After posting a blowout quarter of financial results, Eli Lilly has almost made the obesity business look easy. But amid investors’ enthusiasm for weight loss drugs, the company’s top scientist warned of the challenges of bringing competitive new molecules through the pipeline and to market.
On Thursday’s conference call with investors, Chief Scientific Officer Dan Skovronsky responded to questions about Lilly’s future competitors, who have been releasing promising early and mid-stage data that have shown signs of being able to compete.
“I know investors have gotten excited about various releases of Phase 1 data, but it’s still a challenging space to develop drugs, and we usually wait until we’ve seen pretty robust Phase 2 data before we get too excited about a particular molecule,” Skovronsky said.
And it’s not just a matter of winning on the science. Lilly has invested billions of dollars in manufacturing ramp-ups, and doing follow-up development work to try and win label expansions in conditions like sleep apnea and heart failure.
Main driver of Lilly’s sales
GLP-1s don’t just dominate Lilly’s sales (they made up roughly 50% of the quarter’s revenue), they also dominated Thursday’s investor call — analysts asked no questions about non-cardiometabolic programs in the drugmaker’s pipeline, despite the recent approval of Alzheimer’s drug Kisunla. (On the earnings call, Lilly also disclosed a Phase 2 failure for an experimental anti-tau Alzheimer’s pill.)
It took decades for an obesity drug to finally take hold in the market. Earlier attempts had run into hurdles, including a pulled drug with a different mechanism than the current blockbusters. But in the past few years, Novo and Lilly have opened the field, and everyone from major drugmakers to VC-funded startups have begun work, including Boehringer Ingelheim, Roche, Structure, Viking, Pfizer, Amgen and BioAge, to name a few.
Dan Skovronsky“I think a lot of the news that we’ve seen from the companies will probably sort out as we get to see Phase 2 data and which molecules make it and which have the right profile and which don’t,” Skovronsky said. “But I wouldn’t be expecting 100% success here.”
Those competitors will also need time.
“Just a reminder, we had our Phase 1 [multiple-ascending dose] data for tirzepatide in 2016. That was eight years ago,” CEO Dave Ricks said on the earnings call. “That’s a massive lead over other GIP/GLP agonists that are behind us. On the oral side, you can get more in-category differentiation based on target engagement, safety profiles, etc., but here again, we have the most advanced program.”
And Lilly continues to develop new molecules to compete — it has more than a half dozen next-generation obesity assets in clinical testing.
Going after compounders
Because of the huge demand for the weight loss drugs, businesses have sprung up offering compounded versions, and Lilly and Novo Nordisk have both sued small medical clinics and compounding pharmacies advertising the drugs.
“We’ve been watching this carefully, not really out of concern that they’re taking away our business — we’ve been largely supply constrained here — but rather the impact it’s having on patient health,” Skovronsky said.
Lilly analyzes samples of the compounders’ drugs and has found that in “most instances,” it’s not compounded tirzepatide, Skovronsky said. He said companies are purchasing other chemicals or fake tirzepatide that is “often full of impurities, sometimes contaminated by bacteria. This is a safety risk to patients that we take seriously.”
Ricks said the company is engaging with regulators and “considering all kinds of legal actions, and filed some.”
‘Execute that drill’ on manufacturing
The company has poured about $18 billion into updating, building or buying new manufacturing facilities since 2020 and is “probably not done there,” Ricks said. Lilly disclosed in a Thursday SEC filing that its previously-announced Wisconsin facility acquisition came in at a purchase price of about $925 million.
“We’re quite comfortable building and operating sites,” the CEO said. “As the newest, large sites have begun to come online, we know we can execute that drill and repeat it, and that’s our base plan.”
All dosage forms of tirzepatide are now available in the US, as of an update to the FDA’s shortage database last week. But the drug remains on the FDA’s official shortages list, a sign that Lilly isn’t yet able to fully meet demand.
“That does not mean that any pharmacy, or certainly every pharmacy, has all 12 dosage forms sitting on their shelf. That’s infeasible economically probably for a lot of them, and even logistically,” Ricks said. “We’ll continue to see — because there’s not abundance of supply, it’s more of a real-time fulfillment situation — patients going to pharmacy counters and being told to wait a few days while their order is filled.”
Lilly again said it remains “concerned” about Novo’s pending purchase of Catalent. One of Catalent’s sites helps produce GLP-1 and other diabetes products for Lilly.
“It’s more the oddity of your main competitor being also your contract manufacturer and how to resolve that situation,” Ricks said.