Ladies and gentlemen, thank you for standing by and welcome to the Lilly Quarter Three, 2021 earnings call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time to do require assistance during the call, please press star then 0 and an operator will assist you offline. As a reminder, today's conference is being recorded. [Operator Instructions]

Good morning. Thank you for joining us for Eli Lilly and Company's Q3 2021 earnings call. Kevin Hearn, VP of Investor Relations. Joining me on today's call are Dave Ricks, Lilly's Chairman and CEO, Anat Ashkenazi, Chief Financial Officer. Dr. Dan Skowronski (ph), Chief Scientific and medical officer [indiscernible] White (ph) President of Lilly Neuroscience, Jake Van Arden, CEO of Loxo Oncology at Lilly and President of Lilly Oncology. Patrick Johnson (ph), President of Lilly immunology, and Lilly U.S.A. and Mike Mason (ph), President of Lilly Diabetes. We're also joined by Lauren Zerki Santueja and Sarah 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 Form 10-K and subsequent Form 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 will turn the call over to Dave for a summary of our third quarter results.

Thanks, Kevin. Once again, Lilly had a very strong quarter growing our newest medicines around the world and continuing to advance significant potential new medicines in the late-stage development. While also building long-term opportunities through early-stage investments in technology and progress in early-stage programs. Q3 2021 was also a period where the resilience of our Company, our people and collaborators were tested by the pandemic. And again, they rose to the challenge on, personally recognize and thank my Lilly teammates for delivering such a strong overall performance. Innovating to maintain pipeline velocity, running our plans to meet the rapidly growing demand of medicines and continuing to serve our customers, whether be in person or online. Turning to our strategic deliverables on slide 4, Q3 revenue grew 18% compared to Q3 2020, or 17% in constant currency. This performance was driven entirely by volume. Volume growth was 17 percentage points. When excluding COVID-19 therapies, which includes revenue from COVID-19 antibodies and sales of Olumiant for the treatment of COVID-19, revenue grew an estimated 11% for the quarter and year-to-date. Revenue attributable to our newer medicines grew over 35% and now represents nearly 60% of our core business this quarter, an important indicator for our long-term growth potential. Our non-GAAP gross margin was 79% in Q3 or 79.3%, excluding for the impact of foreign exchange on international inventories sold. Excluding this FX impact, our gross margin decreased by approximately 60 basis points compared to last year. Our non-GAAP operating margin was 30.5%, representing an improvement of over 400 basis points compared to Q3 of last year. And over 100 basis points of sequential improvement from Q2 of this year. We had a number of significant pipeline milestones since our last earnings call in August. Including the FDA approvals for Verzenio and certain…

Thanks, Dave. Slide 7 and 8 summarize financial performance in the Third Quarter and year-to-date. I'll focus my comments on non-GAAP performance. Revenue increased 18% this quarter compared to Q3, 2020 or 11% excluding the items Dave mentioned earlier, representing strong momentum for core business, despite the impact of Alimta's OUS [indiscernible] We continue to be pleased with the strong volume growth across key brands like Trulicity, Paul's, Verzenio and Jardiance as our key growth products made up nearly 60% of our core business during the quarter. Gross margin as a percent of revenue declined ten basis points to 79% in Q3. Favorable products mix excluding COVID-19 therapies, and a favorable impact from foreign exchange rates on international inventory sold were more than offset by lower gross margin on COVID-19 therapies. Total operating expenses grew eight percent this quarter, compared to the same quarter last year. Marketing, selling, and administrative expenses increased one percent while R and D expenses increased 17% driven by significant investments in exciting late-stage pipeline opportunities, including the non [indiscernible], [indiscernible]and [indiscernible]. We also invested approximately $50 million in research and development for COVID-19 therapies in Q3, bringing our total COVID-19 R&D investment to approximately 350 million year-to-date. Operating income increased 37% compared to Q3 2020. And operating income as a percent of revenue was 30.5% for the quarter, an increase of 420 basis points compared to the prior year with sequential growth for second straight quarter. This increase was driven by revenue growth, outpace, and expense growth, and we expect continued margin expansion in the fourth quarter. Other income and expense were expense of $7 million for this quarter compared to income of 10 million in Q3 2020. Our effective tax rate was 14.3%, a decrease of 70 basis points compared with the same quarter…

Thanks, Anat. Like 2020 before it, 2021 continues to be a very productive year for R&D at Lilly. Before I get into the broader portfolio update, I'll highlight several updates from our late-stage pipeline. Starting with Tirzepatide. We shared detailed results from tirzepatide SURPASS-4 Study at EASD this quarter. SURPASS-4 is the largest and longest surpass trial completed to-date. And we were encouraged by the continued hemoglobin A1C and weight control, which participants experienced even past the initial 52-week treatment period, and continuing up to 2 years. Looking at slide 14, this shows the change from baseline in hemoglobin A1C over time during the study. A1C reduction plateaued by roughly 24 weeks and was maintained at 52 weeks and thereafter, to 104 weeks across all the Tirzepatide doses. While in the insulin glargine comparator arm, A1C began to increase after 52 weeks. Durability of A1C control is a challenge for type 2 diabetes treatments. While the 104-week data isn't a definitive answer as to whether Tirzepatide could potentially offer even longer-term durable blood glucose control, these data certainly are encouraging. Moving to Slide 15, as you can see, weight loss plateaued at approximately 52 weeks and was maintained thereafter, such that at 2 years, weight difference at the highest dose was approximately 15% compared to insulin glargine. We've seen in previous incretin therapy trials conducted with GLP-1 s a further increased impact on weight reduction in participants with obesity without type-2 diabetes compared to studies in participants who do have type two diabetes, such as this one. It will be interesting to see if this trend also extends to the dual agonism of Tirzepatide, which has demonstrated weight reductions in type two diabetes trials beyond what has been shown by GLP-1s to-date. We clearly are excited about the weight loss…

Okay. Thanks, Dan. Before we go to Q&A, let me sum up the progress we've made during the quarter. We have seen continued strength in our core business through the first 9 months of the year, with double-digit volume-driven revenue growth net of COVID-19 therapies and strong performance across key brands. We're pleased to see sequential and year-over-year operating margin expansions, as well as strong non-GAAP earnings growth. We have made significant progress developing new medicines. And Q3 was another important quarter for our pipeline as we announced the submission of Tirzepatide in type 2 diabetes, the initiation of a rolling submission for donanemab in the U.S. for early Alzheimer's disease, key life cycle approvals, and submissions for Verzenio and Jardiance, and positive Phase 3 readouts for lebrikizumab.We returned nearly $800 million to shareholders through dividends in Q3, reflecting confidence in the ongoing strength of our business. As we move toward the close of 2021, we are confident in our long-term growth prospects. While the past year has seen tremendous advances in our late-stage pipeline, at our Investor Day in December, we look forward to sharing information with you regarding the next generation of assets that we believe will enable us to sustain the flow of innovative medicines to patients and augment our future growth prospects. Now I will turn the call over to Kevin to moderate the 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. Louise, please provide the instructions for the Q&A session and then were ready for the first caller.

Thank you. And ladies and gentlemen, if you wish to ask a question, [Operator Instructions] And our first question is from the line of Chris Schott, please go ahead.

Great. Thanks so much for the questions. I guess the first one for me is just on some of the 2022 comments. know you're not giving formal guidance yet, but should we be thinking about margin expansion next year from the roughly 30% or so margins that are implied in this year's guidance? I'm just trying to get my hands around how meaningful of a step-up an OpEx we should be thinking about supporting new, these major new launches coming next year. And the second one was just one related to bibs rollout of aduhelm, it's obviously been a challenging launch. Are there learnings here or just changes about how you're thinking about your go-to-market strategy for donanemab and I know Dan, you made some comments in the remarks, but should we be thinking about much in the way of revenue at all for donanemab. And I guess in that window between when it's approved and prior to Trailblazer, too, I'm sure a sense of again, just as you look at what's happened, there is there been surprises or changes in your thinking on the market. Thanks so much.

Thanks. Chris we'll go to Anat for the first question on 2022 margin expansion and then the on the thoughts about the uptake and outlook for donanemab.

Great. Thanks. So for 2022, we will provide further details and guidance in a couple -- in December, so not too far from now, and we'll provide additional carry on how we view the year and what investments and pushes and pulls we have going into next year. As you think about our margin expansion and the goals we've set out and we've communicated in terms of getting to mid-to-high 30s, in terms of margin expansion, we still have a clear line of sight to get there, and that's still our goal. There will be -- but it's not a linear growth, so there will be years that are going to be stronger years, or we're going to be making specific targeted investments. And as you've seen us do this year with donanemab when we have strong convictions in the pipeline asset or when we're preparing to launch very promising opportunities and products, we will invest behind them. So think about this as still growing to mid-to-high 30s, but not necessarily in a linear fashion, but in line with investments we would need to make.

Thanks Anat. Ann.

Well, as Dan stated and as our competitor has shared, they've experienced there clearly is work to do to ensure that the diagnostic and the patient ecosystems are prepared for these medicines. And until there is definitive phase three data, we do believe that we should really expect modest use of these medicine. Now fortunately, as Dan said, for donanemab, this confirmatory data comes quickly in mid-23 for travelers are all too. And so this will be the opportunity to really help patients on a more significant scale. Now, some of the opportunities here, certainly pursuing accelerated approval is really important, both to provide early access. but also to let us begin addressing some of these infrastructure challenges ahead of the Phase three data. We need to build out the diagnostic ecosystem, particularly PET scans and blood tests. We need to make sure that there's adequate infusion capacity. And then very importantly, we need to ensure that there's reimbursements so that the appropriate patients can have access to donanemab. So these are going to be our areas of focus now through our phase 3 window. We're confident in our ability to address these infrastructure challenges over time. And I would say by clearing plaque faster and deeper, we believe that as well as identifying the right patients, we've optimized the chances for showing compelling benefits in the Phase III, which is we said is what was going to show significant uptake in the class. We continue to see the same opportunity for donanemab in the mid to long term once these challenges are addressed and the confirmatory data is available.

Thanks Ann.Chris Thanks for your questions. Next caller, please.

The next caller is Jeff Meacham from Bank of America. Please go ahead.

Hey guys. Good morning and thanks for the question. I had two on Alzheimer's probably for Dan. For donanemab, would you expect completion of the rolling submission by the end of this year, and is there a regulatory threshold you need to hit in terms of the safety exposure, I'm just trying to think of the number of patients that you have to get exposed to it and then for Zachatenamab, what are the next steps here? Is it moving to another anti-tau asset altogether, or do you want to optimize monotherapy Zachatenamab, or maybe even move forward in combination with donanemab? Thank you.

Thanks, Jeff. Dan.

Great. Thanks, Jeff for two good questions. The first is just on the timing of the completion of the donanemab rolling submission. I think you can assume we chose our words carefully here in the call prepared remarks on the timing, you're driving out like what's the regulatory hurdle with respect to safety exposures. You're right, that's the key gating factor on timing. You've heard we've enrolled a lot of patients in the clinical trials, including patients in safety addendum. So, we're extremely confident we'll reach that safety exposure hurdle. I guess, looking forward, there's probably two risks or question marks. One is just around the timing of exactly when do databases get locked and data get cleaned and submitted to the FDA. So that's why we're a little vague on timing here. I think the second one of course that we don't know and won't know until all that data is in, is what are the safety that actually show. And so the assumption here, of course, is that they continue to be consistent with what we've seen in Phase 2. So if those things work out, then I think that'll be the opportunity to talk a little more specifically about the data. With respect to zagotenemab, look, I think we have here a very potent anti-tau antibody designed against what we believe is an important species of aggregated tau delivered at a relatively high doses for any monoclonal antibody, and we were unable to slow the spread of tau progression in the brain. So as present, I don't see a path forward for this antibody and I would be reluctant to invest in really any anti -tau antibody, given what we've seen here, Tau is still a great target, it's just hard to hit it with a monoclonal antibody, I think, given that most of the tau that we care about is inside of cells.

Thank you.

Thanks, Dan. Jeff, thanks for your questions. Next caller, please.

And then next caller is Louise Chen from Cantor. Please go ahead.

Hi, thanks for taking my questions here. So my first question is, how are you preparing for the launch of Donanemab and Tirzepatide next year. And how should we think about the costs associated with that launch? And then 2nd question I had for you is, do you think it's the national coverage determination or the price of Aduhelm that is keeping doctors on the sidelines? Thanks.

Thanks. We'll go to Anat for the question on launch prep and the overall costs for both tirzepatide in donanemab how we think about that going into next year. And then we'll go to Ian for the question around the NCD and ADG home.

Sure. So as we're preparing to launch both these medicines, obvious 1 is in an area where we have significant commercial footprint, manufacturing scale up capabilities and the other 1 is an area we're currently building. So, we're investing in advancing both of these efforts forward preparing for potential launch of Tirzepatide mid next year, and then a regulatory decision on donanemab by the second half of next year. Those will be factored into the guidance that we will provide on December 15th as we go into -- as we go into next year. But rest assured we're building the commercial footprint that we needed to launch these effectively and leveraging the existing footprint we have as well.

Thanks Anat. Ann?

Well, it's a good question that you've asked and I -- I do think there's a number of things that are challenged here. I think as you look at donanemab what's incredibly important is that we had a positive phase 2 study that cleanly met its primary endpoint, showing cognitive benefits for donanemab, as well we're able to share that we had limited duration dosing to plaque clearance and so we believe that this is going to be important for the decisions that physicians and payers make. So I believe the donanemab data is incredibly strong. And then as I said, following quickly the Phase 3 confirmatory data, which I think is important, and all of this being published in the New England Journal of Medicine. So as we're talking to thought leaders and physicians, I do believe that they see the strength of the data that we brought forward in donanemab, and I think that's been a challenge that they've had with some of the competitive space. So I do think that data is one thing on their minds. I think it's well the NCD is playing a role, obviously that will be resolved before we launch and that will be ready for any of the potential out comes there. And I have been working closely with them along the way to make sure that they understand the donanemab data, particularly the rapid clearing of plaques as well as the limited duration dosing that offers we think benefit to them as well. So, it's been a good conversation with them. So far, we really look forward to seeing what they have to say CMS has the same in January and then launching with the strong datasets as Dan said in the second half of next year.

Thanks, Dan. Lousie, thanks for your questions. Next caller, please.

The next caller is Tim Anderson from Wolfe Research. Please go ahead.

Hi. Thank you. I have a couple of questions on the pending in CD by CMS. So 2 questions. First, it's commonly said that this upcoming decision will pertain to the whole ABA class. I struggle to see how that can realistically be the case, because that decision will be made on only 1 Company's mixed Phase 3 data, and there's still other really important informative Phase 3 datasets that are on the come. So wouldn't be NCD, whatever it is initially potentially be revised later as CMS has more information from these additional trials. And then second, if this is indeed a decision that pertains to the whole class, and presumably Lilly has a view on what will happen in January. Do you expect CMS will say that Aduhelm and the class more broadly should be covered in a way that will be commercially meaningful. One can envision that there could be lots of restrictions that might impact to limit the commercial market opportunities.

Thanks, Sam, we'll go to Ann for those questions on the NCD process.

Well, thanks. Good questions on the process for the NCD. So CMS has been clear that the NCD, as they are running the process is to cover the class. Now as I said, we are actively participating in the process, including we provided oral comments in July. And additional written comments in August, and we and I'm sure others as well have been meeting with CMS throughout the process to share our specific data and ensure that the differences in these medicines are understood. And so we've asked them really to evaluate each drug based on their own data. And this is, I think, as I said, particularly important considering that there are some differences between these. We share the data later in the air subsequent to the original readout that the degree of donanemab plaque clearance relates to clinical benefit which I know is very important to CMS in this decision as well as the limited duration dosing. So we really look forward to seeing what they have to say in January, and what readout will look like. We do acknowledge there's a lot of skepticism in the national discussion. And so we do really hope and we'll continue to influence that we think it's drugs should be evaluated by CMS, by payers and prescribers on their own data. It is possible that NCD, the NCD will narrow for the patients most likely the benefit that's a possibility out of this. But that's really aligned with the goals that we've had on our clinical trial designs, which has long been to use the diagnostic tools to make sure that the right patients are getting treatment. So we'll look forward to the readout in January. We'll continue to stay very engaged in this. And yes, I believe as additional data comes out, our data and others in the class, that this will continue to influence the process.

Thanks, An. Tim, thanks for your questions. Next caller, please.

The next question comes from Andrew Baum from Citi. Please go ahead.

The noise coming out of Washington suggests that the Peter's Bill, some of the components of that are gaining traction on some of them are worrying components of price negotiations seem to be more and more limited. I just wonder if you could share any thoughts on what you think, just take the Peter's proposal on out-of-pocket carbs could mean to Lilly and the farmer in terms of increased volume without catastrophic coverage changes. And then second, could you comment on whether you're seeing mutualization of donanemab by the antibody drug antibodies that you see with prolonged usage. And is this one of the factors which is contributing to the finite treatment duration or is neutralization simply not a concern here?

Thanks Andrew and Dave for the first question and Dan for the second.

Thanks, Andrew, for the question. Obviously, there's a lot of talking and discussing going on in Washington about how to Mig medicines more affordable. I think we've been pretty consistent in our view that both as Lilly and I think I can speak for the industry here we are for progress. We're not for the status quo and the centerpiece of almost every part of legislation being discussed which is I think good news for seniors is some reform to the Part D benefit. That is certainly highlighted in representative Peter's Bill. It's in HR-19, it was in the aggressive widen effort. It's I'm sure in the Senate Finance effort now, and I think that's good news. The contours of that are all kind of different, but the general idea is that industry would pay additional costs into the system, that that would reduce monthly out-of-pocket costs, both below and above the catastrophic phase cap -- catastrophic costs as well as eliminate the donut hole. I think we're basically for all those things and we think that's a good set of initiatives. Where the debate sort of kicks in is around how to pay for that, or whether pay for from the industry should go to other healthcare priorities. And of course, we have clear positions on that. One piece of Peter's Bill we don't like is the retroactive CPI Cap. I think that's punitive and unfair. It also is disproportionate on some types of medicines versus others. So I think the industry is aligned, [indiscernible] we don't care for that. Although in general, the idea of a CPI regulator on forward price increases is something people have gotten used to talking about. And then the thing we do, put our foot down and firmly opposed and why we're so against HR3 and other efforts, is taking money out of the pharmaceutical industry for other priorities. Isn't drug pricing a big enough problem? Why don't we take the money out of pharmaceutical industry and give it to patients who want to buy our medicines. And that's a position we've had for a long time. I think it's been a busy week and into next week, probably negotiating out this package, but we're hopeful that some of these messages are resonating and we could land with a Part D reform and modest impact on the industry so we can keep innovating for the future.

Thanks, Dave, Dan.

Thanks Andrew for the question on anti-drug antibodies or ADA's. We do see ADA's with donanemab, they arise pretty early in treatment. There's no connection though with the ADA and our decision on fixed duration dosing. The reason for that is because the doses that we're using are so much higher than the level of anti-drug antibodies that we don't see an effect in our clinical trials that these doses of the ADA's on PK or importantly on PD, which is the plaque clearance effect of donanemab, so no connection there.

Thanks, Dan. Andrew, thanks for your questions. Next caller, please.

The next caller is Seamus Fernandez from Guggenheim Securities, please go ahead.

Thanks for the questions. So maybe first on the performance of Verzenio in the quarter and then your conviction that this market can accelerate moving forward now with the Ki-67 approval. We're hearing good things from physicians, but it just doesn't seem to be reflected in the opportunity that I think we all see ahead for Verzenio. And then as a separate question, I'm sure Mike Mason is tracking the opportunity in obesity very closely. Just wondering what feedback is on the types of patients that are going on to [indiscernible] at this point and how Lilly is thinking about the opportunity in obesity, given the attempted acceleration of the launch of Tirzepatide with the PRB. And obviously, that's in diabetes. but just wondering when we might see a full launch in obesity, given all the trials. Thanks.

Thanks, Seamus. We'll go to Jake for the question on Verzenio and then Mike for the question on Tirzepatide.

Thanks, Seamus. So just starting with Verzenio performance in the quarter. As you probably remember, we had some stocking that happened in the channel in the second quarter, and so part of what happened this quarter is just a modest work down of that inventory. I think the fundamentals of where we stand in the metastatic setting continue to look really strong. I like where we are in terms of NBRX share hopping around 30% hopefully we can continue to grow that. I think that we still haven't seen the entire class of CDK46 inhibitors returns of pre - COVID levels of prescriptions. And so that's obviously an important lever for growth going forward. Probably levered to things like mammogram volumes and other types of preventative care measures that get patients diagnosed and into doctor's offices. But we continue to grow our share of NBRX within the market. Turning to Adjuvan, obviously, we're very excited about launching this medicine for men and women with early breast cancer specifically Ki-67 high patients. It's a real opportunity as I think you've probably heard say before. It's about 8,000-10,000 patients. It's obviously a smaller opportunity than the entire study population that we enrolled in monarchy. And as you know, we'll be looking -- again, next year will be the next analysis of survival to potentially expand to that broader population, should OS trend in the direction that we and FDA want to see to do that. But we have a great opportunity ahead of us. I think certainly it's growth from where we stand today. It's a brand-new indication of real size in terms of both patient numbers and duration. In many ways, that -- realizing that is also linked to the prior comments I made about patients returning to the doctor for preventative care to get diagnosed at levels, hopefully that return to pre -COVID. We don't need that obviously to make headway going into next year, but I think for the long term, it's important for patients to make sure they get into the physician's office to get diagnosed.

Thanks, Jake, Mike.

Hi, Seamus. First of all, you are 100% right. We're looking very closely at the obesity opportunity for Tirzepatide. We're very excited about the weight loss that we solve in type 2 diabetes patients, of up to 14% weight loss, and the potential of that being even higher in the obesity population. Obviously, just a massive unmet need 110 million Americans live with obesity. Only about 3% of them are treated with some type of anti-obesity medication. So we think the opportunity is huge to really help people who live with chronic weight management issues. Now, with our program, we have four trials in us surmount obesity registration program. Our first obesity trial will read out next year or SURMOUNT-1 We're very excited to see that that should happen in mid next year. And then, SURMOUNT-1 2, 3, and 4, we'll get the day of those trials are on track to wrap up in 23. And then so when you look at our obesity submission and approval, it looks like our approval in 2024 is most likely outcome. If everything goes well as we expect in our SURMOUNT program. So very excited about -- with all these launches. I think they've done a nice job. I think not a surprise to us. We thought that what was holding back the current market was just the current products in the marketplace just didn't have clinically meaningful enough weight loss. We thought if we had products on the marketplace that had clinically meaningful weight loss and those products were able to show good, clinical outcomes, overall medical outcomes for those living with obesity, that position for [inaudible 00:56:27] and payers would provide access for it. So it's not going to develop overnight, but we're very encouraged by the early launch and we go big, and just very excited about Tirzepatide 's opportunity.

Thanks, Mike, Seamus, thanks for your questions. Next caller, please.

The next caller is Umer Raffat from Evercore, please go ahead.

Hi, thanks so much for taking my question. Dan, I was very intrigued by the donanemab versus Aducanumab head-to-head trial. And my question really was I understand the primary endpoints on amyloid plaque. But will the trial be able to gauge clinical efficacy on endpoints like CDR, some of the boxes. I ask because it's -- my understanding it's an open-label trial. And then secondly, I feel like there's been a fair amount of investor debate and perhaps confusion on what exactly is Lilly messaging on the Innovent PD-1 launch in U.S. And the sort of debate rages anywhere from Lilly will be a dominant player or not so much. So just so we're all on the same page, I guess, what are you guys expecting and do you expect it to be a meaningful PD-1 in the U.S. market? And if you could speak to your thoughts on whether data generated in Chinese patients would be a relevant commercial consideration for U.S. oncologists are not?

Thanks Umer. We go to Dan for the first question and Jake for the second.

Thanks. Our question is whether the Nan members that it can amount trial head-to-head trial, will be powered to measure clinical efficacy outcomes. It will not be. It is a small and a shorter trial. So we won't be able to draw conclusions about that. But I'd point out that if we believe that plaque Luring is the appropriate surrogate and that question will certainly be answered in the next year to 18 months as we get data from a number of Phase three plaque-lowering drugs, so if it turns out that plaque lowering is an appropriate surrogate for predicting clinical efficacy, then I think that the degree and speed of plaque lowering could be the basis of comparison across different Alzheimer's drugs in the same way that surrogates in oncology to used to compare different drugs in a class, knowing that the long-term outcome trials would have to be extremely large and long duration, powered for clinical outcomes. I also sort of point out that we we're expecting here to have in the scenario where we're really excited about this, we're expecting to have a positive Phase 3 trial for donanemab, which in itself is a differentiator, I think from current competitors. So head-to-head on efficacy against Adjuvan may not actually be relevant.

Thanks, Dan. Jake.

Hey, Umer, thanks for the question. So Sintilimab, the PD-1 inhibitor from Innovent, we brought in to the Company in terms of ex-China right explicitly with the intent to use pricing as a lever to disrupt the U.S. market starting with the United States and potentially moving to Europe as well. And as we've said publicly over the past couple of months, the intent there is really through price predominantly versus other mechanisms such as rebating etc. There are certain customers out there, certain practices, and care models for which this is going to be an attractive tool for lowering costs to their system. And Unfortunately for the way the system is designed today, they are going to be many channels for which a lower-priced option actually isn't appealing. And so as you -- your question was about whether or not we intend to be a dominant player? It's hard for me to say that with any degree of assertion today. We will be focusing, initially, on the segments for which this is an attractive option, given the way that their payer dynamics work. And today that's not a majority by any stretch, but that will be our focus out of the [indiscernible] should [inaudible 01:00:27] be approved. Onto your second question about whether or not the data package that's been generated for the agent will have issues with prescribers in the United States. Our market research today suggests this won't be an issue. But obviously we haven't launched the product yet, we haven't gotten it approved yet, so I can't say that with certainty that our market research suggests it won't be an issue. But really in front of us initially is just getting the drug approved, and I think as you know, that's something we hope for in the early part of next year. But the drug will be subject to an advisory committee and we await the details of what that will cover.

Super helpful. Thank you so much.

Thanks, Jake. Umer, thanks for your questions. Next caller, please.

The next caller is Ronny Gal from Bernstein. Please go ahead.

Good morning, and thank you for taking my question. Two of those, first thing with Umar's points around Sintilimab in the U.S. Essentially two parts on this one. First, any comments about FDA change in policy and use in China only patient population as basis of Commission, the United States, we've heard some things and conferences that suggest that might be some change there. And second, on the same point, you've kind of talked about price as the dominant note here. I guess the question is more around you thinking process You know, pharma has struggled for a long time in commercializing low-cost products and innovative products to the same Company. If PD1 should have a low-cost option, why not pulp why not lebrikizumab why should those not follow a deep discounting strategy giving the clinical profile versus other products in the same class. And 2nd question, given the recent impact of interchangeable Lantus, can you discuss a little bit how the insulin their fast-acting insulin market is different, assuming we will see interchangeable products there, how are the features of the market differ? And would that also be a market which is more amenable to adopting any interchangeable insulin?

Thanks, Ronny. We'll go to Dave for the 1st couple of questions around low - cost entrants and FDA policy, and then we'll go to Mike for the question on the interchangeability of Lantus and how that can potentially [inaudible 01:02:41] a fast-acting insulin.

Sure. Happy to. Maybe before we go to me, Jake do you have any comments on the FDA comments on China data?

Yeah. I think it's a good observation. We've observed the same thing. The tone from DC does seem to have changed a bit over the past 18 months on this topic. So I think we're hearing and reading in some ways, probably the same things that you guys are. We don't have a lot more information than that. And so we await again the regulatory decision from FDA as to the acceptability of the package.

As it relates, Ronny, to the broader question about why not more everyday low-priced strategies in the main and pharmaceuticals. I mean, I think a couple of things come to mind here. First, I think in oncology in particular, it is infeasible quite often to run comparative studies. And so once an incumbent is established, it's very difficult to displace that incumbent. Maybe the one narrow exception might be what Jake highlighted with Sintilimab where you could have a more price-sensitive segment. And here we have analogous data from a different country that was conducted in a time-gap that was prior to other PD-1s being approved in that setting. And so that presents an opportunistic play. We have of course also pursued this in insulin and Mike can comment on that in a second. But basically, our launch to the 30% discount to the other insulin glargine. We've pursued our own low-cost authorized generic of Humalog, now reducing the price to effectively 70% off the original brand. But here again, it illustrates the point Jake was making is that even in the retail side, it's not universally adopted. Today the half-price form of Humalog and the third off-price of insulin glargine that we provide have minority market shares and that's a little bit counter-intuitive. But of course, we all know the incentives of the supply chain which do tend to favor higher list price products, and that's I think where that shows up. Finally, you asked why don't we pursue this for our whole portfolio? Well, I think the overriding thought for our portfolio was often to create differentiated datasets. And 1 thing different from [indiscernible] different from [indiscernible] and authorize generic, Humalog is that those aren't differentiated datasets. So they're more or less interchangeable. So when we create a new medicine, we're seeking to create something better. And in the main, that's how the system is set up and that favors typically an introductory price that's similar to other innovative competitors and then rebating and discounting to the channel to get formulary access and use. And that remains our main strategy. Of course, if there were some big policy shifts that flattened gross to net or reduced, somehow, the incentives of intermediaries, we'd take a look at that. I think our goal would be to deliver lower cost points to consumers if we could. Right now, mostly the system rewards something else and that's how we are forward planning for the portfolio that Dan was talking about. Maybe Mike has any final comments on insulin and interchangeability.

Yeah. Thanks, Dave. First of all, when we look at Semglee, it's only interchangeable with the reference product, which is Lantus, not Basaglar, so we do think it's going to have a more of an impact on Lantus versus Basaglar. I mean, you look at the mill time segments, that first reference product will be insulin aspart, not LifePro (PH). Now I think you also have to take a look at the assemblies interchangeable biosimilar. I think many stakeholders in Washington believe that Semglee interchangeable insulin would launch at a significant discounted price. Now, that hasn't been the case. The net impact of assembly’s interchange will launch is actually the introduction of a higher-priced presentation, not a lower-price presentation. The new presentation is priced at $269 a vial versus $99 a vial of the original singly, which is a 273% increase. So I think what you're not going to see, at least what we haven't seen in the insulin biosimilar space is that the Semglee interchangeable will we're really disrupt the basal insulin market. Rather, what we'll do is allow it to compete and kind of their traditional healthcare system that we know have gaps which we talked about earlier and which we've been trying to fill with our insulin value program and the senior savings model. When you look at in kind of pivot to the mealtime insulin market, mealtime insulin is a bit more complicated. They require more presentations than what you see with a basal insulin. So, premixes are human insulin are also included on the contract. So I think the mealtime insulin is a little bit different than what you see on the basal insulin. But what we've seen to-date is that given [indiscernible] and our price point on interchangeability, we don't think it's going to be really disruptive to the system, but more work within the current system, which we feel that we can strongly defend. At the end of day, I think, to reiterate Dave 's point, I think it's better when we're focused on improvements. and with our Connected Care launch with BIF, with our weekly basal insulin, I think we're focused on really driving innovation and better patient outcomes.

Thanks, Mike. Ronny, thanks for your questions. Next caller, please.

The next caller is Kerry Holford from Berenberg. Please go ahead.

Hi. Thank you. 2 questions [inaudible 01:08:42] price. The increase in demand this quarter. Was that [indiscernible][inaudible 01:08:53] When you [indiscernible] higher [indiscernible] So [indiscernible] just talk a bit more about the dynamics [indiscernible] [indiscernible] in any way the upcoming Adjuvan launch. Then secondly, on the Adjuvan Situation [indiscernible] has commented on that call earlier today that the the FDA has stated into them, to mentioned the base with an idea [indiscernible] will be sufficient as long as in their debt effect on the risk making a bad thing to your experience. There be more relaxed approach in the FDA. [indiscernible] I'm just curious as to why you think there might be anything that you can give there. Thank you.

Kerry, you were kind of breaking in and out, but I think these are for Jake. And the 1st question, Jake, if you didn't catch it, was about quarter-on-quarter revenue And whether that was affected by pricing in CDK46th market or rather the stocking point you made earlier. And then I think the 2nd point was about IDFS versus OS in the FDA 's policy [indiscernible] that.

Yes. Thanks. On the 1st point, yes. I mean, the sequential quarters are really mostly related to the inventory stocking and destocking point that I made earlier. We haven't seen a ton of fluctuation in price. On your comment about Adjuvan, I can't comment on the back and forth that Novartis had with FDA, just obviously not privy to that. Though from what you -- the framing of your question, that actually doesn't sound particularly different than the conversation that we've had with the agency. As Dan mentioned in his prepared remarks, we've of course, as you can imagine, gotten a fair number of questions from folks around the nature of the approval in the subgroup versus the enrolled population among RD. And we'll be publishing in the coming days, the actual OS overall survival data that were part of the regulatory submission. You'll see what those trends look like in both the intent-to-treat population as well as the approved subset. And again, trends in one direction or another that you'll be able to interpret for yourself. But I don't -- from what I can hear, I don't think the Novartis feedback from the agency is all that different from what we've received.

Thanks, Jake. Carrie (ph), thanks for your questions. Next caller, please.

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

Thanks for taking my question. Maybe just a couple of other topics discussed as much. So one on Emgality. It feels like the CGR P markets has been impacted by COVID more than some others. Maybe you could just sort of give us a sense of the dynamics you're seeing there. And have you seen any impact from the oral CGRPs that have entered or preventing. Is that at any role on Emgality or on the class in the last few months? And then the second one just on the Jake side, obviously, a lot of focus on the FDA, their updates on that space. I'm curious if you have any updated timing around when you expect a new, final updated label for Olumiant in RA and/or a decision on the atopic dermatitis applications. Thank you.

We'll go to answer the question on Emgality and Patrick for the question on Olumiant.

Great. Well, thanks for the question on Emgality. So at present, what we've seen is the total migraine prescription market has seen growth but it's driven primarily by the total acute new patient starts and additional concomitant use. With the injectable class, I do think that we're still experiencing headwinds from the pandemic and increased competition in the prevention space overall. We do see some variability of this across the markets, some OUS markets are returning really to pre - COVID growth levels. And while we've seen improvement in the volume of new patient starts, the CGRP MAB class in the U.S. is still about 13% below where we were with the start of the pandemic. So with the new competition and then appropriate treatment for acute and prevention, we're seeing that the market should continue to grow as patient's reengage in the system. On your question on oral impact, I think it's still a bit early to -- early days in the launches to see how this has impacted the space in this way. So we'll watch that carefully. I think our belief is that with so many patients and so much unmet need, the opportunity for these medicines, particularly the MAB,remains significance. And obviously in the end it comes down to what's best for that patient and how we get them to their migraine-free days. And that's one place that we think we believe [indiscernible] has an advantage. So, we'll continue to watch this space. We continue to believe in the efficacy that [indiscernible]brings to the market. And so, you'll see us continue to push forward in supporting the product.

Thanks, An. Patrick?

Well, thank you very much. In terms of the question related to rheumatoid arthritis, the FDA has requested changes to the box warning for all JAK inhibitors to include serious heart-related events, cancer, blood clots, and deaths. And we believe in life about its most likely that the JAKs will be placed off of the biologic source of the treatment of rheumatoid arthritis. And that's Mediamath Olumiant is currently played in the U.S. so we don't see any major impact on Olumiant driven by this change. When we moved our atopic dermatitis, we know about the FDA meets their PDUFA due to the ongoing assessment of JAK inhibitors. And we believe also here, it's most likely above the JAK inhibitors, will end up being placed off to the biologics. Despite that, we also recognize that atopic dermatitis is a very heterogeneous disease. And our clinicians have a use for more tools in the toolbox, but that's what we believe is most likely moving forward. And we would expect some regulatory actions prior to the end of this year.

Thanks, Patrick, Vamil, thanks for your questions. Next caller, please.

The next caller is Carter Gould from Barclays. Please go ahead.

Good morning. Thanks for taking the questions. Maybe first for Dan, just coming back to the head-to-head study. I don't think I've heard you say yet the time period in which you going to be measuring these reductions in amyloid. I believe you did give up second half, '22 a timeline for reading out the result. But, should we be thinking about that as like a three-month or six-month time point or just the number of patients that get to below the lower limit of detection over some period. And then maybe for Jake, on the third class, I know you guys have expressed some cautiousness on the role of [indiscernible] -- in the treatment paradigm in the past, we started to see some of the later stage data roll out from some of your competitors. Wanted to get your latest thoughts there. And if we might start to see some of your third combination data from the original EMBER study before year-end. Thank you.

Thanks, Carter. We'll go to Dan to the 1st question on the Aducanumab head-to-head and then Jake for the 2nd.

Yeah. Thanks for your question, Carter. I think you're appropriately pointing out that actually both things matter in terms of plaque clearance, how fast you clear the plaques, and also how deep you clear the plaques. I think in the fullness of time when we have Phase 3 readouts for multiple drugs that look at efficacy, I predict those would be 2 important predictor factors and how well a drug helps patients is, how quickly and how deeply it clears plaques. I think we have significant [indiscernible] there in both aspects with donanemab. So you can be sure we'll be looking at both of those things and reporting that out as I said in the back-half of next year.

Thanks, Dan. Jake.

Yeah. Thanks for the questions about their old cert program. We're looking forward to seeing the radius Menarini data at San Antonio as I'm sure you are. That's studies. are a little interesting and that is very heavily enriched for ESR-1 mutated tumors. And so, we're interested in seeing the degree to which the effect size observed in the study was really driven by that enriched subgroup where you would expect an outsized effect size versus a drug like fulvestrant versus in the non ESR-1 mutant patients. I think that question has meaningful read-through as to the overall value of the class. If it's really just limited or driven by the ESR-1 mutants. I think that's a very different proposition than a true all-comer effect size. As it relates to the combination data of ours, that -- those are data we'll probably present next year.

Thanks, Jake. Carter, thanks for your questions. Next caller, please.

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

Thank you. I have a couple of questions. First, is it not possible for Lilly to file Tirzepatide for obesity in 2022 on just the SURMOUNT-1 Trial with supporting weight loss data from the diabetes trials? Other follow-on indications for other drugs have been approved on one study, and SURMOUNT-1 is a trial of 2,400 patients, so it's a big trial. Second question, are you planning to use blood-based biomarkers such as P-tau217 as companion diagnostics with the -- or within the donanemab filing? I think you have used the [indiscernible] diagnostic in the Trailblazer trials. So wondering if that's part of the filing. Thank you.

Thanks, Steve. We'll go to Mike for the question on Tirzepatide and then Dan for the question on the [indiscernible] and submission of donanemab. Mike?

Yes, Steve good question. We -- in our discussions with the FDA, we've agreed upon 4 trials for the [indiscernible]program that make up our submission for the obesity indication for Tirzepatide. As I said earlier, those will read out -- SURMOUNT-1 will read out next year, SURMOUNT 2, 3, and 4 readout in '23 and we'll submit and expect approval in '24. Based on conversation with the FDA, when we set our development program, that's the current plan.

Thanks, Mike. Dan.

Yeah. Thanks, too. Good question on companion diagnostics and their role in FDA approval of Alzheimer's drugs. I think based on what we've seen with ADU are base case expectation here is that the FDA is operating under an assumption that standard of care now for Alzheimer's disease, if you are diagnosing efficient for Alzheimer should include BioMark or confirmation of disease. So for that reason, my guess is that they won't be -- BiMark won't be included in prescribing information as companion diagnostics. I would take the opposite position probably with payers where I think they are likely to be required before reimbursement for these medicines but that has to has to be worked out. So those assumptions I just laid out sort of underlie our thinking about how P-Tau or Amyvid or any other biomarkers, CSF beta will be incorporated into labels, probably not a d into practice, probably yes. And so we're proceeding accordingly to make sure that P-Tau 2017 is as well as other biomarkers can be widely available around the same time as we launched donanemab, so that it can be incorporated into the standards of clinical practice. As a biomarker for detecting Alzheimer's pathology and trashing patients to therapy.

And thanks, Stan, Steve, thanks for your questions. Next caller, please.

The next caller is from Matthew Harrison from Morgan Stanley. Please go ahead. [Operator Instructions]

Okay. Great. Thanks. I was just wondering if you could comment on lebrikizumab and your sort of views on the market., and in particular, now that you've seen the Ox40 data from Amgen KK, if that has any impact on how you think about the longer-term potential of that market. Thanks.

Thanks. Matthew will go to Patrick for the question on lebrikizumab.

Well, thank you very much for the question. We're very encouraged by the induction that [indiscernible] lebrikizumab, where we saw more than 50% of patients treated with lebrikizumab achieving an EASI-75 and that we'll also met all the key secondary endpoints and we actually believe that we have an opportunity here to launch a best-in-class [indiscernible]]. And currently we are looking forward to the 52 weeks based on [indiscernible] top of 2022 and a potential submission the second half of next year. When it comes [indiscernible]? days, it doesn't change our outlook for lebri. As I share, we believe we have a best-in-class IL-13. And we also believe that we have a very competitive asset with the market leader. And base d in a market that we know there is a big unmet need, and by logic, penetration is still very low, and we know that there is a need for many more medications and particularly with the heterogenous need in the marketplace.

Thanks, Patrik. Matthew, thanks for your question. We'll wrap up our Q&A. Go to Dave for our close.

Great. Thanks, Kevin. We appreciate your participation in today's earnings call and your interest in our Company. We continue to grow our broad commercial portfolio with strong momentum in our core business, supported by many key brands and accelerating classes. This is complemented by a compelling pipeline with industry-leading opportunities. And we remain focused on bringing new medicines to patients and creating value for all of our stakeholders. Thanks again for dialing in. And please follow-up with Investor Relations. if you have any questions we did not address on the call and hope you have a great day.

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.