ELI LILLY & Co (LLY) September 14, 2026 Conference Transcript

All right. Thanks so much, everyone. I'm Terrence Flynn, Morgan Stanley's U.S. Biopharma Analyst. For important disclosures, please see the Morgan Stanley Research Disclosure website at www.morganstanley.com backslash research disclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. This afternoon, I'm very pleased to be hosting Eli Lilly. Joining us today from the company is Ilya Yufa, who is the company's executive vice president and president of Lilly USA and Global Customer Capabilities. But appreciate the time this afternoon. And I'm really looking forward to the discussion.

Yeah, appreciate it.

So I figured, you know, we'd start with obesity. Not a surprise. But the company has one of the broadest portfolios in the industry here. And so I think a question we get a lot is just how to think about segmentation of the market. Because, again, you guys have a broad portfolio, but there are a lot of different subcategories within this disease. And so maybe talk to us about the long-term vision in terms of how you're positioning the portfolio based on the current portfolio, but also some of the new medications are in development as well.

Well, listen, we're equally excited about what we do in obesity. Obviously, as we think about long-term portfolio, we think about how do we ensure that we cover different needs from different populations. Obviously, it's easy to say anyone who lives with overweight and obesity, you can solve all problems with one medicine. I think the reality that we're seeing is that there are a lot of different needs, whether it's around how people enter their journey of health, whether how they maintain, or different aspects, whether it's different health benefits and different indications within this space. We're looking at different mechanisms. And so the idea for us to have a broad set of medicines and portfolio to answer those different needs is an important element. Whether or not someone enters their journey on an oral therapy like Fondeo or intensifies and needs a different mechanism or multiple mechanisms to solve their needs, we believe that having those options are critical to meet patients where they are. Obviously, trisepatide and ZEP-bound is foundational. It's setting the standard of care and preference for most physicians and people that are in the current journey. But we have to be honest that the current utilization of obesity treatments is still low. We're still in a single digit. utilization of people that could benefit from these medicines. So it's important that we have the broad set. So Fondeo, we have now ZetBound. Obviously, there's a lot of interest on our side for reditrutide. Then we're also exploring alloralintide and other components that could improve on different aspects, whether it's tolerability, frequency. And so that's our vision, is to have a broad set of portfolio. And I'm sure we'll cover this a little bit later, but we also believe that in this space in particular is very consumer-oriented and having a broad portfolio that people can have a relationship with the company and their experience that they have as a consumer is an important element beyond just the portfolio.

Okay, great. I know we'll unpack a lot of this in the subsequent questions, but, you know, I think it's important, as you mentioned, to have, you know, unless someone has coverage, they're not going to be able to benefit from the medication, so that's obviously been a big Where do we stand in terms of the commercial coverage, and how do we think about some of these wrapper services that we're hearing about, and where does that fit in the strategy as we go from this year into 2027? Yeah.

I think on the commercial side, we've been relatively stagnant on 50%. We've seen some employers recently remove coverage. We're also in discussions with many employers on adding coverage, and while I don't see kind of a step change coming into 27 on either direction, there's a lot of movement that we need to still have within this space. probably the single largest driver of increased access is the bridge. In Medicare, we're seeing obviously good initial uptake and people taking advantage of the bridge program. We also see some states on the Medicaid side starting to add coverage. And on the employer side, we have our Employer Connect and conversations with a lot of employers about the different options, whether it's PBM or Employer Connect program, to add coverage. and flexibility in the employee cost-sharing as part of that. I do anticipate that that will move, and as the body of evidence on the direct health economics of utilizing these treatments, will show a benefit of employers investing in this space. We just published a study around ZEP-bound cost of care. I believe more and more evidence will point in that direction and will increase over time.

Before we get to the cost-effectiveness study, just one follow-up on those wrapper services. Are you seeing anyone leaning in yet aggressively there, or where does it stand in terms of, like, is this just preliminary conversations or actually seeing employers embrace that program?

No, we have a network of more than 20 third-party providers that are actively having conversations with employers. Our team is also having active conversations. and I believe we'll have a number of employers opt in or maintain coverage through this program. For 27? For 27. Yeah, because this is the cycle for typically you make your benefits decisions around this time frame, usually before October, to announce what you're covering in the next year. So we anticipate a number of companies will enter through this space.

Okay, okay, stay tuned. And you mentioned the cost-effectiveness study. Again, maybe just walk us through kind of the key takeaways, because I think that has been, you know, partly what you hear is just, well, we don't really want to pay for the upfront cost because we don't know what the downstream savings is. But now it seems like there's some data that's starting to kind of bolster this argument. And so what did you guys find in this study?

Yeah, I think one of the important aspects that I've seen improve over time is that the conversations with employers and payers, there's now a good conversation and understanding of the health benefits of obesity treatments. And the greatest challenge has been around anyone's P&L, around, okay, but what is it in the direct cost? They may agree that there could be some indirect benefit, good on the health benefit, but what does it mean to the near-term bottom line? And what we looked at is around direct medical costs for people utilizing ZEP-bound. Now, this particular study had 55 and over. And what we saw is that you get savings as early as six months. So you start seeing savings in six months. And then once you get to the 12 months, you can get upwards to $600 per month per person of benefit, which more than offsets the cost of the medicine. And so we believe that that accumulation of evidence will start to increase, which should convince many employers and payers, and obviously bridge, you'll see, a significant amount of savings by investing in this space. So listen, it'll take time and more than just one study to change the complete calculus for many employers, but it does catch people's attention, and it should.

You mentioned the Medicare Bridge Program. So as you think about the rollout there, any points of friction that you're seeing at this point in the rollout or anything you'd point us to?

I think one aspect that's important, not everyone understands the friction in the health care system is real when it comes to obesity treatment. in most plans that you see on the commercial side, you have variability on criteria. And so every plan has their own set of prior authorization and what's allowed, what's not allowed, the different comorbidities, the different BMI. And one unique aspect of the BRIDGE program is that it's a unified set of criteria on people that different BMI, different comorbidities, but it's standard across the entire Medicare eligibility criteria. That is an important element as we see what's being implemented. The other piece is that just the mechanism and the logistics of Bridge, having a program at large scale work in the first few days, while there were some minor hiccups here and there, overall it's working really well. So what we're doing is educating physicians, pharmacists, consumers on the eligibility criteria, the process itself to go through the PA and the PA denial through Part D to make sure that the aspects that are excluded, they go through Part D, and the ones that are included in the eligibility criteria then get reapplied. It's an automatic process, and we're seeing pretty significant uptake of number of people actually coming through bridge. I think Dr. Oz quoted close to 600,000 people leveraging access to medications within bridge. So really positive, just from a logistics standpoint, an important piece, that $50 standard out-of-pocket for people with Medicare that are eligible is a terrific program.

How does that $600 compare to what you would have got if you said six months ago, like, there's going to be this many people on it in the first, you know, two months or something?

Listen, as always in this space, we have lots of different scenarios, and we know that having one forecast, every forecast is going to be wrong in some direction. I think one of the things that we were really positive about is the criteria. We're really positive about the $50 out of pocket, which is standard. And so we predicted that there would be reasonable uptake. I think what we're seeing now is that, and we also knew that there were a number of people in self-pay in the Lilly Direct program that were Medicare eligible, and what we're seeing is predominantly new patients coming in, so 60% to 70% being new. And the other probably not surprising for us is that when you have a standard of $50 out-of-pocket, there's been a preference towards injectable and a preference towards set-bound in overall bridge programs. And so that part I think we expected, and we're pleased with kind of how the whole process has been working.

Okay, great. And I think just to remind you, I think you've said, what, 18 to 20 million eligible people potentially?

Yeah, around 20 million eligible based off of the criteria that we estimate. And then, you know, again, what we're seeing is pretty around 600,000. And you're seeing, obviously, for ZepBound, when you look at our trend, it's QuickPen that is available through Bridge. It's also available for self-pay. So all of the growth there. We're also seeing good uptake of Foundale as part of the bridge program as well.

And what do you, I know it's not really in your hands, but, like, what do you think happens at the end of 27 with the bridge program?

Yeah, I think with the significant uptake and also even our own cost of study, debt-bound cost of care, and knowing that there's significant savings, That will be a program that if there's anything that continues, it's how do you ensure that we continue this program because of the health benefit, reduction hospitalization, savings to overall Medicare program. I think this will be a net positive towards finding a solution past 27. Okay.

The other thing you mentioned is, again, the consumer orientation of this market, which has been, you know, kind of N of one or maybe N of two. There's maybe one other case study you look at, like aesthetics, for example. So as you think about that, it's become, I think, what, 40, 45% of the business in the U.S. How do you think about leveraging that, leaning into that on the forward? And is this something like a subscription service? You know, we see what Apple's done with their ecosystem, for example. So is that a possibility given the breadth of portfolio and the success you've had around ZetBound? Or are there other iterations of this?

Yeah, I think, you know, when we first entered with Lilly Direct, it was an experiment solving part of the problem is ensuring that the transparency of our pricing actually gets to patients. And I think what we found in launching this in obesity is that it's more than that. You reduce some of the frictions that exist in the healthcare system, especially in a disease area where there's a lot of stigma. and there's a lot of variability in how you actually get access. And so breaking down some of those barriers are real. I think you should expect to see more experimentation, whether it's around pricing or around looking at our portfolio or looking at how do you do wraparound and embed that into the consumer experience, What other components on how you start therapy? Are there other elements within our beyond obesity that are important for consumers that enter their journey through obesity? All of that is something that we're interested in and we believe adds a lot of value. Now, to your direct question around subscription, you know, we've had a journey program, which is a similar concept in kind of e-commerce related to if someone fills their prescription within a certain number of days, they continue on a discounted price. And so looking at ways on people entering therapy, on reducing friction, on how do you stay adherent to therapy and get the most of what you're trying to achieve in terms of your goals, these are all elements that we're embedding and, one, starting to experiment and enhance our little direct experience within obesity.

And then I do see components of other disease areas that we're either currently in or in the future that we'll be in that could have some aspects of the consumer that will play a larger role. okay great um maybe i want to pivot to uh foundale launch and so again you know uh as you as you look out now through the end of the year maybe just give us an update on kind of the latest metrics and then how to think about those tracking through the end of 26 and let's focus first on the u.s and then we'll go to the ex-us second sure sounds good uh well first there are a few different components that i look at just from a discipline around execution and how we launch any brand

There is a component around consumer awareness that's important as you build out a new brand. That's something that we've put a lot of attention to. The second is...

I did see a new commercial during the U.S. Open.

Yes, I'm glad. The second is around do HCPs and physicians understand the profile of Fundeo and have they actually tried it with patients entering their journey so that they get experience and understand the real-world efficacy and tolerability of FoundAO. And then I look at some other parameters around kind of our field execution. So maybe on the consumer awareness piece, we've amped up our consumer advertising and awareness of FoundAO. We just recently launched an ad with Martha Stewart. We're hoping that will build out some level of greater consumer awareness and consumer interest. The other piece is around the trial. I think we shared during our Q2 results that we've increased the number of trialists to over 36,000. That's continuing to increase, so we see progression around trialists. And then the other encouraging indicator is that for the people, the physicians that have tried to use Foundario with their patients, Have they moved to adoption? And we're starting to see that also move in the right direction. Obviously, from our field execution, ensuring that physicians have samples readily available if they need to start a patient. We've improved on our access and coverage for FoundAO. We're doing a number of peer-to-peer programs so that physicians can talk to other physicians around the profile of FoundAO. So a lot of our leading indicators are moving in the right direction. And the outcomes, of course, you guys and I look at the outcomes of that, we're starting to see movement in our share. So we now have more than 30% share in new starts within oral GLP-1. So we're starting to see some progress. And that's a marked improvement just in the last two months of new starts. So we're heading in the right direction. It'll be a gradual move, and we're moving in all segments. On the covered space, on the commercial, we're moving in bridge, and we're moving in the self-pay. Obviously, with self-pay, you've got to look at the mix around most of the starts on self-pay currently. That will shift over time, and those are at lower price points initially until people get through to higher doses.

Do you guys think you can get to over 50% steady-state share in the oral side as you think about the profile of the medicine and what you've seen now over the last couple of months or so?

I challenge my team to get leading share in pretty much any market. So if you asked me this question in pretty much every space, I'd probably answer yes. I challenge my team to get leading share. We've done that in Lurio. We've done that with Zepo. We've done that with Jardians. We promoted it. We've done that with Manjaro, and we'll continue to challenge our teams to do that with Fandale.

Do you think you can get there by December, end of December?

I won't commit to a time where we get there, but we're continuing to make progress. So I think we have to continue to drive new trial. I'm convinced that the experience itself should play out in a positive way and I'm, of course, ambitious in what we achieve. In the end, my hope is that more people are able to enter their journey, and this is expansive, and that's been our focus. I'd rather get there in a quality way and focus on the right patient population that can benefit and that we expand the number of people that get treated. That's probably more important to me than any other product.

Maybe we'll pivot to OUS. You know, you guys have launched in a few countries, as you said, on the second quarter call. I think the ambition is to launch in over 40 markets, I think, by 27, which would be, you know, a very broad offering. And I think one of the key advantages, I guess, of FoundEAO is it's a true small molecule scalable oil. So as you think about kind of maybe the second half of 26, how should we think about the pace of that rollout? And then we'll talk about 27 after.

Well, first, I think we've now launched in the UAE and the UK, where we have approvals. And the early indication is that it's been positive and that it's been expansive. So new patients are getting treated as a result of us introducing Fundeo. and there's interest in the oral segment for treating overweight and obesity. We just got approval in Saudi and also in Mexico, so we plan to launch there. And then it's submitted in over 40 markets, so as soon as we get approvals, our plan is to launch. We have supply readily available. Our commercial teams are ready, and so it's just a matter of the timing of those approvals. Those will be gradual over time, and we'll enter those markets. Obviously, predominantly for Manjaro, outside the U.S., it's a self-pay market. We have some markets that reimburse for type 2 diabetes. We have some, we just got approval for reimbursement in obesity in France. But it's still around 75% of the market outside the U.S. is self-pay. And as we get approvals, we'll continue to launch Foundeo outside the U.S. as well.

And in those early launch markets, are you seeing that? It sounds like you are, but expansive to Manjaro, meaning it hasn't really cannibalized Manjaro. It's basically added new to GLP patients.

Correct. We see the total market growing, and Lilly, in terms of overall share, is also growing, both in Manjaro, because it's still early in our launch cycle for Manjaro, and we're seeing new patients coming in with the introduction of Fandeo. So we see it expansive.

One more before we go to kind of the next topic is just on Fandeo, is just how to think about adherence persistence relative to injectables. I think that's another longer-term debate in the market, not just for obesity medications but just for orals specifically.

Maybe I'll provide some context to it as well. First of all, it's early days for Fondeo, and I think the first indicator is second fill, and the second fill data is very good. So we see it being consistent with other oral medications and also not that far off from what we see on the injectable space. Context-wise, though, if you look at most therapies in the space diabetes or obesity, probably the gold standard on adherence has been Trulicity. And we compare Trulicity to many oral therapies in diabetes space, and Trulicity as a once-a-week injectable therapy has always actually had greatest adherence overall, approaching that 16-month average adherence. we're seeing that for Manjaro and Zetbound to be in that same realm. So adherence being much greater than what we typically see in chronic therapy. And most chronic therapies have persistence that's less than a month. And so that's something to contextualize. Now, this space is a little bit different in that many chronic diseases, a person taking a medicine doesn't always know or feel whether or not there's been a benefit until they go to their physician and get their blood work done to know whether or not it's been beneficial. Whereas in obesity, there is a component where someone sees and feels the benefit by staying on therapy. And so I do anticipate that we'll have probably better adherence than typical chronic disease. Will it be the same as injectable? We'll see. I think that's the gold standard in adherence. But just to have context into chronic disease, you typically don't see as great of adherence as we've seen in the past with Trilicity and now Zepbana Manjaro.

Okay, great. Right. You know, the other thing that we and I think investors are watching is the rollout of generic semaglutide in some of these OUS markets. India, Canada, I think Brazil is coming soon. As you think about, is there an analog for how this could play out in the U.S.? And I think the question is more around just not so much Manjaro, because I think you're already seeing a lot of differentiation. people are voting with their wallets. They're effectively choosing it, even though in some cases there is a price and differential of a branded SEMA, but more so for the Foundeo piece. So as you think about like a glip to glip, not a glip to two mechanism, but glip to glip, like what does this mean for Foundeo as you see the generic rollout of SEMA in some of these OUS markets?

Yeah, I think maybe the first part is what are we seeing currently in those markets? And by the way, this is not so different than what we've seen in the ED market in the past. When a generic enters, what you typically see is an expansion of the number of people that actually get treated. So that's what we currently see in both India and Canada is that the market is expanding. What we're also seeing, although a share naturally when the market expands significantly through generic share declines, but the overall volume, absolute volume is continuing to grow for Manjaro in those markets. Now, the moral of the story is that there's both an innovation and profile of the medicine does matter, where there's differentiation, where people do vote on what they feel could give them greatest benefit. And there's a brand loyalty component from a consumerized market that also plays a role. How much does one play versus the other? Hard to predict, but We've seen that in the ED space as well, where there is actually very little differentiation in some of the space. So now, read through for Fandeo, maybe I'll go back to your earlier question related to, you know, what is our ambition and vision of our portfolio? And having a full portfolio of different options in a consumer-oriented market is important when you enter and you stay in the ecosystem as a consumer. And so I think that's an important aspect that we believe will play out. And we do think Foundeo, as a true small molecule, also has some advantages on being able to be a truly once a day, anytime pill.

Yeah. And is there any of those markets that you think is more similar or different to the U.S., the ex-U.S. markets? If you had to pick, like, one that would be, like, a quote-unquote proxy? I know there's not an identical one, but...

Difficult. You know, I've spent four years running international, and what I can tell you is that there's – the similarity is that there's health care friction in all markets. That's similar. This hybrid, you typically, outside the U.S., you see predominantly kind of single-payer decisions on coverage, and then you see, like, in markets where there's no coverage, it's entirely self-pay. There's really nothing in between. With the U.S., it's kind of in between where you obviously need to grow access and affordability, but there's no, like, single market that plays exactly the same as the U.S., but there are components that are similar.

Okay. Maybe we'll just move on to some of the newer up-and-coming products in the pipeline. You mentioned Ritatra Tide, Allura. Maybe we'll start first on Ritatra Tide. I think the question is just positioning in the market relative to terzepatide. Again, I mean, phenomenal drugs at the standard of care on type 2 and obesity. And so, you know, how do you plan to position this new injectable product relative to terzepatide?

Yeah, we're really excited about retretutide. I think there's a component which, you know, we knew as we studied in phase 2 on the higher end of efficacy and getting bariatric-like efficacy. And if you take a look at the Smart Phase 3 results, on the proportion of people actually moving from obesity to no longer being in the weight category and BMI of obesity is pretty phenomenal. And so I think it will play a role for those people living with obesity that may not have enough efficacy in the current therapies that exist where Rana Trutide can play a significant role, both for gaining access in that population, because you typically have even more comorbidities in that population, But also, excuse me, I think that the great kind of surprise was in the lower end of the entry of redditriotide, you see trisepatide-like efficacy with only one step, and you have very good tolerability. And so I do believe it will play a role on both ends of the spectrum, on people entering their journey and finding that the lower doses of retutide can play a significant role. Now, still, the standard of care has been terzepatide and ZEP-bound, and so I continue to see terzepatide being a great standard of care, and you see that on any of the results comparing against terzepatide. It is a great standard of care and preferential treatment. It will take time to build Reditrutide in that space, but it's good to have those multiple options, both in the higher end of efficacy as well as people just entering their journey.

And similar question, I guess, on Allura. I think the thing that struck me from ADA was, you know, Ruth made a comment that this will be the largest development program in Lilly's history in terms of a Phase III program. So obviously the company is very excited about this asset. Where does this fit in terms of the commercial opportunity and segmentation of the market?

Yeah, if you look at our Phase II results, pretty encouraging on just efficacy in the monotherapy space and the tolerability. And even in the lower doses of a lower lintide, the starting point, you get placebo-like tolerability with 13% efficacy, and you can get up to 20% efficacy in monotherapy. And then we're also studying it with terzepatide as well. And so could you see an add-on or amplification of efficacy without compromising on tolerability profile? And so we believe there could be some significant benefit for people that currently do make that tradeoff. And so having those multiple options is a positive for building up a portfolio, and that's why the tolerability profile and how much efficacy you get as part of that can be a great both monotherapy as well as add-on for the future. So we're encouraged by that program in addition to what we've done.

And then maybe one last one on obesity before we leave a couple minutes for Alzheimer's. That's about right. Long-actings, just, you know, I heard you guys have talked about opportunity in the maintenance setting. So just maybe what's the market, you know, feedback there in terms of where potential long-actings could fit from a segmentation perspective?

Yeah, to me, I think it's less about long-acting. It's more about solving what is the actual consumer need and what are physicians looking for. And that's how do people maintain or adhere to therapy? And there are different aspects to that. We talked about tolerability as being one, frequency or administration being another. Can a less frequent than weekly be beneficial? Yeah, we believe that could be beneficial. We're exploring options in that space. But we're looking at it as less about just a single asset or use case, but we're looking at all use cases on how do you answer the maintenance piece. We have attain, maintain, we have surmount, maintain, that play a role in answering to some extent what you could do once you get to your goal, how do you maintain, and that serves one need to answer that question, and then we believe the rest of our portfolio can help answer the others.

So we hosted Biogen earlier today. they obviously got approval of Lakembi sub-Q for induction. You guys, your message has been focused on, you know, you've got an IV monthly versus their every other week. So as you think about the near-term dynamics, do you think that that new sub-Q is going to change those shared dynamics at all, or do you guys feel pretty confident in kind of the profile you have from a, you know, dosing data perspective?

Yeah, I think, first, it's good to see innovation in this space because it's needed. from a patient on met need. We feel good about our profile. We have leading share now, but the profile of having once monthly, but more importantly, kind of the treat to like a fixed duration until you meet the hurdle of removing plaque is an important one. The most important thing we do in this space is less about share and probably how do you improve the ecosystem. The time that it takes to get diagnosed and treated in Alzheimer's is, if anyone here has anyone in their family or in their close network battling and trying to get diagnosed, it's a messy process and takes too long. So the introduction of blood-based biomarkers is an important element of innovation. How do you scale that as a standard for confirmatory and make the process from once you get diagnosed to treatment? We've made progress there. We've double the number of people that are being, that are treating, but there's a lot more to do here. And I think both companies should spend more time in establishing an improved ecosystem for the benefit of people living with this awful disease.

Great. Well, Ilya, we're out of time, but thank you so much. Thank you. Appreciate it.

Yeah.