Eli Lilly’s Strategic Response to GLP-1 Demand Surge: Insights from Outgoing CFO Anat Ashkenazi
Introduction
Eli Lilly has achieved significant success with its weight loss and diabetes drugs, Zepbound and Mounjaro. Outgoing CFO Anat Ashkenazi, who will soon transition to her new role as CFO of Alphabet, sheds light on the company’s strategies to manage this success. In an exclusive interview with CNBC, Ashkenazi discussed Eli Lilly’s plans to ramp up manufacturing, improve patient access, and shift societal perceptions about obesity.
Managing Rapid Growth
The dramatic rise in demand for GLP-1 agonists, including Eli Lilly’s Mounjaro and Zepbound, has presented both opportunities and challenges for the pharmaceutical giant. These drugs have revolutionized the treatment landscape for diabetes and obesity, resulting in unprecedented sales and investor enthusiasm. Ashkenazi, who has been with Eli Lilly for over two decades and took over as CFO in 2021, has played a pivotal role in navigating this growth.
Understanding the Business
Ashkenazi emphasized the importance of a deep understanding of the business and industry to effectively manage such rapid growth. “You have to be a really good student of the business and understand it inside and out and understand the industry,” she stated. This comprehensive understanding allows the company to bring value and navigate the complexities of the pharmaceutical landscape.
Addressing Supply Challenges
One of the major hurdles Eli Lilly faces is meeting the soaring demand for its GLP-1 treatments. Both Eli Lilly and its rival Novo Nordisk have struggled to produce enough supply, leading to nationwide shortages. These drugs, which help regulate appetite and blood sugar by mimicking gut hormones, are part of a market expected to be worth $100 billion by the decade’s end.
Expanding Manufacturing Capacity
To address these supply issues, Eli Lilly has been investing heavily in expanding its manufacturing capabilities. Ashkenazi highlighted several ongoing projects, including new facilities in North Carolina, Indiana, Ireland, and Germany, as well as the recent acquisition of a site from Nexus Pharmaceuticals. The company announced an additional $5.3 billion investment in its Indiana manufacturing plant, reflecting its commitment to scaling up production.
Investing in Infrastructure
Since 2020, Eli Lilly has invested over $18 billion in building, expanding, and purchasing manufacturing plants across the U.S. and Europe. This extensive infrastructure is crucial for meeting future demand and ensuring that patients receive the treatments they need. “As we start selling product and we get the revenue in and cash flow associated with that sale, we want to funnel that cash flow back to the business to invest in those manufacturing facilities,” Ashkenazi explained.
Improving Patient Access
Beyond manufacturing, Eli Lilly is tackling the challenge of improving patient access to its GLP-1 treatments. Limited insurance coverage remains a significant barrier, especially for weight loss drugs, which are often seen as too expensive by insurers. Despite this, Ashkenazi noted that coverage for Zepbound is improving, with about 67% of U.S. commercial insurers now offering coverage as of April 1.
Expanding Insurance Coverage
Eli Lilly is actively working to expand insurance coverage for the remaining patients. Ashkenazi expressed optimism about the potential for increased coverage under Medicare as the company demonstrates the efficacy of its treatments for a range of obesity-related conditions. Under new Medicare guidelines, obesity treatments approved for additional health benefits can now be covered by Part D plans.
Changing Perceptions of Obesity
A crucial part of Eli Lilly’s strategy is to change long-standing misconceptions about obesity. Ashkenazi pointed out that obesity is often incorrectly viewed as a lifestyle choice rather than a chronic disease. “Our goal is to ensure that society, the healthcare system, and patients themselves actually view this and understand that it is a chronic disease…and therefore should be treated as such,” she said.
Research and Development Initiatives
Eli Lilly is conducting extensive research on tirzepatide, the active ingredient in Zepbound and Mounjaro, to demonstrate its benefits across various health conditions. The company is studying its effects on obesity-related issues such as fatty liver disease, obstructive sleep apnea, chronic kidney disease, and heart failure. These efforts aim to solidify the drug’s reputation as a comprehensive treatment for multiple health problems.
Future Outlook
Despite the challenges, Eli Lilly has made significant progress in ramping up production and improving access to its GLP-1 treatments. While Ashkenazi acknowledged that the company might not meet demand levels this year or next, the steps taken so far are promising. The ongoing investments in manufacturing and efforts to expand insurance coverage are expected to yield positive results in the coming years.
Conclusion
Eli Lilly’s journey with its GLP-1 drugs, Zepbound and Mounjaro, underscores the complexities and rewards of innovation in the pharmaceutical industry. Under Anat Ashkenazi’s strategic leadership, the company has navigated rapid growth, addressed supply challenges, and worked towards changing societal perceptions of obesity. As Ashkenazi prepares to transition to her new role at Alphabet, Eli Lilly’s commitment to expanding access and improving patient outcomes remains steadfast. The company’s ongoing investments and strategic initiatives position it well to continue its trajectory of success in the evolving landscape of diabetes and obesity treatments.