Q1 2020 Earnings Call

Ladies and gentlemen, thank you for standing by welcome to the Lily Q1 earnings Conference call.

Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Lilly Q1 Earnings Conference Call.

Operator: At this time, all participants are in a listen-only mode. Later, we will have an opportunity for questions and answers, with instructions given at that time, as well as now. If you have a question, please press 1, then 0 on your touch-tone phone. You'll hear an indication that you've been placed in a queue, and you may remove yourself from the queue by repeating the 1, then 0 command. We ask you to wait approximately two minutes before you begin pressing those buttons. Please pick up your handset and make sure your phone is unmuted before you press any button.

At this time all participants are in a listen only mode. Later, we will have an opportunity for questions and answers with instructions given at that time as well as no. If you have a question. Please press. One then zero on your Touchtone phone, you'll hear an indication that you've been placed in Q and you may remove yourself from the Q by repeating the way.

One then zero command.

We ask you to wait approximately two minutes before you pretty begin pressing those buttons.

Please pick up your handset.

Make sure your phone is on muted before you press any buttons.

Operator: As a reminder, your conference call today is being recorded. I'll now turn the conference call over to your host, Vice President of Investor Relations, Kevin Hearn. Go ahead, please. Good morning. Thank you for joining us for Eli Lilly and Company's Q1 2020 Earnings Call. I'm Kevin Hearn, Vice President of Investor Relations.

As a reminder, your conference call today is being recorded I'll now turn the conference call over to your host Vice President Investor Relations. Kevin Hurt go ahead. Please.

Good morning, Thank you for joining us for Eli Lilly and companies Q1, 2020 earnings call I'm, Kevin heard Vice President of Investor Relations.

Kevin Hearn: Joining me on today's call are Dave Ricks,

Joining me on today's call, our Dave Ricks, Lilly's, Chairman and CEO, Josh Smiley, Chief Financial Officer, Dr., Danskin, Wronski Chief Scientific officer.

Unnamed: Steve Ricks

Unnamed: Lilly's Chairman and CEO, Josh Smiley, Chief Financial Officer, Dr. Dan Skovronsky, Chief Scientific Officer

Unnamed: Anne White, President of Lilly Oncology; Patrik Jonsson, President of Lilly Biomedicines; and Mike

The white president of Lilly oncology.

Patrick Johnson, President of Lilly Bio medicines, and Mike Mason President of Lilly diabetes. We're also joined by Cirrus Smith, and Mike support the Investor Relations team.

Unnamed: Mike Mason, President of Lilly Diabetes. We're also joined by Sarah Smith and Mike Sapar of the Investor Relations Team. In addition, I would like to welcome Anat Hakeem, who recently joined Lilly as a Senior Vice President.

In addition, I would like to welcome another key who recently joined Lilly as senior Vice President and General Counsel.

Unnamed: as Senior Vice President and General Counsel.

Unnamed: Scott joins Lilly with a wealth of experience in the healthcare industry and more broadly across the legal profession. Her prior roles include general counsel at WellCare.

Joins Lilly with a wealth of experience in the healthcare industry and more broadly across the legal profession for prior experiences include General counsel at Wellcare Health plans Associate General counsel with Abbott as well, it's working for a number of years a fully in larger Latham walk ins.

Unnamed: Chair Health Plans, Associate General Counsel at Abbott

Unnamed: as well as working for a number of years at Foley & Lardner and Latham & Watkins.

Unnamed: [inaudible] during this conference.

During this conference call, we anticipate making projections and forward looking statements based on our current expectations.

Unnamed: During this conference call, we anticipate making projections and forward-looking statements based on our current expectations. However, our actual results could differ materially due to a number of factors, including the extent and duration of the effects of the COVID-19 pandemic, as well as other factors listed on slide 3 and those not

Our actual results could differ materially due to a number of factors, including the extent and duration of the effects of the Kobin 19 pandemic.

As well as other factors listed on slide three and there was outlined at our latest forms 10-K, 10-Q, and any case filed with the Securities and Exchange Commission.

Unnamed: as outlined in our latest forms 10-K, 10-Q, and any 8-Ks 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

The information, we provide about our products and pipeline is for the benefit at the investment community. It is not intended to be promotional and is not sufficient for prescribing decisions.

Unnamed: are recommended to be promotional and are not sufficient for prescribing decisions. As we transition to our prepared remarks, a reminder that our commentary will focus on non-GAAP financial measures which exclude the financial contribution for Milenko during 2019 and present earnings per share as though the full disposition via the exchange offer was complete on January 1st.

As we transition to our prepared remarks reminder, that our commentary will focus on non-GAAP financial measures, which exclude the financial contribution from Elanco during 2019 and present earnings per share as a full disposition via the exchange offer was complete on January Onest 2019.

Unnamed: 2019. Now I'll turn the call

Now I'll turn the call over to Dave for some opening comments.

Dave Ricks: I'll turn the call over to Dave for some opening comments. Thanks, Kevin.

Thanks, Kevin.

Dave Ricks: Well, these are challenging times for all of us as the COVID-19 pandemic has affected the way we live, the way we conduct business, and, most importantly, the health and wellness of millions of people. Like all of you, we're hopeful that the decisions to implement social distancing will be effective to curb the spread of COVID-19 as our industry works urgently to enhance testing and speed therapies to market, to treat and then prevent the virus. Today's call will have a different structure than usual.

Well these are challenging times for all of US as the cover 19 pandemic has affected the way, we live where we conduct business and most importantly, the health and wellness of millions of people.

Like all of you were hopeful that the decisions to implement social distancing will be effective to curb the spread of koby 19, as our industry works urgently to enhance testing and speed therapies to market to treat and then prevent the virus.

Today's call will have a different structure than normal.

Dave Ricks: Before we discuss our Q1 results, we'll describe the impact of COVID-19 and the pandemic in general is having on our business and the actions we've taken to respond to the resulting global crisis. Our Q1 results were driven by very strong fundamentals, with additional benefit from increased inventory across the supply chain, including at the patient level. This is as a result of the COVID-19 pandemic. Despite that near-term benefit, the COVID-19 pandemic is likely to have a negative impact on our business in the future. We expect headwinds later in 2020 and potentially beyond, such as destocking as supply chains normalize from the recent demand surge, and decreases in new prescriptions as a result of fewer patients visiting physicians' offices. Potential changes in segment mix in the U.S. due to rising unemployment and pricing pressures resulting from the fiscal strain on government-funded healthcare systems around the world. However, we do not yet know the extent and duration of these impacts.

Where we discuss our Q1 results well described the impact of covered 19, a and it's the pandemic in general is having on our business and the actions we've taken to respond to the resulting global crisis.

Our Q1 results.

Were driven by very strong fundamentals.

With additional benefited from increased inventory across the supply chain, including at the patient level.

This is there's or <unk> as a result of the koby 19 pandemic.

Despite the near term benefit the company 19 pandemic is likely to have a negative impact on our business in the future.

We expect headwinds later in 2020 and potentially beyond such as de stocking as supply chain is normalized from the recent demand surge.

Decreases in new prescriptions as a result of fewer patients visiting physicians offices.

Potential changes in segment mix in the U.S. due to rising unemployment.

And pricing pressures, resulting from the fiscal strain on government funded healthcare systems around the world.

Well, we do not yet no the extension duration of these impacts.

Dave Ricks: Like everyone around the world, we're hopeful that the massive mobilization of scientific and technical resources occurring across this industry and in collaboration with government and academic laboratories will yield multiple effective therapies in the coming months and an effective vaccine on calendar 21. While it's difficult to predict the specifics of how the world will manage through this pandemic, it seems clear our industry will play a leading role. In the midst of the outbreak and in its aftermath, it seems equally clear that investing in research and development to address and then conquer human disease has never been more important. And this is likely to remain true for some time.

Like everyone around the world, we're hopeful that the massive mobilization of scientific and technical resources occurring across this industry and in collaboration with government and academic labs will yield multiple effective therapies in the coming months.

At an effective vaccine in calendar 21.

Well, it's difficult to predict the specifics of how the world managers through this pandemic it seems clear our industry will play a leading role.

In the midst of the outbreak and then in its aftermath. It seems equally clear that investing and research and development to address and then conquer human disease has never been more important and this is likely to remain true for some time.

As Weve navigated the crisis, we've acted with speed and agility focusing on the needs of patients our employees and the communities we serve an operator.

Dave Ricks: As we've navigated the crisis, we've acted with speed and agility, focusing on the needs of patients, our employees, and the communities we serve and operate in. I'll provide a summary of our response, then Dan will describe our ongoing efforts to develop a treatment for COVID-19, and Josh will walk through the potential financial impact of our outlook going forward. Slide four summarizes our strategic approach and actions to date. As you can see, we focused on five areas, maintaining a safe supply of and access to our medicine, putting the strain on the medical system, and developing a treatment for the virus.

I'll provide a summary of our response then Dan will describe our ongoing efforts to develop a treatment for koby 19, and Josh will walk through potential financial impact over outlook going forward.

Slide four summarizes our strategic approach in actions today as you can see we focused on five areas maintaining a safe supply.

Okay and access to our medicines.

Reducing the strain on the medical system.

Developing a treatment for the virus.

Dave Ricks: Keeping our employees safe and supporting our community to ensure that the 40 million plus patients we serve have access to their medicine. Early in the outbreak, we took a number of steps to maintain the supply of medicines around the world. To limit their exposure to the virus, we reduced the number of employees at our manufacturing sites to the bare minimum required to operate our facilities and enhanced already robust precautionary measures for safety and cleanliness. The majority of our supply chain is multi-sourced, and for materials we supply from one source, we keep sufficient inventory on hand to avoid disruption.

Me, our employees safe and supporting our communities.

To ensure that 40 million plus patients we serve have access to their medicines early in the outbreak we took a number of steps to maintain the supply medicines around the world.

To live at their exposure to the virus, we reduced personnel that are manufacturing sites to the bare minimum required to operate or facilities and enhanced already robust precautionary measures for safety and cleanliness.

The majority of our supply chain is multi sourced and for materials, we supply from one source, we keep sufficient inventory on hand to avoid disruptions.

Even with increased demand and customer stocking, we have sufficient inventory in production capacity for all our products. This includes all forms of insulin.

Dave Ricks: Even with increased demand and customer stocking, we have sufficient inventory and production capacity for all our products. This includes all forms of in- And we don't currently anticipate any issues meeting patient needs through the remainder of the pandemic. Our manufacturing sites in the U.S., Europe, and China have remained operational through this crisis.

And we don't currently anticipate any issues meeting patient needs through the remainder of the pandemic.

Our manufacturing sites in the U.S. Europe, and China have remained operational through this crisis.

Dave Ricks: We're proud of the extraordinary efforts of our manufacturing colleagues who've worked diligently to supply our medicines to patients around the world who depend on them. In addition to the numerous programs currently available through the Lilly Diabetes Solution Center, we announce the introduction of the Insulin Value Program. This allows patients with commercial insurance or without insurance to limit their monthly out-of-pocket expenses for insulin to $35 per prescription.

We're proud of the extraordinary efforts of our manufacturing colleagues who've worked diligently to supplier medicines to patients around the world who depend on them.

In addition to the numerous programs currently available through the Lilly diabetes solution Center, we now see introduction of the insulin value program.

This allows patients with commercial insurance or without insurance to limit their monthly out of pocket expenses for insulin to $35 per prescription.

Of note the solution center has seen a significant increase in daily calls since this new benefit was announced.

Dave Ricks: Of note, the Solutions Center has seen a significant increase in daily calls since this new benefit was announced. Patient affordability continues to be a top priority, and we remain committed to helping people access the medicines they need. We've also made a number of decisions that reduce the strain on the medical system. These include pausing new clinical starts and enrollment for most ongoing programs, suspending our in-person customer visits to physicians, repurposing our labs to conduct diagnostic testing here in Indiana for COVID-19, and creating a drive-through testing facility for healthcare workers and first responders in the Indianapolis area. We took these actions because they are the right thing to do during these challenging times and to do our part to combat the spread of COVID-19. Dan will give a more complete pipeline update later, but I would like to highlight that we do not expect significant changes to the timelines for our ongoing late-stage studies, except for the previously announced delays for the GI indications of our IL-23 antibody Mirakizumab.

Patient affordability continues to be a top priority and we remain committed to helping people access the medicines they need.

We've also made a number of decisions, which reduced the strain on the medical system. These include pausing, new clinical starts and enrollment for most ongoing programs.

Spending are in person customer visits to physicians re purpose thing our labs to conduct diagnostic testing here in Indiana for Coven, 19, and creating a drive through testing facility for healthcare workers and first responders in Indianapolis area.

We took these actions because they are the right thing to do during these challenging times and to do our part to combat the spread of Cobot 19.

Dan will give a more complete pipeline update later, but I would like to highlight that we do not expect significant changes to the timelines for ongoing late stage studies.

Except for the previously announced delays for the G.I. indications of our I, all 23 antibody Mira Kisan Matt.

In terms of addressing the significant.

Dave Ricks: In terms of addressing the significant, Unmet Need for treating COVID-19, we've acted upon several opportunities which we hope will result in a treatment option. These include partnering with Epsilora to develop potential antibody therapies, which we expect will enter the clinic this summer; participating in the National Institute of Allergy and Infectious Disease Adaptive COVID-19 Treatment Trial with our JAK inhibitor, ferricidinib; and initiating a phase 2 clinical trial with an antibody targeting angiopoietin 2 to explore its potential use in reducing the progression of acute respiratory distress syndrome related to The need for new medicines is urgent, and we've mobilized our development team at a record pace. Keeping our employees safe and healthy and our company running smoothly is, of course, also a top priority.

Unmet need of treating coven 19, we've acted upon several opportunities.

Which we hope will result in a treatment option.

These include partnering with EPS celera to develop potential antibody therapies, which we expect will enter the clinic. This summer.

Participating in the National Institute of allergy and infectious disease adaptive cobot 19 treatment trial.

With our JAK inhibitor baricitinib.

Initiating a phase two clinical trial with an antibody targeting angiopoietin two to explore its potential use in reducing the progression of acute respiratory distress syndrome related to covert 19.

The need for new medicines is urgent and we mobilized our development team at a record pace.

[noise], keeping our employee safe and healthy intercompany running smoothly is of course also a top priority. We've implemented remote work practices added health and wellness benefits and provided additional compensation for those essential employees routinely coming to our sites such as those and manufacturing.

Dave Ricks: We've implemented remote work practices, added health and wellness benefits, and provided additional compensation for those essential employees routinely coming to our sites, such as those in manufacturing. We've also created opportunities for employees to volunteer during work hours to support our medical system, including helping staff our drive-through testing facility. Today, Lilly has tested nearly 30,000 people for COVID-19, which represents over a third of all tests conducted in the state of Indiana, while absorbing all associated expenses. We are building on this capacity by developing serological antibody tests that will be critical in the next phase of the pandemic. In addition, we've been supporting our local communities by funding or contributing to public health awareness campaigns, as well as providing assistance and deploying available resources to fight the pandemic.

We've also created opportunities for employees to volunteer during work hours to support our medical system, including helping staff or drive through testing facility.

Today Lilly is tested nearly 30000 people for coven 19, which represents over a third of all test conducted in the state of Indiana.

While absorbing all associated expenses.

We are building on this capacity by developing serological to antibody test that will be critical and the next phase of the pandemic.

In addition, we've been supporting our local communities by funding are contributing to public health awareness campaigns as well as providing assistance and deploying available resources to fight the pandemic.

I would also note our appreciation for the high level of responsiveness and cooperation from the FDA and other government agencies in the U.S. and abroad.

Dave Ricks: I would also note our appreciation for the high level of responsiveness and cooperation from the FDA and other government agencies in the U.S. and abroad as we partner together to fight COVID-19 and minimize the negative impact on drug development timelines for our other innovative medicines. Across the biopharmaceutical industry, we're working around the clock, collectively driving forward to address the acute medical need created by the COVID-19 pandemic. And to further elaborate on that, I'll turn the call over now to Dan to provide more details on the ongoing efforts to treat COVID-19 and a regular pipeline update.

As we partner together to fight coping 19.

And to minimize the negative impact to drug development timelines for our other innovative medicines.

Across the biopharmaceutical industry, we're working around the clock collectively driving forward to address the acute medical need created by the Koby 19 pandemic.

And to further elaborate on that I'll turn the call over now to Dan to provide more details on the ongoing efforts to treat over 19 and our regular pipeline update.

Dan Skovronsky: Thanks Dave. I'm proud to highlight the ongoing efforts we have to combat COVID-19. As Dave mentioned earlier, we're moving at an unprecedented pace as part of an industry-wide effort to develop a treatment for COVID-19. As a scientist and as a physician, I'm incredibly impressed and thankful for the ways our teams at Lilly are working to make an impact against this new disease. We've demonstrated how nimble a large organization can be when truly focused and united behind an important cause.

Thanks, Dave I'm proud to highlight the ongoing efforts we have to combat over 19 as Dave mentioned earlier, we're moving at an unprecedented pace as part of an industry wide effort to develop a treatment for covert 19, as a scientist and as a position I'm incredibly impressed and thankful for the ways our teams at Lilly.

We are working to make an impact against this new disease.

We've demonstrated how nimble a large organization can be when truly focused and United behind an important costs.

Dan Skovronsky: Slide 5 provides an overview of the three active therapeutic programs we are pursuing. The first is baricitinib. This is our JAK inhibitor in collaboration with Insight. It is recently, we have recently announced it is part of the National Institute of Allergy and Infectious Disease Adaptive COVID-19 Treatment Trial based on the known anti-inflammatory activity of baricitinib, recent data and preclinical studies, and case reports from investigator-sponsored clinical trials. We believe baricitinib could have the potential to dampen the cytokine storm that occurs when hospitalized COVID-19 patients are fighting to combat the inflammation in their lungs, which often leads to them needing a ventilator. While we are cautiously optimistic about the potential of baricitinib to help treat patients with COVID-19, it's important to also note the approved rheumatoid arthritis indication includes warnings about the risk of developing serious infections.

Slide five provides an overview of the three active therapeutic programs we are pursuing.

First is person is our JAK inhibitor in collaboration with insight. It has recently, we have recently announced it as part of the National Institute of allergy and infectious disease adaptive Cobot 19 treatment trial.

Based on the known anti inflammatory activity of Baricitinib recent data in preclinical studies in case reports from investigator sponsored clinical trials, we believe baricitinib could have potential to dampen the cytokine storm that occurs when hospitalized cobot 19 patients are fighting to combat the inflammation their lungs, which often leads to requiring ventilator.

Well, we're cautiously optimistic about the potential of Baricitinib to help treat patients with Covance 19, it's important to also note. The approved rheumatoid arthritis syndication includes warnings about the risk for developing serious infection.

Dan Skovronsky: The bear-sitting arm of the study begins this month in the U.S., with planned expansion to Europe and Asia, and results are expected in the next two months. Next, we started a Phase 2 trial with a monoclonal antibody against angiopoietin 2, or ANG2, in pneumonia patients hospitalized with COVID-19 who are at a higher risk of progressing to acute respiratory distress syndrome, or ARDS. The ANG2 level in plasma is strongly correlated with ARDS risk and severity based on multiple studies in humans.

The bare sitting in our arm of the study begins this month in the U.S. with planned expansion to Europe and Asia and results are expected in the next two months.

Next we started a phase two trial with a monoclonal antibody against Angiopoietin two orange to in pneumonia patients hospitalized with covert 19, we're at a higher risk of progressing to acute respiratory distress syndrome or a rgs.

The answer to level in plasma is strongly correlated with a rds risk and severity based on multiple studies in humans.

Dan Skovronsky: Our trial will test whether inhibiting the effects of ANG2 with a monoclonal antibody can reduce the progression to ARDS or the need for mechanical ventilation. This trial has already begun enrolling patients at centers across the United States. We expect results from this trial in the coming months. Our third and potentially most significant program is part of our previously announced collaboration with Abcelera, where we are pursuing antibody therapies for the potential treatment and prevention of COVID-19. Our scientists have been working together with Abcelera, NIH, and academic partners to characterize virus neutralizing antibodies obtained from one of the first U.S. patients who recovered from the virus. The most advanced antibody in this program shows potent neutralization of live viruses and has now entered GMP Manufacturing.

Our trial will test whether inhibiting the effects of anj too with the monoclonal antibody can reduce the progression to a rds where the need for mechanical ventilation.

This trial has already begun enrolling patients at centers across the United States. We expect results from this trial in the coming months.

Our third and potentially most significant program is part of our previously announced collaboration with up Celera, where we are pursuing antibody therapies for the potential treatment and prevention of covert 19.

Our scientists have been working together with up Celera NIH and academic partners to characterize virus neutralizing antibodies obtained from one of the first us patients who recovered from the virus.

The most advanced antibody in this program shows potent neutralization of live virus.

And as now entered GMP manufacturing.

Dan Skovronsky: We plan to submit an IND to the FDA by the end of May to allow the start of clinical testing in patients. The pace at which we've advanced these potential treatments has been possible due to the tireless efforts of our research and development colleagues in partnership with a number of private and government partners. The need for treatment options to battle COVID-19 is staggering, and we are leveraging our financial resources and our very significant scientific capabilities to rapidly pursue solutions. The challenges facing our society and our economy are great, and the pharmaceutical industry is rising to the challenge. I'll now provide a brief pipeline update. Slide six shows select pipeline opportunities as of April 20th.

We plan to submit an eye in due to the FDA by the end of May to allow start of clinical testing in patients.

The pace at which we've advanced these potential treatments has been possible due to the tireless efforts of our research and development colleagues in partnership with a number of private and government partners the need for treatment options to battle covert 19 is staggering and we are leveraging our financial resources and are very significant scientific capabilities to rapidly.

Through solutions.

The challenges facing our society and our economy are great and the pharmaceutical industry is rising to the challenge.

I'll now provide a brief pipeline update.

Slide six shows select pipeline opportunities as of April Twentyth movements since our last earnings call includes the approval of loom, Jeff in the EU in Japan.

Dan Skovronsky: Movements since our last earnings call include the approval of LUMJEV in the EU and Japan, and the U.S. approval of TELTS for pediatric psoriasis. You previously mentioned COVID-19 trial initiations for Bear Citinib and Ang-2, one program advancing to Phase I, the attrition of an early phase project, and the removal of empagliflozin for type 1 diabetes based on Moving to slide 7, we provide an update on our 2020 key events that have occurred during the quarter.

The U.S. approval of Taltz for pediatric psoriasis.

Previously mentioned Cobot 19 trial initiation for Baricitinib exchange to.

One program advancing to phase one.

Christian of an early phase project.

And the removal of Empagliflozin for type one diabetes based on a complete response letter from the FDA.

Moving to slide seven we provide an update on our 2020 key events that have occurred during the quarter. In addition, the previously mentioned approvals. We also announced the first of two phase three trial studying mere kids map in psoriasis met its primary endpoint.

Dan Skovronsky: In addition to the previously mentioned approvals, we also announced that the first of two phase 3 trials studying myriakizumab and psoriasis met its primary endpoints. The submission of Tenezumab in Europe for moderate to severe osteoarthritis pain in collaboration with Pfizer. The Diane T.U.

The submission of Tanezumab in Europe for moderate to severe osteoarthritis pain in collaboration with Pfizer.

The Diane T U trial for Solanezumab, which did not meet its primary endpoint.

Dan Skovronsky: trial for solanezumab, which did not meet its primary endpoints, and Galkinezimab received a negative opinion from the CHMP for cluster headache in Europe. Before I close this R&D update, I'd like to emphasize that in addition to our ongoing efforts to combat COVID-19, we remain committed to advancing important new medicines across our entire portfolio. Although we announced our pause for new trial starts and enrollment in most programs, we remain committed to discovering and developing new treatments for the patients we serve. With the exception of Mirakizumab for GI indications, our late stage portfolio remains on track to deliver important clinical trial data in line with our previously communicated timeline. Of note, the Terzapatide Surpass Program in type 2 diabetes is fully enrolled, and we expect to share the first phase 3 trial results later this year.

And Galcanezumab received a negative opinion from the CH MPV per cluster headache in Europe.

Before I close the R&D update I'd like to emphasize that in addition to our ongoing efforts to combat covered 19, we remain committed to advancing important new medicines across our entire portfolio.

Although we announced our pause to new trial starts and enrollment in most programs, we remain committed to discovering and developing new treatments for the patients we serve.

With the exception Americas amount for GE I indications, our late stage per port portfolio remains on track to deliver important clinical trial data inline with our previously communicated timelines.

Of note the terms appetite surpassed program in type two diabetes is fully enrolled and we expect to share. The first phase three trial results later this year.

These are challenging times around the world, but I'm encouraged by the unprecedented response of the scientific community and the pharmaceutical industry to rapidly develop potential new treatments and vaccines for covert 19.

Dan Skovronsky: These are challenging times around the world, but I'm encouraged by the unprecedented response of the scientific community and the pharmaceutical industry to rapidly develop potential new treatments and vaccines for COVID-19 and to sustain advancements across all diseases. Now I'll turn the call over to Josh to discuss the impact of COVID-19 on our Q1 financial performance and our outlook going forward.

To sustain advancements across all diseases.

Now I'll turn the call over to Josh to discuss the impact to covert 19 on our Q1 financial performance and our outlook going forward.

Josh Smiley: Thank you, Dan. And good morning, everyone. As Dave shared earlier, we are confident that our business fundamentals are strong and that we're well positioned to navigate the obstacles ahead. However, there undoubtedly will be a near-term impact on our industry and our company, though the length and magnitude of the effects are uncertain. I'll spend a few minutes discussing the financial impact of COVID-19 on our Q1 performance and providing a framework for how we are thinking about this potential impact going forward before then providing a more detailed review of our financial results. We began 2020 with positive momentum and observed robust prescription trends in January and February. However, as COVID-19 spread throughout the world and economic activity slowed significantly in many cities and regions, we observed the following changes in behaviors that affected Patients refilled existing prescriptions earlier than normal or bought a larger supply to ensure that they didn't run out. Wholesalers and retailers increased the level of inventory on hand to ensure adequate supply.

Thank you Dan and good morning, everyone.

As they shared earlier, we're confident that our business fundamentals are strong in that we're well positioned to navigate the obstacles ahead. However, there will undoubtedly will be a near term impact to our industry and our company the lengthen magnitude in the effects are uncertain.

So I'll spend a few minutes discussing the financial impact encoded 19 on our Q1 performance and providing a framework for how we're thinking about this potential impact going forward before then providing a more detailed review of our financial results.

We began 2020 with positive momentum in observed robust prescription trends in January and February.

As cobot 19 spread throughout the world and economic activity slowed significantly in many cities in regions. We observed the following changes in behavior that affected our business.

Patience refilled existing prescriptions earlier than normal or by the larger supply to ensure that they didnt run out.

Wholesalers and retailers increased the level of inventory on hand to ensure adequate supply.

Reduce hospital visits resulted in a preference for medicines that do not require administration in a physician's office or at a hospital.

Josh Smiley: Reduced hospital visits resulted in a preference for medicines that do not require administration in a physician's office or at a hospital. Patients abandon fewer prescriptions at the pharmacy counter. Mail order utilization increased, which typically has a larger number of units per prescription than those filled at retail pharmacies, and new therapy starts slowed as patients largely avoided hospitals and clinics unless they were seeking treatment for COVID-19. We estimate the net impact of these trends resulted in increased patient and channel stocking, which increased worldwide sales by roughly $250 million in Q1, with approximately $200 million of that impact in the U.S. We think the majority of the U.S. impact occurred in our diabetes portfolio, and notable products where we believe increased stocking impacted our Q1 U.S. results include, Insolence by approximately $70 to $80 million Trulicity by approximately $30 to $40 million and Tolerance by approximately $20 to $25 million, While we expect much of this stocking to reverse in future quarters as the excess supply in the channel and in patient's medicine cabinets is consumed, the timing and ultimate levels are uncertain.

Patients abandoned fewer prescriptions at the pharmacy counter.

Mail order utilization increase which typically has a larger number of units per prescription in those filled at retail pharmacy and new therapy starts flowed at patients largely avoided hospitals and clinics unless they were seeking treatment for coven 19.

We estimate the net impact of these trends resulted in increased Asian, and channel stocking, which increased worldwide sales by roughly $250 million in Q1 with approximately $200 million that impact in the U.S.

We think majority of the U.S. impact occurred in our diabetes portfolio and notable products, where we believe increased stocking impacted our Q1 U.S. results include.

Insulin by approximately 70 $80 million trulicity by approximately $30 million to $40 million and call by approximately $20 million to $25 million.

While we expect much of this talking to reverse in future quarters as the excess supply in the channel and inpatient medicine cabinet is consumed the timing and ultimate levels are uncertain.

We continue to closely monitor these factors and we'll utilize our quarterly earnings call to provide updates to our out.

Josh Smiley: We continue to closely monitor these factors, and we'll utilize our quarterly earnings calls to provide updates on our outcome. Slide 8 lists a number of factors we are monitoring that may impact our financial performance. While reduced new therapy starts had a negligible impact during Q1, this impact could grow in future periods as fewer new starts translates into fewer total prescriptions. In the U.S., we are starting to see an impact as IQVIA reported new-to-brand prescriptions across the industry declined by 42% for the week ending April 10th versus pre-COVID-19 averages. For our portfolio, we anticipate this impact to be more pronounced for our immunology and pain products and less so for oncology and diabetes. However, we expect this impact to be temporary as patients will return to seeing their doctors as social distancing restrictions are lifted. However, over the midterm, the significant increase in unemployment we are seeing could be a headwind. Increased unemployment may result in a shift of patients from commercial insurance to lower-net-price government insurance in the U.S. or to being uninsured.

Slide eight lift the number of factors, we're monitoring that may impact our financial performance.

While reduced new therapy starts had a net negligible impact during Q1 impact could grow in future periods as fewer new starts translates into fewer total prescription.

In the U.S., we are starting to see an impact that Q via reported new to brand prescriptions across the industry declined by 42% for the week ending April 10 versus pre covert 19 averages.

For our portfolio, we anticipate that impact to be more pronounced for our immunology and pain products and less so from college in diabetes.

However, we expect this impact to be temporary as patient will return to seeing their doctors as social distancing restrictions are lifted.

Over the mid term the significant increase in unemployment, we are seeing couldn't be a headwind increased unemployment may result in a shift the patient from commercial insurance the lower net price government in shorts in the U.S. or to being uninsured.

We're monitoring this dynamic closely and what could create headwinds in the near term this effect should lessen when the global economy eventually strength.

Josh Smiley: We're monitoring this dynamic closely, and while it could create headwinds in the near term, this effect should lessen when the global economy eventually strengthens. Given the significant benefits our products provide to 40 million patients around the world, we remain confident in our long-term outlook for revenue growth and margin. In terms of managing capital, our balance sheet and liquidity are strong, and we have investment-grade ratings from both Moody's and S&P. We're confident in our ability to generate substantial operating cash flow and have not seen an impact on our ability to access capital markets, including commercial paper, at reasonable rates. Financial strength is a valuable asset during this period, and we intend to maintain our current credit ratings while using our balance sheet capacity to invest in the business and pursue business development opportunities that enhance our future growth.

Even a significant benefits our products provide 40 million patients around the world. We remain confident in our long term outlook for revenue growth and margin expansion.

In terms of managing capital our balance sheet and liquidity are strong and we have investment grade ratings from both Moody's and S&P.

We're confident in our ability to generate substantial operating cash flow and have not seen an impact to our ability to access capital market, including commercial paper a reasonable rate.

Financial strength is a valuable asset during this period and we intend to maintain our current credit ratings, while using our balance sheet capacity to invest in the business and pursue business development opportunities that enhance our future growth prospects.

I will probably provide more details on our 2020 outlook shortly but in summary, we do expect impact on our financial results through the remainder of the year and potentially into 2021, but the underlying strength and momentum in our business is strong.

Josh Smiley: I'll provide more details on our 2020 outlook shortly, but in summary, we do expect the impact on our financial results through the remainder of the year and potentially into 2021, but the underlying strength and momentum in our business is strong. While combating the COVID-19 pandemic is a top priority, we remain focused on executing our strategy of developing new medicines for patients. We exited 2019 with very strong momentum in revenue growth and margin expansion driven by the uptake of our newer product. On slide nine, you will see that momentum continued in Q1 2020, as we delivered strong underlying business performance, augmented by the estimated COVID-19-related buying patterns from patients and customers I just described. Revenue growth accelerated in Q1, increasing 15% versus Q1 2019, or 16% in constant currency. This strong performance was driven by volume, which contributed 22 percentage points of growth, net of the estimated COVID-19.

While combating the cobot 19 pandemic is a top priority we remain focused on executing our strategy of developing new medicines for patients.

We exited 2019 with very strong momentum in revenue growth and margin expansion driven by the uptake of our newer products.

On slide nine you will see that momentum continued in Q1 2020, as we delivered strong underlying business performance augmented by the estimated coven 19 delight related buying patterns from patients and customers I just described.

Revenue growth accelerated in Q1, increasing 15% versus Q1 2019 were 16% in constant currency.

This strong performance was driven by volume, which contributed 22 percentage points of growth.

Net of the estimate coven 19 impact revenue growth was 11% for the quarter in constant currency.

Josh Smiley: Revenue growth was 11%.

Josh Smiley: Our newer medicines continue to be the driver of this growth, representing more than half of our revenue in the quarter. We made good progress in Q1 on our productivity agenda, as operating income grew 32% versus last year.

Our newer medicines continued to be the driver of this growth representing more than half of our revenue in the quarter.

We made good progress in Q1 on our productivity agenda as operating income grew 32% versus last year.

Our non-GAAP operating margin improved by 390 basis points to 31, 30.1% as revenue growth outpace operating expenses.

Josh Smiley: Our non-GAAP operating margin improved by 390 basis points to 30.1% as revenue growth outpaced operating expenses. The estimated impact of COVID-19 buying patterns on the quarter also had a positive impact on our non-GAAP operating margin. But, as we discussed during our 2020 financial guidance call, we expect our 2020 operating margin to build throughout the year to achieve our 2020 target for the full year of 31. We've announced multiple pipeline milestones since our Q4 2019 earnings call, including approval of LoomDev in Europe and Japan and new indications for both Trulicity and Tulse in the U.S. During Q1, we returned approximately $1.2 billion to shareholders via share repurchases and the dividend. As previously announced, we increased the dividend by 15% for 2020.

Yes, maybe the impact of cobot 19 buying patterns on the quarter also had a positive impact on our non-GAAP operating margin.

But as we discussed during our 2020 financial guidance, while we expect our 2020 operating margin to build throughout the year to achieve our 2020 target for the full year, 31%.

We've announced multiple pipeline milestone since our Q4 2019 earnings call, including approval of loomed, Devon, Europe, and Japan, new indications for both Trulicity and cost in the us.

During Q1, we returned approximately $1.2 billion to share hurdle shareholders.

Share repurchases and that dividend.

As previously announced we increased the dividend by 15% for 2020.

At this point, we do not expect to make additional share repurchases in the near term in order to maintain a question of liquidity and capacity for investment and continued dividend growth.

Finally, we closed the acquisition of Nomura company focused on developing new therapy for chronic skin conditions enhancing our phase three pipeline with the addition of Labreck Ism, App, which is complimentary to our dermatology business.

Josh Smiley: At this point, we do not expect to make additional share repurchases in the near term in order to maintain a cushion of liquidity and capacity for investment and continued dividend growth. Finally, we closed the acquisition of Demura, a company focused on developing new therapies for chronic skin conditions, enhancing our phase three pipeline with the addition of Lebrokizumab, which is complementary to our dermatology business.

Okay.

Slide 10 include the summary of key events since our last earnings call.

Moving to slide 11, our non-GAAP financial performance in Q1 was robust even when adjusting for the code 919 impact described earlier.

In addition to strong topline performance gross margin as a percentage revenue with stable versus Q1 2019 at approximately 80%.

It's favorable product mix and greater manufacturing manufacturing efficiencies were partially offset by price and increased costs associated with over 19.

Josh Smiley: Slide 10 includes a summary of key events since our last learning. Moving to slide 11, our non-GAAP financial performance in Q1 was robust, even when adjusting for the COVID-19 impact described earlier. In addition to strong top-line performance, growth margin as a percent of revenue was stable versus Q1 2019 at approximately 80%. A favorable product mix and greater manufacturing efficiencies were partially offset by price and increased costs associated with COVID-19. Moving down the P&L, operating expenses grew slower than revenue, at 7% versus last year's quarter. However, marketing, selling, and administrative expenses increased modestly, by 2%, as cost containment and productivity measures offset investments in key growth products. Travel restrictions and the suspension of in-person customer interactions late in the quarter did result in lower travel and meeting expenses.

Moving down the CNL operating expenses grew slower than revenue at 7% versus last year's quarter.

Marketing selling and administrative expenses increased modestly by 2% as cost containment and productivity measures offset investments in key growth products.

Travel restrictions and the suspension of in person customer interactions late in the quarter did result in lower traveling meeting expenses.

However, it is offset by a higher U.S. branded prescription drug manufacturing fee that we recognized in Q1.

R&D expenses grew 13%, reflecting higher development expenses for late stage assets increased throughout 2018, our pause on clinical trial starts had limited impact in Q1.

Operating income increased 32% compared to Q1 2019 at sales growth outpaced expense growth, resulting in operating income as a percent of revenue of 30.1% for the quarter.

Josh Smiley: However, these were offset by a higher U.S. branded prescription drug manufacturing fee that we recognized in Q1. R&D expenses grew 13%, reflecting higher development expenses for late-stage assets that increased throughout 2019. Our pause on clinical trial starts had limited impact in Q1.

We began 2020 with good momentum executing our strategy and are on track to achieve our 2020 full year operating margin target of 31%.

Other income expense was income of $89 million this quarter compared to income of $86 million in Q1 2019.

Both quarters. This was driven by investment gains on public equity.

Josh Smiley: Operating income increased 32% compared to Q1 2019 as sales growth outpaced expense growth, resulting in operating income as a percent of revenue of 30.1% for the quarter. We begin 2020 with good momentum executing our strategy and are on track to achieve our 2020 full-year operating margin target of 31%. Other income and expense was $89 million this quarter, compared to $86 million in Q1 2019. In both quarters, this was driven by investment gains on public equity. Mark, the market gains in Q1 2020 were primarily generated by prior equity investments in companies that are now pursuing vaccines for COVID-19. As we regularly highlight, this line item can be volatile as public market valuations fluctuate. Our tax rate was 13.6 percent, an increase of 70 basis points compared with the same quarter last year, driven primarily by the mix of earnings in higher tax jurisdictions, partially offset by an increase in net discreet tax benefits.

Mark to market gains in Q1, 2020, what primarily generated by prior equity investments in companies that are now pursuing vaccines for over 19.

As we regularly highlight this line item can be volatile as public market valuations fluctuate.

Our tax rate was 13.6% an increase of 70 basis points compared with the same quarter last year, driven primarily by the mix of earnings at higher tax jurisdiction, partially offset by an increase in net discrete tax benefit.

So at the bottom line earnings per share increased 32%.

On slide 12, we quantified the effective price rate in volume on revenue growth as mentioned early earlier worldwide revenue grew 16% in constant currency during Q1, driven by strong volume growth of 22%, which we estimate a 17% netted the impact of cobot 19 buying patterns. This was partially offset by price.

Foreign exchange had a modest negative impact on revenue growth this quarter.

Price declined 3% net of the price impact from the inclusion of tie that in Alimta in government sponsored programs in China.

US revenue grew 15% compared to the first quarter of 2019.

Volume growth of 19% was led by Trulicity Humalog call Olympic doesn't present Ho and Gallatin Baisiwala.

Josh Smiley: So at the bottom line, earnings per share increased by 30. On slide 12, we quantify the effect of price, rate, and volume on revenue growth. As mentioned earlier, worldwide revenue grew 16% in cost and currency during Q1, driven by strong volume growth of 22%, which we estimate at 17% net of the impact of COVID-19 buy-in patterns. This was partially offset by price, for an exchange that had a modest negative impact on revenue growth this quarter. The price declined 3% net of the price impact from the inclusion of Tyvet and Olympia in government-sponsored programs in China. U.S. revenue grew 15% compared to the first quarter of 2009. Volume growth of 19% was led by Trulicity, Humalog, Tulps, Olympta, Verzenio, Mgality, and Basaguar. As I mentioned earlier, we saw stocking at the wholesale and patient level due to COVID-19, which contributed approximately $200 million of revenue this quarter.

As I mentioned earlier, we saw stocking at the wholesale and patient level due to covert 19 that contributed approximately two mills $200 million of revenue this quarter.

While the situation remains fluid, we do expect that impact the largely reverse over the course of 2020.

Pricing with the 4% drag on us revenue growth this quarter in line with our 2020 guidance. This was driven primarily by growth in lower nice price segment, primarily driven by our diabetes products, which was partially offset by changes to estimate for rebates and discounts recall and reduced utilization of patient assistance programs for and Galaxy due to increased commercial.

Reimbursement.

We have strong commercial and Medicare part D access across the portfolio and that remains intact throughout Q1.

Moving to your revenue grew 21% in constant currency, driven by 24% volume growth, partially offset by the negative effects of foreign exchange in price.

Volume growth was led by Trulicity illuminate calls in presenting Joe Bennett and also benefited from the divestiture of legacy product in Spain.

We estimate total international results were impacted by approximately $50 million of stocking due to the impact of coven 19 in Q1 and that significant majority of that occurred in Europe.

Josh Smiley: While the situation remains fluid, we do expect this impact to largely reverse over the course of 2020. Pricing was a 4% drag on U.S. revenue growth this quarter, in line with our 2020 guidance. This was driven primarily by growth in lower-price segments, primarily driven by our diabetes products, which was partially offset by changes to estimates for rebates and discounts for TALS, and reduced utilization of patient assistance programs for EMGALITY.

However, the underlying trends are very strong as our newer products have continued to scale.

Injected Japan revenue grew 8% in constant currency driven by volume growth somewhat offset by a modest pricing headwind due to government mandated price decreases that went into effect in 2019.

Any O surrounds that Trulicity ILUVIEN in Ellipta when the key contributors to growth, partially offset by increased competition for portfolio in the impact of generic stood there.

In China revenue grew 30% in constant currency, driven by 93% volume growth, partially offset by pricing concessions associated with the inclusion of tie that in a lift debt in government sponsored program.

Josh Smiley: Commercial Reimbursement. We have strong commercial and Medicare Part D access across the portfolio, and that remained intact throughout Q1. Moving to Europe, revenue

We're very pleased with a significant volume increases we saw for these products in our ability increase access for patients disease. These important cancer meds.

Josh Smiley: We agree 21%

Josh Smiley: Volume growth was led by Trulicity, Illumiant, Taltz, and Verzenio and also benefited from the divestiture of a legacy product in Spain. We estimate total international results were impacted by approximately $50 million of stocking due to the impact of COVID-19 in Q1, and that a significant majority of this occurred in Europe.

Outside of five it in Ellipta, our business in China thought meaningfully a meaningful decline in new patient starts. During Q1 has been opened 19 spread peak during March.

As the situation appears to be moving toward more stability. We are cautiously encouraged that new patient initiation in person customer interactions have begun to resume.

Josh Smiley: However, the underlying trends are very strong as our newer products have continued to scale. In Japan, revenue grew 8% in quantity, driven by volume growth, somewhat offset by modest price headwinds due to government-mandated price decreases that went into effect in 2019. Verzenio, Saramza, Trulicity, Illumian, and Olympda were the key contributors to growth, partially offset by increased competition for Porteo and the impact of generic stratera.

Revenue in the rest of the world increased 14% in constant currency driven by increased volume from our key growth drivers Trulicity and Jardiance and collaboration with Beringer Ingelheim, Paul see Alice and surrounds that drove growth in Q1.

As shown on slide 13, our key Brook growth products continue to drive impressive worldwide volume growth. These new medicines delivered nearly 20 percentage points of growth this quarter.

While also benefiting from the increased stocking that I described earlier.

Josh Smiley: In China, revenue grew 30% in constant currency driven by 93% volume growth, partially offset by price and concessions associated with the inclusion of Tivit and Olympta in government-sponsored programs. We're very pleased with the significant volume increases we saw for these products and our ability to increase access for patients to these important cancer medicines. Outside of Tyvett and Olympia, our business in China saw a meaningful decline in new patient starts during Q1 as the COVID-19 spread peaked in March. However, as the situation appears to be moving toward more stability, we are cautiously encouraged that new patient initiation and in-person customer interactions have begun to resume.

Slide 14 highlights the contributions of our key growth products in total these brands generated nearly $3 billion in revenue this quarter, making a 51% of total revenue.

On slide 15, we provide an update on capital allocation.

In Q1, 2020, we invested $2.4 billion to drive our future growth through a combination of business development capital expenditures in after tax investment in R&D. In addition, we returned approximately $1.2 billion the shareholders via dividends and share repurchase.

We remain well capitalized enclosed Q1 with approximately $4 billion of cash and investments and the ability to access debt markets at attractive rates.

Moving to slide 16, you'll find our updated 2020 financial Guy.

This is based on our best estimates at this time as we're balancing transparency and insight into the current view of our business with the uncertainty surrounding the extending duration of the impact of the over 19 and Dennis.

Josh Smiley: Revenue in the rest of the world increased 14% in constant currency, driven by increased volume from our key growth drivers. Trulicity, Jardians, in collaboration with Berenger Ingelheim, Tulps, Cialis, and Saranza drove growth in Q1. As shown on slide 13, our key growth products continue to drive impressive worldwide volume growth. These new medicines delivered nearly 20 percentage points of growth this quarter, while also benefiting from the increased stocking that I described earlier. Slide 14 highlights the contributions of our key growth products. In total, these brands generated nearly $3 billion in revenue this quarter, making up 51% of total revenue. On slide 15, we provide an update on capital allocation. In Q1 2020, we invested $2.4 billion to drive our future growth through a combination of business development, capital expenditures, and after-tax investment in R&D. In addition, we returned approximately $1.2 billion to shareholders via dividends and share repurchase. We remain well capitalized and closed Q1 with approximately $4 billion of cash and investments and the ability to access debt markets at attractive rates.

Key assumptions supporting our updated guidance include.

The Q1 stocking benefit largely reverses over the course of 2020.

The near term reduction in new patient prescription peaks in the second quarter in the U.S. and much of your.

Healthcare activity returns to more normal levels in the second half of this year as doctors reason seeing new patients.

Price headwinds from the increased utilization of patient affordability programs and changes in segment mix and due to increased U.S. unemployment.

And enrollment in existing studies as well as the initiation of new clinical trials resumes midyear.

And near term spending on travel in person customer interactions and direct consumer advertising decreases and investments in digital promotion and support increase.

We do believe the reduction in new container patient starts will be temporary but will impact our 2020 performance the potential impact from increased unemployment will likely be more muted in the near term, but the impact could be more pronounced in 2021, depending on the shape of an economic recovery and the U.S. government programs to stimulate employment.

While the extending duration of impact from Coven 19 drives the most uncertain outlook the positive underlying momentum in Q1 in our business.

Emitted by the addition estimated additional revenue benefit from opened 19 related buying patterns.

Josh Smiley: Moving to slide 16, you'll find our updated 2020 financial guidance. This is based on our best estimates at this time as we are balancing transparency and insight into the current view of our business with the uncertainty surrounding the extent and duration of the impact of the COVID-19 pandemic. Key assumptions supporting our updated guidance include, The Q1 stocking benefit largely reverses over the course of 2020, and the near-term reduction in new patient prescriptions peaks in the second quarter in the U.S. and much of Europe. Healthcare activity returns to more normal levels in the second half of this year as doctors resume seeing new patients, although price headwinds from the increased utilization of patient affordability programs and changes in segment mix due to increased U.S. unemployment and enrollment in existing studies as well as the initiation of new clinical trials.

Gives us confidence that the potential downside for the remainder of the year is accommodated within our previously communicated revenue range.

While there are scenarios that could cause revenue to fall outside either end of our range. We believe the revenue range accommodates most of the uncertainty we see today. In addition to the impact of unemployment in the pace of economic recovery described earlier. The main variables. We are month, we will monitor our the impact on new prescription trends during social distance in period and the timing of resumption of non.

Over 19 healthcare activity.

While we currently anticipate the most pronounced impact on new prescriptions to occur in Q2, the headwinds are likely to show up in Q3 in Q4 as inventory levels normalized and the impact of fewer new prescriptions compounds.

Moving down the income statement, we're confirming our prior expectations for gross margin as a percent of revenue to be roughly roughly 81% on a non-GAAP basis and 79% on a GAAP basis.

Josh Smiley: They resumed mid-year.

Josh Smiley: and near-term spending on travel, in-person customer interactions, and direct consumer advertising decreases, and investments in digital promotion and support increase. We do believe the reduction in new patient starts will be temporary, but it will impact our 2020 performance. The potential impact from increased unemployment will likely be more muted in the near term, but the impact could be more pronounced in 2021, depending on the shape of an economic recovery and U.S. government programs to stimulate employment.

We do anticipate higher manufacturing costs associated with the extraordinary measures, we are taking to keep our manufacturing workers safe and to keep medicines loan to patients around the world. We expect it to the offset though by benefits from higher manufacturing volumes.

We are maintaining our range from marketing selling and administrative expenses as savings from reduced travel and decreased promotion are anticipated to be offset by investments in digital capabilities and increased marketing expenses in the second half of the year for equal growth products.

Our range for research and development expenses is also unchanged as savings from the paused a clinical trial activities are offset by our investments to pursue therapeutic treatments for coated 19 as described earlier.

Josh Smiley: While the extended duration of impact from COVID-19 drives the most uncertainty in our outlook, the positive underlying momentum in Q1 in our business, augmented by the estimated additional revenue benefits from COVID-19-related buying patterns, gives us confidence that the potential downside for the remainder of the year is accommodated within our previously communicated revenue range. While there are scenarios that could cause revenue to fall outside either end of our range, we believe the revenue range accommodates most of the uncertainty we see today. In addition to the impact of unemployment and the pace of economic recovery described earlier, the main variables we will monitor are the impact on new prescription trends during social distancing periods and the timing of the resumption of non-COVID-19 healthcare activity.

Therefore, there's no change to our non-GAAP operating income as a percent of revenue guidance of 31%.

We are updating the range of other income and expense to zero to $150 million of expense, reflecting Q1 gains in our equity portfolio. Obviously that number has some volatility going forward and we'll update accordingly.

Turning to taxes Theres, no change to our GAAP and non-GAAP effective tax rate guidance of approximately 15%.

Earnings per share is now expected to be in the range of $6 in 70 cents to $6. A 90 cents on a non-GAAP basis, our GAAP EPS is expected to be in the range of 626 40.

We are increasing the range to reflect the uncertainty of the impact our business for the remainder of the.

Our performance in the first quarter net of Cobot 19 benefit highlights the strength of our underlying business fundamentals and as Dave mentioned in his an introduction we remain confident in the long term outlook for our business.

So Dave I'll turn it back to you for closing remarks.

Josh Smiley: While we currently anticipate the most pronounced impact on new prescriptions to occur in Q2, the headwinds are likely to show up in Q3 and Q4 as inventory levels normalize and the impact of fewer new prescriptions compound. Moving down the income statement, we're confirming our prior expectations for gross margin as a percent of revenue to be roughly 81% on a non-GAAP basis and 79% on a GAAP basis. We do anticipate higher manufacturing costs associated with the extraordinary measures we are taking to keep our manufacturing workers safe and to keep medicine flowing to patients around the world. We expect this to be offset, though, by benefits from higher manufacturing volumes.

Thanks, Josh.

The Cobot 19 global pandemic has impacted us all in unforeseen ways, although near term challenges exist. We do remain confident in our long term outlook for the company and the strength of our fundamentals.

Times of Great crisis can bring out the best in people and companies.

Lilly will continue to rise so that challenge.

Well the great deal of uncertainty remains there are few certainties, two which I would draw your attention.

First the collective spirit expertise and commitment in my Lilly colleagues around the world is inspiring.

Despite challenging circumstances and disrupted work routines they have rallied to fulfill our mission of discovering and supplying medicines that make life better for people around the world.

They are exceptional.

Second speed agility continue to be critical to the success of our business.

Josh Smiley: We are maintaining our range for marketing, selling, and administrative expenses as savings from reduced travel and decreased promotion are anticipated to be offset by investments in digital capabilities and increased marketing expenses in the second half of the year for key growth products. Our range for research and development expenses is also unchanged, as savings from the pause in clinical trial activities are offset by our investments to pursue therapeutic treatments for COVID-19, as Dan described earlier. Therefore, there is no change to our non-GAAP operating income as a percent of revenue guidance of 31%. We're updating the range of other income and expense to $0 to $150 million of expense, reflecting Q1 gains in our equity portfolio. Obviously, this number will have some volatility going forward, and we'll update accordingly.

We've moved swiftly pivoting our focus to join the fight against Cobot, the Coca 19 pandemic by leveraging our deep scientific capabilities and expertise on both the testing and therapeutic fronts.

And lastly, I've never been more certain of the importance of a healthy and vibrant biopharmaceutical industry.

While it will take time to exit the current situation, we will recover and the pharmaceutical industry will be the primary catalyst developing new treatments and the vaccine to combat Cobot 19.

Allowing people across the world to return to living their lives more normally.

And enabling economic activity to grow.

It's clear we are vital part of any long term solution for fighting this or any future pandemic.

This concludes our prepared remarks, and now I'll turn the call over to Kevin to moderate the human a session.

Josh Smiley: Turning to taxes, there's no change to our GAAP and non-GAAP effective tax rate guidance of approximately 15%. Earnings per share is now expected to be in the range of $6.70 to $6.90 on a non-GAAP basis. Our GAAP EPS is expected to be in the range of $6.20 to $6.40. We're increasing the range to reflect the uncertainty of the impact on our business for the remainder of the year. Our performance in the first quarter, net of COVID-19 benefit, highlights the strength of our underlying business fundamentals. And, as Dave mentioned in his introduction, we remain confident in the long-term outlook for our business. So Dave, I'll turn it back to you for closing remarks. Thanks Josh

Thanks, Dave.

Well take questions for as many colors as possible. So we ask that you limit your questions to chew per caller.

Alan Please provide the instructions for the culinary session and then we're ready for the first caller.

Absolutely, ladies and gentlemen, as a reminder, if you have questions press. One then zero on your Touchtone phone.

Herein indication you've been placed in Q and you may remember yourself from the Q by pressing the pound pardon me the one than zero come and again.

If you want to speakerphone, please pick up your handset and make certain that your phone is on muted before you press any buttons.

Our first question will come from the line of Terence Flynn with Goldman Sachs go ahead.

Dave Ricks: The COVID-19 global pandemic has impacted us all in unforeseen ways. However, although near-term challenges exist, we do remain confident in our long-term outlook for the company and the strength of our fundamentals. Times of great crisis can bring out the best in people and in companies, and Lilly will continue to rise to that challenge. While a great deal of uncertainty remains, there are a few certainties to which I would draw your attention. First, the collective spirit, expertise, and commitment of my Lilly colleagues around the world is inspiring. Despite challenging circumstances and disrupted work routines, they have rallied to fulfill our mission of discovering and supplying medicines that make life better for people around the world. They are exceptional.

Hi, Thanks for taking the question.

Maybe first I was just wondering Josh if you could expand on how the environment changes your approach to capital allocation I know you mentioned.

Maybe less share repurchases and near term, but on the BD M&A side do you actually think there could be an increasing number of opportunities and does it change. How you think about size and then the second I had was just where you stand with regulatory interactions and launch prep for Supper Catnip, just wondering if covert changes at all your go to market strategy. Thank you.

Thanks, Sara so that adjusts for the first one of them to answer the question on Super continent.

Aaron Thanks.

On capital allocation, we really are sticking to our strategy and as we've outlined.

Dave Ricks: Second, speed and agility continue to be critical to the success of our business. We've moved swiftly, pivoting our focus to join the fight against the COVID-19 pandemic by leveraging our deep scientific capabilities and expertise on both the testing and therapeutic fronts. And lastly, I've never been more certain of the importance of a healthy and vibrant biopharmaceutical industry. While it will take time to exit the current situation, we will recover, and the pharmaceutical industry will be the primary catalyst, developing new treatments and a vaccine to combat COVID-19, allowing people across the world to return to living their lives more normally and enabling economic activity to grow. It's clear we're a vital part of any long-term solution for fighting this or any future pandemic. This concludes our prepared remarks, and now I'll turn the call over to Kevin to moderate the Q&A session.

We do see external innovation or business development as a key component of our long term growth strategy, but what we're really focused on continue to focus on our key opportunities in our therapeutic areas, where we can bring in.

Mr Best in class type of assets into the pipeline.

We're continuing I think that work continues.

I haven't seen anything slowdown as a function of not being able to travel or work from home types of activities.

Certainly there are smaller biotech companies that may have different views in terms of their cash runway or.

And to the extent that that helps to an engender more discussions will take advantage that I don't think it changes anything in terms of of how we think about size are our business.

This is strong as I mentioned.

And we don't see benefit in large scale types of acquisition. So we'll continue to focus on the things that we are focused on and I think for as long as we're in these kind of on social distant thing.

Restrictions I don't see that is impacting our ability to transact.

Kevin Hearn: 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. Allen, please provide the instructions for the Q&A session, and then we're ready for the first call.

Thanks, Josh Dan.

Yes, Sir Thanks, a question on Super Catnip, So I'm pleased to share that theres been no delay in the regulatory timeline for Supper Catnip and the update then extremely collaborative and responsive and working through these challenges time. So we just thank them for the speed and the commitment Theyve had they've continued to progress the application and as you know we submitted in this.

Operator: and the first caller.

Operator: Absolutely. Ladies and gentlemen, as a reminder, if you have questions, press 1, then 0 on your touchtone phone. You'll hear an indication that you've been placed in queue, and you may remove yourself from the queue by pressing the 1, then 0 command again. If you're on a speakerphone, please pick up your handset and make certain that your phone is unmuted before you press any button.

Summer currently under priority review, so we expect to have regulatory action by the PDUFA date in Q3.

Regarding your questions on launch it is interesting times, obviously and as a company as Dave shared we continue to prioritize combating the spread of current Iris and we recognize that this is also the case for health care professionals and we're incredibly aware of the load that they're carrying at this time and need to express our appreciation for all of their efforts on behalf of their patients.

Operator: Our first question will come from the line of Terence Flynn with Goldman Sachs. Go ahead. Hi, thanks for taking the time.

Terence Flynn: question. Maybe first, I was just wondering, Josh, if you could expand on how the environment changes your approach to capital allocation? I know you mentioned maybe less share repurchases in the near term. But on the BD M&A side, do you actually think there could be an increasing number of opportunities? And does it change how you think about size? And then the second question I had was just where you stand with regulatory interactions and launch preparation for selpertatinib. Just wondering if COVID changes at all your go-to-market strategy.

So with that we also recognize that Super catnip has shown striking emphasis efficacy.

And really a very favorable safety profile in treating lung and direct cancers with red fusions rent mutations and so we think is it still is very important that patients and physicians are aware that there is a new medicine available and the first two specifically target red alterations. So what we're doing launch activities. They will look different but we're committed to making sure.

Josh Smiley: Thank you. Thanks, Terence. We'll go to Josh for the first one and then Anne for the question on sulfur catenibs.

Patients who are good candidates for self are getting them have access so assuming that in person interactions are still on hold when we launch we're going to focus initially on making sure that we inform customers of the approval and the key efficacy and safety data via email and other digital channels that we have we're also going to make sure that were quick to engage in.

Josh Smiley: Hi Terence, thanks. On capital allocation, we really are sticking to our strategy, and as we've outlined, we do see external innovation or business development as a key component of our long-term growth strategy. But what we're really focused on, and continue to focus on, are key opportunities in our therapeutic areas where we can bring in first or best-in-class type assets into the pipeline. We're continuing. I think that work will continue. I haven't seen anything slow down as a function of not being able to travel or, you know, work from home types of activities. Certainly, there are smaller biotech companies that may have different views in terms of their, you know, cash runway or sheets, and to the extent that that helps to engender more discussions, we'll take advantage of that. But I don't think it changes anything in terms of

Virtual product details when the customer request those.

Give them more information and then when appropriate we're also going to make sure that we leveraged virtual peer to peer programs to provide thought leaders the opportunity to share the data with our colleagues and in addition of course will be sharing the data through a top tier journal publication as well as in upcoming medical meetings. So we'll make sure that the the goal here.

Just make sure that physicians and patients are aware and then form that we have now.

Incredible new medicine that specifically targeted for rat and it's just an incredible partnership with Loxo and level of hillock late teens. If you think about it. This medicine started phase one first patient dose that may of 2017, and we're looking at approval here in 2020, So it's remarkable and our thanks really goes to the FDA for the speed at which they are moving through the roof.

Josh Smiley: I don't think it came came.

Josh Smiley: We're in these kinds of social distancing restrictions, but I don't see that as impacting our ability to transact.

Josh Smiley: Thanks, Josh.

Josh Smiley: Anne.

Anne E. White: Yes, Terence, thanks for the question on sulprocatinib. I'm pleased to share that there's been no delay in the regulatory timeline for sulprocatinib. And the FDA has been extremely collaborative and responsive in working through these challenging times, so we just thank them for the speed and the commitment they've shown. They've continued to progress the application, and as you know, we submitted it in December; it's currently under priority review. So we expect to have regulatory action by the PDUFA date in Q3. Regarding your questions on launch, it is obviously an interesting time. And as a company, as Dave shared, we continue to prioritize combating the spread of the coronavirus, and we recognize that this is also the case for healthcare professionals. And we're incredibly aware of the load that they're carrying at this time and need to express our appreciation for all of their efforts on behalf of their patients. So with that, we also, though, recognize that sulprocatinib has shown striking efficacy, efficacy, and really a very favorable safety profile in treating lung and thyroid cancers with RET fusions or RET mutations.

[music].

Thanks, and Terrence Thanks for your questions next caller please.

Our next question will come from the line one moment please.

Yes.

Hi, I'm, having some equipment difficulties and I seem to have lost my Q. So just give me one moment. Please.

Okay.

Ladies and gentlemen, we seem to have lost the queue for the question and answer session. We asked would you. Please repress one zero at this time, if you were in Q.

Just one moment please.

One moment, please ladies and gentlemen, we're having some tough technical difficulties.

We are restarting the question and answer session. If you would repress one than zero at this time.

My apologies to everyone on the conference call.

Moving next to the line of Chris Shaw with JP Morgan.

Go ahead please.

Great. Thanks, very much appreciate all the color on the call today, just my two questions first on disruption to near term prescription.

You mentioned diabetes is an area less impacted relative to areas like pain and immunology, but you have a specific question on Trulicity I guess I think about that products and the GLP one category in general we've been seeing very healthy growth here, we've seen significant new patient starts is this a product and a market might be more broadly that you anticipate could see a slowdown as we go through twoq.

Anne E. White: And so we think it still is very important that patients and physicians are aware that there's a new medicine available and the first to specifically target RET alteration. So what we're doing with launch activities, they will look different, but we're committed to making sure that patients who are good candidates for selprocatinib have access. So assuming that in-person interactions are still on hold when we launch, we're going to focus initially on making sure that we inform customers of the approval and the key efficacy and safety data via email and other digital channels that we have. We're also going to make sure that we're quick to engage in virtual product details when the customer requests those and give them more information. And then, when appropriate, we're also going to make sure that we leverage virtual peer-to-peer programs to provide thought leaders with the opportunity to share the data with their colleagues.

As the impact of some of the reduced physician visits start to build and then my second question was on pair mix over time cures helps frame the magnitude of impact you could see to net price in the us from adverse payer mix as we look out over.

So the next year. So I guess, specifically is this something that could cause price to meaningfully deviate from this low single digit price erosion. We're seeing so so could that become more like a mid to high single digit erosion or are you thinking about a more modest impact on that thanks very much.

Thanks, Chris will go to Mike Mason for the question on Trulicity than Josh the question on payer mix.

Anne E. White: And in addition, of course, we'll be sharing the data through a top-tier journal publication as well as in upcoming medical meetings. So we'll make sure that the goal here is to make sure that physicians and patients are aware and informed that we now have an incredible new medicine that's specifically targeted at RET. And it's just been an incredible partnership with LOXO and the LOXO and Lilly teams. If you think about it, this medicine started Phase 1, first patient dosed in May of 2017, and we're looking at approval here in 2020. So it's remarkable.

Okay on on Trulicity.

No it's difficult to predict long term impact of look over 19 prices given the uncertainty on the link them the impact on economy and patient visits and also it's unclear how patients who live with diabetes, who are at greater risk for a complications from coven 18.

I will will that change the compliance they havent, the medication and increase that but I wonder what I can tell you is little over a month into the crisis that the GLP market and Trulicity Trx volume remains strong.

Anne E. White: And our thanks really go to the FDA for the speed at which they're moving through the review. Thanks, Anne. Terence, thanks for your questions. Next caller, please. Our next question will come from the line, one moment please. I'm having some equipment difficulties and I seem to have lost my cue, so just give me one moment, please.

It's currently at 30% and so we haven't seen the impact at the Trx level yet.

We have seen that impact on NTS and then be Rx.

Volume kind of post co bid both for Trulicity and the GLP market.

Operator: Ladies and gentlemen, we seem to have lost the queue for the question and answer session. We ask that you please repress 1 and 0 at this time if you are in the queue. Just one moment, please. One moment, please, ladies and gentlemen, we are having some technical difficulties.

Josh and shared that the overall pharma market had seen in decline.

42% in MB Rx, what we're seeing the the GLP market is a 30% decline for MB Rx now we haven't seen that manifests itself in the Trx volume yet.

Operator: We are restarting the question and answer session. If you would repress 1 then 0 at this time, my apologies to everyone on the conference call. You will move next to the line for Chris Schott with J.P. Morgan. Go ahead, please.

If you take a look at the.

Rx and Port Trulicity, it's only 5.6% of the Trx rate, which is a really relatively low turnover.

Chris Schott: Great, thanks very much, and I appreciate all the color on the call today. Just my two questions, first on disruption to near-term prescription. You mentioned diabetes as an area less impacted relative to areas like pain and immunology, but I do have a specific question about Trulicity. I guess when I think about that product and the GLP-1 category in general, we've been seeing very healthy growth here; we've seen significant new patient starts. Is this a product and a market maybe more broadly that you anticipate could see a slowdown as we go through 2Q as the impact of some of the reduced physician visits start to build? And then my second question was on payer mix over time.

For the marketplace. So we think that trulicity relative to other products other therapeutic areas will have come a slower impact from the current situation, but again, it's it's hard to predict as we.

Of uncertainty on the link the the impact.

The economy in patient visits, but we can say is that we're very confident and trulicity strong fundamentals, we saw 32% volume growth in Q1.

Chris Schott: Can you just help us frame the magnitude of impact you could see to net price in the US from adverse payer mix as we look out over the next year or so? I guess specifically, is this something that could cause prices to meaningfully deviate from this low single-digit price erosion we're seeing? So could that become more like a mid to high single-digit erosion? Or are you thinking about a more modest impact than that? Thanks very much.

40% revenue growth in Q1, so we're very confident and a very strong fundamentals oculus cities. So Chris Thanks for your question.

Thanks, Mike Josh.

Thanks, Chris on your question on what what could happen the net price going forward given what we're seeing in the in the us with the economy and first I'd say I think it's too early to make too many predictions, there's a lot to still see.

Michael B. Mason: Thanks Chris. We'll go to Mike Mason for the question on triclicity and then Josh for the question on pyramids. Okay, on Trellis, the, um... You know, it's difficult to predict the long-term impact of the COVID-19 crisis given the uncertainty about its length and the impact on the economy and patient visits. And also, it's unclear how patients who live with diabetes who are at greater risk for complications from COVID-19 will, will that change the compliance that they have with their medication and increase that.

And as you highlighted in your question, we've already assumed that we're going to see.

Negative net prices in the us for between now and 2025, that's already in our.

Current guidance I would see whatever happens here is probably eight.

A moderate impact on that.

I think what we have keep in mind first for lilly's portfolio were spread across.

Across multiple payer segments certainly.

In general a move from a well in short commercial patients to Medicaid is a net negative but.

Many of the commercial patients problem is my assumption, who are losing in the first wave losing employment. They may not be in great commercial plans to begin with their exchanges and other things. So theres a lot to still see what happens here. Our view is will ensure that the patients who are.

Michael B. Mason: But what I can tell you is, a little over a month into the crisis, the GLT market and Trulicity TRX volume is currently at 30%, and so we haven't seen the impact at the TRX level yet. We have seen an impact on NTS and NBRX volumes, you know, kind of post COVID, both for Trulicity and the GLP market. Josh shared that the overall pharma market had seen a decline of 42% in MBRX. What we're seeing in the GLP market is a 30% decline for MBRX. Now, we haven't seen that manifest itself in the TRX volume yet. If you take a look at MPRX and Trulicity, it's only 5.6% of the TRX rate, which is a relatively low turnover for the marketplace.

Losing insurance have access to our medications and programs, we as Dave mentioned announced the 35 dollar.

Change to our diabetes program. So we're looking at everything we can do to ensure that people can stay on our medications and I'm access to them and believe that some of these impacts will be temporary and then we'll have a much better sense by the ended the year on what 2021 looks like but I'd say overall, our expectation is this continued to trend to net price declines, but not funded.

Mental changed our thinking about the business.

Thanks, Josh Chris Thanks for your questions next caller please.

We will move next to the line of Andrew Baum with Citi go ahead.

Michael B. Mason: So we think that, you know, Trulicity relative to other products, other therapeutic areas, will have kind of a slower impact from the COVID situation. But again, it's hard to predict as we have uncertainty about the length and impact of the economy on patient visits. What we can say is that we're very confident in Trulicity's strong fundamentals. We saw 32% volume growth in Q1 and 40% revenue growth in Q1. So we're very confident in the very strong fundamentals of Trulicity. So, Chris, thanks for your question.

Thank you same topic you has a high exposure redsun. She appears to the commercial book for your full year.

Guidance could you help us on what kinds of us unemployment rates youre, assuming as well as some machlis uses the voting Austin potential Medicaid expansion anything you can say about the risk the twentytwenty, one and then separately on ILUVIEN massive Smith.

Hope at 19, Im just trying to understand which patient population you were targeting this initiative networks, both a potential antiviral effects as well as an anti inflammatory effect, which would suggest.

Michael B. Mason: Thanks Mike. Josh?

Josh Smiley: Thanks, Chris, for your question on what could happen to net price going forward, given what we're seeing in the U.S. with the economy. First, I think it's too early to make too many predictions. There's a lot to still see.

Potentially two different patient populations the idea that in respiratory distress. What are you going here with a clinical trial many thanks.

Josh Smiley: And as you highlighted in your question, we've already assumed that we're going to see negative net prices in the U.S. between now and 2025. That's already in our current guidance. I would see whatever happens here as probably a moderate impact on that. I think what we have to keep in mind first for Lilly's portfolio is that we're spread across.

Thanks, Andrew will go to Josh for the first question and then Dan on not very 19 coded.

Thank you Andrew I think as it relates to 2020, our sales guidance range on the until we I described sort of the factors were looking at I'd say, we're on the lower end to that sales range, we do.

Josh Smiley: across multiple payer segments. In general, a move from a well-insured commercial patient to Medicaid is a net negative, but, you know, many of the commercial patients, my assumption is, who are losing, you know, in the first wave losing employment, they may not be in.

Including our thinking there some incremental impact from pricing.

Again, I think it's I think it's.

Probably pretty muted this year.

Josh Smiley: Great commercial plans to begin with. There are exchanges and other things. So there's a lot to still see what happens here.

And then I think we'll just have to look and see what what next year looks like and I think it's not just absolute levels of unemployment is what programs are in place to bridge the gap and otherwise so this year.

Josh Smiley: You know, our view is that we'll ensure that the patients who are, you know, losing insurance have access to our medications and programs. We, as Dave mentioned, announced the thirty-five dollar change to our diabetes program. So we're looking at everything we can do to ensure that people can stay on our medications and have access to them.

I think our range given the strong position, we're starting from Q1, our range accommodate potential incremental pricing impacts for.

Potentially short term moves day on insurance or Medicaid, but I think at this point, it's a little early to have real growth rollout of specifics around this way.

Thanks, Josh Dan.

Thanks, Andrew for the question on Baricitinib in mechanism of action in potential uncovered 19.

Josh Smiley: believe that some of these impacts will be

Josh Smiley: and then we'll have a much better sense by the end of the year on what 2021 looks like, but I'd say overall our expectation is this continues a trend and that price declines but not a fundamental change to how we're thinking about the Thanks, Josh. Chris, thanks for your questions. Next caller, please.

You're right in your comments about a potential for dual mechanism of action for Baricitinib.

First publication on the potential role of fair sitting had been covered non team came from group called benevolent AI, where they modeled out that the effects both on viral entry and on inflammatory response could be beneficial.

In this disease the trial that we discussed that is the adapted covert adaptive coding bid 19 trial with NIAD.

Andrew Baum: We will move next to the line of Andrew Baum with Citi. Go ahead. Thank you. Same topic. You have a high exposure, relative to your peers, to the commercial book.

Andrew Baum: For your full year guidance, could you help us with what kind of US unemployment rates you're assuming, as well as some magnitude of the volume loss and potential Medicaid expansion. Anything you can say about the risk to 2021? And then separately on Illumia and baricitinib for COVID-19, I'm just trying to understand which patient population you're targeting, because the literature talks to both a potential antiviral effect as well as an anti-inflammatory effect, which would suggest, you know, potentially two different patient populations, the earlier than respiratory distress. Where are you going with this clinical trial? Many thanks. Thanks, Andrew. We'll go to Josh for the first question and then Dan for variant 19 and COVID.

Is in hospitalized patients so its fits rather later in the disease progression.

And the design of the Charles primarily to look at the effects of Baricitinib on that inflammatory cascade.

Notable that that trial currently is can seek to visit factorial design with.

From debt severe of course in addition to look into clinical outcomes of these patients are a load and other factors will also be evaluated.

If we see success there that could give us confidence to go earlier in the disease course, but given sort of the mixed mechanism of action here.

Right now we're looking at that does hospitalized patients.

Thanks, Dan Andrew Thanks for your questions next caller please.

Will come from Dave Reisinger with Morgan Stanley Go ahead. Please.

Yes.

Thanks, very much so I have two questions first.

Josh Smiley: Thank you, Andrew. I think as it relates to 2020, our sales guidance range on the, you know, I described sort of the factors we're looking at. And I'd say if we're on the lower end of that sales range, we do include in our thinking there some incremental impact from pricing. But again, I think it's probably going to be pretty muted this year. And then I think we'll just have to look and see what next year looks like. And I think it's not just the absolute level of unemployment; it's what programs are in place to bridge the gap and otherwise. So this year, again, I think our range, given the strong position we're starting from in Q1, our range accommodates potential incremental pricing impacts for potentially short-term moves to uninsurance or Medicaid. But I think at this point, it's a little early to have a lot of specifics around those.

In the event that baricitinib and or the and to succeed in June.

What are the next steps.

Would you be filing for approval at that time, and then with respect to the Anj too could you just discuss the manufacturing capacity.

The amount of volume you could produce later this year.

And then second with respect to clinical trials when do you expect.

To restart enrollment in the majority of your trials. Thank you.

Thanks, Dave will go to Dan for both of those yes, thanks, Dave So.

Starting out with expectations for what if any of our molecules are successful in covered 19 Baricitinib is probably the most straightforward to answer it's a small molecule that can be produced at large capacity and and it's already approved in geographies around the world for rheumatoid arthritis, so depending on the quality of the data and.

Dan Skovronsky: Dan? Thanks, Andrew, for the question on parasitinib and its mechanism of action and potential in COVID-19. You're right in your comments about the potential for a dual mechanism of action for parasitinib. I think the first publication on the potential role of parasitinib in COVID-19 came from a group called Benevolent AI, where they modeled out that the effects both on viral entry and on inflammatory response could be beneficial in this disease. The trial that we discussed that is the adaptive COVID-19 trial with NIAID is in hospitalized patients, so it's rather later in the disease progression, and the design of the trial is primarily to look at the effects of parasitinib on that inflammatory cascade. It's notable that that trial currently is conceived of as a factorial design with remdesivir, of course, in addition to look at the clinical outcomes of these patients, viral load, and other factors will also be evaluated. I think if we see success there, that could give us competence to go earlier in the disease course, but given sort of the mixed mechanism of action here, right now, we're looking at those hospitalized patients.

The benefit risk that we see uncovered 19 patients you could expect that could potentially move very very quickly.

Successful and two is sort of the opposite ends of the spectrum. This is an.

Investigational monoclonal antibodies.

Production is more constrained and lead times are longer.

And this is a phase two type trial I think though the one that we're most focused on.

Which you Didnt directly ask about in your question is the neutralizing antibodies against covered 19, I think thats, where we see a relatively high probability of technical success given success with neutralizing antibodies against other viruses and also given what we've seen preclinically with our project.

And that's also why and where you can imagine a broad treatment paradigm antibodies like this are likely not not only to work in the sick patients, but could potentially have a prophylactic use which then sort of demands large quantities I think in all of these programs. You. Just also note that these aren't.

Chronic therapy is there a onetime use or short period of time in the case for Baricitinib.

Dan Skovronsky: Thanks, Dan. Andrew, thanks for your questions. Next caller, please. That will come from Dave Risinger.

But still I think for the antibody, we're working very diligently to expand our manufacturing capacities that would be ready to deploy.

David R. Risinger: That will come from Dave Risinger with Morgan Stanley. Go ahead, please.

David R. Risinger: Yes, thanks very much. I have two questions first. In the event that Baricitinib and or ANG2 succeed in June, what are the next steps? Would you be filing for approval at that time? And then, with respect to ANG2, could you just discuss the manufacturing capacity and the amount of volume you could produce later this year? And then, second, with respect to clinical trials, when do you expect to restart enrollment in the majority of your trials? Thank you. Thank you. Dave, we'll go to Dan for both of those. Yeah, thanks, Dave.

Both internally and with partnerships if the neutralizing antibodies are successful, we're making those investments in advance I mentioned, we started GMP manufacturing already.

At our AR.

Facilities to support the clinical trials and we're prepared to scale quite rapidly if we see a positive signal with the neutralizing antibody.

Your second question was on clinical trial restart timelines.

I think it's important to think about the context for why we stopped.

Dan Skovronsky: So starting out with the expectations for what if any of our molecules are successful in COVID-19, baricitinib is probably the most straightforward to answer. It's a small molecule that can be produced at large capacity, and it's already approved in geographies around the world for rheumatoid arthritis. So depending on the quality of the data and the benefit risk that we see in COVID-19 patients, you could expect that it could potentially move very, very quickly if it's successful. Ang-2 is sort of on the opposite end of the spectrum.

Enrolling new patients and starting new clinical trials. It wasn't so much of problem with our ability to maintain the clinical trials in fact, I'm quite confident even more confident today than I would've been a month ago in our ability to meet all of our sponsor obligations, our ability to deliver drug to sites or even directly to patients where it's needed to meet.

Sure outcomes, either at the sites or by other means directly with patients. So I'm really confident in our ability to carry out the trials its a desire to relieve the sites and the hospitals of the burden of running clinical trials. So we're watching our clinical trial sites carefully many of them are.

Dan Skovronsky: This is an investigational monoclonal antibody production is more constrained, and lead times are longer. And this is a phase two type trial. I think, though, the one that we're most focused on, which you didn't directly ask about in your question, is the neutralizing antibodies against COVID-19. I think that's where we see a relatively high probability of technical success, given the success of neutralizing antibodies against other viruses and also given what we've seen preclinically with our project. And that's also one where you can imagine a broad treatment paradigm. Antibodies like this are likely not only to work in sick patients but could potentially have a prophylactic use, which then sort of demands large quantities. I think in all these programs, you also note that these aren't chronic therapies. They're one-time use or a short period of time, in the case of baricitinib.

Our already starting to to asked the same question you are when they can restart.

We'll make decisions along with them.

Based on the burden of covered 19 that they're having and how much time and attention they can devote to clinical trials.

Thanks, Dan Dave Thanks for your questions next caller please.

The Seamus Fernandez with Guggenheim go ahead. Please.

Couple of here.

Hey, Tim a.

Consulting group that estimate the sort of medical Medicaid.

Enrollment increase in so I guess.

I'm, just hoping that you guys could put a little bit more.

Granularity around your estimates for expectations for Medicaid enrollment.

This group estimate that Medicaid enrollment increased by 11 to 23 million.

Dan Skovronsky: But still, I think for the antibody, we're working very diligently to expand our manufacturing capacity that would be ready to deploy, both internally and with partnerships, if the neutralizing antibodies are successful. We're making those investments in advance. I mentioned we started GMP manufacturing already at our facilities to support the clinical trials, and we're prepared to scale quite rapidly if we see a positive signal with the neutralizing antibody. Your second question was about clinical trial restart timelines. You know, I think it's important to think about the context for why we stopped enrolling new patients and starting new clinical trials. It wasn't so much a problem with our ability to maintain the clinical trials. In fact, I'm quite confident, even more confident today than I would have been a month ago, in our ability to meet all of our sponsor obligations, our ability to deliver the drug to sites or even directly to patients where it's needed to measure outcomes either at the sites or by other means directly with patients. So, I'm really confident in our ability to carry out the trials. It's a desire to relieve the sites and the hospitals of the burden of running clinical trials. So, we're watching our clinical trial sites carefully. Many of them are already starting to ask the same question you are when they can restart.

Underinsured increased by 10 to 11 million.

Maybe you can just help us put a little contacts around the percent of volume.

Well lead volume flows into Medicaid currently versus the percent of sales that flows into Medicaid currently I think help us understand a little bit in the context in that regard.

And then the second question.

And then I think we were expecting.

Thank you Alzheimer's data.

In the second half of this year for the antibody could you just.

Update us on that and.

And how thats progressing is that still expected in the second half of this year or should we anticipate that.

Sort of a 2021 timeframe just an update there will be great. Thanks, so much.

Thanks, Seamus, we'll go to Josh for the first question and then Dan for your question on.

And then I've read out sure.

Thanks Seamus.

In terms across our entire portfolio.

In the U.S. about 10% of our volume is Medicaid right now.

About 40% is commercial insurance, 20% part D. And then the rest is part b or hospital based or uninsured or other types of volumes.

As we talked about before that I think the the biggest sort of challenge would be a really well in short commercial patient moving to Medicaid there are lot of steps in between those things happening I as I mentioned in the prior question. We are anticipating in our sales guidance for 2020 that we could see some.

Dan Skovronsky: We'll make decisions along with them based on the burden of COVID-19 that they're having and how much time and attention they can devote to clinical trials. Thanks, Dan. Dave, thanks for your questions. Next caller, please. This must be Seamus Fernandez with Guggenheim. Go ahead, please, couple here. You know, there's a HMA is a consulting group that estimates the sort of medical costs

Net impact as a function of that but again I would say it's it.

We've looked at all those estimates and.

In terms of what the long term Wolfcamp B and we will provide more updates on that for 2021, we have a better sense, but again I'd say that our sales guidance right now does accommodate the fact that we may see some near term moves too.

Seamus Fernandez: Medicaid enrollment increases, so I guess I will

Seamus Fernandez: Yeah.

Seamus Fernandez: I'm just hoping that you guys could put in a little bit more.

Increase Medicaid or increase on in short.

Seamus Fernandez: [inaudible]

Thanks, Josh good Thanks, Seamus for the question on our Alzheimer's Phase two portfolio you asked specifically about the and then a map our anti Nthreepg a beta antibody. This is a really robust plaque clearing antibody. We know it can clearplex to quite a great extent and quite quickly.

Seamus Fernandez: of Lilly's volume that flows into Medicaid.

Seamus Fernandez: Currently, versus the percent of sales that flow into Medicaid currently can, I think, help us understand a little bit of the

Seamus Fernandez: in that regard.

Seamus Fernandez: And then the second question for Dan: Dan, I think we were expecting you.

Seamus Fernandez: from the Phase 2 Alzheimer's data in the second half of this year for the NGC antibody. Could you just update us on that and how that's progressing? Is that still expected in the second half of this year? Or should we anticipate that in sort of a 2021 timeframe? Just an update there would be great. Thanks so much.

Well, it's 18 month phase two study designed to demonstrate efficacy in a relatively large and homogenous population of Alzheimer's patients.

This study is fully enrolled it's proceeding along that previously communicated timelines, which means that last patient visit will be in the end of this year.

As you said and.

Most likely then we'll have data to talk about shortly after that although probably in January rather than in December.

Seamus Fernandez: Thank you.

Josh Smiley: Thanks, Seamus. We'll go to Josh for the first question and then Dan for your question on dynamite readout.

No changes to our timelines on that trial similarly the.

Josh Smiley: Sure. Thanks, Seamus.

Josh Smiley: In terms of across our entire portfolio... In the U.S., about 10% of our volume is Medicaid right now. About 40% is commercial insurance, 20% is Part B, and then the rest is Part B or hospital-based or uninsured or other types of volumes. You know, as we talked about before, I think the biggest sort of challenge would be a really well-insured commercial patient moving to Medicaid. There are a lot of steps in between those things happening.

Tao antibody as Ross, our symptomatic de one pan those are all phase two studies designed for efficacy similarly.

Fully enrolled and moving along the previously communicated timeline so no change in the Alzheimer's portfolio.

Thanks, Dan Seamus. Thanks for your questions next caller please.

We'll be Steve Scala from Cowen go ahead.

Good morning. Thank you. It was mentioned that most clinical programs are pause for new starts a couple of questions related to this first I realize that every trial is different but generally speaking how long will pause have to last to impact the long term outlook for lilly's.

Josh Smiley: As I mentioned in a prior question, we are anticipating in our sales guidance for 2020 that we could see some net impacts as a function of that. But again, I would say it's, and we've looked at all those estimates in terms of what the long-term outlook could be. And we'll provide more updates on that for 2021 when we have a better sense. But again, I'd say that our sales guidance right now does accommodate the fact that we may see some near-term moves to increase Medicaid or increase the uninsured.

Sales and visions say through 2025 and.

And then second according to clinical trials Dot Gov, only five of 155 million.

Newly trials that are actively recruiting.

Josh Smiley: Thanks, Josh. Good

Dan Skovronsky: Thanks, Seamus, for the question on our Alzheimer's Phase 2 portfolio. You asked specifically about Denenimab, our anti-N3PG A-beta antibody. This is a really robust plaque-clearing antibody. We know it can clear plaques to quite a great extent and quite quickly as well.

Have had recruitment status changed in the last five weeks just wondering about this relative to what you said and what the release set I believe companies are obligated to reflect any changes within 30 days. So I'm just curious why really no changes have been reflected thank you.

Dan Skovronsky: It's an 18-month Phase 2 study designed to demonstrate efficacy in a relatively large and homogenous population of Alzheimer's patients. This study is fully enrolled. It's proceeding along the previously communicated timelines, which means that the last patient visit will be at the end of this year, as you said, and most likely, we'll have data to talk about shortly after that, although probably in January rather than in December. But there are no changes to our timelines on that trial. Similarly, the tau antibody as well as our symptomatic D1-PAM, those are all Phase 2 studies designed for efficacy.

Thanks, Steve will go to Dan for both of those questions. Thanks to for this question. So the first question was just about like how long does the delay and new enrollment have to be before it starts to impact our long term financials.

Look I think you know very well that clinical trial timelines and enrollment timelines are often estimates would give those rounded usually to the half a year, sometimes just calendar year. So.

Dan Skovronsky: Similarly, fully enrolled and moving along the previously communicated timelines. So, no change in the Alzheimer's portfolio. Thanks, Dan. Seamus, thanks for your questions. Next caller, please. That will be Steve Scala from Cowen. Go ahead. Good morning.

For now you can you can think of these as a worst case scenario being a day to day delay. So for every day that were paused enrollment as Jay delay to when we get the data now our ambition is to beat that.

And there's a couple of reasons why we think we can do that.

Steve Scala: Thank you. It was mentioned that most clinical programs are paused for new starts. A couple questions related to this. First, I realized that every trial is different. But generally speaking, how long will the pause have to last to impact the long-term outlook for Lilly's sales visions, say, through 2025? And then second, according to clinicaltrials.gov, only five of 155 clinical trials have been paused. And then third, according to clinicaltrials.gov, Lilly trials that are actively recruiting have had their recruitment status changed in the last five weeks. Just wondering about this relative to what you said and what the release said. I believe companies are obligated to reflect any changes within 30 days, so I'm just curious why no changes have actually been reflected. Thank you.

There's sort of the.

Latent demand to be in these clinical trials, that's accumulating so when we flip the switch again to allow enrollment.

We think we'll see bolus of patients and be able to make up some last time on enrollment that's one of the reasons. Another reason why.

We can even make up some time and be better than and day by day is the fact that we can stagger our enrollment in different geographies not everywhere in the world is similarly affected by covered 19, so while our comments on pausing.

Enrollment.

It might apply to the majority of our geographies. There could also be certain countries, where we continue to enroll or even shift enrollment more to those countries as for the clinical trials dot Gov updating you're right that there is a time lag in that update.

Dan Skovronsky: Steve, we'll go to Dan for both of those questions. Thanks, Steve, for those questions. So, the first question was just about, like, how long does the delay in new enrollment have to be before it starts to impact our long-term financials? Look, I think you know very well that clinical trial timelines and enrollment timelines are often estimates. We give those rounded usually to the half a year or sometimes just the calendar year.

Theres also a time lag freely and in stopping.

Enrollment because you can imagine that although we say no new enrollment their patients who could be part of the way through screening and on a case by case trial by geography by geography basis, we often allow those patients who are ready undergoing spending procedures to continue.

As procedures and enrolling in the in the trial. So it takes a little bit of time for all this to trickle through the system.

Dan Skovronsky: So, for now, you can think of this as a worst-case scenario being a day-to-day delay. So, for every day that we're paused enrollment, it's a day delay until we get the data. Now, our ambition is to beat that, and there are a couple of reasons why we think we can do that. There's sort of a latent demand to be in these clinical trials that's building. So, when we flip the switch again to allow enrollment, we think we'll see both patients and be able to make up some lost time on enrollment. That's one of the reasons.

But I am as I said earlier looking forward to the day when when we can turn this back on when the hospitals and clinical trial sites.

I have got.

Beyond the burden of treating covert 19 patients.

Thanks, Dan Thank Steve for your questions next caller please.

So we'll be intervene Jacob.

Yes go ahead.

Great. Thank you so much for taking taking my question just on.

Dan Skovronsky: Another reason why we can even make up some time and be better than day by day is the fact that we can stagger our enrollment in different geographies. Not everywhere in the world is similarly affected by COVID-19. So, while our comments on pausing enrollment... that might apply to the majority of our geographies, there could also be certain countries where we continue to enroll or even shift enrollment more to those countries. As for the clinicaltrials.gov updating, you're right that there's a time lag in that update. There's also a time lag in stopping enrollment because you can imagine that although we say no new enrollment, there are patients who could be part of the way through screening, and on a case-by-case, trial-by-trial, geography-by-geography basis, we often allow those patients who are already undergoing So it takes a little bit of time for all this to trickle through the system. But I am, as I said earlier, looking forward to the day when we can turn these back on when hospitals and clinical trial sites have gotten beyond the burden of treating COVID-19 patients.

Let's see if I may.

Sorry to beat a dead horse here, but.

Want to understand relative to the negative 5%.

Yes price pressure that you had guided to in the us.

How we should be thinking about that now.

And related to that is I know you've spoken about.

Spoken to Insulins being barely profitable on Medicaid channel is that some quick soliciting as well I'm, assuming it's not as onerous.

As it is for Insulins, if thats, which were to happen.

But just any kind of color.

Would be helpful.

With regards to Trulicity and then just a quick question if I may on Paul.

Looks quite strong you also mentioned changes in rebates and discounts any kind of color around pricing for tanks as well would be helpful.

Thanks, and I mean, what we'll go to Josh for both of these on price related questions on Trulicity and pulse.

Thanks to being at first our outlook at the beginning of the year for US price was was net declines in the low single digits.

Dan Skovronsky: Thanks, Dan. Thanks, Steve, for your question. Next caller, please. That will be Naveen Jacob, with UBS. Go ahead.

And as I mentioned.

In the range and we're looking at now I think we're still in the low single digit that that could add in the more pessimistic case, maybe that at the point or something but it's still in the it's still in the same.

Umer Raffat: Great, thank you so much for taking my question.

Umer Raffat: Just on Trulisi, if I may, and sorry to beat a dead horse here, but I want to understand, relative to the negative 5% price pressure that you guided us to in the US, how we should be thinking about that now? And related to that, I know you've

Range.

To your question specifically about about products.

What we've said insulin are not profitable and Medicaid, we pay and effect a 100% rebates for patients who are on.

On our mealtime insulins in Medicaid so that the place where you see a real challenge I think it to the extent that patients are moving from commercial insurance to Medicaid Trulicity. It's it's less of an issue. It's still net net positive but that Medicaid just in general is is a lower price.

Umer Raffat: You've spoken about, you've spoken to insulin being...

Josh Smiley: is barely profitable in the Medicaid channel. Is that true for tricitility as well? I'm assuming it's not as onerous as it is for insulin if that's what's sure to happen, but just any kind of color would be helpful with regard to toxicity. And then just a quick question, if I may, on TULT: it looks quite strong. You also mentioned changes in rebates and discounts. Any kind of color around pricing for TULT would be helpful, as well. Thanks, Naveen. We'll go to Josh for both of these price-related questions on Truelicity and Tulpa.

Segments and commercial.

Plan, but it wouldn't be as big of a move as it would be for for.

Commercially insured mealtime insulin patients on Trulicity I think we've highlighted through the.

Through the last few years that Trulicity access is is not as strong as it is for.

Josh Smiley: Thanks, Naveen. At first, you know, our outlook at the beginning of the year for U.S. prices was net declines in the low single digits, and as I mentioned, in the range that we're looking at now, I think we're still in the low single digits, but you know, that could add in the more pessimistic case, maybe that adds a point or something, but it's still To your question specifically about products, what we've said is insulin is not profitable in Medicaid; we pay, in effect, 100% rebates for patients who are on our mealtime insulin in Medicaid. So that's the place where you see a real challenge, I think, if to the extent that patients are moving from commercial insurance to Medicaid.

The rest of our portfolio.

And what we have what we do in many cases is truly patients had to step through various.

PPA days or restrictions in their plans, we make estimates on.

On our utilization on how things are going to transpire there what we what we found in Q1 is we were actually getting more net price for a segment of our of our patients than we had estimated so we've got a little bit of a benefit there I think for the year, we're still sort of assuming the same that we maintain the kind of access that we have.

Now at relatively constant prices and you'll see these ups and downs and it's a little bit challenging and targets for the reason as I mentioned, you'll see sort of the quarterly ups and downs, but the underlying trend that we see is.

Pretty stable pricing pretty stable access.

Thanks, Josh Levine. Thanks for your questions next caller please.

Josh Smiley: Prolificity, it's less of an issue, it's still, you know, net positive, but Medicaid just, in general, is a lower price segment than commercial, planned, but it wouldn't be as big of a move as it would be for our commercially insured mealtime insulin patients. On Trulicity, I think we've highlighted over the, you know, the last few years that Trulicity access is not as strong as it is for the rest of our portfolio. And what we have, what we do in many cases, Trulicity patients have to step through various PAs or restrictions in their plans. We make estimates on, you know, our utilization of how things are going to transpire there. What we found in Q1 is that we were actually getting more net price for a segment of our patients than we had estimated. So we got a little bit of a benefit there.

I will be Geoff Meacham with bank of America.

Your line is open.

One moment. Please mr. mentioned, we seem to have last year in line here would you. Please depressed repress one than zero.

We just go to the next caller and catch Jeff up the Ministry is not in.

Thank you.

Next question will be.

From.

Alma Rhofade with Evercore one moment please.

Hi, Thanks for taking my question I think much for taking my question I hope everyone. Thanks.

There's been some concern about safety after European paper and I thought it would be helpful. If you could speak to the blinded CV event rate Youre seeing across your phase three program and whether it's in line with what you would have expected.

Josh Smiley: I think for the year, we were, and we're still sort of assuming the same thing: we maintain the kind of access that we have now at relatively constant prices. And you'll see these ups and downs. And it's a little bit challenging and talks for the reason that I mentioned, you'll see sort of the quarterly ups and downs, but the underlying trend that we see is pretty stable pricing, pretty stable access.

Secondly, I know John you've gotten only 25 questions on it. So let me just after the 26, one you mentioned pretty stable pricing.

Josh Smiley: Thanks, Josh. Naveen, thanks for your questions. Next caller, please. That will be Geoff Meacham with Bank of America.

In the diabetes business can you speak to whether patients in high deductible private plans.

Geoff Meacham: Your line is open. One moment, please. Mr. Meacham, we seem to have lost your line here. Would you please repress 1 then 0?

Bill could you at the same net price Lilly as those in Medicaid. Thank you.

Thanks will think soon where we're going to Dan around at GE IP safety and then Josh for pricing, yes. Thanks similar for the for the question surely you're referring to sort of a small epidemiological study that looked at risk of GRP polymorphisms.

Operator: We can just go to the next caller and

Operator: and catch Geoff up in a minute if he's not in.

Operator: Alright, thank you. The next question will be... from Umer Raffat with Evercore. One moment, please. Hi, thanks so much for taking my question. I hope everyone's staying safe. There's been some concern about gift safety after the European paper, and I just thought it would be helpful if you could speak to the blinded CV event rate you're seeing across your Phase 3 program and whether it's in line with what you would have expected. And secondly, I know Josh, you've gotten only 25 questions on it, so let me just ask the 26th one. You mentioned pretty stable pricing.

I don't think thats directly applicable to what we're seeing with tours appetite.

Sure we're studying this in that.

Population that has diabetes.

And we know from our phase two trials at the physiological effects of Trws appetite.

Which obviously is combined JP and GLP.

Our quite beneficial and they look like they would have a strong effect on improving.

Cardiovascular outcome. So we're super confident about that in terms of the blinded.

Umer Raffat: in the diabetes business. Can you speak to whether...

And rates in our ongoing studies, that's not something that that we disclose or talk about.

Umer Raffat: Patients in high-deductible private plans still produce the same net price for Lilly as those in Medicaid. Thanks. Well, thanks Umar. We'll go to Dan about GIP safety and then Josh for pricing.

But.

Certainly, though is the the rate of those events is the rate limiting factor in our submission. So thats a long tail and our submission is waiting to get enough events to discharge any cardiovascular safety or so we can we can submit terms appetite.

Dan Skovronsky: Yeah, thanks, Umar. For the question, I think you're referring to sort of a small epidemiological study that looked at the risk of GIP polymorphisms. I don't think that's directly applicable to what we're seeing with terzapatide. Here, we're studying this in a population that has diabetes. And we know from our phase two trials that the physiological effects of terzapatide, which obviously is combined GIP and GLP, are quite beneficial, and they look like they would have a strong effect on improving cardiovascular outcomes. So we're super confident about that. In terms of the blinded, you know, event rates in our ongoing studies, that's not something that we disclose or talk about. But certainly, though, the rate of those events is the rate limiting factor in our submission. So that's the long tail in our submission is waiting to get enough events to discharge any cardiovascular safety risk so we can submit terzepatite. Thanks, Dan.

Thanks, Dan Josh.

Thanks for the question and I think you are building on one of the comments I made which was I don't think you can just look at sort of a move from commercial to Medicaid. It's it's very much driven by.

Planned dynamics than otherwise and I think without getting into too much detail yet is fair to say that patients in the not in high deductible plans when they're in that deductible phase you know that we and other pharmaceutical companies have copay cards and other things to try to alleviate the sort of the cash burn.

Net the at the retail.

Pharmacy, so we do.

The net price for those specific prescriptions to us is very low and probably and in many cases could be lower than a Medicaid prescription, but again I think that gets back to what I was saying early earlier it.

I think it's way too premature to to make assumptions around what a move from commercial to Medicaid may look like there are lots the complexities here and I think lots of things still to be learned about the economy and what 2021 will look like but it's not.

Josh Smiley: Umar, thanks for the question. And I think you were building on one of the comments I made, which was that I don't think you can just look at sort of a move from commercial to Medicaid. It's very much driven by, you know, plan dynamics and otherwise. And I think, without getting into too much detail, yeah, it is fair to say that patients on the high-deductible plans, when they're in that deductible phase, you know that we and other pharmaceutical companies have copay cards and other things to try to alleviate the, you know, sort of the cash burden at the retail pharmacy. So we do, you know, the net price for those specific prescriptions to us is very low, and probably in many cases could be lower than a Medicaid prescription.

Not as I think on it on a math basis as concerned as probably it looks like when you just look at just general commercial too to Medicaid forced for one of the reasons that youre sort of implying and your question.

Thanks, Josh and were thanks for your questions next caller. Please.

We returned to line of Geoff Meacham with Bank of America go ahead.

Hey, guys. Thanks, so much of the question.

Josh a number of questions for you.

Quantified the pull forward cobot impact for a few products just wanted to ask you are those things on is happening today us and do you expect the.

Josh Smiley: But again, I think that gets back to what I was saying earlier. I think it's way too premature to make assumptions around what a move from commercial to Medicaid may look like. There are lots of complexities here, and I think lots of things still to be learned about the economy and what 2021 will look like. But we're not, I think, on a math basis, as concerned as it probably looks like when you just look at just general commercials for Medicaid for one of the reasons that you were, you know, sort of implying in your question.

Oh, you asked dynamic to to eventually mirror the U.S. and then on your guidance.

Would you expect normalization of the market to be more of a threeq or Fourq you type of event and then real quick Dave.

At the end, but how would you characterize your discussion with policymakers today versus the beginning of the year.

Just with respect to headwinds on drug pricing I'm, clearly industry responsive kovats, having somewhat of a halo effect.

Umer Raffat: Thanks, Josh. Umer, thanks for your questions. Next caller, please.

Thanks, guys.

Thanks, Jeff Josh same than day, thanks, Jeff So just on the $250 million. We estimated in Q1 as you mentioned about $200 million that is in the U.S. and we talked about the three big product categories I.

Operator: We return to the line with Geoff Meacham with Bank of America. Go ahead.

Geoff Meacham: Hey guys, thanks so much for the question. Josh, I have a number of P&L questions for you. You quantified the pull forward COVID impact for a few products. Just wanted to ask you, are those same trends happening today in the U.S., and do you expect the OUS dynamic to eventually mirror the U.S.? And then, on your guidance, would you expect normalization of the market to be more of a three Q or four Q type of event? And then real quick, Dave, you highlighted at the end, but how would you characterize your discussion with policymakers today versus the beginning of the year, just with respect to headwinds on drug pricing, and clearly, industry response to COVID is having somewhat of a halo effect. Thanks.

I think the rest.

The product I didnt mention it sort of spread nominally among those others.

As we look at that 200 million in the U.S.

Only less than a third of that is that the wholesale.

Filler level. So we saw some modest filled at the wholesaler most of that estimate we're making is that that is either in the retail channel or all the way down to patients.

Patient home.

So I think its can be pretty difficult I mean, we're assuming that that will turn around but I think being able to sort of make a prediction. At this point is top I would assume the wholesaler fees will start to normalize more quickly and I think we're seeing that.

The retail and patient piece I think we'll be some of it will be a function of what happens in social distancing, otherwise and some of it who knows it maybe a little bit more.

Have a long tail associated with that what we saw in Europe.

Geoff Meacham: Thanks, Geoff. Okay, Josh. Thanks, Dave. Thanks, Geoff.

It was about $50 million and I think most of the estimate is around our diabetes portfolio and I think that one we probably assume is a little more likely to normalize in the second half of this year. So I think Jeff will we'll try to.

Josh Smiley: So just on the $250 million we estimated in Q1, as you mentioned, about $200 million of that is in the U.S. We talked about the three big product categories. I think the rest, the products I didn't mention, it sort of spread nominally among those others. As we look at that 200 million in the US, only less than a third of that is at the wholesaler level. So we saw some modest growth at the wholesaler level.

Be transparent about that as we move through the quarters, but I think there it's going to be some variability in that you asked piece that in the retail channel or all the way to patient.

Homes.

Yes.

Yes on the policy side I mean, I think you have a right there maybe just a little subtext.

There is sort of two.

Pressures that prior to co fit I think we were feeling one was.

Broad acceptance across both sides, though that there were certain behaviors and actions, which are under desirable by the industry and should be curved.

Josh Smiley: Most of that estimate we're making is either in the retail channel or all the way down to the patient, you know, in the patient's home. So I think it's gonna be pretty difficult. I mean, we're assuming that that will turn around, but I think being able to sort of make a prediction at this point is tough. I would assume the wholesaler piece will start to normalize more quickly, and I think we're seeing that. The retail and patient piece, I think some of it will be a function of what happens in social distancing. Otherwise, about some of it, who knows? It may be a little bit more, and have a long tail associated with that.

Many of these actually Lilly agrees with so this is about patent evergreen being and strategies that.

Involve using systems designed to create incentives in a way that perhaps is.

Case in poor taste, and maybe worse case abusive.

There's a bunch of Senate related.

Actions to curb these and I think were generally for them because we don't do those things.

And I think they do create a suppression of.

The respect for interest in the industry.

Josh Smiley: What we saw in Europe...

Josh Smiley: I think that one we probably assume is a little more likely to normalize in the second half of this year. So I think, Geoff, we'll try to be transparent about this as we move through the quarters, but I think there is going to be some variability in that U.S. piece that's in the retail channel or all the way to patient care.

I actually think those items will continue makes the kobin crisis, maybe even be amplified because as solutions come from the industry, which they will it's clear that the producers of those solutions will be under a lot of screw need to make sure there's broad access and affordability and that we're acting reasonably but I have to say.

Dave Ricks: Yes, on the policy side, I mean, I think you have it right there. Maybe just a little subtext, you know, the There's sort of two pressures that prior to COVID, I think we were feeling.

I'm speaking to my my peers across the industry on many collaborative projects and.

Within our own company nobody is really focused on.

Dave Ricks: One was broad acceptance across both sides of the aisle that there were certain behaviors and actions which are undesirable by the industry and should be curbed. Many of these actually Lilly agrees with, so this is about patent evergreening and strategies that involve, you know, using systems designed to create incentives in a way that perhaps, Best case in poor taste and maybe worst case abusive There's a bunch of Senate related Actions to curb these and I think we're generally for them because we don't do those things And I think they do create a suppression of the the respect for and trust in the industry I actually think those items will continue Make the kovat crisis maybe even be amplified because as solutions come from the industry, which they will it's clear that the Producers of those solutions would be under a lot of scrutiny to make sure there's broad access and affordability and that we're acting reasonably, but I have to say I'm speaking to my my peers across the industry on many collaborative projects and, You know, within our own company, nobody's really focused on, you know, the pure commercial side of this. It's really about solving the problem. And the spirit of collaboration and response has been tremendous. But I think that pressure will be there. And some, there could be actions coming quickly that could strike in those areas. Again, from a Lilly perspective, we're less.

The the pure commercial side of this it's really about solving the problem and the spirit of collaboration response has been tremendous but I think that pressure will be.

There and some there could be actions.

Coming quickly that could strike in those areas again from a Lilly perspective, we are less.

Constructive on those in fact, we've been for many of those proposals on other hand, Theres I think from the more the far left in the us in certain though you a circles.

This idea that perhaps the industry itself is flawed and profit motive in pharmaceuticals is a bad thing of course, we be Emily disagree with that.

Since that point of view and I do think those voices are significantly quieted today as everyone realizes that the built up capacities of this industry or the very thing that will allow the world to escape Kobin 19, and well in the absence of a pandemic those may seem like a premium in the presence of a pandemic.

Those seem really scarce and important.

And so.

I am more bullish on that more extreme view being significantly dissipated for some time to come we need to behave ourselves appropriately and with good taste, if I can use that word and with.

Dave Ricks: You know, constructive on those. In fact, we've been for many of those proposals. On the other hand, there's, I think, from the more far left in the U.S. and in certain U.S. circles, this idea that perhaps the industry itself is flawed and the profit motive in pharmaceuticals is a bad thing. Of course, we vehemently disagree with that point of view.

Balance to our actions as we solve the problem, but I'm encouraged by that so far.

So I think we've got a unique.

I said in my comments, Jeff will kind of a once in a generation opportunity to reset the reputation the industry and to put in place policy that makes sense and balance profit motive, which we think clearly as a place to create new medicines, not just for code, but others.

Dave Ricks: And I do think those voices are significantly quieted today as everyone realizes that the built-up capacities of this industry are the very thing that will allow the world to escape COVID-19. And while in the absence of a pandemic, those may seem like a premium in the presence of a pandemic, they seem really scarce and important. And so I'm more bullish on that more extreme view being significantly dissipated for some time to come. We need to behave ourselves appropriately and with good taste, if I can use that word, and with a kind of balance to our actions as we solve the problem. But I'm encouraged by that so far. So I think we've got a unique, you know, as I said in my comments, Geoff, kind of a once in a generation opportunity to reset the reputation of the industry and to put in place policies that make sense and balance the profit motive, which we think clearly has a place to create new medicines, not just for COVID, but others with curbing abusive behaviors and making sure we're earning So anyway, we'll work on that certainly over the next couple years, but first we need to work on solving the pandemic problem, and that's got all my energy right now.

With the curbing abuse of behaviors and making sure we're earning the respect.

From patients and policymakers alike. So anyway, we'll work on that.

Certainly over the next couple of years, but first we need to work on solving the endemic problem and Thats got all my energy right now.

Thanks, Jeff. Thanks for your questions next caller, please that will be Louise Chen with Cantor go ahead.

Hi, Thanks for taking my questions here. So my first question is if there's any way you could give us a sense of the underlying earnings growth. If you extract the impact from Covidien any non operational items, even if it's just qualitatively.

And then second question is are you expecting any economic benefit for your covert candidates in development if they do one thank you.

Thanks, John.

I believe thanks, I think if you just.

At a very high level, you just take out the revenue.

Q1 that we're attributing to.

The $250 million, who are attributing to buying patterns and sort of hold everything else the saying, yes, we get down to earnings EPS growth.

Dave Ricks: Thanks Dave. Geoff, thanks for your questions. Next caller, please. That will be Louise Chen with Cantor.

On a on a more normalized basis of about 18% or so so I think thats probably a.

Louise Chen: Go ahead. Hi, thanks for taking my questions here. So my first question is, if there's any way you could give us a sense of the underlying earnings growth if you extract the impact from COVID and any non-operating items, even if it's just qualitatively? And then my second question is, are you expecting any economic benefit from your COVID candidates and development if they do work? Thank you.

Reasonable look at the business as with every quarter. There are other things that we could normalize.

Although there, but I think thats probably a.

Good sort of starting point and as we've mentioned would that we're expecting that to 50 to.

Normalized some sometime through the year at least in our guidance for now, but that's that's where we are I think that on the question around economic benefits no Theres no benefit assumed in our in our guidance from any of these treatments.

Operator: .. .. .. .. Yeah, hi, Louise.

Josh Smiley: Thanks. I think if you just, You know, at a very high level, if you just take out the revenue for Q1 that we're attributing to the $250 million that we're attributing to buying patterns and sort of hold everything else the same, you know, we get down to earnings, EPS growth, on a more normalized basis of about 18% or so. So, you know, I think that's probably a reasonable look at the business. As with every quarter, there are other things that we could normalize, you know, out of there. But I think that's probably a good sort of starting point.

More much more interested in getting these treatments patients at this point and frankly I'd say at this point, we're probably just assuming some costs for sure associated with.

Investment in in the trials that Dan mentioned in the scale up in manufacturing and otherwise so that some of that thinking already embedded in our our line items now.

Thanks, Josh Louise Thanks for your questions next caller please.

Veeva nail divan with.

Josh Smiley: And, you know, as we've mentioned with that, we're expecting that 250 to normalize, you know, some time during the year, at least in our guidance for now. But that's, that's where we are, I think. And on the question around economic benefits, no, there's no benefit assumed in our guidance from any of these treatments. We're much more interested in getting these treatments to patients at this point, and frankly, I'd say at this point, we're probably just assuming some cost for sure. Associated with the investment in the trials that Dan mentioned in the scale-up in manufacturing and otherwise, so that, you know, some of that thinking is already embedded in our line item guidance now.

Mizuho Securities go ahead.

Great. Thanks for taking my question. Thanks for all the color on the call me. They just got a couple of questions on pipeline. So one near to the Maggie mentioned the positive initial topline data and thrive.

I guess had been wondering about our differentiation for that product relative to the other aisle 23, maybe there's anything more you can share now that you have some of the top line data and just any update on timing, especially in the G.I. trials I think you've talked about that being up and the more unique opportunity potentially and then going back to Alzheimer's I. Appreciate your comments from the four just regarding.

And to you.

And can I will be something solar and also from going to nearly ma'am you mentioned the plaque reduction than you've seen.

Josh Smiley: Thanks, Josh. Louise, thanks for your questions. Next caller, please. That will be Vanille Devane with Mizuho Securities.

Mmm Diane to use resulted in any way change your thoughts around sort apply production in the biomarker impact impacting might have on clinical outcome at the end of the basis, because we did not see that correlation in that trial I know the small trial, but any perspective would be helpful. Thanks.

Operator: Go ahead. Thanks for taking my questions. Thanks for all the color.

Operator: Paul, maybe I just got a couple of questions on wine. So one miracle you may have you mentioned the positive initial top line data and thrive. I guess we've been wondering about the differentiation for that product relative to the other IL-23s. Maybe if there's anything more you can share now that you have some of the top-line data and just any update on timing, especially for the GI trials, that being a kind of more unique opportunity, and then going back to Alzheimer's. I appreciate your comments from before. Just regarding Diane, to you, and kind of we'll be talking about Stola and also from the Ganton area.

Thanks, Manuel will go to Patrick for the near his AMAP question and then Dan for the all time or question.

Thank you very much and we announced that they made against them up Matt on the call primary and key secondary endpoints in the furthest away just one plan when you guys Thats Handbook on closing in two weeks try on in psoriasis.

And that is what we expected us when and we're sending the bought extremely high I'm sorry, I just wanted to talk to have been able now to demonstrate in five head to head.

So maybe you ought to be Anthony.

Both in terms of time, Tom said, and then look CRM and then just staying on.

Operator: You mentioned the plaque reduction that you've seen, but don't end on that. Do the DyeNTU results in any way change your thoughts around the plaque reduction, the biomarker, and the impact it might have on the clinical outcome at the end of the day, just because we do not see that correlation in that trial? I know it was small.

Okay around and so we are waiting now for the second phase three trial, we intend to hand to hand try as well, so say casino mob and 52 weeks data and I think thats when you get any inform our decision on how we program and we may and we have sold I asked the syndication.

And our Manny I think we've also stake if any feeling about the big excitement around strategic alliances in Crohns disease, and we remain on track you can I. Just wanted is a big unmet need and we have potentially Boston costs investing cost asset the Medicare sum up and we also know about that biologics penetration is ran up you may know.

Operator: Any perspective would be, Thanks, Pamela. We'll go to Patrick for the Mirakizumab question and then Dan for the Alzheimer's. So we are waiting now for the second phase three trial, which is the head-to-head trial versus Sekishinumab for 52 weeks, and I think that will particularly inform our decision on how we progress with the psoriasis indication. For Miriam, I think we have also stated very clearly that the big excitement is around ulcerative colitis and Crohn's disease, and we really believe that in ulcerative colitis, there is a big unmet need, and we have potentially first-in-class and best-in-class assets in Miriam Kierkegaard, and we also know that the biologic penetration is relatively low, and we have previously shared that we expect a top- For Crohn's disease, we announced earlier that we would make a top-line announcement in 2021.

And we have pretty much readiness, we shall we expect the topline readout for the induction data in Q obvious yeah, and then maintains topline in Nam and plan to Atlanta.

Oh, I'm Crohns disease, we have announced only about 21, new at topline announcement in 20 to 22.

Hi, Matt. We then comment 19, we also know that that we'd be at M&A again on those programs. However, we believe it's also premature quantifying the impact and ask that you Asian I'm on slide 11 answered on the standing on the impact Atlanta, So what I mean, it tends to meet the gains knows and then they have I think.

Hey, hey payment by it and because then.

To access the studies and side, but I think that infusion on Sam to us and the IP and for some of those answers to conduct.

Endoscopy.

On a high level of excitement stand for both on spent expedite has in crohns disease and the head to head data processing casino mob wait and it will guide out a station moving forward on psoriasis.

Operator: At this time, I would like to invite you to join me in congratulating the Class of 2022.

Operator: Thank you very much for your time, and with COVID-19, we are certain that there will be a delay in one or both of those programs. However, we believe it's also premature to quantify the impact, and as the situation evolves, we will have a better understanding of the impact.

Thanks, Patrick Dan, Yes, as for Alzheimer's Diane to you I mean of course this is a really heroic and difficult effort to study effects of drugs in the dominantly inherent Alzheimer's population.

I think unfortunately, there's just a small number of patients who completed the trial, especially at the higher does for Solanezumab, so tough to make conclusions about any any clinical effects. So there.

Operator: as well as our ability to mitigate those risks.

Operator: Today here, what's important to state is it's driven by difficulties to access the study sites, but particularly infusion centers and the ability for some of those centers to conduct and perform endoscopies. So, overall, the high level of excitement still for both ulcerative colitis and Crohn's disease and the head-to-head data versus tachycinoma will guide our decision moving forward on psoriasis. Thanks, Pastor Dan.

As you point out so as not a plaque lowering antibody.

Works on on soluble a beta.

So can't draw conclusions about about plaque lowering from from Solanezumab data.

I think though the most important things to look at in Diane or the biomarker outcomes and perhaps.

Operator: Yeah, as for Alzheimer's, Diane, to you, I mean, of course, this is a really heroic and difficult effort to study the effects of drugs in the dominantly inherited Alzheimer's population. Unfortunately, I think there are just a small number of patients who completed the trial, especially at the higher doses of solanezumab. So, it's tough to make conclusions about any clinical effects of SOLA there. But, as you point out, SOLA is not a plaque-lowering antibody. It works on soluble A-beta, so we can't draw conclusions about plaque lowering from solanesimab data.

If you think about the biomarker outcomes, you could add a little bit of of confidence around plaque loring, but once again, it's a small study and hard to draw those conclusions I look forward to the results from our phase two trial, which I think should be a clean trial, a clean test of the hypothesis in a relatively a margin is population, but that data is now.

Very far off right now.

Thanks, Dan well, thanks for your questions and we're going to the next caller. Please.

I will be from Tim Anderson with Wolfe Research Your line is open.

Operator: I think, though, the most important things to look at in Diana are the biomarker outcomes, and perhaps, if you think about the biomarker outcomes, you could add a little bit of confidence around plaque lowering, but once again, it's a small study and hard to draw those conclusions. I look forward to the results from our phase two trial, which I think should be a clean trial. Thanks, Dan. Well, thanks for your questions. And we're going to the next caller, please. That will be from Tim Anderson with Wolf Research. Your line is open. Thank you. A couple of questions on Trezepatide.

Thank you couple of questions. Please on terms appetite.

You mentioned results in 2020, and everyone knows that I think.

Is that just likely to be topline are we likely to see a more complete set of results in some form or another.

Well, there's publication or presentation.

And then second question is on to that your PD one in China.

I feel like overtime have gotten mixed messages from the company on the importance of this product maybe a year ago I was talking to one of the members of senior management and that was kind of described as a China only product.

Tim Anderson: You mentioned results in 2020. Is that just likely to be top line, or are we likely to see a result for this publication? And then the second question is on TIVID, your P1 in China. I feel like, over time, I've gotten mixed messages from the company on the importance of this product. Maybe a year ago, I was talking about it, and it was kind of described as a China-only product. But I don't know if that's still the current point of view. I asked about it last quarter, but I didn't get it. So the question is really two-fold on...

Of smaller importance.

But I don't know if that's still the current point of view asked about it last quarter I didnt get much of an answer.

Question is really twofold onto that.

The development program from here in China in terms of next tumor types and perhaps more importantly, your plans to take this outside of China into developed markets, you us Europe or anywhere else. That's traditionally considered developed.

Tim Anderson: The development program from here in China in terms of the next tumor type and, perhaps more importantly, your plans to take this outside of China into development. Thanks, Tim. We'll go to Mike for the thirst and appetite question, and then Dave will take the question on to type it. Yeah, thanks for the question. Just directly, you know, we do believe we'll have our first top-line readouts of the SURPASS program for the first trial in Q4 of 2020 and then additional readouts top-line as well as at medical meetings going into. Thanks for the question.

Thanks, Tim we're going to Mike for the answers appetite questions and Dave will take the question on target.

Yes, thanks for the question.

Just directly we do believe we'll have our first topline readouts other surpassed program for the first trial in Q4 2020, and then additional readouts.

Topline as well as at medical meetings going into 21.

Thanks for the question.

Yes.

Tim as it relates to timing I don't think you read of the prior commentary is wrong I think we originally.

Michael B. Mason: Tim, as it relates to TyBIT, I don't think your read of the prior commentary is wrong. I think we originally collaborated with InnoVent as a China-only play for biologics and cancer and a few other biosimilar opportunities, but two things have changed, which I think and today, you know, we're breaking out China for the first time, so maybe that's the third thing that's changed, but one is that TyBIT was the only PD-1 put on the PDL nationally in China, so that does change the economic profile of it for us and certainly for the Chinese business, and the second is the positive data that was released in the combination with Temetrexid in first-line non-small cell lung cancer, which is very encouraging and I think does change the trajectory of that certainly in China.

Operator within event as a China only play for biologics cancer.

In a few other biosimilar opportunities, but there are two things have changed which I think.

And today, we're breaking out China for the first time, so maybe that that's a third thing this change, but one is that.

Type it.

Was the only PD one put on the PDL nationally in China. So that does change the economic profile of it for us and certainly for the Chinese business.

And the second is the positive.

Data that was released in the combination with Pemex. It in in first line non small cell lung cancer, which is very encouraging and I think does change the trajectory that certainly in China.

Michael B. Mason: Of course, right now, we're very focused on the Chinese opportunity, and that remains our focus in the short term, and as Josh mentioned, I think in his remarks, there was a great volume growth in China for Oncology portfolio and TyBIT's a key part of that, so anyway, great partnership with InnoVent. They do a great job, and it's been a successful way to think about building our business, which was a little bit underrepresented in China a decade ago, through local partnerships with local innovators, and we're really pleased with how that's progressed.

Of course, right now, we're very focused on the Chinese opportunity and that though that remains our focus in the short term.

And as Josh mentioned I think in his remarks, there was a.

Great volume growth in China for oncology portfolio and type, it's a key part of that so.

Okay, Great partnership within event, they do great job and it's been a.

Successful way to think about building, our business, which was a little bit underrepresented in China, a decade ago through local partnerships with local innovators and we're really pleased with how thats progressing.

Dave Ricks: Dave, Tim, thanks for your questions. Next caller, please.

Tim Thanks for your questions next caller please.

I will be Carter Gould with Barclays go ahead.

Carter Gould: That will be Carter Gould with Barclays. Go ahead. Good morning. Thanks for taking the time to answer the question. I just wanted to, I guess, dig into the comment over the inevitable fiscal pressure on government-funded healthcare, specifically thinking about Europe and the pressure on budgets there. Are you guys viewing it as a possibility, probability, or likelihood that there's incremental pricing pressure in Europe, I guess, looking out later this year or into next? I'd appreciate any thoughts there. And then, following up on the Tyvit data and the Tyvit discussion, when could we expect the Orion 11 data to be presented? If that's something that could still come in the first half of this year, or will we have to wait until the second half of the year? Thank you. Thanks, Carter. We'll go to Dave for the question about Europe and then.

Good morning, Thanks for taking the question I just wanted to I guess dig into the comment over the in the inevitable fiscal pressure on government funded healthcare, specifically thinking about Europe and the pressure on budget there I guess.

Are you just giving you the possibility probability or likelihood is incremental pricing pressure in Europe, I guess looking out.

Later this year into next.

There and then following up on the private data type discussion.

When could we expect the Orient 11 data to be presented if that's something that could still common in first half this year or what we have to wait until the back half of the year. Thank you.

Thanks, Carter will go to Dave for the question for Europe, and then and for the question about the time that Orient 11 data, yes, as it relates to your opinion I wouldn't say this extrapolates to other.

Government run health systems, like Australia, Canada, Japan as well.

We saw a policy response in nearly every jurisdiction following the auto nine fiscal crisis, well this isn't a fiscal crisis. It's.

Dave Ricks: and Anne for the question about the TIVET ORIENT 11 data.

There will be a fiscal crisis brought on by the pandemic in many of these economies. It will lower tax receipts and then the governments will need to look for methods to reduce their spending I think we can predict that with almost absolute certainty.

Dave Ricks: Yeah, as relates to Europe, and I would say this extrapolates to other government-run health systems like Australia, Canada, Japan as well. We saw a policy response in nearly every jurisdiction following the 08-09 fiscal crisis. Well, this isn't a fiscal crisis, but there will be a fiscal crisis brought on by the pandemic in many of these economies. It will lower tax receipts, and then governments will need to look for methods to reduce their spending. I think we can predict that with almost absolute certainty.

One of the items on their list is often drugs because it's an input that community go shaded or many cases, they don't need to negotiate that just change their rules.

And we saw that certainly happened in create a three or four year series of policy moves depending on the relative strength. The economy. That's a press drug pricing in places like Europe, and Australia, Canada. So we're projecting that in the future as Josh mentioned, we don't see a lot of that happening in 20, probably tax receipts falling in 20.

Dave Ricks: One of the items on their list is often drugs, because it's an input that can be negotiated, or in many cases they don't need to negotiate, they just change their rules. And we saw that certainly happen and create a three- or four-year series of policy moves, depending on the relative strength of the economy, that suppress drug pricing in places like Europe. Australia Canada so we're projecting that in the future as Josh mentioned we don't see a lot of that happening in 20 probably tax receipts falling in 21 lead to legislative actions in 21 and 22 which leads to suppress pricing beyond that that's to me a certainty across the industry and then the real question is how relatively innovative is your portfolio because a lot of these policies tend to be using leverage governments can have when there's relative substitutability so the more innovative your portfolio the more immune you become to these things obviously we're working hard on that side of the equation and hopefully we'll be on the positive end of the industry but I suspect this industry as a whole there'll be these international pressures will will present themselves across everyone's portfolios to some degree or another

The one lead to legislative actions in 21, and 22, which leads to suppress pricing beyond that.

That's to me a certainty across the industry and then the real question is relatively innovative is your portfolio because a lot of these policies tend to be using.

Leverage governments can have when there is relative substitutability, so the more innovative portfolio. The more immune you become to these things obviously, we're working hard on that side of the equation and hopefully we'll be on the positive and to the industry, but I suspect as an industry as a whole there'll be these international pressures will will present themselves across everyone's port.

Volumes to some degree or another.

Thanks, Dave and.

Yes. Thanks for the question on time, so with the Phase III Orient study as you know as an interim analysis that was positive and we're very excited about initiating that submission with an event.

To the regulatory authorities in China, and we will be submitting that data for a medical meeting in the second half of this year. So you'll see it in the second half of 2020.

Dave Ricks: Thanks Dave. Yes, thanks for the question on Tyvitz.

Great. Thanks, Dan Carter, Thanks for your questions.

Anne E. White: So with the Phase 3 Orient Study, as you know, it's an interim analysis.

We've exhausted the Hughes will go to Dave close.

Anne E. White: Thank you all for joining us today. We are very excited about the data that was submitted to the regulatory authorities in China. We will be submitting that data for a medical meeting in the second half of this year.

Alright. Thank you all we appreciate your participation in the call and your interest in the company.

Obviously different times today, and just on a personal note I know many of.

Anne E. White: Great, thanks Anne. Carter, thanks for your questions.

The sell side community are based on the East Coast and we hope you all well and your families.

Operator: Any other questions? We've exhausted a few, so we'll go to Dave for the close.

Operator: All right, thank you all. We appreciate your participation in the call and your interest in the company. Obviously, different times today, and just on a personal note, I know many of the Southside community are based on the East Coast, and we hope you're all well and your families are functioning and certainly healthy through this crisis. As usual, any follow-up calls or questions can be directed to our really incredible investor relations team. And again, I hope you all stay well and we'll be in touch soon. Take care.

Our functioning and certainly healthy through this crisis as usual any follow up calls.

Questions can be directed to our.

Really incredible Investor relations team.

And again hope you all stay well and we'll be in touched soon take care.

Ladies and gentlemen, I will conclude your conference call for today. Thank you for your participation then for using Eighttwenty.

Executive Teleconference service you may now disconnect.

Operator: Ladies and gentlemen, that will conclude your conference call for today. Thank you for your participation and for using the AT&T Executive Teleconference Service. You may now disconnect. We're sorry, your conference is ending now. Please hang up.