice President, Investor Relations

Thanks, Tim, for those couple of questions. Maybe we’ll fill the one on the interim look, Dan?

Dan SkovronskyChief Scientific Officer and President of Lilly Immunology

Yeah. Sure. Well, thanks for that question, Tim. As you know, Lilly doesn’t comment on interims.

Probably, most trials in our portfolio do have opportunities for interim looks, but that has — is not, I think, germane at all to the question on the timing on ClinicalTrials.gov, which was before and continues to be the time point at which we’ll have final data. When we initially put that time point in ClinicalTrials.gov, it was in early 2020, we hadn’t started enrolling in the trial yet. So, that was based on our assumption on enrollment rates, but probably more importantly on event rates. And as the trial matures, we get a view on event rates.

I know it’s frustrating for investors and for us perhaps to wait to longer time to get events. But of course, that’s great news for patients when the event rates are slower, remembering that this is a head-to-head trial with a drug Trulicity that we already know is active in preventing [Inaudible] events.

Joe FletcherSenior Vice President, Investor Relations

Thanks, Dan. Paul, next question.

Operator

The next question is coming from Mohit Bansal from Wells Fargo. Mohit, your line is live.

Mohit BansalWells Fargo Securities — Analyst

Great. Thank you very much for taking my question and congrats on the progress. I have a question regarding your sleep apnea study. How much benefit do you think from baseline is required for this to be clinically meaningful? Is it 50% or more? And do you think the trial is big enough to seek a label in sleep apnea? Thank you.

Joe FletcherSenior Vice President, Investor Relations

Thanks, Mohit, for the question. Dan, back to you.

Dan SkovronskyChief Scientific Officer and President of Lilly Immunology

Yeah, thanks. There isn’t really a well-established threshold for clinical meaningfulness in sleep apnea. Of course, the commonly used measure here is an index of how many apneic or hypoxic events a patient has while sleeping. It’s — you know, certainly, drugs in this category I think have great potential to improve that.

We’re excited to see what tirzepatide can see. Probably, you know, in addition to the absolute percent improvement in AHI that we’ll be looking for, I’d also like to see patients switching from one category, for example, intermediate to mild disease or things like that. So, we’ll be looking at a number of things to assess clinical meaningfulness here, but I’m quite optimistic.

Joe FletcherSenior Vice President, Investor Relations

Thanks, Dan. Paul, next question.

Operator

The next question is from Louise Chen from Cantor. Louise, your line is live.

Louise ChenCantor Fitzgerald — Analyst

Hi. Thanks for taking my question. I wanted to ask you how you think about sizing the downstream opportunities for a GLP-1 such as tirzepatide maybe in NASH, some of the other indications that you’re going after as well? Thank you.

Joe FletcherSenior Vice President, Investor Relations

Thanks, Louise, for that question. I think — so about the downstream opportunities in NASH and elsewhere, Patrik, do you want to fill that?

Patrik JonssonPresident, Lilly Diabetes and Obesity and Lilly USA

Well, thank you very much. I think there’s two important aspects. The first one is when we refer to employer opt-in. I think employers are really looking actively into benefits of listing anti-obesity medications.

And whatever data we can generate here being in the cardiovascular space, being in OSA, or being in NASH and other indications will be extremely important for increased employer opt-in. The second piece will be in Medicare Part D. As long as TROA is not paused, I think data in those comorbidities will be critical to enable access for patients in Medicare Part D. So, those are truly the key drivers for those indications.

Joe FletcherSenior Vice President, Investor Relations

Thanks, Patrik. Paul, next question.

Operator

The next question is coming from Kerry Holford from Berenberg. Kerry, your line is live.

Kerry HolfordBerenberg Capital Markets — Analyst

Thank you for taking my questions. It’s on tirzepatide obesity. Interested to hear why you’ve taken the decision not to launch under the Zepbound brand outside the U.S., but rather seek a label expansion for weight loss to Mounjaro. Does that relate to simplicity, perhaps faster reimbursement access? And I wonder if you foresee any risk here that ex U.S.

governments prefer ultimately to keep diabetes and obesity budgets separate? Thank you.

Joe FletcherSenior Vice President, Investor Relations

Thank you, Kerry, for the questions. I’ll hand it over to Ilya to talk about the branding of tirzepatide OUS.

Ilya YuffaPresident, Lilly International

Sure. Yeah. So, the branding for tirzepatide outside of the U.S., it depends on a number of different factors, whether it’s regulatory or competitive market dynamics. There are some payer dynamics as well.

We don’t anticipate that being a challenge in terms of negotiating reimbursement either for Type 2 diabetes or for chronic weight management. We continue to have those discussions in a number of markets and are optimistic about our ability to commercialize under different brand scenarios.

Joe FletcherSenior Vice President, Investor Relations

Great. Thank you, Ilya. Paul, next question.

Operator

The next question is from Geoff Meacham from Bank of America. Geoff, your line is live.

Geoff MeachamBank of America Merrill Lynch — Analyst

Good morning, guys. Thanks so much for the question. Dave, I know you guys formally announced LillyDirect last fall, but should we view it as a platform, you know, that just streamlines access to providers and Lilly meds or is there a monetization model or some market differentiation that could also play out over time? Thank you.

Dave RicksChairman and Chief Executive Officer

I can start. Patrik, jump in. Yeah, thanks for the question. You know, the idea was really actually borne out of the challenges patients face every day in the U.S and sometimes seeing doctors.

And, you know, we have a doctor finder tool, as well as telehealth partners on the platform for migraine, diabetes, and obesity. Finding medicines in their pharmacies, you know, that’s a been a challenge. And I think particularly as supplies are tight, many patients report driving to five, six, seven pharmacies to find the medicine they need. This simplifies that process.

And then, you know, I think, in addition, there’s been a lot of noise about drugs that are illicit or copies or compounded versions of Zepbound or other weight loss drugs. And that’s concerning to us, and I think it’s concerning to patients. So, by going to LillyDirect, literally, they have confidence in the supply. And finally, you know, application of our savings programs has also been a challenge at the pharmacy counter, and that happens 100% of the time on LillyDirect.

We haven’t thought about it as a way to create some new, you know, retail distribution business. It’s a way to serve the patients that want our medicines better. That’s sort of the frame we’re in now. Early days.

We’re trying to develop it to be smoother, better, include more products over time, have better information about physicians and telehealth providers. So, look for more developments there. But good start so far. A lot of energy and enthusiasm from the patient community.

Joe FletcherSenior Vice President, Investor Relations

Thanks, Dave. Paul, next question.

Operator

The next question is coming from David Risinger from Leerink. David, your line is live.

David RisingerLeerink Partners — Analyst

Yes. Thank you and congrats on today’s updates. So, my question is for Dave and Dan on lean muscle loss associated with incretin use. Could you help us understand Lilly’s take on this debate and comment on tirzepatide’s data to date relative to semaglutide? What I’ve observed is that SURMOUNT-1 showed a 3-to-1 fat-to-lean muscle loss ratio, whereas sema’s Step 1 trial showed a 1.5-to-1 ratio, albeit with a slightly different assessment.

Thank you.

Joe FletcherSenior Vice President, Investor Relations

Thanks, David. I’ll ask Dan to fill that.

Dan SkovronskyChief Scientific Officer and President of Lilly Immunology

Yeah. Thanks for your question. Maybe just starting with our take on lean versus fat mass, I think the ratio of lean to fat mass is an important thing to think about. Body composition, not just body weight, matters to patients.

For example, in risk of Type 2 diabetes or cardiovascular disease, that body ratio seems to be important. The good news is that for patients on tirzepatide, that ratio appears to improve. As you pointed out, they lose far more fat mass than lean mass. And so, in every trial we’ve done, at the end of the trial, if you measure body composition, it’s better, a higher ratio of lean to fat than at the beginning of the trial.

So, we see this changing body composition as a benefit — a potential benefit of tirzepatide to be further explored. Of course, it’s also a benefit we want to further extend. You’ve seen us try to improve the total amount of body weight loss. We’re also trying to improve the — further improve, I should say, the change in body mass composition, and that’s why you saw us to acquire Versanis and experiment with drugs like the bimagrumab.

The numbers you quote from the tirzepatide and semaglutide studies seem right to me. Of course, they’re not head-to-head studies. But it does raise a question here about whether there’s a potential benefit of GIP-1 — GIP agonism here in addition to GLP-1 agonism. That’s probably the way I would interpret this data.

Joe FletcherSenior Vice President, Investor Relations

Thanks, Dan. Paul, next question.

Operator

The next question is coming from Evan Seigerman from BMO Capital Markets. Evan, your line is live.

Evan SeigermanBMO Capital Markets — Analyst

Hi, all. Thank you for taking my question. I would love to get your take on how you’re thinking about the opportunity for the oral GLP-1s. We’ve seen some mixed data from competitors, and I just would love to get how you see this evolving in context of your investment on orforglipron.

Thank you.

Joe FletcherSenior Vice President, Investor Relations

Thanks, Evan, for the question. Patrik, maybe you can talk about how we think about an oral agent.

Patrik JonssonPresident, Lilly Diabetes and Obesity and Lilly USA

Well, thank you very much. You know, when we look at the opportunity in obesity, we have more than 110 million in the U.S. We have 650 million globally. I think taking into account the current supply constraints across markets, it’s impossible to reach all of those with injectables.

So, I think that’s the big opportunity we have for orforglipron. And what we have seen so far in phase 2, if we can replicate those data in phase 3, we have an oral medicine here with a weight loss along the lines of the best competitive incretin, not at the level of tirzepatide, but at the level of the best incretin in the marketplace, and with no food or water restrictions. So, we really see the opportunity here with orforglipron to reach patients across the globe. And there is another component as well.

If we look at the current market, approximately 20% of patients who have obesity are actually concerned to take an injectable. So, that’s another opportunity we have for orforglipron. So, we believe that a really strong drug in our hands moving forward in the space of chronic weight management.

Joe FletcherSenior Vice President, Investor Relations

Thank you, Patrik. Paul, next question.

Operator

The next question is from Steve Scala from Cowen. Steve, your line is live.

Steve ScalaTD Cowen — Analyst

Thank you so much. There could be several reasons why Lilly is not initiating a phase 3 trial of tirzepatide in NASH. First. Lilly believes it has better molecules.

Second, there’s something in the phase 2 data which is less than ideal. Or third, Lilly will do a phase 3, it just hasn’t gotten around to finalizing plans. But that really can’t be it. To draw a parallel, you’re starting a phase 3 with LPA without even telling us that phase 2 is positive.

So, what would be best for us to conclude about tirzepatide in NASH? Thank you.

Joe FletcherSenior Vice President, Investor Relations

Thank you, Steve.

Dan SkovronskyChief Scientific Officer and President of Lilly Immunology

Yeah, no, thanks, Steve, for the clever analysis here. So, first of all, I should just say, we literally just got this phase 2 data, so give us a chance to determine our next steps on plans. Probably, I’d debunk at least one of the hypotheses here. There’s nothing bad in the data that would stop us from going to phase 3.

In terms of having a better molecule, probably we do in retatrutide. Of course, we don’t have that kind of phase 2 data here for retatrutide, and so that’s based on liver fat reduction, which was just incredible in the phase 2 trial. Still, though, I think having a positive phase 2 trial here with really meaningful data in NASH obligates us to think about next steps. As I said, that’s going to the FDA to talk to them.

I would say in terms of planning a phase 3 for any drug in NASH, the really important priority for us is to move away as much as we can from liver biopsies and replace them with noninvasive testing. I think we and others in the field have made a lot of progress there. We see analogies here to other disease areas. And we hope that in the future, it’ll be possible to conduct phase 3 NASH trials without relying on biopsies.

That would really have a profound effect on the feasibility of running these trials quickly, but also in the clinical application of NASH drugs where those noninvasive biomarkers could be used to identify patients for treatment and monitor their response to therapy rather than biopsy.

Joe FletcherSenior Vice President, Investor Relations

Thank you, Dan. Paul, next question.

Operator

The next question is from Chris Shibutani from Goldman Sachs. Chris, your line is live.

Chris ShibutaniGoldman Sachs — Analyst

Thank you. Duration of use of the GLP-1s across the diabetes and obesity populations, previously, you’ve characterized the duration in the range of 15 months for diabetes and have commented that you don’t believe we have enough experience. Any updates there and when do you think we will have enough experience to be able to get a better gauge of duration of use median in the obesity population, at least initially?

Joe FletcherSenior Vice President, Investor Relations

Thanks, Chris. Patrik, do you want to comment on duration of therapy?

Patrik JonssonPresident, Lilly Diabetes and Obesity and Lilly USA

Yeah. Thank you very much, Chris. I think you’re right. It’s quite challenging.

It’s still early days with both Mounjaro and particularly Zepbound, and we’ve been facing some specific key dynamics in terms of supply and also changes to the co-pay program. However, when we look at the recent data for Mounjaro, it’s encouraging and it suggests that patients that start their therapy back in Q1 2023 are having a persistency, at least along the lines of other injectable incretins. For Zepbound, definitely too early, but we strongly believe that patients will be motivated when they see the benefits of the drug. And that will, of course, be many factors impacting both supply, microeconomic, and microeconomic.

But we are convinced that there will be a finite duration of treatment also for obesity since when we look into even heart failure in Type 2 diabetes, more than 12 months period of adherence is considered long. But encouraging data in Type 2 diabetes so far. And with Zepbound, we will see that that will, for sure, be an end of duration based upon what we’ve seen in other chronic diseases, but we believe that the features itself will be motivating for patients.

Joe FletcherSenior Vice President, Investor Relations

Thanks, Patrik. Paul, next question.

Operator

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

Akash TewariJefferies — Analyst

Hey. Thanks so much. So, David, at J.P. Morgan, you made an interesting comment on orforglipron where you mentioned the molecule has lots to prove here.

Can you elaborate a bit on what you mean by this? And what’s your confidence on orfo’s DDI profile? It seems to have a bit of CYP3a4 inhibition. So, will this drug be able to get dose with SGLT2s given they were excluded in some of your earlier studies? Thanks.

Dave RicksChairman and Chief Executive Officer

Sorry, that was for me? I think I can frame like why I said that, but maybe, Dan, why don’t you comment on the specific DDI questions and SGLT2 co-administration? I just said that because we’re just starting the phase 3, and we all know small molecule, there’s a bit of empiricism in terms of eliminating safety risks. And of course, every day, as we expose more patients to the drug and we have higher doses, that’s a good day where we don’t announce that the drug has a problem. At some point, we reached a lot of confidence. We just weren’t at that point, and we’re not at it now.

I think we’re running the phase 3 experiment, and we need to discharge the off-target safety that is inherent in small molecule discovery, and we’ve seen in this class from others. But nothing specific on my mind. Maybe Dan can further reassure us.

Dan SkovronskyChief Scientific Officer and President of Lilly Immunology

Yeah. Thanks, Dave. Of course, just the normal phase 3 types of risks, but new safety signals, which could always arise. I think with respect to DDI and co-administration with SGLT2s, we expect that to be possible, and we have that ongoing in our phase 3 trials.

There are patients who achieve — we’ll be [Inaudible] with orforglipron, as well as other drugs like SGLT2s.

Joe FletcherSenior Vice President, Investor Relations

Thanks, both. Paul, next question.

Operator

The next question is from Trung Huynh from UBS. Trung, your line is live.

Trung HuynhUBS — Analyst

Hi, guys. Thanks for taking my questions. Can I just ask your thoughts on GIP agonism versus antagonism given data yesterday from a competitor suggesting more limited effects on things like blood pressure and lipid modifications? Just how differentiated do you think an agonism approach is versus antagonism and why do you think agonism is the way forward? Thank you.

Joe FletcherSenior Vice President, Investor Relations

Dan.

Dan SkovronskyChief Scientific Officer and President of Lilly Immunology

Yeah. Well, first of all, it’s not a fair comparison. We have so much data now on the benefits of GIP agonism from tens of thousands of participants in randomized clinical trials for tirzepatide. So, we’re extremely confident here about the benefits of GIP agonism.

Adding to that data, we have experimented with a pure GIP-1 agonist that doesn’t have any GLP-1, and we reported the benefits there in our phase 1 study. We’re contrasting that here to a small phase 1 study that was recently published with a drug that has both GLP-1 agonism and GIP antagonism. I noted in that publication that GIP antagonism is at a much lower affinity. So, it probably only starts to antagonize GIP at very high doses.

That’s probably a question for that company. But I noted at the high doses actually an increase in free fatty acids and complete attenuation of the decrease in triglycerides in the clinical trial. Those are some effects that we attribute to GIP. And so, I’m not surprised that antagonism of GIP is starting to have some negative effects once that kicks in.

We also see GIP agonism as having positive benefits on tolerability, reducing potentially nausea and vomiting. And again, I think maybe at the higher doses, you could probably see some hints of the opposite effect with antagonism. So, pretty glad with the decision we took, and let’s see how the field continues to evolve.

Joe FletcherSenior Vice President, Investor Relations

Thank you, Dan. Paul, next question.

Operator

The next question is from Carter Gould from Barclays. Carter, your line is live.

Carter GouldBarclays — Analyst

Great. Good morning. Thanks for taking the questions. I guess over the prior two earnings calls, there had been at least an acknowledgment that CMOs were going to be part of the equation going forward for supply on the incretin side.

I guess does the developments yesterday have any sort of direct or indirect impacts as you think about that part of the equation going forward?

Joe FletcherSenior Vice President, Investor Relations

Thanks, Carter. Anat, do you want to fill that?

Anat AshkenaziChief Financial Officer

Sure. So, we’ve — and I’ve mentioned on this call as well that we have a very expensive manufacturing expansion agenda, which does include third parties. While our strategy is and has always been to develop more internally, we do have third parties as well. So, we — as we saw the announcement that came out from Novo yesterday regarding the intent to acquire Catalent and we certainly have questions about that transaction and need to learn more.

And we don’t know, Catalent is an integral part or manufacturer of both commercial and pipeline products for the industry, especially in diabetes and obesity, and we have products with these sites as well. So, our focus today is on ensuring that continuity of supply of medicine for patients is uninterrupted, as well as we intend on holding Catalent accountable to their contract with us as we look and we gain more information on this proposed transaction.

Joe FletcherSenior Vice President, Investor Relations

Thank you. Paul, next question.

Operator

The next question is coming from James Shin from Deutsche Bank. James, your line is live.

James ShinDeutsche Bank — Analyst

Hi. Good morning. Thanks for taking the question. I just want to circle back to Carter’s question.

You know, given Lilly is well capitalized and manufacturing capacity being the priority, I mean could you expect more buy versus build to get around some of the technical bottlenecks and the nontrivial FDA process? Just want to get your thoughts there.

Joe FletcherSenior Vice President, Investor Relations

Dave.

Dave RicksChairman and Chief Executive Officer

Yeah. Maybe I’ll give it a shot. Thank you for the question, James. Yeah, as I mentioned on the earlier question related to orforglipron, we are not — we don’t think of ourselves as capital-constrained buying or building in this space.

The reality is there just isn’t built capacity that’s available. Most of it that’s being used is already deployed against the leading products in the GLP-1 space, at least any at scale. And new capacity has a lead time of three to four years. So, all of the things that are coming online now, like we mentioned today our very large site in Concord, North Carolina, that’s a big node of capacity for the sector and certainly for Lilly.

I mean, that was announced two and a half years ago, and it will just begin production at the end of this year. So, that’s the problem. And why is that? Well, of course, greenfield building is difficult, repurposing is difficult, but also the — these are technically complex facilities. There’s not an infinite number of people who know how to set them up.

And the supply chain for the machines that make the products is also constrained. So, at this point, I don’t think there’s an easy way forward. And I think even in yesterday’s announcements, we have a lot of questions about that. But I think even the purchaser or our competitor said it will take many years for them to be able to increase capacity within that purchase.

So, it’s just not an easy problem to solve. I think, over time, it will ease. There’ll be more capacity brought online by us, or competitor, and maybe others, including third parties. And new technologies will emerge like orforglipron and/or other oral options that tap into different asset bases.

So, I know it’s frustrating for investors. It’s frustrating for us. It’s even more frustrating for patients. But it’s just sort of the situation we’re in is there’ll be steady gains in manufacturing over the coming several years and perhaps bigger gains after that.

Joe FletcherSenior Vice President, Investor Relations

Thank you, Dave. Paul, next question.

Operator

The next question is from Rajesh Kumar from HSBC. Rajesh, your line is live.

Rajesh KumarHSBC — Analyst

Hi, there. Can you give us some color on, you know, how the access with employers is playing out? Are you getting exclusive access for your drugs or you’re being added to the existing access your competitors’ drugs have? And what is the nature of discussion, especially given that, you know, the pound is priced at a more attractive list price? So, I’m assuming with rebate, the differences might be a bit smaller, but any color there might be super helpful.

Joe FletcherSenior Vice President, Investor Relations

Yeah. Thanks, Rajesh. I think we covered that in Chris Schott’s question earlier. I don’t know if Patrik have anything to add or we could just move on.

Patrik JonssonPresident, Lilly Diabetes and Obesity and Lilly USA

I think the only addition would be that we are always aiming for open access. We believe that’s important for the providers and the patients we are serving. So, that’s going to be our aim when it comes to employer opt-in as well. And we believe the move by pricing Zepbound 22% below the competition despite launching with a best-in-class profile is also a good signal for increased and enhanced employer opt-in.

Joe FletcherSenior Vice President, Investor Relations

Thanks. Thank you, Patrik. Paul, next question. I think we’re going to answer two more.

Operator

The next question is from Andrew Baum from Citi. Andrew, your line is live.

Andrew BaumCiti — Analyst

Thank you. Could you talk to your scenario planning for post-2032 when the potential exists for generic semaglutide to be launched? There seems to be significant interest and investment in capacity expansion. Now, obviously, this is complex, as you outlined, given not just API but fit and finish and IP and the rest of it. But I’m just curious how you think about that in terms of future-proofing your business against step edits and other, thinking about your broader incretin portfolio?

Joe FletcherSenior Vice President, Investor Relations

Thanks, Andrew, for the very long-term question. I’ll pass it over to Anat to talk about 2032 and beyond.

Anat AshkenaziChief Financial Officer

We do look at 2032 and we actually do look beyond. And the way we look at our business, it is a long-term business, it’s not a business that changes every year or two. So, we do look at the long-term horizon, both in terms of the commercial products, as well as what’s coming through the pipeline. And as we think through the events of [Inaudible] whether for our products or those of competitors, our way of managing through that is to bring new breakthrough innovation to the marketplace.

So, to raise the bar on our own innovation, we don’t wait for that to occur or happen by competition, but to bring something into the market that provides a meaningfully improved outcome for patients. So, in this specific example, you used the GLPs, certainly tirzepatide brought in a higher bar for weight loss for patients with chronic weight management, and retatrutide that Dan referenced in his comments currently in phase 3 has the potential to bring even further improved outcome for patients. So, that’s how we see that. In terms of capacity and whether the question is on whether companies should be or shouldn’t be building given that there is a patent expiry at the end, we do look at that and we look at the long-term horizon.

But certainly, the investments in a manufacturing facility, for example, the ones we’ve just mentioned, whether it’s in Concord, North Carolina or Research Triangle Park, between the two of them, it’s about a $4 billion investment, are certainly good investments of our capital given that size of opportunity over the long term. I will say that as you think about potential for the generic or biosimilar entry in this space, in general, it will require quite a massive investment in capital. Just the sites that I’ve mentioned today on the call and we’ve talked about for the past year or so totaled about $11 billion. And that’s on top of already substantial network we have around the globe, primarily in the U.S.

and Europe, for production. So, as you think about entering into that space, it will require some significant capital commitments.

Joe FletcherSenior Vice President, Investor Relations

Thank you, Anat. Maybe a final question, Paul, and then we’ll wrap up.

Operator

Certainly. The next question is from Tim Anderson from Wolfe Research. Tim, your line is live.

Tim AndersonWolfe Research — Analyst

Thank you so much. So, one of the competitor datasets, obviously, everyone’s watching is the Amgen data this year, and their messaging is around, you know, longer dosing frequency, you know, monthly dosing, and then possibly a greater effect of weight loss off therapy. So, can you comment on your value — on your views of the value of extended dosing like monthly or longer, and then do you believe in that argument about, you know, efficacy being sustained off therapy, or is that just a function of the fact that this drug lasts longer?

Joe FletcherSenior Vice President, Investor Relations

Dan.

Dan SkovronskyChief Scientific Officer and President of Lilly Immunology

Yeah. I’ll start with the second and then maybe Patrik will weigh in on potential value here, but — although that could be a good question for Amgen. Look, I think the sustainability data I saw in that publication are a bit underwhelming. You know, it’s a very high dose drug at half-life of an antibody.

So, just based on plasma concentrations, that would be extended to expect it to remain there after a month or two. It doesn’t surprise me. But what we’re seeing is that it — doses that are reasonably well tolerated, if there were any doses that are reasonably well tolerated, weight loss is lower than what we would need to see to take a molecule to phase 3, for sure, and sustainability doesn’t appear to be at all differentiated.

Patrik JonssonPresident, Lilly Diabetes and Obesity and Lilly USA

The only addition would be that when we look at market research, of course, convenience is one factor, but it’s not necessarily the most important factor when it comes to provider and consumer selecting treatments. So, I am really excited about the course we have in our hands. Of course, tirzepatide remaining a foundational treatment for obesity, but also with the addition of retatrutide and orforglipron. And also, the opportunities here to look into options with additional non-weight loss-dependent pharmacology to complement the assets we have in the pipeline.

Joe FletcherSenior Vice President, Investor Relations

Thank you, both. Dave, do you want to wrap this up?

Dave RicksChairman and Chief Executive Officer

Yeah. Absolutely. That’s good, Joe. Thanks.

We appreciate everyone participating today and, of course, your interest in the company. 2023 was a really productive year for Lilly, and we look forward to continued momentum in 2024 with a strong guide today. Thanks again for dialing in, and please follow up with Joe and the IR team if you have additional questions that weren’t answered. Thanks.

Operator

Thank you. Ladies and gentlemen, this does conclude our conference for today. This conference will be made available for replay beginning at 1 p.m. today, running through February 20th at midnight.

You may access the replay system at any time by dialing 800-332-6854 and entering the access code 187676. International dialers can call 973-528-0005. Again, those numbers are 800-332-6854 and 973-528-0005 with the access code 187676. [Operator signoff]

Duration: 0 minutes

Call participants:

Joe FletcherSenior Vice President, Investor Relations

Dave RicksChairman and Chief Executive Officer

Anat AshkenaziChief Financial Officer

Dan SkovronskyChief Scientific Officer and President of Lilly Immunology

Terence FlynnMorgan Stanley — Analyst

Ilya YuffaPresident, Lilly International

Chris SchottJPMorgan Chase and Company — Analyst

Patrik JonssonPresident, Lilly Diabetes and Obesity and Lilly USA

Seamus FernandezGuggenheim Partners — Analyst

Umer RaffatEvercore ISI — Analyst

Tim AndersonWolfe Research — Analyst

Mohit BansalWells Fargo Securities — Analyst

Louise ChenCantor Fitzgerald — Analyst

Kerry HolfordBerenberg Capital Markets — Analyst

Geoff MeachamBank of America Merrill Lynch — Analyst

David RisingerLeerink Partners — Analyst

Evan SeigermanBMO Capital Markets — Analyst

Steve ScalaTD Cowen — Analyst

Chris ShibutaniGoldman Sachs — Analyst

Akash TewariJefferies — Analyst

Trung HuynhUBS — Analyst

Carter GouldBarclays — Analyst

James ShinDeutsche Bank — Analyst

Rajesh KumarHSBC — Analyst

Andrew BaumCiti — Analyst

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