Eli Lilly, challenge on cures for diabetes and obesity. Focus on new factories

Cross-reference the table numbers of a company presentation with the transcript of management comments and answers to analysts' questions. It is a useful exercise. It helps to understand essential points of corporate development. This is also the case with the first quarterly report on 2024 of Eli Lilly & Company. The US giant, in a chart, emphasises the significance - on the expansion of turnover - of so-called 'new products'. Among others: Mounjaro (drug against diabetes 2), Zepbound (anti-obesity cure) and Jaipirca (medicine against blood cancers). Well: the graphical suggestion has to be 'combined' with the numerical indication, made during the conference call, of how - within the 26% increase in turnover compared to the same period in 2023 - some USD 1.8 billion of growth is attributable precisely to new products. This is a context that, on the one hand, underlines how fundamental the development of new drugs is for the group; and, on the other, recalls the relevance of products in the area of diabetes and anti-obesity treatments.

Yes, medicines for slimming. The latter is a booming sector. Last year, it was worth around six billion dollars, according to Goldman Sachs. In 2030, it should reach around 100 billion. Faced with such numbers - to which must be added the fact that the WHO stresses that excess weight is among the leading causes of death globally - the interest on the part of pharmaceutical companies is not surprising. First and foremost Eli Lilly which, it should be remembered, has developed Tirzepadide which is effective against both diabetes and excess weight. Well, last November the company received the OK - from both the Food and drug administration (Fda) and the British Mrha - for Zepbound (Tirzepadide's trade name). This drug achieved - between the beginning of January and the end of March 2024 - a turnover of USD 0.57 billion. The growth is very strong, so much so that the group - similarly to the other Tirzepatide-based medicine (Mounjaro with 5.16 billion in sales in 2023) - faces a situation of excess demand compared to the current production capacity. The Fda itself indicates that, on Zepbound, there is an imbalance on some dosages of the drug. An impasse that the group indicates should be overcome in the second half of 2024.

On closer inspection, the positive development is also the effect of the factory development plan. Of course! The effort is not focused on the Zepbound and concerns the entire product portfolio. That said, however, interventions are planned to support new drugs as well, including the anti-obesity treatment. In this respect, Eli Lilly (at the end of April) acquired an Fda-certified plant in Wisconsin. Furthermore, in Europe, on the one hand, a new facility will be in operation in Ireland from 2026 (1 billion is the commitment); and on the other hand - together with the 750 million investment set for Italy - the expansion of the production base in Germany is expected (approximately 2.5 billion is the outlay). Not only that. A major job is planned for two new plants in the LEAP Innovation Park in Boone County (Indiana). In short: the numbers indicate how the effort on expanding the production base is important.

Just as important is the development of new medicines and the diversification of their applications. On this front, the group has been pushing for some time. In 2023, expenditure on 'research and development' was USD 9.3 billion (about 27% of revenues). A fine figure against which the company further accelerated in the first quarter of 2024: disbursements reached 2.52 billion (+27% compared to the same period of the previous year). This is a strategy aimed at enriching the portfolio pipeline in the various therapeutic areas. Sectors which, as of 31/21/2023, account for the following percent of sales - according to Bloomberg: Oncology and Immunology are worth 19.5 and 11.1% respectively, while Neurosciences weigh in at 8.4%. Diabetes and Obesity, on the other hand, generate 57.6% of revenues. This last value indicates - despite diversification being a focus of the group - the relevance of the segment in question. So much so that - as a matter of practice - with respect to drugs such as Tirzepadite (used in Zepbound and Mounjaro) other applications are sought. An example? The recent positive Phase III result for the treatment of adults suffering not only from obesity, but also from moderate to severe sleep apnoea. A physical condition, the latter, which can have important cardiometabolic implications contributing to various diseases: from hypertension to stroke to heart failure.

So far, some considerations on therapeutic areas and R&D. Precisely with regard to R&D there is, however, one aspect, which is not talked about too much. Eli Lilly has - for some time - been committed to the use of new technologies. In particular, Artificial Intelligence (AI). CBInsights points out how, from 2022 to the present, the multinational has materialised multiple agreements with realities to accelerate, for example, the so-called 'drug discovery'. Among the most recent, in order of time, is the agreement (in which Novartis also participates) with Isomorphic Labs. The aim? To exploit the AI platform of Isomorphic Labs itself in order to develop small molecules. That said, the group is also part of the artificial intelligence gold rush with its venture capital investment arm Lilly Venture. Thus, in 2024 alone, the deals with Zephyr Ai (precision medicine) and Bioage Labs (drug discovery) can be remembered. Beyond the individual moves, the strategy is on the table. It is an approach that has several aims: from increasing the efficiency of molecule discovery and development to increasing employee productivity. In this sense, the group speaks of 'digital worker equivalent workforce'. A concept that indicates the working hours saved by using technology instead of a human being.