Ladies and gentlemen, thank you for standing by, and welcome to Lilly’s Q2 Earnings Call. [Operator Instructions]. As a reminder, today's conference is being recorded. I would now like to turn the conference over to our host, Vice President of Investor Relations, Kevin Hern. Please go ahead.

Good morning. Thank you for joining us for Eli Lilly and Company's Q2 2021 earnings call. I'm Kevin Hern, Vice President of Investor Relations. And joining me on today's call are Dave Ricks, Lilly's Chairman and CEO; Anat Ashkenazi, Chief Financial Officer; Dr. Dan Skovronsky, Chief Scientific Officer and Medical Officer; Anne White, President of Lilly Oncology; Ilya Yuffa, President of Lilly Bio-Medicines; Mike Mason, President of Lilly Diabetes; and Jake Van Naarden, CEO of Loxo Oncology at Lilly. We are also joined by Lauren Zierke, [indiscernible] Sara Smith of the Investor Relations team. During this conference call, we anticipate making projections and forward-looking statements based on our current expectations. Our actual results could differ materially due to a number of factors, including those listed on Slide 3. Additional information concerning factors that could cause actual results to differ materially is contained in our latest Forms 10-K and subsequent Forms 10-Q and 8-K filed with the Securities and Exchange Commission. The information we provide about our products and pipeline is for the benefit of the investment community. It is not intended to be promotional, and is not sufficient for prescribing decisions. As we transition to our prepared remarks, a reminder that our commentary will focus on non-GAAP financial measures. Now I'll turn the call over to Dave for a summary of our second quarter results.

Thank you, Kevin. Q2 of last year was the peak of the pandemic’s negative impact to our business. And one year later, I'm proud of the innovation and resilience displayed by my Lilly colleagues to deliver against our objectives in new ways, while also mobilizing to develop treatments to help combat COVID-19. Looking at Q2 2021, we were encouraged by the increasing worldwide vaccination rates, as well as the underlying environment in most of our major markets. COVID-19 related stocking in Q1 followed by destocking in Q2 of last year, complicates quarterly performance comparisons. Therefore, looking at revenue growth in the first half of 2021 better reflects the underlying trends in our business. On today's call, we will provide year-over-year comparisons for both Q2 and the first half of the year. In the first half of 2021, we delivered 11% growth in our core business. This excludes COVID-19 antibody revenue, this was buoyed by strong volume driven growth across key brands in major geographies, including the U.S., Europe, and China. Turning specifically to Q2, revenue grew 23% compared to Q2 2020, or 20% in constant currency. This performance was driven entirely by volume growth of 22 percentage points. As previously highlighted, in Q2 2020, we saw reversal of the $250 million pandemic related product stocking which occurred in Q1 2020. When excluding COVID-19 antibody revenue, the Q2 2020 COVID-19 related destocking and the sale of Cialis in China, our core business grew 12% for the quarter, up from 7% in Q1 on the same basis. We were pleased to see sequential top line growth in the core business this quarter, signaling that healthcare systems continue recovery from the pandemic and the strength of our underlying business. Key growth products continue to drive our revenue growth and represent 54% of our…

Thanks, Dave. Slides 7 and 8 summarize financial performance in the second quarter and year-to-date. I'll focus my comments on non-GAAP performance. Revenue increased 23% this quarter compared to Q2 2020 or 12% excluding the items Dave mentioned earlier, representing strong momentum for our core business. Given the COVID-19 related stocking, and destocking seen between Q1 and Q2 of 2020, our first half performance of 11% revenue growth or 8% in constant currency, excluding COVID-19 antibody revenue is a more accurate reflection of underlying performance, and the sequential quarter-over-quarter revenue growth better represent the strength in our core business. Sequential revenue growth from Q1 to Q2 for core business, increase in vaccination rates in many major markets, and the majority of our sales reps now being back in the field, suggests the recovery from the pandemic was in line with our expectation for the quarter. We're particularly pleased with the strong volume growth across key brands like Trulicity, Taltz, Verzenio and Jardiance. Verzenio in the U.S. grew nearly 6 percentage points in share total prescription exiting June, compared to the prior year. While Trulicity, Taltz and Jardiance increased their leading market share in the same period, while class growth accelerated. These products along with other key growth products represented 54% of revenue in the core business this quarter. Gross margin as a percent of revenue declined 30 basis points to 79.3% in Q2. The decrease in gross margin percent was driven primarily by unfavorable effect of foreign exchange rates on international inventories sold. Excluding this FX impact, gross margin as a percent of revenue grew 60 points this quarter. Total operating expenses grew 18% this quarter, compared to the same quarter last year. Marketing, selling and administrative expenses increased 16% as the base period in Q2 2020 included a meaningful…

Thanks, Anat. 2021 has clearly been a productive year for R&D at Lilly, with continued strong progress in our pipeline and more potential catalysts on the way. Before I get into the broader portfolio update, I'll spend a few minutes highlighting several updates for our late-stage pipeline. I'll start with donanemab. In Q2, the first amyloid lung agent for the treatment of Alzheimer's disease was approved under the FDA's accelerated approval pathway based on plaque lowering, which we believe reflects a shift in policy and sets a new path for Alzheimer's drug approval in the U.S. Lilly has long been an advocate for using biomarkers for amyloid plaque and neurofibrillary tangles to identify patients for treatment and to monitor their response to therapy. We were pleased to see the FDA's conclusion that improvements in brain pathology are appropriate surrogates for clinical efficacy of Alzheimer's drugs. Based on data we've seen to date, we believe donanemab clears plaque faster and deeper than previously seen with other therapies and achieved complete plaque clearance in a majority of patients in TRAILBLAZER-ALZ after only limited duration of dosing. On the basis of the clinical evidence for donanemab, we were pleased to have received Breakthrough Therapy designation from the FDA. At the Alzheimer's Association International Conference last week, we shared additional important analyses from donanemab TRAILBLAZER-ALZ. Briefly, I'll highlight several findings. First, we shared detailed exploratory statistical analyses comparing a variety of methods beyond MMRM and DPM, as summarized on Slide 14. We are pleased to see that these new analyses showed consistency of effects on primary and secondary outcomes across all statistical methods. Notably, all of the new analyses conducted showed good separation of treatment from placebo with statistical significance achieved for most endpoints at nearly all relevant time points measured. The robustness of…

Thanks a lot, Dan. I appreciate that. Before we go to the Q&A, let me sum up the progress we've made during this quarter. We've seen strength in our core business in the first half of this year and increased momentum in Q2. This is driven by strong volume-driven growth across key brands in most major geographies. We're pleased to see sequential top line growth this quarter as well as year-over-year margin expansion. We made significant progress developing new medicines, and Q2 was another positive quarter for our pipeline as we announced plans to submit tirzepatide in type 2 diabetes and donanemab in Alzheimer's disease later this year as well as an approval for Jardiance in HFrEF, and as Dan outlined, positive results in HFpEF. We returned nearly $800 million to shareholders through dividends and completed $500 million in share repurchases, reflecting confidence in the ongoing strength of our business. As we look forward to the rest of the year, we are quite confident in our long-term prospects. Before we move on to Q&A, I would like to share -- also like to share that we will hold a live investor meeting this December to highlight our R&D pipeline and progress for investors. We will also provide our initial 2022 guidance at this meeting. Given the limited physical space available, this event will have an accompanying webcast. We're hopeful that we can host this event in person, but are watching the evolution of the pandemic closely and we'll adjust accordingly to a virtual event, if needed. Our IR team will be in contact in the coming weeks to issue invitations and provide more logistical details on this meeting. Now let me turn it over to Kevin to moderate our Q&A session.

Thanks, Dave. We'd like to take questions from as many callers as possible, so we ask that you limit your questions to two per caller. Lois, can you please provide the instructions for the Q&A session, and then we're ready for the first caller?

[Operator Instructions]. And our first question is from the line of Terence Flynn from Goldman Sachs.

Maybe, Dan, I was just wondering if you could elaborate at all on your comments regarding your discussions with the FDA on donanemab. It sounds like they're consistent with your expectations. But any more color you can provide if they've actually signed off fully on your plans to file the BLA? And then how much additional safety data would they want to see from the ongoing TRAILBLAZER-2 study?

Thanks, Terence. Dan?

Yes. Sure, Terence. Thanks for that question on donanemab and FDA and safety. In June, when we got the Breakthrough Therapy designation and we announced our expectations to file the BLA by the end of the year, that was based on our current understanding of the situation. Since then, things have progressed and I would say I'm even more confident now than I was then, that we should have an adequate package to support a complete submission by the end of this year. That includes, of course, our confidence that we have enough safety data to support a full evaluation of the benefit/risk of this drug. I think given limited duration of dosing, that helps as well as given the near completion now of enrollment in TRAILBLAZER-2. So it's our intent then to use combined safety data from the completed Phase 1 and Phase 2 studies as well as an early look at safety data from that ongoing Phase 3 study to support the package. Now of course, with any ongoing study, there's always risk. We don't know what that safety data is going to show. If it's consistent with safety data we've collected prior to the study, then I think we should also be confident that, that would support a positive benefit/risk assessment and put us on track to launch next year, as we said.

And the next question is from Ronny Gal from Bernstein.

Two, the first one, I'll stay with donanemab. You have kind of suggested in your comments there that there will be a good chance to use some of the biomarkers that you are developing in the early commercial use of donanemab. Can you talk a little bit about what markets do you expect to have proved by when? And how do you see the -- essentially, the entire patient passage through the use of donanemab going forward? And how does it differ from other amyloid β? And second, Basaglar seems to have a bit of a price drop this quarter. Can you discuss a little bit what you're seeing here? What are you expecting with the approval of the first interchangeable biosimilars? Any impact there? And as we go forward, how should we think about that franchise?

Thanks, Ronny. We'll go to Dan for the questions on donanemab, and then Mike Mason for the questions on Basaglar.

Yes. Thanks, Ronny, for the question on biomarkers and their commercial use. Of course, this has been an area of great progress and great investment by Lilly. We continue to put a lot of emphasis here. I think objectively, you wouldn't have had the progress that we're seeing now in Alzheimer's disease had it not been for the ability to select patients for treatment and follow their response treatment with biomarkers. We don't see that as a research-only application. That should be available, those kinds of tools, to patients in the clinical -- who are being clinically treated for Alzheimer's disease in the future. So the status of the tools right now is both of the PET agents, the tau PET imaging with Tauvid that we use in the amyloid PET imaging with Amyvid. Those are both, of course, FDA approved and availability is somewhat limited right now, particularly for Tauvid, but could quickly be scaled with the launch of donanemab in the future. The third agent, which is probably the one that will be the most accessible to patients is the phospho-tau217 assay. Just as we continue to work on that assay, we're more and more impressed with its performance, its ability to identify patients, and even as I've shown today, track their progression. So this could be an answer for patients in the near term. We'll work hard to make that available. The bar is often lower for in vitro diagnostics and in vivo diagnostics. And I think there's good potential there. You asked about the patient flow once all these things are approved and available and presumably, that happens around the time that donanemab launched but not before. I think it would make sense and fit with medical practice if screening starts with some sort of simple cognitive exams by a physician to assess the patient's eligibility to early Alzheimer's, then they would move on to probably a blood-based test like phospho-tau217. If that's positive, that could either be a basis for treatment depending on if data support that or that could triage patients to PET scans for further evaluation.

Thanks, Dan. Now to Mike for the questions around Basaglar Q2 performance and Semglee interchangeability.

Yes. Thanks for the question on Basaglar. The performance that you're seeing in the second quarter of '21 has primarily been driven by pricing pressure and volume pressure in the Medicaid segment for Basaglar. Let me give you a little bit of color on how the Medicaid segment works. There's really 2 different types of states: those that have one signal unified preferred drug list across managed Medicaid and fee-for-service; and then others that have 2 different kind of unique preferred drug list across fee-for-service and a different one for managed Medicaid. What we've seen with Basaglar is when states decide to transition from having 2 preferred drug list to a unified preferred drug list, the economics for the state tends to favor the long-standing brands like Lantus. And so at that point, you see if we have one estate for -- in a managed Medicaid, you'll see the transition back to Lantus. So that's what you've seen driving our Q2 performance. Also in the managed Medicaid space, we have seen some pricing pressure there from Semglee that has required us to put more rebates on the -- in order to preserve volume for that. Now let me turn to kind of -- well, first of all, before turning to Semglee, know that the trends for Basaglar are fully baked into our guidance for the remaining part of 2021. Now let me turn to Semglee. First of all, understand that Semglee has gained interchangeability just with Lantus, not with Basaglar. So we don't anticipate any immediate impact on Basaglar. If you look at Semglee performance to date, they've captured about 2% share of market on the TRx and about 1% of new treatment starts. And the vast majority of that has come from Medicare Part A, which is hospitals, and the Medicaid segment. If you look at the price point for Semglee, it's currently at $99 per vial and about $150 for 5 pack of pens. And with the move to interchangeability, we really support any actions that help patients with diabetes have more affordable out-of-pocket experience, which is why anyone, regardless of insurance status, is eligible to buy their monthly prescription of Lilly insulin for $35 or less through our Insulin Value Program. The Insulin Value Program has helped lower the average out-of-pocket costs for a monthly prescription of Lilly insulin, which also requires -- or includes multiple vials or insulin pen packs to $28.05 in the face of raising health insurance deductibles. So it's great that people living with diabetes has access to many options to lower their out-of-pocket costs. Thanks for the question.

And the next question is from Tim Anderson from Wolfe Research.

A couple of questions. Just your general thoughts on subcu dosing with antibodies to plaque, does that offer meaningful differentiation? At a high level, the benefits would seem quite obvious to being able to dose a drug at home. But some argue that it falls outside of a Medicare Part B framework, so maybe docs would be more inclined to stick with an infusion. And I believe you originally did not pursue subcu because you're worried you wouldn't get enough drug across the blood brain barrier. Roche has shown us that they can achieve that. So can we expect Lilly might also pursue a subcu? And would this require a formal Phase 3 study looking at plaque reduction as a primary endpoint? And then last quick question, why wouldn't something like P-tau217 become a separate meaningful revenue stream in its own right for Lilly?

Thanks, Tim. We'll go to Dan for all those questions.

Okay. Thanks. No, it's a good question and line of questions here on subcu dosing for anti-amyloid therapies. Probably 2 factors that we have taken into account in addition to the ones you mentioned. First and most important is efficacy for patients. And I think all of the data that we have so far suggest and support the notion that deep and rapid clearance is key here. And so if you're going to go to subcu dosing, it's important to make sure you do get enough drug in so that you can quickly get patients to clear. That's not going to always be possible with every drug. I think the second consideration with subcu dosing is the duration of therapy. So if it's a limited duration of therapy, the difference between IV and subcu, if it's once a month for 6 months, that's not a big difference between IV and subcu. Whereas if it's for the rest of your life, maybe that is a bigger difference. Finally, with respect to our plans for subcu, I do think it's an important option to offer patients, notwithstanding the previous comments, even for a limited duration therapy, some patients may prefer it, assuming you can get the same kind of efficacy. I think with donanemab, that's unlikely to be possible, and we're not pursuing it given the doses we need and the formulation we have. However, we have a second-generation antibody here that we call N3pG4, which I think is quite likely to be viable in a subcutaneous presentation. And that is our focus of development around N3pG4. My expectation around that is that it should be able to show comparable amyloid plaque lowering with subcutaneous dosing as donanemab does with IV dosing. If so, given the similarities between the drugs, we would seek an accelerated approval pathway for that drug in the future as sort of a subcutaneous version of donanemab, although it is a new enemy. Your second question was around the phospho-tau assay and whether that's a significant revenue stream. It's certainly conceivable and we haven't sort of thought through all of our commercial plans around that. But really for Lilly, and it may be significant for some companies, I think for Lilly, though, our focus is on removing barriers for treatment to patients. And so as we think about how we position diagnostics and therapeutics in the marketplace, our focus will be on really making sure that most patients possible can get treated appropriately.

And maybe just a comment -- thanks, Dan, Tim, on the access and payment environment, I think our priority at Lilly is always going to be how to make it easier for patients to get to a therapy and then we solve for value on the back end. There are clearly benefits in the short-duration treatment, like Dan said, with donanemab in a Part B. They're going to be watched closely by their physicians initially anyway. There are real and important side effects, which require imaging analysis for this class of drugs. And so it's an intensively managed disease. But through time, as we've seen with other classes, as comfort level will rise in primary care, in particular, in using therapeutic antibodies to treat Alzheimer's, a more convenient form available at our local pharmacy, perhaps for self-injection or injection by a caregiver, would be preferred. So our plans line up with -- in pursuing both those channels, although in early days, probably the intensive nature of the treatment and specialist nature will favor the infusion. But we're committed to both, and we're solving for patient convenience at the end of the day.

The next question is from Chris Schott from JPMorgan.

Just one on donanemab and then one on Verzenio. Just I guess my bigger question on donanemab is, how are you thinking about the role of Aβ antibodies maybe prior to definitive cognition data being available? So I guess do you see cognition data significantly expanding the market opportunity for these products? Or do you anticipate we're going to see broad usage, even in the event, let's just say, the additional cognitive readouts you see on donanemab were less definitive than what we saw in the Phase 2? I'm just trying to say, do you think the whole market at this point is just going to move to plaque regression or reduction or at least cognition is still very important, I think, in terms of the commercial opportunity? My second question was on the Verzenio update. I just -- just a 2-parter here. Just when do you think you'll have that incremental OS data for the other 50% of the population? And how hard is it to identify these higher-risk patients as we think about maybe the initial commercial opportunity in adjuvant?

Thanks, Chris. We'll go to Dan for donanemab, and then Anne for the questions on Verzenio.

Yes. So your question is -- maybe I'll break it in two parts. The first part is like how important is in the near term to have additional cognitive benefit data for amyloid plaque [lung] drugs. And then in the longer term, what happens if the confirmatory studies give a negative surprise. So in the short term, I'd just clarify that we have compelling clinical efficacy data for donanemab. The only trial that's going to be successful, a positive Phase II study and its primary endpoint showing cognitive benefits for donanemab, that's different, unique and exciting, published in the New England Journal, that's exciting. And I think that will be helpful even before we have the confirmatory data, being in that unique position. There will be some physicians, I'm sure, as are today, who still say, I don't want to use a drug until I have cognitive data. Fine, for those physicians who are willing to make that link between the surrogate efficacy data and the Phase II data in donanemab, if you believe that lowering amyloid plaque is the good thing to do, you're going to want the drug that lowers amyloid plaque the most. And I think that's an exciting aspect of donanemab as well. But then we come to the confirmatory studies. I think surely everyone have to acknowledge if for multiple sponsors, multiple drugs are all clearly negative, that would be a bad thing and we would retreat and say that this was a wrong way of thinking. I think that scenario is extremely unlikely. I think the most likely scenario is probably a mixed picture. Some drugs will be better than others. Some trials will reach significance, others might not. You've heard me speak about the confidence in our trial, but we have to see the data. I think in that scenario, that will strengthen -- that would be good enough to reinforce the notion that amyloid is an important surrogate and reducing amyloid is a good idea.

Thanks, Dan. Anne, on Verzenio?

Yes. Chris, thanks for the question. And as Dan shared, we are incredibly pleased with what we're seeing out of Verzenio and the monarchE data and as he shared key endpoints, such as IDFS have continued to strengthen with further follow-up. And now we have two years of median follow-up. And so very pleased with that, and as he shared, we remain very confident there will be an OS trend favoring Verzenio in the broader population. So we would work with the FDA to expand our label to include these patients in the future. So obviously, this is event driven and so the timing of this will be determined by the event rate. So our next planned analysis is in the second half of '22, and this analysis will help us really further inform the timing of that final analysis. So as you commented, the overall survival data in the broader population is still immature. We still have less than 50% of the events needed to do that final OS analysis. But with what we're seeing, and again, strong performance in both the high and low Ki67, we remain confident to see this trend in OS favoring Verzenio to replicate. As far as Ki67, good news here is that this is really a familiar concept to physicians. It is already accepted as a prognostic factor in breast cancer. And it's really easily performed through an IHC assay, so very simple assay. And these are broadly available in the pathology labs. And the assay and the methodology that we used on monarchE is straightforward and proven to be accurate and really highly reproducible. So our belief is that oncologists will move to quickly adopt this in practice. And really, this clarity in patients with the highest risk, I think, will help to accelerate uptake in this setting. So we look forward to launching in this setting.

The next caller is Umer Raffat from Evercore. Please go ahead.

Hi, thanks so much for taking my question. Surprisingly, I also want to talk about Alzheimer's today. Dan, I have three subparts. First, are you expecting to use interim data from your ongoing Phase III as part of the regulatory filing or during the review? Secondly, once the plaque is cleared, and I think 60% of patients have clearance by 12 months, what rate of onset of new amyloid plaque do you expect subsequently? And I'm just trying to understand your expectation on finite duration of dosing versus Biogen's opinion on continued dosing. And then finally, I'm also trying to reconcile the slide you showed on the nonlinear model, the Conrado model, suggesting a relationship between plaque decrease and a slowing in clinical progression. Are you saying there's a relationship? Or are you saying there's a causality? Because you might recall the New England Journal paper on your Phase II mentioned there was no association between plaque and clinical benefit at patient level 1, Biogen data suggested similar. Thank you very much.

Thanks, Umer. Dan?

Okay. Three great questions, Umer. Thanks. So the first question, you asked if we'd use interim data, I commented that we'll take a safety cut of data in the right way to support that submission. We don't plan to support that submission or do we see the need to support that submission with any looks at efficacy data. We have adequate efficacy data supporting the plaque lowering, which would be the basis of submission and approval under accelerated approval. Your second question is once plaque clears, how long does it take to come back? We have some data on that that was also presented at AAIC. I didn't highlight it this morning. But what we found is that off therapy, there is very slow, negligible, really, regrowth of plaque. I think if you sort of extrapolate it out, it might take 14 or 15 years or something like that to regrow amyloid plaque. The average age of patients in this trial is 75. And remember, we haven't fully halted progression of disease. So that doesn't feel like a near-term thinking on redosing will be necessary to keep them clear. But we'll have the ability to follow patients for many, many years and confirm that. Finally, I think you've correctly summarized the situation, which is that in our initial analysis, we didn't see a correlation and now we are reporting that we do see a correlation. Why is that? And of course, correlation can't prove causation so it is just a correlation. So why do we see it now? I think what we learned was quite interesting. And that's that the amount of plaque you remove depends a lot on how much plaque you have to start with. So if you only have 50 centiloids of plaque, there's only so much you can remove. If you have 100 centiloids of plaque based on, you can remove a lot more. So that turns out to be a pretty important compound in these kinds of correlations. The people who are -- have the more severe disease, perhaps longer duration, lower cognitive performance, older age, they might have more plaque at baseline, you can remove more but they still might be the worst progressors than people who have lower plaque and you remove less. So, I think our thinking initially, and maybe the field thinking, was a little bit backwards on this to look for a straight correlation between change and change without adjusting for all of those important baseline covariance.

And our next question is from the line of Andrew Baum. Please go ahead.

A couple of questions please. Just going back to interim analysis for TRAILBLAZER-ALZ to not so much as used to support accelerated but to accelerate the readout for the full standard regulatory review, you're using a Bayesian disease progression model. Given that you're getting such a rapid clearance of Alzheimer's and that's linked to cognition in those patients who have that, do we have to assume that the follow-up is going to go out to the full 72 weeks? Or is there a possibility of early unblinding driven by efficacy in these patients? And then second, perhaps you could comment on the manufacturing capacity for donanemab as well as the regulatory outlook for your P-tau assay, assuming that you attain regulatory approval on the accelerators. Thank you.

Thanks, Andrew. Dan, we'll go to you for those questions.

Yes. So Andrew, you've asked a follow-up question here, an important one, on the potential even in the face of an accelerated review for accelerated approval, rather, for plaque lowering, whether we'd still be keen to get that kind of data a bit earlier by pulling forward an interim on TRAILBLAZER-2. We haven't ruled that out. We also don't have plans at this moment in time. I think we just need to see where we are and where the field is. But really, the -- maintaining a pristine Phase III trial would probably be a pretty high priority, particularly if accelerated approval gives the path for patients to have access to the medicine, then it becomes less urgent to get that data faster. So that's our current thinking. We've been working hard to make sure we have manufacturing capacity. I feel good about where we are to support launch and growth of donanemab and hopefully someday enter PG4 even to follow that. With respect to the commercialization of a P-tau diagnostic, there are different paths forward for an in vitro diagnostic, including a lab-developed test, or LDT, which can be done in a centralized location, for example, under CLIA. And that's a pretty fast path and that's one of the options that we consider.

And the next question comes from Louise Chen from Cantor. Please go ahead.

Hi, thanks for taking my question. So first question I had for you is, how do you think about a potential outcome for the national coverage determination of monoclonal antibodies to treat Alzheimer's disease? And then second question is, how would you think about pricing donanemab if it is approved? Thank you.

Thanks, Louise. Dan?

Okay. Thanks. Two sort of commercially focused questions on donanemab. I mean the first one on the national coverage decision, determination -- of course, that's important. When -- I think it was widely said that when the first approval came, it was quite broad an indication and then subsequently, the FDA working with the sponsor focused the patient population. I think there could still be opportunity for further focusing here. And that's one direction the experts at CMS may take. In that case, it could be requiring patients to have evidence of Alzheimer's pathology in the form of amyloid plaques or even tau pathology. As I said before, I think that matches our goals and what we think is right. It will take some time for that to play out probably over the next nine months or so and surely will be part of some of those discussions and share our data and thinking in the right way. And then on pricing, I think I simply say it's too early to comment on that. We have some time yet.

The next call is Geoff Meacham from Bank of America. Please go ahead.

Dan, you're popular today, so I just have a couple more for you. On donanemab, is there a hurdle that FDA has provided in terms of number of patients for safety, either for the filing or during the review? And then as the data from TRAILBLAZER matures, what is your estimate on what the duration of therapy benefit could ultimately be? And then real quick on tirzepatide. Just wanted to know as you guys complete the filing. At this point, what's the gating factor as you look at the different geographies and you prepare?

Thanks, Jeff, we'll go to Dan for the donanemab questions, and then Mike Mason on tirzepatide.

Yes. So with respect to the safety hurdle for donanemab or for any drug, really, it's having adequate exposures and duration of exposures in a broad population to be able to fully assess the benefit risk of a given drug. Now that's not a number that depends on the particulars of the drug, the population, of course, that you hope to treat the duration of therapy, of course, but also the particulars around the safety data and the efficacy data that you collect. So it would be nice and easy, I think, for sponsors and the FDA if there was a particular line in the sand that could be drawn. But as I said, it needs to be tailored for each drug. Based on our current thinking and analysis and discussions, as I said, I think we'll be there comfortably at the end of this year. Your second question was about -- I think it was about the duration of benefit as the TRAILBLAZER data mature. I commented on the duration of plaque lowering, which appears to be sustained. But I think, Geoff, you're getting at the duration of the cognitive benefit. We see a slowing of decline on average between that patients are still declining. You could ask, are the lines coming together or going apart? I think on some of the cuts to the initial data, there might have been a perception that the lines were not diverging at the later time points, I think, as I showed the additional statistical methods. And even as we look at the raw data, we're pretty comfortable here that we have lines that diverge over time. And therefore, I would expect that, that benefit of slowing would continue over time. But too soon to have real data on that.

Thanks, Dan. Mike, on tirzepatide?

Yes. Thanks for the question. Our Phase III SURPASS program for type 2 diabetes is done and completed. So the only gating factor here is how quickly we can summarize the data and submit to the regulators, which we plan to do by the end of the year to major global regulators.

And the next caller is Carter Gould from Barclays. Please go ahead.

Maybe I guess I'll try to take another stab at the pricing question. I appreciate it's early, but it is sort of the elephant in the room. And just maybe if Dave and team could comment just on the appropriateness of the pricing benchmarks in the space already today in Alzheimer's, as you think about it. And then obviously, 3Q has tripped in the past around Trulicity dynamics. So just hoping, if you could just offer a little bit more clarity there on as you think about pricing headwinds into 3Q specifically? Thank you.

Thanks, Carter. So we'll go to Dave for the question on pricing for donanemab, and then Mike on Trulicity pricing dynamics.

Yes. I appreciate the question, and we totally get the curiosity. There's, as you understand, probably lot of limitations of what we would say at this stage. One of the reasons for the limitation is really the ultimate label we have and the value we can demonstrate to customers is a key input at Lilly for pricing. And we have -- fortunately, the only study in the space that hit its pre-specified endpoint for disease reduction -- or disease progression reduction, and those are key. As we demonstrated at AAIC, we continue to cut that data. I think there was an earlier question about how we might differentiate in the NCD process, but that's one of them as we have this completed study with exquisite biomarker profiles of the product and can continue to elucidate what donanemab does in the brains of Alzheimer's patients in ways that perhaps others could not. And those are inputs as well. Finally, Lilly has been a leader in value-based concepts and really partnerships to make sure that the appropriate patients can easily access at low out-of-pocket cost or medicines. And we're applying that thinking to this problem as well in the U.S. as well as outside. Our goal isn't to just get an approval, but to make sure that all of the people millions in the U.S. who could qualify for it could access it on day one. So those are all inputs into that process and without throwing out a number here, which wouldn't be appropriate until we get an approval. That's how we think about it. Hopefully, that gives you some color behind the scenes.

Thanks, Dave. And then to Mike on Trulicity for pricing dynamics, pricing trends.

Yes. Thanks for the question, really nothing new to report on Trulicity pricing. At the beginning of the year, we gave guidance that when you take a look at the impact of increased rates and market, second mix and offset by lower utilization, 340B and modest list price increases, that for the year, we would see low single-digit price decline for Trulicity. That's what we're experiencing, so really nothing new to update at this point in the year.

Yes. Let me just add just more general comment on pricing movement through the year, and I know we've had numerous conversations on this. And it does -- there does tend to be some volatility throughout the year. We do tend to see as patient flow through the health care system, more pronounced impact from the coverage gap in the second and third quarter of the year. So you see that dynamic throughout every -- really every year, as Mike said. And we built those assumptions into our full year guidance in terms of pricing dynamics for the year. And obviously, as we have more color and insight, we'll provide that. But right now, as we look at the full year estimate for U.S. pricing dynamic, it's consistent with what we previously discussed in terms of overall erosion. You saw 3% for the first half of the year, which is what you should expect for the full year.

The next question is from Seamus Fernandez from Guggenheim. Please go ahead.

Great. So really wanted to kind of focus in on abemaciclib in prostate cancer and the update that was provided, I think in an abstract published at AACR, some of the details were provided with regard to the sort of threshold for moving forward as it relates to the hazard ratio. And it cites a hazard ratio of 0.64, 80% power. So with a P-value of 0.1 to, I think, continue advancing into the next stage of CYCLONE 2. So just wanted to clarify if that information is consistent and a driving force for moving forward, that would seem like a robust piece of information to have as we head into that. And then as incremental to that, just wanted to get a sense of the magnitude of the opportunity that Lilly believes this would represent for Verzenio going forward. And if there are, let's say, RB, so the retinoblastoma-related requirements for enrollment or any other biomarker requirements that could limit the size of the patient population. And then just as a follow-up. In terms of the NCD determination, just wanted to clarify if the pricing of the initially priced product would have any impact on Lilly's ability to independently price its own product, and if that's part of the reason why Lilly has argued for the products being treated independently as part of the NCD rather than as a class.

Thanks, Seamus. We're going to toss it to Dan first to start on Verzenio, and then Anne will follow to round that out, and then we'll go back to Dan for the NCD question.

Yes. You're asking, Seamus, very smartly about the criteria to expand the study from our Phase II study to a Phase III study. I don't think we want to get into the very precise details on what that was. But you're correct that it was a very robust threshold. So we're excited to see that happen. We take Phase III starts very seriously at Lilly. We don't want Phase III failures. So when we have studies like this one, in any therapeutic area where we move from Phase II to Phase III without ever seeing the data, we set aggressive bars that data really have to match to move forward to Phase III. So you can expect that's what we did here. Anne for more detail.

Thanks, Dan. Anne, for more detail there and also the magnitude of the opportunity we see in prostate?

Yes. I mean, as Dan said, we were incredibly pleased with this outcome and the recommendation by the DMC, and we set a very aggressive threshold on this adaptive design, and we're impressed that it met that threshold. And I think it just continues to be another example of how Verzenio differentiates from the competition. So the Phase III is open. It's already enrolling patients. We anticipate the results of the analysis in 2024. On the question on market size, so CYCLONE 2 is -- it's a metastatic castrate-resistant prostate cancer trial that really targets patients who have not yet received prior novel hormonal agent, so in earlier settings. So our initial research shows that the addressable market could be in the range of 25% to 50% of metastatic CRPC. So it's depending really a bit on how the market evolves with the use of NHAs in that earlier setting. So in the U.S., for example, based on that, we currently estimate between 7,000 and 14,000 patients would match that inclusion criteria for CYCLONE 2. And exciting in this space is that as long as being a high unmet need in a large patient population, there's also a long length of anticipated treatment duration. So this could be a treatment duration of up to two years or longer. So that's why we're particularly excited about this opportunity, is what it delivers there. There is no RB or other biomarker requirements in the study.

Thanks, Anne. Dan, on NCD?

Last question was on NCD and why did I say that we think we -- each drug should be evaluated on its own merits. Is that an allusion to pricing or something like that? No, my primary focus here is on the patient and the outcomes that a drug could deliver, which, even within the same class, could be different. Our theory and I presented data today to support that theory, is that the amount of amyloid you remove and how quickly you do that is important for predicting outcomes. If that's the case, you can easily imagine different drugs, even with the same class having different benefits for patients and some of those benefits may be above a threshold for coverage and others may not. That's conceivable. Not what I anticipate is the most likely scenario, but we want to be prepared for all scenarios here.

The next question is from Vamil Divan from Mizuho Securities. Please go ahead.

Thanks for all the updates on the pipeline. So maybe a couple sort of separate topics that have been covered more on the call. So for one on lebrikizumab, clearly that one maybe gets underappreciated a little bit. We got Phase III data coming up. Can you maybe just set some expectations and what you're hoping to see? I know you have a dosing advantage potentially with that product, but obviously, dupi's a pretty formidable competitor there. So maybe you can just sort of frame what you're hoping to see. And then tirzepatide, just one quick follow-up. I know you mentioned you started, I think you said, the HFpEF study for that product. Are you looking at that for HFrEF as well? I just -- I don't remember you mentioning that. And if not, I'm just curious why you wouldn't pursue that.

Thanks, Vamil. We'll go to Ilya for the question on lebrikizumab, and then Mike for tirzepatide.

Great. Thank you for the question on lebrikizumab. We're excited to -- for the second half of the year to see the data related to our induction phase for lebrikizumab across a number of trials. And so what we're hoping to see and expect to see is replicating some of the positive signals we saw in Phase II, where we have strong efficacy in skin itch, and we believe have a very good safety profile. And so we anticipate that lebrikizumab will have a very competitive profile versus DUPIXENT in a growing and a significant unmet need. And we see lebrikizumab being an important asset for us as we think about not only atopic dermatitis, but our overall presence and strength in dermatology and our growing immunology franchise.

Thanks, Ilya. Mike?

Okay. Thanks for the question. Yes, we have only announced a HFpEF study for tirzepatide, and that's currently all we're planning on announcing at this point. I think we're very confident in the opportunity of tirzepatide in the HFpEF. When you look at patients that have HFpEF, there's a large segment that also are obese and obesity is a [steep] phenotype within this patient population. So I think we feel good about our -- the results we've seen in our Phase II studies that give us, I think, confidence that we'll be successful in HFpEF. And so right now, our efforts are focused on HFpEF.

The next caller is Steve Scala from Cowen. Please go ahead.

Two questions. First, on the Q1 earnings call, Lilly said in monarchE, there had been 76 events, 39 on abemaciclib, 37 on control. Can you provide an update with numbers on a like-for-like basis? And then secondly, on your oral SERD, did Lilly see potential for differentiation in the ASCO data? And if so, what differentiation did it see, particularly as competitor data and news flow evolves? Lilly has previously said, it would not pursue a me-too SERD. So I'm wondering what is different about yours.

Thanks, Steve. We'll go to Anne for the first question on Verzenio, and then Jake for the question on oral SERD differentiation.

Well, thanks, Steve. And as Dan shared, we're going to be presenting data from this recent analysis at a medical meeting later this year. So we won't be able to share further details and then, obviously, due to the embargo. But as you can tell, we are very pleased to see the data continue to strengthen in this latest analysis with more than two years of follow-up. As we stated previously, the overall survival data remains immature. So at this point, what I can share is we have less than half of the events needed, so less than 50% of the events needed for the prespecified OS analysis. So the data remains immature. Again, we were really pleased, even with that immaturity, to see that the patients with highest risk already had this favorable trend. But thanks for the question and look forward to sharing more at a meeting later on.

Thanks, Ann. Jake?

Sure, happy to take the question on SERD. We're pleased with how the drug is performing clinically. It's doing everything that we expected it to do from a pharmacology safety and efficacy perspective. I think the data package that we presented at ASCO and that which we continue to see in the trial subsequent to ASCO, placed the drug in a vacuum on par with the best agents in development from our peers. But this is not a class of medicine that stands on its own period. This is really a development program. And I think as it relates to me-tooism, what I would say is that we're not interested in pursuing a me-too development program, and we stand by that statement. And frankly, our leadership position in breast cancer, in particular, with emerging Verzenio data as we've been talking about today, I think, put us in a unique position as it relates to this class of medicines. That all having been said, I also think we are a bit more cautious about the long-term role of SERDs in this landscape, and we're looking forward to some randomized data for the first time from some of our competitors later this year that I think will shed some light on where these drugs ought to fit in the overall treatment paradigm.

And that comes from Matthew Harrison from Morgan Stanley. Please go ahead.

Great. I guess two for me. So first, just a follow-up with two parts on the Conrado model, one, do you know regulators view of this model? And then secondly, maybe if you can just explain what we're seeing in a little bit more detail, it looks like you're seeing about a 40% regression, slowing at 100% clearance. I assume this is over 18 months. Would you expect that to continue to compound? I'm just wondering why only sort of 40% slowing when you've cleared all the plaque. And then just a second follow-up on SERD, any plans to look at that in combination with CDK4/6 or other combinations?

Thanks, Matthew. We'll go to Dan for the questions on the Conrado model, and then Jake on SERD.

Yes. Thanks, Matthew, for the question there. No, we don't have a regulator's view on the Conrado model. But we're encouraged that this model was built, as I said earlier, by the CAMD -- by data from the CAMD consortium and has been around for a while and used for various applications. What we're doing here, though, to be clear, is checking a patient's progression against what we predict their progression would be. So knowing all of their baseline factors, how much would the predicted to have progressed had they not been on drug versus how much did they actually progress. And so that's essentially what you're seeing in the graph. You're right, even with full plaque clearance, there's still some progression. There's only a 40% decrease. Now that's as big an effect as anyone ever has talked about in Alzheimer's disease, but surely, over time, we're going to need additional therapeutics for Alzheimer's beyond just clearing the plaque, at least in this stage of disease. And I think that's probably where tau therapeutics come into play. So that's how we think about it. I think earlier in the disease course, it could be quite different. Perhaps if you get it early enough, you could have 100% disease slowing in progression and in essence, no Alzheimer's, but that is yet to be proven.

Thanks, Dan. Going to Jake for that question on SERD?

Yes, a question on SERD. Of course, we plan to explore combining our oral SERD with CDK4/6, in particular, with abemaciclib. We're doing that right now in the context of an expansion cohort of the Phase I/II trial, the same trial for which we presented data at ASCO has expansion cohorts that contemplate rational combinations, including with abemaciclib.

Thanks, Jake. Matthew, thanks for your questions, and we've exhausted the queue. We'll go to Dave for the close.

Thanks, Kevin. Thanks to Dan for answering all those questions. We appreciate your participation in today's call and your interest in the Company, of course. We continue to see growth with our broad commercial portfolio. And we have strong momentum across our core business supported by a breadth of brands and accelerating classes and robust growth across U.S., Europe and China. In addition, as you heard today, we believe we have a compelling pipeline with industry-leading opportunities, and we remain focused on bringing new medicines to patients and creating value for all our stakeholders. Thanks again for dialing in. Please follow up with Investor Relations team if you have any questions we have not addressed today, and hope you have a great day. Thanks.

Thank you. And ladies and gentlemen, that does conclude our conference for today. Thank you for your participation and for using AT&T teleconference service. You may now disconnect.