August 14, 2024
Expanding Horizons: Lilly's Strategic Manufacturing and International Sales Growth
Eli Lilly and Company (Lilly) has been at the forefront of pharmaceutical innovation, consistently advancing its manufacturing capabilities and expanding its global market presence. As part of its strategic initiatives, Lilly has emphasized the importance of manufacturing expansion as its "top priority," with significant developments marking progress in this area.
Manufacturing Milestones
In May, Lilly announced a substantial increase in its investment in a new Active Pharmaceutical Ingredient (API) factory near Indianapolis, committing to a $9 billion investment. This decision underscores the company's dedication to enhancing its manufacturing infrastructure to meet the growing demand for its products.
Management also provided further updates on Lilly's $2 billion facility in Concur, North Carolina, where Lilly anticipates initiating production by the end of the year with plans to start shipping GLP-1 products by 2025. The development of the Concur facility, which began in 2022, highlights the complexities and time required to scale the production of relatively complex GLP-1 products. This process also indicates the competitive dynamics in the market and potential limitations on the ability of competitors to challenge market leaders.
International Sales: A Strong Growth Vector
Lilly's strategic focus extends beyond manufacturing, with international sales playing a crucial role in its growth trajectory. Notably, Mounjaro has seen a significant uptick in international sales, jumping from approximately $300 million in Q1, representing 16% of total product revenue, to around $700 million, more than doubling and now accounting for 22% of product revenue. This growth has been particularly strong in specific markets such as Saudi Arabia and the UAE, where Lilly has achieved a leading market share. While Zepbound has not been launched internationally, this positions Mounjaro closer to Ozempic, where international revenues constituted approximately 26% of total Ozempic sales in Q2.
Navigating Coverage Challenges
The coverage of GLP-1s remains an ongoing concern, given their high cost and the consequent impact on payor spending. Lilly's management noted significant progress in this area, with Zepbound achieving 86% access in the commercial segment since its launch in December. More than half of employers are estimated to have opted into anti-obesity medicine coverage, indicating modest growth in this segment. Additionally, the medicine is now off the FDA shortage website, which is an improvement from earlier this year.
Mounjaro's access has reached 93% in the commercial segment and 89% in Part D, showcasing positive momentum. Despite this positive momentum, challenges persist, as illustrated by Blue Cross Blue Shield of Michigan's decision to cease covering GLP-1 drugs for weight loss starting next year, impacting 10,000 individuals. This follows the NC state health plan's move to drop coverage of obesity medications for its 480,000 covered lives, citing a projected $1.5 billion loss by 2030 if coverage continued.
These episodes underscore the unique challenges faced by these medications due to their unprecedented demand and the balancing act required to manage their success and accessibility.
Looking Ahead
As Lilly continues to expand its horizons, its efforts to address production complexities, penetrate new markets, and overcome coverage hurdles will be pivotal in shaping its future success and impact on the pharmaceutical industry.
