Q4 2020 Eli Lilly and Co Earnings Call

Yes.

Yeah.

Operator: Ladies and gentlemen, thank you for standing by, and welcome to the Lilly Q4 2020 earnings call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. If you wish to put yourself in line for a question, Please press 1 then 0 on your telephone keypad if you should require assistance during the call. Please press star then zero. As a reminder, this conference is being recorded.

Ladies and gentlemen, thank you for standing by and welcome to the Lilly Q4, 'twenty and 'twenty earnings call.

At this time all participants are in a listen only mode.

Later, we will conduct a question and answer session.

If you wish to put yourself in line for a question. Please.

Please press one then zero on your telephone keypad.

If you should require assistance during the call. Please.

Please press Star then zero.

As a reminder, this conference is being recorded.

Operator: I would now like to turn the conference over to our host, Vice President of Investor Relations, Mr. Kevin Hearn. Please go ahead, sir.

I would now like to turn the conference over to our host Vice President of Investor Relations Mr. Kevin Hern. Please.

Please go ahead Sir.

Kevin Hearn: Good morning. Thank you for joining us for Eli Lilly and Company's Q4 2020 earnings call. I'm Kevin Hearn, Vice President of Investor Relations. Joining me on today's call are Dave Ricks, Lilly's Chairman and CEO, Josh Smiley, Chief Financial Officer, Dr. Dan Skovronsky, Chief Scientific Officer, Anne White, President of Lilly Oncology, Ilya Yuffa, President of Lilly Biomedicines, and Mike Mason, President of Lilly Diabetes. We're also joined by Sarah Smith and Lauren Zierke of Investor Relations. 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 those listed on slide three. Additional information concerning factors that could cause actual results to differ materially is contained in our latest Forms 10-K and subsequent Forms 10-Q and 8-K filed with the Securities and Exchange Commission. The information we provide about our products and pipeline is for the benefit of the investment community. It is not intended to be promotional and is not sufficient for prescribing decisions.

Good morning, Thank you for joining us for Eli Lilly and company's Q4, 'twenty and 'twenty earnings call and Kevin Hern, Vice President of Investor Relations. Joining me on today's call are Dave Ricks, Lilly's, Chairman and CEO, Josh Smiley, Chief Financial Officer, Dr. Danskin, Roski, Chief Scientific officer and why.

President of Lilly oncology.

President of Lilly Bio medicines, and Mike Mason President of Lilly diabetes.

We're also joined by Sarah Smith, and warrant <unk> of the Investor Relations team.

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

Our actual results could differ materially due to a number of factors, including those listed on slide three.

Additional information concerning factors that could cause actual results to differ materially is contained in our latest forms 10-K, and subsequent forms 10-Q, and 8-K filed with the Securities and Exchange Commission.

The information, we provide about our products and pipeline is for the benefit of the investment community.

It is not intended to be promotional and is not sufficient for prescribing decisions.

Kevin Hearn: As we transition to our prepared remarks, a 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 though the full disposition via the exchange offer was complete on January 1, 2019. Now, I'll turn the call over to Dave for a summary of our 2020 results. Thanks, Kevin.

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

Now I will turn the call over to David for a summary of our 2020 results.

Thanks, Kevin.

Dave Ricks: On our guidance call in December 2019, we provided a framework for how we are thinking about the 2020 to 2025 period, noting our expectations to continue to deliver top-tier revenue growth and operating margin growth into the mid to high 30s while continuing to increase R&D productivity. As we met with investors throughout 2020, it was evident that while there was good insight into management's expectations for the next few years, investors were increasingly focused on our ability to grow in the second half of this coming decade. In the past two months, we have begun to deliver answers to that question, with positive data for LOXO305, terzipatide, and dononumab, each with a chance to significantly improve patient outcomes in areas of high unmet medical need.

And our guidance call in December 2019, we provided a framework for how we were thinking about the 'twenty and 'twenty to 'twenty and 'twenty five period.

Noting our expectations to continue to deliver top tier revenue growth and operating margin growing into the mid to high thirty's, while continuing to increase R&D productivity.

As we met with investors throughout 2020, it was evident that while there was good insight and the management's expectations for the next few years investors, we're increasingly focused on our ability to grow in the second half of this coming decade.

And the past two months, we have began we have begun to deliver answers to that question with positive data for locks of three O five tours at the tide and Danone and map each.

Each with a chance to significantly improve patient outcomes and areas of high unmet medical need.

We believe these are three of the most important and exciting pipeline assets in our industry.

Dave Ricks: We believe these are three of the most important and exciting pipeline assets in our industry and provide meaningful support for Lilly's growth potential beyond 2025. Together with Fresenio data and early breast cancer last summer, we have significantly reinforced our growth prospects for the midterm and upgraded them for the long term. While these readouts drive incredible momentum for our future, I am also pleased with the way that we delivered in a complex and challenging 2020. Our 2020 revenue enabled us to exceed our midterm revenue goal of 7% CAGR from the years 2015 to 2020. Turning to the quarter, revenue grew an impressive 22% versus Q4 2019, or 20% in constant currency. This strong performance was driven entirely by volume growth of 24 percentage points, despite continued pricing headwinds and demand pressure from the effects of COVID-19. Excluding BAML and IVMAB, revenue grew over 7% for the quarter.

And provide meaningful support for lilly's growth potential beyond 'twenty and 'twenty five.

Together with presenting our data and early breast cancer last summer, we have significantly reinforced our growth prospects for the midterm and upgraded them for the long term.

Well these readouts drive incredible momentum for our future I'm also pleased with the way that we delivered and a complex and challenging 2020.

Our 2020 revenue enabled us to exceed our midterm revenue goal of 7% CAGR from the years 2015 to 2020.

Turning to the quarter revenue grew an impressive 22% versus Q4, 'twenty and 19 or 20% and constant currency.

This strong performance was driven entirely by volume growth of 24 percentage points.

Despite continued pricing headwinds and demand pressure from the effects of COVID-19.

Excluding Bam Laneve and Mab revenue grew over 7% for the quarter key growth products continue to drive this volume and our revenue now representing 55% of our base business.

Dave Ricks: Key growth products continue to drive this volume and our revenue, now representing 55% of our base business. We continue to advance our productivity agenda in Q4, as the combination of strong revenue growth and modest operating expense growth drove significant margin expansion. Our non-GAF operating margin was approximately 33%, with and without COVID-19 therapy.

We continue to advance our productivity agenda and Q4.

That's a combination of strong revenue growth and modest operating expense growth drove significant margin expansion.

Our non-GAAP operating margin was approximately 33%.

With and without Covid, 19 therapies and improvement of roughly 650 basis points versus Q4 2019.

Dave Ricks: An improvement of roughly 650 basis points versus Q4 2019. With continued margin expansion for the quarter and full year, excluding the impacts of COVID-19 on our business in 2020, we would have achieved our midterm operating margin as a percent of revenue goal of 31%. We are proud to have delivered nearly 1,000 basis points of operating margin expansion since 2016. In addition to the strong business performance, we achieved multiple pipeline milestones since our Q3 earnings call. These include the positive results I noted for Loxa 305, Terzapatide, and Dononumab, as well as the FDA granting emergency use authorizations for bamlanivimab and baracidinib to help patients with COVID-19. This is a submission of Ampegaflozin for heart failure in people with reduced injection fraction in the US, Europe, and Japan.

With continued margin expansion for the quarter and full year, excluding the impacts of COVID-19 on our business in 'twenty and 'twenty, we would've achieved our mid term operating margin as a percentage of revenue goal of 31%.

We're proud to have delivered nearly 1000 basis points of operating margin expansion since 2016.

In addition to the strong business performance, we achieved multiple pipeline milestones since our Q3 earnings call. These include the positive results I noted for locks of three O five tours appetite and Danone and map.

The FDA granting emergency use authorizations for bandwidth is a mab and bear sitting there to help patients with COVID-19.

The submission of Mpeg of flows and for heart failure and people with reduced injection fraction in the U S. Europe and Japan. This was done in collaboration with Boehringer Ingelheim.

Dave Ricks: This is done in collaboration with Berger Ingelheim and the submission of Bresenio, an early breast cancer drug, in the U.S. During Q4, we put our growing operating cash flow to work, announcing a 5% increase in the dividend for the third consecutive year, as well as continuing to pursue external innovation to augment future growth prospects with the acquisition of Prevail Therapeutics. This acquisition adds a promising new modality for Lilly by creating a gene therapy program that will be anchored by Prevail's portfolio of clinical stage and late preclinical stage gene therapies for Alzheimer's, Parkinson's, dementia, ALS, and other neurodegenerative disorders. Moving to slides 5 and 6, you'll see a list of key events since our last earnings call. In November, we announced that Artie Shaw, our Senior Vice President and Chief Information and Digital Officer, will retire in the first half of this year after 27 years of service to Lilly.

And the submission of <unk> and early breast cancer and the U S.

During Q4, we put our growing operating cash flow to work and announcing a 5% increase and the dividend for the third consecutive year as well as continuing to pursue external innovation to augment and future growth prospects with the acquisition of prevail therapeutics.

This acquisition adds promise a promising new modality for Lilly by creating a gene therapy program there'll be anchored by prevails portfolio of clinical stage and late preclinical stage gene therapies across all timers, Parkinson's dementia, ALS and other neurodegenerative disorders.

Moving to slides five and six you'll see a list of key events since our last earning call earnings call.

In November we announced that Artie Shaw, our senior Vice President and Chief information and digital officer will retire and the first half of this year. After 27 years of service to Lilly.

Dave Ricks: She's been an invaluable member of our executive committee and a leader who really models our values. In addition to leading the development of our digital information strategy, she has developed and mentored talent throughout the organization and demonstrated a deep care for the patients we aim to serve. I want to thank Artie for her many contributions to Lilly. Now, I'll turn the call over to Josh to review our Q4 and folio results. Thanks, Dave, and good morning.

She's been in and valuable member of our Executive Committee, and our leader, who really models our values.

In addition to leading the development of our digital information strategy. She has developed and mentored talent throughout the organization and demonstrated a deep care for the patients. We aim to serve I want to thank already for her many contributions to Lilly and.

And now I'll turn the call over to Josh to review, our Q4 and full year results. Thanks, Dave and good morning.

Josh Smiley: Slide 7 summarizes our non-GAAP financial performance in Q4 and 2020. As Dave mentioned, revenue increased 22% this quarter compared to Q4 2019 and increased 7% excluding the Amla Nivamap sale. Gross margin as a percent of revenue declined 130 basis points to 78.6 percent, and related manufacturing costs.

Slide seven summarizes our non-GAAP financial performance in Q4 and 2020.

As Dave mentioned revenue increased 22% this quarter compared to Q4, 2019 and increased 7% excluding family and <unk> sales.

Gross margin as a percentage of revenue declined 130 basis points to 78, 6%.

Excluding the impact of bandwidth nib and AD revenue and the related manufacturing costs gross margin as a percentage of revenue was 79, 9% in line with Q4 2019 performance.

Josh Smiley: Gross margin as a percent of revenue was 79.9%, in line with Q4 2019 performance. Moving down the P&L, operating expenses grew 3% compared to the same quarter last year. Marketing, selling, and administrative expenses were down 8% as reduced activity due to COVID-19 and productivity measures offset investments in key growth products. R&D expenses increased 16% driven by investment in COVID-19 therapy.

Moving down the P&L operating expenses grew 3% compared to the same quarter last year.

Marketing selling and administrative expenses were down 8% as reduced activity due to COVID-19, and productivity measures offset investments in key growth products.

R&D expenses increased 16% driven by investment and COVID-19 therapies.

Josh Smiley: Net of COVID-19 expenses, baseline R&D was relatively flat, and total operating expenses decreased over 5% compared to Q4 2019. Operating income increased 53% compared to Q4 2019, as revenue growth far outpaced expense growth, resulting in operating income as a percent of revenue of 33% for the quarter. Excluding the impact of COVID-19 therapies, operating income grew 34% in the quarter, and the operating margin for our base business was 32.7% for Q4. Other income and expense was $477 million this quarter, compared to $206 million in Q4 2019, driven by investment gains on public equity. As we noted in our Q3 earnings call, beginning in 2021, we will exclude the gains or losses due to equity investments from our non-GAAP measures. We have posted a supplemental investor workbook for Q4 on that basis to enable you to have an apples-to-apples comparison as we move into 2021 and compare to our 2020 non-GAAP performance. Our tax rate was 14.4%, an increase of 180 basis points compared with the same quarter last year, driven primarily by net discrete tax items in both quarters.

Net of COVID-19 expenses baseline R&D was relatively flat and total operating expenses decreased over 5% compared to Q4 2019.

Operating income increased 53% compared to Q4 2019 as revenue growth far outpaced expense growth, resulting in operating income as a percentage of revenue of 33% for the quarter.

Excluding the impact of COVID-19 therapies operating income grew 34% and the quarter and the operating margin for our base business with.

It was 32, 7% for Q4.

Other income and expense was income of $477 million this quarter compared to income of $206 million and Q4 2019, driven by investment gains on public equities.

As we noted in our Q3 earnings call beginning in 2021, we will exclude the gains or losses due to equity investments from our non-GAAP measures.

We have posted a supplemental investor workbook for Q4 on that basis to enable you to have an apples to apples comparison as we move into 2021 and compare it to 2020 non-GAAP performance.

Our tax rate was 14, 4% and increase of 180 basis points compared with the same quarter last year, driven primarily by net discrete tax items in both quarters.

Josh Smiley: At the bottom line, net income increased 58%, while earnings per share increased 59%. Net of COVID-19 therapies, net income and earnings per share increased 43%. Moving to slide eight, you can see these same non-gap measures for the full year.

At the bottom line net income increased 58% while earnings per share increased 59% net of COVID-19 therapies net income and earnings per share increased 43%.

Moving to slide eight you can see these same non-GAAP measures for the full year and.

Josh Smiley: In spite of the ongoing demand impact from the pandemic, we grew the top line at 10% or 6% excluding BAML and NIVIMAX. Excluding COVID-19 therapies, our operating margin expanded by 300 basis points, contributing to 30% EPS growth while continuing to invest behind our newer products and pipelines. On slide nine, we quantify the effect of price and volume on revenue growth. As mentioned earlier, worldwide revenue grew 20% in constant currency during Q4, driven by strong volume growth of 24%, partially offset by price. Foreign exchange had a modest impact on revenue growth.

In spite of the ongoing demand impact from the pandemic. We grew the top line at 10% or 6%, excluding Bambi and never map, excluding COVID-19 therapies, our operating margin expanded by 300 basis points contributing to 30% EPS growth, while continuing to invest behind our newer products and pipeline.

On slide nine we quantify the effect of price rate and volume and revenue growth.

As mentioned earlier worldwide revenue grew 20% and constant currency during Q4, driven by strong volume growth of 24%, partially offset by price.

Foreign exchange had a modest impact on revenue growth.

Josh Smiley: U.S. revenue grew 31% compared to the fourth quarter of 2019, and 7% excluding BAMLIN-IVMAP. For the base business, volume growth of 11% was led by Trulicity, Taltz, and Verzenia. Pricing was a 5% drag on U.S. revenue growth this quarter, driven primarily by increased rates to maintain excellent access, partially offset by modest list price increases, largely for diabetes, and to a lesser extent by changes to estimates for rebates and discounts for TALs, which was driven by the access win at ESI. Segment mix was not a major driver of U.S. price performance in the fourth quarter, as increased utilization in more highly rebated government segments was offset by lower utilization in the 340B segment, primarily for Trulicity and Humalog.

U S revenue grew 31% compared to the fourth quarter of 2019, and 7%, excluding Bambi and never map.

For the base business volume growth of 11% was led by <unk> and <unk>.

Pricing was a 5% drag on U S revenue growth this quarter, driven primarily by increased rates to maintain excellent access partially offset by modest list price increases largely for diabetes and to a lesser extent by changes to estimates for rebates and discounts for <unk>, which was driven by the access win at ESI.

Segment mix was not a major driver of U S price performance and the fourth quarter as increased utilization and more highly rebated government segments was offset by lower utilization and the 340 <unk> segment, primarily for <unk> and human log.

Josh Smiley: Like Q4, the full impact of price was also a headwind of 5%, consistent with our 2020 expectations for a mid-single-digit net price decline in the US. While the midterm price trends are stable at present, given the increasing variability in payer mix, we expect to see quarterly variability in our U.S. price impact during the course of 2021. Moving to Europe, revenue grew 12% in constant currency driven by 9% volume growth and a favorable impact from price. Volume growth was led by Olympta, Trulicity, and Talt.

Like Q4, the full impact of price was also a headwind of 5% consistent with our 2020 expectations for a mid single digit net price decline and the U S.

While the mid term price trends are stable at present, given the increasing variability and payer mix, we expect to see quarter with quarterly variability and our U S price impact during the course of 2021.

Yeah.

Moving to Europe revenue grew 12% and constant currency, driven by 9% volume growth and a favorable impact from price.

Volume growth was led by Alimta and <unk> and pulse.

Josh Smiley: We're pleased with the continued uptake of our key growth products across Europe and are looking forward to continued strong growth in 2021. In Japan, revenue decreased 10% in constant currency, driven primarily by decreased volume of post-patent expiry products Cialis and Porteo, as well as by a modest pricing headwind due to the government-mandated price decreases that went into effect in March 2020. Japan is experiencing the impact of counter-cyclical patent expiries with Cialis, Stratera, and Cymbalta LOEs impacting growth in 2020 and likely in 2021. In China, revenue grew 31% in constant currency, driven by 57% volume growth driven by TIVET and partially offset by pricing concessions for the government-sponsored programs, which drove TIVET's significant volume growth. We are excited about the momentum of our China oncology business, and we are looking forward to continued growth for Tivit and the launch uptake for Virginia. We're also pleased that Trulicity and Illumiant were added to the NRDL as of January 2021.

We're pleased with the continued uptake of our key growth products across Europe and are looking forward to continued strong growth in 'twenty and 'twenty one.

And Japan revenue decreased 10% and constant currency, driven primarily by decreased volume and post patent expiry products see Allison portfolio as well as by a modest pricing headwind due to the government mandated price decreases that went into effect in March 2020.

Japan is experiencing the impact of countercyclical patent expertise with C. Alice for Terra and Cymbalta Eloise impacting growth in 'twenty, and 'twenty and likely in 2021.

And China revenue grew 31% and constant currency, driven by 57% volume growth driven by timing and partially offset by pricing concessions for the government sponsored programs, which drove type of significant volume growth.

We are excited about the momentum of our China oncology business and we're looking forward to continued growth for <unk>.

And the launch uptake from present here. We're also pleased that <unk> and El Limn Lumia were added to the NR D. L. As of January 2021.

Josh Smiley: Revenue in the rest of the world increased 6% in constant currency, driven by strong volume from Trulicity and Illumion, as well as 3 percentage points of growth coming from BAMLMAB sales to Canada. The same information for our full year revenue is at the bottom of the slide. Next, shown on slide 10, key growth products continue to drive impressive volume growth. These newer medicines delivered nearly 14 percentage points of growth this quarter, with Bamlanivimab also contributing roughly 14 percentage points of growth. The strong volume growth in our key products was partially offset by post-LOE products, as well as by reduced Trigenta royalties from the restructuring of our alliance with Baron Greenwald, but this impact will sunset as we move into 2021.

Revenue and the rest of the world increased 6% and constant currency driven by strong volume from <unk>, and Illumina and as well as three percentage points of growth coming from Bam lament and mat sales to Canada.

The same information for our full year revenue was at the bottom of the slide.

As shown on slide 10, our key growth products continue to drive impressive volume growth.

And as newer medicines delivered nearly 14 percentage points of growth this quarter with bandwidth and of the Mab also contributing roughly 14 percentage points of growth.

The strong volume growth and our key products was partially offset by post LOE products as well as by reduced <unk> royalties from the restructuring of our alliance with bear and Greenville.

This impact will sunset as we move into 'twenty and 'twenty one.

Slide 11 highlights the contributions of our key growth products in total these brands generated over $3 6 billion and revenue this quarter, making up 55% of our base revenue.

Josh Smiley: Slide 11 highlights the contributions of our key growth products. In total, these brands generated over $3.6 billion in revenue this quarter, making up 55% of our base revenue. Amidst the ongoing challenges presented by the pandemic, we are encouraged by the performance of our key growth products in 2020. Trulicity grew 23%, adding nearly a billion dollars last year to finish with over $5 billion in revenue while outgrowing the GLP-1 injectable class in the U.S. and exiting 2020 with a nearly 47% share of total prescriptions amidst the re-acceleration of growth for injectable GLP-1. Tolls grew 31% to nearly $1.8 billion in revenue, outgrowing the U.S. market in both dermatolog Jardians crossed $1 billion in sales for Lilly's share of revenue in 2020, ending the year at nearly 60% of total SGLT2 prescriptions in the U.S. and driving encouraging growth for the class as we look forward to regulatory action for HFREF and the readout for HFPAS this year.

Amidst the ongoing challenges presented by the pandemic. We are encouraged by the performance of our key growth products and 2020.

Drew lets see grew 23%, adding nearly $1 billion last year to finish with over $5 billion and revenue while outgrowing. The G. L. P. One injectable class and the U S and exiting 2020 with nearly 47% share of total prescriptions amidst the re acceleration of growth for injectable G. L. P ones.

<unk> grew 31% and nearly $1 $8 billion and revenue outgrowing the U S market and both dermatology and rheumatology and are entering 2021 with best in class access that provides a strong foundation for long term growth.

Jordi and crossed $1 billion and sales for Lilly share of revenue and 2020, ending the year at nearly 60% of total S. G. L. T. Two prescriptions and the U S and driving encouraging growth for the class as we look forward to the regulatory action or have RAF and the readout, perhaps past this year.

And <unk> revenue grew nearly 60% and 2020 to over $900 million significantly.

Gently outgrowing the CDK four and six class growing six percentage points and total prescriptions, while nearly doubling new to brand share of market on the heels of positive data readouts for overall survival in metastatic breast cancer, and 2019 and early breast cancer and 2020.

Our key growth products will continue to drive Lilly strong growth outlook in 2021.

On slide 12, we provide and update on capital allocation.

In 2020, we invested over $8 billion to drive our future growth through a combination of business development capital expenditures and after tax investment and R&D in.

Josh Smiley: And Vresenio revenue grew nearly 60% in 2020 to over $900 million, significantly outgrowing the CDK 4 and 6 classes, growing six percentage points in total prescriptions while nearly doubling new-to-brand share of the market on the heels of positive data readouts for overall survival in metastatic breast cancer in 2019 and early breast cancer in 2020. Key growth products will continue to drive Lilly's strong growth outlook in 2021. We provide an update on capital allocation. In 2020, we invested over $8 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 $3.2 billion to shareholders via dividends and share repurchases.

In addition, we returned approximately $3 $2 billion to shareholders via dividends and share repurchases.

As mentioned earlier earlier, we also announced a 15% dividend increase for the third consecutive year, demonstrating our confidence and the outlook for the company.

We are focused on utilizing the strong cash flow our business generates to develop the next wave of new medicines through both internal and external sources as highlighted by the recently completed acquisition of prevail therapeutics.

We'll remain active and assembly and assessing bolt on acquisitions or in licensing, where we can create shareholder value and enhance our future growth prospects.

Turning to our 2021 financial guidance on slide 13.

We are affirming our non-GAAP guidance and we've updated our GAAP guidance to reflect the impact of the precision Biosciences, Maris and Asahi could say agreements, which with reported earnings per share for 2021, now expected to be and the range of $7 and 10 to $7 75.

The impact of the recently completed acquisition of prevail therapeutics will be updated on our next quarterly call and will only impact Lilly's GAAP guidance for 2021, there will be no change to our 2021 guidance for R&D expense, our non-GAAP EPS as a result of this transaction.

Josh Smiley: As mentioned earlier, we also announced a 15% dividend increase for the third consecutive year, demonstrating our confidence in the outlook for the company. We are focused on utilizing the strong cash flow our business generates to develop the next wave of new medicines through both internal and external sources, as highlighted by the recently completed acquisition of Prevail Therapeutics. We will remain active in assessing bolt-on acquisitions or in licensing, where we can create shareholder value and enhance our future growth prospects. Turning to our 2021 financial guidance on slide 13. We are affirming our non-GAP guidance, and we've updated our GAP guidance to reflect the impact of the Precision Biosciences, MARIS, and Asahi-Casse agreement, which with reported earnings per share for 2021 now expected to be in the range of $7.10 to $7.75.

As we move into this new year and as we noted on our guidance call. We continue to experience suppressed demand due to the pandemic with several key therapeutic classes still below our pre COVID-19 baseline.

We remain committed to ensuring we are doing our part to limit COVID-19 exposure for physicians patients and our employees as cases surge and the U S and around the world.

At present, most of our HCP interactions and the U S and many other major markets are virtual.

While this may have a near term impact on new to brand performance. We continue to believe our approach is the appropriate posture as we support health care professionals navigating the ongoing pandemic and driving broad vaccination to enable a return to normalcy for health care systems, and the second half of the year.

In addition, our year end 2020 inventory build was approximately $120 million higher than Q4, 2019, which was driven by 2019, having a lower than typical year and stocking and it's primarily impacts our diabetes products as well as pulse and alimta.

Josh Smiley: The impact of the recently completed acquisition of Prevail Therapeutics will be updated on our next quarterly call and will only impact Lilly's GAP guidance for 2021. There will be no change to our 2021 guidance for R&D expense or non-GAAP EPS as a result of this transaction. As we move into this new year, and as we noted on our guidance call, we continue to experience suppressed demand due to the pandemic, with several key therapeutic classes still below their pre-COVID baseline. We remain committed to ensuring we are doing our part to limit COVID-19 exposure for physicians, patients, and our employees as cases surge in the U.S. and around the world. At present, most of our HCP interactions in the U.S. and many other major markets are virtual.

We anticipate this inventory will burn off in Q1, and 2021 like normal historical patterns.

As I noted on our guidance call. We also experienced significant COVID-19 related stocking benefit are roughly $250 million in Q1, 'twenty and 'twenty.

Given those divergent year over year inventory trends, we expect inventory patterns will have a negative impact on revenue growth and operating margin expansion in the first quarter of 2021.

Despite these challenges we remain confident and our full year outlook for 2021 and have increased confidence and our mid and long term outlook given our recent high quality pipeline readouts.

And so now I'll turn the call over to Dan to highlight our progress and R&D.

Thanks, Josh we had and exciting start to 2021 and as we read out positive results, Virginia, and a map and the phase II Trail Blazer Al study.

Josh Smiley: While this may have a near-term impact on new-to-brand performance, we continue to believe our approach is the appropriate posture as we support healthcare professionals navigating the ongoing pandemic and driving broad vaccination to enable a return to normalcy for healthcare systems in the second half of the year. In addition, our year-end 2020 inventory build was approximately $120 million higher than Q4 2019, which was driven by 2019 having a lower than typical year-end stocking This primarily impacts our diabetes products as well as Pulse and Olympda.

Lilly has spent more than 30 years dedicated to finding solutions for Alzheimer's disease, and we are proud of our progress and advancing the science and providing hope for patients and their families suffering from this devastating disease.

On Slide 14, you can see our key takeaways from this exciting trial, we're encouraged by the strong efficacy results where in a relatively small study we overcame the scale of the study with precision on patient enrollment and a very potent and effective plaque clearing drug.

Becoming the first ever disease modification study to hit statistical significance on its primary endpoints.

Dan Skovronsky: We anticipate this inventory will burn off in Q1 2021, like the normal historical pattern. As I noted on our guidance call, we also experienced a significant COVID-19 related stocking benefit of roughly $250 million in Q1 2020. Given those divergent year-over-year inventory trends, we expect inventory patterns will have a negative impact on revenue growth and operating margin expansion in the first quarter of 2021. Despite these challenges, we remain confident in our full-year outlook for 2021 and have increased confidence in our mid- and long-term outlook given our recent high-quality pipeline readout. So now we'll turn the call over to Dan to highlight our progress in R&D. Thanks, Josh.

With the slowing of declined by 32% relative to placebo as measured by the integrated Alzheimer's disease rating scale.

The address is a clinical composite tool combining two well accepted measures and Alzheimer's disease, Adas Cog and 13 for cognition and Adcs ADL instrumental activities of daily living for function.

While the study was not powered for assessing multiple endpoints, we're very encouraged by the consistent improvements observed on all prespecified secondary endpoints for cognition and function compared to placebo, So Jeanette and map did not reach statistical significance on every secondary endpoint.

The consistency across time points and across statistical methods was very encouraging, particularly the disease progression model, which is becoming more accepted by the scientific community.

Dan Skovronsky: We had an

Dan Skovronsky: We had an exciting start to 2021 as we read out positive results for Genetimab in the Phase 2 Trailblazer Owl Study. Lilly has spent more than 30 years dedicated to finding solutions for Alzheimer's disease, and we are proud of our progress in advancing the science and providing hope for patients and their families suffering from this devastating disease. On slide 14, you can see our key takeaways from this exciting trial. We are encouraged by the strong efficacy results, where in a relatively small study, we overcame the scale of the study with precision on patient enrollment and a very potent and effective plaque-clearing drug, becoming the first ever disease modification study to hit statistical significance on its primary endpoint, with a slowing of decline by 32% relative to placebo as measured by the Integrated Alzheimer's Disease Rating Scale. ADDRESS is a clinical composite tool combining two well-accepted measures in Alzheimer's disease, 8S-COG13 for cognition and ADCSI-ADL, instrumental activities of daily living, for function.

In addition, we saw rapid and deep amyloid plaque clearance per day net of Mab treated patients who on average showed an 84 central Lloyd reduction of amyloid plaque and 76 weeks compared to a baseline of 108 central Lloyds.

Since below twenty-five center Lloyds is a negative amyloid scan. This means that the average day nano mab treated patient had a negative skin by the end of the study.

And finally, the safety profile was consistent with observations from phase one.

Amyloid related imaging abnormalities or ARIA were observed which is consistent with plaque clearing antibody and the genetic mab treatment group area and E occurred and 27% of treated participants with and overall incidence of 6% of patients experiencing symptomatic Aria E.

We look forward to sharing the full results of Trailblazer ALS at the a D. P. D 2021 virtual meeting on March 13th and we plan to have and Investor call at 11, a M on March 15th.

Dan Skovronsky: While the study was not powered to assess multiple endpoints, we are very encouraged by the consistent improvements observed on all pre-specified secondary endpoints for cognition and function compared to placebo. However, Denetimab did not reach statistical significance on every secondary endpoint. The consistency across time points and across statistical methods was very encouraging, particularly the disease progression model, which is becoming more accepted by the scientific community. In addition, we saw rapid and deep amyloid plaque clearance in Denenumab-treated patients who, on average, showed an 84-centiloid reduction of amyloid plaque at 76 weeks, compared to a baseline of 108 centiloids. Since below 25 centiloids is a negative amyloid scan, this means that the average genetomab-treated patient had a negative scan by the end of the study. Finally, the safety profile was consistent with observations from Phase 1. Amyloid-related imaging abnormalities, or ARIA, were observed, which is consistent with plaque-clearing antibodies.

We hope to reproduce and extend these exciting findings and our second pivotal Donato Mab trial Trailblazer ALS, two and 18 months study, which began enrolling patients last year at.

And at present and the study is expected to complete enrollment later this year with nearly twice as many patients as the first to Trailblazer trial.

We will be engaging regulators to finalize the patient numbers and statistical plans for trailblazer too and we hope the exciting results from Trailblazer, one will increase patient interest and expedite enrollment.

Trailblazer two was designed last year prior to Trailblazer one data.

And while the design is similar at that time, we incorporated a few differences including <unk>.

C D or some other boxes was moved to the primary endpoint for this larger trial, while a dress becomes a key secondary endpoints.

We added a high Tao group.

And we include a blood based screening or enrollment using the pea titled Biomarker.

Dan Skovronsky: In the Denenumab treatment group, ARIA E occurred in 27% of treated participants, with an overall incidence of 6% of patients experiencing symptomatic ARIA E. We look forward to sharing the full results of Trailblazer Owls at the ADPD 2021 virtual meeting on March 13th, and we plan to have an investor call at 11am on March 15th. We hope to reproduce and extend these exciting findings in our second pivotal Denanamab trial, Trailblazer ALS-2, an 18-month study which began enrolling patients last year. At present, the study is expected to complete enrollment later this year with nearly twice as many patients as the first trailblazer trial. We'll be engaging regulators to finalize patient numbers and statistical plans for Trailblazer 2, and we hope the exciting results from Trailblazer 1 will increase patient interest and expedite enrollment. Trailblazer 2 was designed last year prior to the data from Trailblazer 1.

We look forward to sharing the trailblazer ALS data and discussing next step for genetic map with regulators.

Moving to slide 15, as we discussed in depth on Tuesday's call There've been a number of developments for our COVID-19 antibodies since our last earnings call, which I will highlight only briefly.

No.

In November the FDA granted emergency use authorization for Bam whenever mab as a treatment for COVID-19, we also submitted a request for EUA for bandwidth never Mab and after seven map together, which remains under review based on phase II data from the Blaze one trial.

Since the EUA for Bam whenever map, we've shipped approximately 1 million doses and will have over 1 million additional doses available through mid 2021 for use around the world.

This week the U S government committed to purchase 500000 of those additional doses by the end of March.

Should any UAE be granted for bama never Mab and enter separate back together, we expect to be able to supply in collaboration with Amgen and up to 1 million doses of up to seven Mab for administration with Bama and never Mab together by mid 2021, with 250000 doses available already and the first quarter of this year.

Dan Skovronsky: And while the design is similar, at that time, we incorporated a few differences, including the CDR sum of the boxes was moved to the primary endpoint for this larger trial, while ADRAS became a key secondary endpoint. We added a high tau group. And we include a blood-based screening for enrollment using the PTAL biomarker. We look forward to sharing the Trailblazer ALS data and discussing the next step for DNNMAP with regulators. Moving to slide 15.

And just the past eight days, we've shared phase III data from the Blaze to prevention trial, we're been live and map showed up to and 80% reduction of risk of COVID-19 for nursing home residents.

Phase III data from the <unk> one trial for at the seven map together with family and have a map, which showed a 70% reduction and hospitalization or death among high risk COVID-19 patients providing further support for the EU a request for their joint administration.

Dan Skovronsky: As we discussed in depth on Tuesday's call, there have been a number of developments for COVID-19 antibodies since our last earnings call, which I will highlight only briefly. In November, the FDA granted emergency use authorization for bamlanivimab as a treatment for COVID-19. We also submitted a request for EUA for bamlanivimab and etesevimab together, which remains under review based on Since the EUA for Bamlanivimab, we've shipped approximately 1 million doses and will have over 1 million additional doses available through mid-2021 for use around the world. This week, the U.S. government committed to purchase 500,000 of those additional doses by the end of March. Should an EUA be granted for BAMLIN-IVMAB and anti-sevumab together, we expect to be able to supply, in collaboration with Amgen, up to 1 million doses of anti-sevumab for administration with BAMLIN-IVMAB together by mid-2021, with 250,000 doses available already in the first quarter this year.

Importantly, there were no COVID-19 related deaths and the antibody treatment arms from these two pivotal datasets.

After having seen these results Lilly has decided we will no longer conduct placebo controlled studies and high risk patients.

Initial results from the ongoing Blaise for phase II trial provide viral load and PK and PD data, which demonstrated that lower doses, including Bama and live and up 700 milligrams and enter seven Mab 1400 milligrams together are similar to the 2800 milligram doses of those antibodies administered together.

We expanded the blaze for trial to also evaluate the administration of Bama and never Mab with Vir 70, 831, and collaboration with Bayer and GSK reinforcing our commitment to collaborate across the industry to treat current and future streams of COVID-19.

Dan Skovronsky: In just the past eight days, we've shared phase three data from the Blaze 2 prevention trial, where Bemlan-Evimab showed up to an 80% reduction in risk of COVID-19 for nursing home residents. Additionally, phase 3 data from the Blaze 1 trial at the Sevimab Center, together with BAML and Evimab, which showed a 70% reduction in hospitalization or death among high-risk COVID Importantly, there were no COVID-19 related deaths in the antibody treatment arms of these two pivotal data sets.

And yesterday, we received authorization from the F D. A to update preparation and administration instructions and response to feedback from frontline nurses and doctors to enable flexibility, which can reduce infusion times considerably.

These updates can shorten infusion times to as little as 16 minutes.

We're pleased with the potential impact or neutralizing antibodies can have and we're working diligently to make them available to patients around the world.

While the exciting progress with the net of Mab and the COVID-19, neutralizing antibodies has dominated lilly's news and the past few weeks, we have continued to robustly advance the rest of our pipeline slide.

Dan Skovronsky: After having seen these results, Lilly has decided that we will no longer conduct placebo-controlled studies in high-risk patients. Initial results from the ongoing Blaze 4 Phase 2 trial provide viral load and PKPD data, which demonstrate that lower doses, including Bamlanivimab 700 mg and Etesevimab 1400 mg together, are similar to the 2800 mg doses of those antibodies administered together. We expanded the Blaze IV trial to also evaluate the administration of BAMLIN-IVMAB with VIIR 7831 in collaboration with VIIR and GSK, reinforcing our commitment to collaborate across the industry to treat current and future strains of COVID-19. And yesterday, we received FDA authorization to update preparation and administration instructions in response to feedback from frontline nurses and doctors to enable flexibility, which can reduce infusion times considerably. These updates can shorten infusion times to as little as 16 minutes.

Slide 16 shows select pipeline opportunities as of January 27 positive movement since our last earnings call includes.

And the submissions, Dave noted for Jarden and Brasilia.

The submission of Illumina and for the treatment of COVID-19, and Japan.

The initiation of a phase III trial for impact will close and and post myocardial infarction patients the movement of two pain assets into phase two.

And the introduction of eight new phase one assets, including our first clinical assets from two new modalities for Lilly the SA RNA molecule <unk> three from our collaboration with di Sirna and two gene therapy molecules from prevail.

In fact, we ended 2020 with a total of 17, new phase one starts for the year, surpassing 2019 total of 16 first human doses, which was the highest number of new clinical starts for Lilly and a decade.

Considering the significant challenges we faced in 2020, including temporarily stopping the initiation of new clinical study or studies.

This is a remarkable achievement and speaks to the resilience and determination of our R&D organization during challenging times.

Dan Skovronsky: We're pleased with the potential impact our neutralizing antibodies can have, and we're working diligently to make them available to patients around the world. While the exciting progress with Nanomab and the COVID-19 neutralizing antibodies has dominated Lilly's news in the past few weeks, we have continued to robustly advance the rest of our pipeline. Slide 16 shows select pipeline opportunities as of January 27th. Positive movement since our last earnings call includes the submissions, Dave noted, for Jardians and Bresenio. The submission of Illumiant for the treatment of COVID-19 in Japan.

Moving to slide 17, we show a final tally of how we finished 2020 versus the key events that we expected to occur.

Since our guidance call in mid December we had submissions for cell per cabinet for non small cell lung cancer and Japan.

<unk> for heart failure for reduced ejection fraction and the United States.

And <unk> from early breast cancer, and the United States.

The sea of Blue Checkmark emphasizes the sheer quantity of pipeline advancements in 2020.

However, my takeaway from your past is that I am delighted with the quality represented here.

<unk> potentially practice changing data for type two diabetes.

Dan Skovronsky: The initiation of a phase 3 trial for empagliflozin in post myocardial infarction patients. The movement of two pain assets into phase two, and the introduction of eight new Phase 1S, including our first clinical assets from two new modalities per Lilly, the siRNA molecule AngPTL3 from our collaboration with Dicerna and two gene therapy molecules from Prevail. In fact, we ended 2020 with a total of 17 new phase 1 starts for the year, surpassing 2019's total of 16 first human doses, which was the highest number of new clinical starts for Lilly in a decade. Considering the significant challenges we faced in 2020, including temporarily stopping the initiation of new clinical studies, this is a remarkable achievement. This speaks to the resilience and determination of our R&D organization during challenging times.

For hematologic tumors.

For early breast cancer.

The launch of a first in class Ret inhibitor.

And as well as the emergency use authorizations for two medicines to help address the COVID-19 pandemic.

We're proud of the significant achievements delivered in 2020.

As we transition into 'twenty and 'twenty, one I'd like to note that Joshua linker will be leaving his position as CEO of blocks of oncology at Lilly to explore other interested endeavors.

We're grateful to Josh for his contributions to human health both of them OXXO and it is time with Lilly, we look forward to working with him and a consulting role.

I'm very pleased to announce that Jacob and Arden is assuming the CEO role continuing to work alongside mission and and David Hyman, ensuring leadership continuity and maintaining the strategy and operating model for laakso oncology at Lilly and <unk>.

<unk> is a very highly talented leader and this move allows them to continue to grow his responsibilities for the benefit of Lilly and <unk>.

Moving to slide 18, you can see the expected events for 'twenty and 'twenty, one, including the banana map data and upcoming disclosure I previously mentioned.

Dan Skovronsky: Moving to slide 17, we show a final tally of how we finished 2020 versus the key events that we expected to occur. Since our guidance call in mid-December, we had submissions for cell percatenib for non-small cell lung cancer in Japan, Jardians for Heart Failure for Reduced Ejection Fraction in the United States, and Virgenio for early breast cancer in the United States.

A number of other major readouts are expected this year.

Including.

The remainder of the tours appetite phase III program, where we're looking forward to building on the surpass one data we disclosed late last year.

The phase II readout, and <unk> 10, a map our anti Tau antibody for early Alzheimer's in a trial similar and designed to the Trailblazer trial that just read out.

Several potential phase III readouts and immunology.

And the results of impact will flow and perhaps Pat.

Based on the recent high quality pipeline data readouts for genetic Mab suraj appetite and locks a third three O. Five we entered 2021 optimistic by the impact. These optimistic these assets could have on patients and we're focused on discovering and developing more new medicines to help patients.

Dan Skovronsky: The sea of blue check marks emphasizes the sheer quantity of pipeline advancements in 2020. However, my takeaway from the past year is that I am delighted with the quality represented here, including potentially practice-changing data for type 2 diabetes, for hematologic tumors, and for early breast cancer. The launch of a first-in-class Reddit, as well as the emergency use authorizations for two medicines to help address the COVID-19 pandemic. We're proud of the significant achievements delivered in 2020. As we transition into 2021, I'd like to note that Josh Belenker will be leaving his position as CEO of Loxo Oncology at Lilly to explore other interests and endeavors. We're grateful to Josh for his contributions to human health, both at Loxo and in his time with Lilly.

Now I'll turn the call back over to Dave for some closing remarks.

Thanks, Dan before we go to Q&A, let me briefly sum up the progress we've made in 'twenty and 'twenty.

2020 was a remarkable year as.

As Lilly work to fulfill its promise and its purpose and new and important ways.

In addition to many contributions and the fight against the global pandemic, our business grew 10% and 2020.

Driven by strong volume growth from our key growth products launched since 2014.

These products now account for more than half of our revenue for the first time.

Dan Skovronsky: We look forward to working with him in a consulting role. I'm very pleased to announce that Jacob Naarden is assuming the CEO role, continuing to work alongside Nishananda and David Hyman, ensuring leadership continuity and maintaining the strategy and operating model for Loxo Oncology at Lilly. Jake is a very highly talented leader, and this move allows him to continue to grow his responsibilities for the benefit of Lilly and Loxley.

We continued our productivity journey, delivering nearly 300 basis points of operating margin expansion for our base business we.

We made significant progress on our innovation based strategy with lots of three or five zip and tide and Brasilia and early breast cancer readouts delivering potential category changing data.

January is don't own a mab topline success was the first in Alzheimers.

With <unk> for bandwidth isn't mab and Illumina and think about COVID-19, and bolt on acquisitions of Derma IRA and prevail book ending the year. The past 12 months have been and exceptional example of Lilly success and leveraging internal.

Dave Ricks: Moving to slide 18, you can see the expected events for 2021, including the DNNMAP data and upcoming disclosure I previously mentioned. A number of other major readouts are expected this year, including the remainder of the Terzapatite Phase 3 program, where we are looking forward to building on the Surpass One data we disclosed late last year. The Phase 2 readout for Zagotenimab, our anti-tau antibody for early Alzheimer's, in a trial similar in design to the Trailblazer trial that just read out. Several potential phase 3 readouts in immunology, and the results of empagliflozin for Heft-Pak. Based on the recent high-quality pipeline data readouts for Genetimab, Terzapatide, and Loxa-305, we enter 2021 optimistic about the impact these assets could have on patients, and we're focused on discovering and developing more new medicines to help patients. Now I turn the call back over to Dave for some closing.

And external innovation.

We returned nearly $3 $2 billion to shareholders via the dividend and share repurchase.

And we will have another meaningful dividend increase, which we announced in December reflecting significant confidence and the ongoing strength of our business.

All of this was accomplished against the headwind of a pandemic that is still raging.

Well, the new year does not free us from that near term challenge our long term outlook has never been stronger.

This concludes the prepared remarks, and I'll turn the call over to Kevin for the Q&A.

Thanks, David we'd like to take questions from as many callers as possible. So we ask that you limit your questions to two per caller.

Tony Please provide the instructions for the Q&A session and then we're ready for the first caller.

Thank you, ladies and gentlemen, if you wish to ask a question. Please press one and then zero on your telephone keypad.

You may withdraw your question at any time by repeating the ones you're old come out.

Our first question comes from the line of Geoff Meacham with Bank of America. Please go ahead.

Okay. Thanks morning, everyone. Thanks for the question.

Just have a couple.

Dave Ricks: Well, thanks, Dan. Before we go to Q&A, let me briefly sum up the progress we made in 2020. 2020 was a remarkable year as Lilly worked to fulfill its purpose in a new and important way. In addition to many contributions in the fight against the global pandemic, our business grew 10% in 2020, driven by strong volume growth from our key growth products launched since 2014. These products now account for more than half of our revenue for the first time. We continued our productivity journey, delivering nearly 300 basis points of operating margin expansion for our base business. We made significant progress on our innovation-based strategy with LOXO305, Terzipatide, and Virginio early breast cancer readouts, delivering potential category-changing data. Well, January's DononaMab top-line success was a first in all... With EUAs for Bamlanivimab and Illumia to combat COVID-19 and bolt-on acquisitions of Dermyra and Preva We return nearly $3.2 billion to shareholders via the dividend and share repurchase. And we will have another meaningful dividend increase, which we announced in December, reflecting significant confidence in the ongoing strength of our business. All of this was accomplished against the headwind of a pandemic that is still raging.

Dan on AR, and Donana, Ma'am, I know youre planning on having a regulatory discussions, but but beyond expanding trail Bayer Trailblazer alts too is it reasonable to start a third study just to expand the safety database and the treatment experience.

And then Josh you mentioned, you're still seeing and commercial impact from Covid. What would you say other franchises that were mostly affected in 'twenty and 'twenty and and maybe just review your assumptions for normalization of some of those are in 'twenty and 'twenty one. Thank you.

Thanks, Jeff and Jeff.

[noise]. Thanks, Jeff. Your question is whether we would consider starting a third day net them have studied and proved the safety database and no we haven't considered that at present.

And of course, as we said our our next step is to discuss the dataset, we have with regulators I think if we determined that we need more patients the place to do that as is the trailblazer two study.

With respect to additional studies I think there could be opportunities to explore other populations and we're working through those possibilities right now, but we don't see that that's necessary for this current population.

Thanks, Jeff I think when we look across our therapeutic areas are we at its relatively consistent at this point that we're we're still not quite back to ER, new to brand prescriptions and in key areas like immunology pain and diabetes, although the the diabetes numbers are looking stronger.

Kevin Hearn: While the new year does not free us from that near-term challenge, our long-term outlook has never been stronger. This concludes my prepared remarks, and I'll turn the call over to Kevin for the Q&A. 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. Tony, please provide the instructions for the Q&A session, and then we're ready for the first caller. Thank you, ladies and gentlemen. If you wish to ask a question, please press 1 then 0 on your telephone. You may withdraw your question at any time by repeating the one... Our first question comes from Geoff Meacham with Bank of America. Please go ahead.

As we as we get here into January but I think we're still seeing some some suppressed demand.

Physicians have a I think and in most markets and figured out how to see patients safely and we're seeing nothing like what we saw back in April.

April and May and.

And the U S. So I think we just have to be cautious as we get into the first quarter and and you know realize that the more complex treatments.

You do have some higher degree of out of variability against them and that includes started starting new patients in areas like like migraine I think maintenance has been good throughout the day throughout the pandemic. So we do expect it you know as we get through the first half of this year, we will see return to fully normal levels.

Kevin Hearn: Okay, thanks. Good morning, everyone. Thanks for the question. Just have a couple, Dan. On Donanimab, I know you're planning on having regulatory discussions, but beyond expanding Trailblazer ALTS 2, is it reasonable to start a third study just to expand the safety database and the treatment experience? And then, Josh, you know, you mentioned you're still seeing commercial impact from COVID. What would you say are the franchises that were mostly affected in 2020 and, maybe just review your assumptions for the normalization of some of those in 2021?

But I think it's fair to assume that in the first quarter will still be a you know and many of the many of the therapeutic areas a little bit below our pre COVID-19 baselines in terms of new prescription starts.

Okay, Great and then thanks guys.

And I was mentioning Jeff as well derm, because I think that one also you see some suppression and new patient starts not affecting our share or anything, but just the overall volume and the category.

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

Thank you. Our next question comes from Tim Anderson with Wolfe Research.

Geoff Meacham: Thank you. This is Geoff and Geoff.

Thank you a couple and banana mab.

Geoff Meacham: Thanks, Geoff. Your question is whether we'd consider starting a third DNNMAP study to improve the safety database. No, we haven't considered that at present. Of course, as we said, our next step is to discuss the data set we have with regulators. I think if we determine that we need more patients, the place to do that is the Trailblazer 2 study. With respect to additional studies, I think there could be opportunities to explore other populations, and we're working through those possibilities right now, but we don't see that necessary for this current population.

Investors are naturally wondering what the odds are that you can file for approval based on this first phase through a phase two trial to me it seems highly unlikely given the size of the trial and the different subgroups, but just wondering if you can share your latest thoughts on that and.

And then Dan.

And your view of the need to continue to knock down and what is sometimes described and the industry is toxic oligomers, which is what you might achieve like giving monoclonal <unk> are chronically well after patients have already seen plaque normalization.

Josh Smiley: Thanks, Geoff. I think when we look across our therapeutic areas, it's relatively consistent at this point that we're still not quite back to new-to-brand prescriptions in key areas like immunology, pain, and diabetes, although the diabetes numbers are looking stronger, you know, as we get here into January. But I think we're still seeing some suppressed demand. Physicians have, I think, in most markets, figured out how to see patients safely, and, you know, we're seeing nothing like what we saw back in April and May in the U.S. So I think we just have to be cautious as we get into the first quarter and, you know, realize that the more complex treatments, you know, have some higher degree of variability against them.

Thanks, Tim we'll go to Dan for both of those came.

And Tim So your first question is on the possibility of approval from a single study in Alzheimer's disease look are we in general we don't disclose our back and forth with the FDA or other regulators.

And this case of course, we have said that next steps our discussions with regulators, so clearly that hasnt happened yet.

Still we understand the regulatory threshold traditionally has been adequate and well controlled trials that means more than one trial.

And this case, we have a single are adequate and well controlled trial in Alzheimer's disease.

Josh Smiley: And that includes starting new patients in areas like migraine. I think maintenance has been good throughout the pandemic. So we do expect that, you know, as we get through the first half of this year, we'll see a return to fully normal levels. But I think it's fair to assume that, in the first quarter, we'll still be, you know, in many of the many therapeutic areas, a little bit below pre-COVID baselines in terms of new prescriptions. Okay, we're great.

And that you know as I said is not not been the standard and this area.

Of course, and other disease areas, notably and oncology.

And drugs can be approved from a single trial, usually that's an accelerated approval usually it's a group that's well defined by.

Pathologic characteristics and and Biomarkers, usually there's dramatic pathologic response as well as clinical outcomes.

Dave Ricks: Thanks guys.

Kevin Hearn: Probably worth mentioning, Geoff, as well, DERM, because I think that one also sees some suppression in new patient starts, not affecting our share or anything, but just the overall volume in the category. Thanks Dave. Geoff, thanks for your questions. Next caller please.

Of course, that's also true and in the case of this day that and map trial, but again oncology is quite different than the and Alzheimer's disease.

Your second question was on the question of toxic oligomers and.

Operator: Thank you. Now, our next question.

Tim Anderson: Our next question comes from Tim Anderson with Wolf Research. Thank you. A couple on Dynanomab. Investors are naturally wondering what the odds are that you could file for approval based on this first phase two trial. To me, it seems highly unlikely given the size of the trial and the different subgroups. But I was just wondering if you could share your latest thoughts on that. And Dan, your view of the need to continue to knock down what is sometimes described in the industry as toxic oligomers, which is what you might achieve by giving monoclonals chronically well after patients have already seen plaque normalization.

It's it's long been unclear what is the toxic species of a beta is and monomers and oligomers as of plaques.

This antibody was designed to be exquisitely specific for amyloid plaques, we don't think it binds oligomers.

And thereby the efficacy and therefore the efficacy we see here seems to imply that it's the plaques that are the toxic species rather than the oligomers. However, we can't rule out that these two things are and equilibrium with each other and perhaps by clearing plaques you you remove a like a nurse as well.

Dan Skovronsky: Thank you, Tim; we'll go to Dan for both of those.

Thank you Dan.

And then thanks for your questions next caller please.

Dan Skovronsky: Tim, so your first question is about the possibility of approval from a single study in Alzheimer's disease. Look, we, in general, don't disclose our back and forth with FDA or other regulators. In this case, however, we've said that next steps are discussions with regulators, so clearly that hasn't happened yet.

Next question comes from the line of Nomura were fought with Evercore. Please go ahead.

Hi, Thanks, so much for taking my questions Dan.

And in prior studies, the I 80, our S and point the composite they use and banana mab it didn't correlate very well with C D or some other boxes, but I did find it interesting that the most recent expedition three trial for solar and is a mab did have high concordance between this new composite versus C D or some other boxes.

Dan Skovronsky: Still, we understand the regulatory threshold has traditionally been adequate and well-controlled trials, which means more than one trial. In this case, we have a single adequate and well-controlled trial in Alzheimer's disease. That, you know, as I said, has not been the standard in this area. Of course, in other disease areas, notably oncology, drugs can be approved from a single trial. Usually, that's an accelerated approval. Usually, it's a group that's well-defined by pathologic characteristics and biomarkers. Usually, there's a traumatic pathologic response as well as clinical outcomes.

I guess, what I'm wondering is how should we be thinking about weather I E. D. R. S versus C D or some other boxes and correlates closely or not or is it more a function of the more recent trials where C. D. Art does in fact correlate very closely with ADR S and I'm thinking about that heading into your Donana Mab trial. The other one I had is you have this cash.

Dan Skovronsky: But, of course, that's also true in the case of this DENETIMAP trial. But again, oncology is quite different from Alzheimer's disease. Your second question was about the question of toxic oligomers. You know, it's, it's long been unclear what the toxic species of A beta is. Is it monomers? Or is it oligomers? Is it plaques? This antibody was designed to be exquisitely specific for amyloid plaques. We don't think it binds oligomers, and thereby the efficacy. Hence the efficacy we see here seems to imply that it's the plaques that are the toxic species rather than the oligomers. However, we can't rule out that these two things are in equilibrium with each other, and perhaps by clearing plaques, you remove oligomers as well.

Our antibody phase III coming up this year, maybe if you could remind us how is this how mab similar or different than some of the other ones because the progress on this target has not been a quite good to date and I saw your trial was pushed out a little bit as well, but it would be very helpful to have any color. Thank you.

Thanks, Dan.

Great. Thanks for your first question on a day address and its correlation with where the C. D are look you know and when we think about and endpoint for any clinical trial, there and Theres really two things that make and endpoint are good and 0.1 is the statistical validation behind it. So in other words is it reliable across different patients across.

Dan Skovronsky: Thank you, Sam. Tim, thanks for your questions. Next caller, please. The next question comes from the line of Umer Rafat with Evercore. Please go ahead.

Umer Raffat: Hi, thanks so much for taking my questions. Dan, in prior studies, the IADRS endpoint, the composite they used in Nanomab, it didn't correlate very well with the CDR sum of the boxes. But I did find it interesting that the most recent Expedition 3 trial for Solanizumab did have high concordance between this new composite versus CDR sum of the boxes. I guess what I'm wondering is, how should we be thinking about whether IADRS versus CDR sum of the boxes correlates closely or not, or is it more a function of the more recent trials where CDR does, in fact, correlate very closely?

Different time points across different trials, we've put together a lot of data that support that.

Second is it meaningful for patients and and this course case of course, we believe that that's inherently true. This is a composite of two things that are widely used.

<unk> thought to be important and meaningful Adas cog and activities of daily living obviously activities of daily living inherently meaningful for patients now.

Now why do we pick I address versus C. D are to be the primary outcome and the study that that should be obvious. It's because we believe that address would be more sensitive.

Umer Raffat: with ADRS. I'm thinking about that heading into your...

For measuring a decline and therefore, a more sensitive from measuring a drug effect. That's based on all of that statistical validation data that we did if address and C D or some other boxes were perfectly well correlated than I, just couldn't be better it couldn't be a more powerful and and yet I'm, telling you that our our assumption going into this trial was.

Umer Raffat: The other one I had is you have this Tau antibody phase 3 coming up this year; maybe if you could remind us how this TauMab is similar or different than some of the other ones because of the progress on this.

Umer Raffat: has not been quite good to date, and I saw your trial was pushed out a little bit.

Dan Skovronsky: I was pushed out a little bit as well, but it'll be very helpful to have any color. Thank you. Thanks, Umer. Dan?

Was that it would be so oh of.

Of course different outcomes will have a some correlation but they won't be perfectly correlated.

Dan Skovronsky: Great. Thanks, Umer, for your first question on ADDRESS and its correlation with CDR. Look, you know, when we think about an endpoint for any clinical trial, there are really two things that make an endpoint a good endpoint. One is the statistical validation behind it. So, in other words, is it reliable across different patients, across different time points, across different trials? We've put together a lot of data that support that. Second, is it meaningful for patients? And in this case, of course, we believe that that's inherently true. This is a composite of two things that are widely used, both thought to be important and meaningful, ADAS-COG and activities of daily living, obviously activities of daily living are inherently meaningful for patients. Now, why did we pick iDRESS versus CDR as the primary outcome of the study? That should be obvious.

Based on what we saw in this trial I think we haven't changed our thinking on on outcomes and and we still think I dresses is a very valid and important outcome for Alzheimer's trials of course, that's a discussion to be had with regulators and the scientific community.

With respect to Zack I tend to map. This is our anti Tau antibody that just has denied and mab was a different type of anti amyloid beta based on its specificity for plaques are exactly 10, a mab is a different kind of anti Tau antibody. It's highly specific for aggregated Tau and now we think that's particularly important in the case of Tau because theres a lot of soluble <unk>.

And America Tao.

And Tau antibodies like any other antibody not much of it gets and the brain. So if you have a lot of monomer and a little bit of antibody. It could sop up all of your antibody and and not have left to go after what we think is the more important species are aggregated.

Tao So we'll have to wait and see of course. This is a field that is younger than anti amyloid therapies, but we've taken a lot of the things we learned from anti amyloid apply them and anti Tau and <unk> and we're quite looking forward to getting that data later this year.

Dan Skovronsky: It's because we believe that iDRESS would be more sensitive for measuring a decline and therefore more sensitive for measuring a drug effect. That's based on all of that statistical validation data that we did. If iDRESS and CDR, some of the boxes, were perfectly well correlated, then iDRESS couldn't be better, couldn't be more powerful. Yet, I'm telling you that our assumption going into this trial was that it would be. Of course, the different outcomes will have some correlation, but they won't be perfectly correlated.

Thanks, Kathy and Wes.

Thanks for your questions next caller please.

Yes. Our next question comes from the line of Steve Scala with Cowen. Please go ahead.

Thank you two questions investor expectations are quite high for it and then on the map in terms of sales potential Lilly knows the full data for Trailblazer and also the largely failed a beta antibody landscape better than any other company.

Dan Skovronsky: Based on what we saw in this trial, I think we haven't changed our thinking on outcomes, and we still think high-dress is a very valid and important outcome for Alzheimer's trials. Of course, that's a discussion to be had with regulators and the scientific community. With respect to Zagotenumab, this is our anti-tau antibody. Just as Denetumab was a different type of anti-amyloid beta based on its specificity for plaques, Zagotenumab is a different kind of anti-tau antibody. It's highly specific for aggregated tau. Now we think that's particularly important in the case of tau because there's a lot of soluble monomeric tau, and tau antibodies, like any other antibody, don't get into the brain. So if you have a lot of monomer and a little bit of antibody, it could top up all of your antibodies and not have left to go after what we think is the more important species, aggregated tau. So we'll have to wait and see. Of course, this is a field that is younger than anti-amyloid therapies, but we've taken a lot of things we learned from anti-amyloids and applied them to anti-tau, and we're quite looking forward to getting that data later this year.

And what you've said, including that Donato Mab will be a driver and twenty-five III 30. It sounds as though you are fully comfortable with these multibillion dollar expectations and.

Is that the conclusion, you want to leave us with.

And secondly locks of three O five looks like it could be a best in class and oncology and the safety looks favorable has Lilly ruled out non oncology indications for 305 potentially M S or perhaps for the sister B T. K that you also have thank you.

Thanks, Steve we'll go to a day for the first question and then Dan for the second one.

Yes, Steve I mean, we don't comment on analyst models or forecasts and we never would and so I can't directly answer your question I guess, what I can say is we've invested in Alzheimer's for 30, plus years and spent a lot of money as you pointed out mostly failing.

Because there's a huge unmet medical need and we believe that investment is justified based on the size of the market, but we're not able to say today, you know donut and mab as a you.

You know is the answer has a path to market et cetera, we're not saying any of that we're looking forward to the 80 P D presentation.

<unk> coming up.

The field will survey that data and make their own conclusions and we need to talk to the FDA and a form a way about the path forward and then we'll get to sales forecast later, but.

Dan Skovronsky: Thank you. Umer, thanks for your questions. Next caller, please. If our next question comes from the line of Steve Scala with Cowan, please go ahead.

And just not possible to answer a question like and when you asked.

Thanks, Dan and Okay. The second question more straightforward locks of three or five are is it really uniquely a specific and <unk>.

Steve Scala: Thank you. Two questions.

Steve Scala: Investor expectations are quite high for Denonimab in terms of sales potential. Lilly knows the full data for Trailblazer and also the largely failed A-beta antibody landscape better than any other company. Based on what you've said, including that Denonimab will be a driver in years 25 through 30, it sounds as though you are fully comfortable with these multi-billion dollar expectations. Is that the conclusion you want to leave us with?

First of all would be TK inhibitor with great drug properties, that's why it's a generating such remarkable data and oncology.

You're asking a question that we've thought a lot about which is could this also translate to being a highly differentiated molecule and and immunology I think and in this case and we would not pursue the same molecule I think this is down the road far enough and oncology this will be and oncology molecule.

Dave Ricks: Secondly, LOXO305 looks like it could be best in class in oncology, and the safety looks favorable. Has Lilly ruled out non-oncology indications for 305, potentially MS, or perhaps for the sister BTK that you also have? Thank you.

But you raised the question of whether we'd be interested and generating a sister molecule as you said for immunology indications and that's certainly something we are considering.

Thank you.

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

Our next question comes from the line of David Risinger with Morgan Stanley. Please go ahead.

Dan Skovronsky: Also, have. Thank you. Thanks Steve. We'll go to Dave for the first question and then Dan for the second one. Yes, Steve. I mean, we don't comment on analyst models or forecasts, and we never would. So I can't directly answer your question. I guess what I can say is that we've invested in Alzheimer's for 30 plus years and spent a lot of money, as you point out, mostly failing, because there is a huge unmet medical need. And we believe that investment is justified based on the size of the market. But we're not able to say today that Donut and Mab as a, you know, is the answer has a path to market, etc. We're not saying any of that. We're looking forward to the ADPD presentation coming up. The field will survey that data and draw their own conclusions. And we need to talk to the FDA in a formal way about the path forward. And, you know, then we'll get to the sales forecast later. But, you know, it's just not possible to answer a question like the one you asked Dan.

Yes, thanks, very much and congrats on the updates I have two questions. Please first.

And when do you expect to have clarity from the FDA on whether Lilly can file with the single small phase two trial are on.

And then and a map and then second would Lilly consider changing the primary end point for Trailblazer, two which is currently C D or some other boxes. Thank you.

Thanks, Dave and Dan Okay. Thanks, David Your first question is on the potential for filing, which which I think we addressed before we havent had those discussions with the regulators of course, we we moved quickly to understand the data and schedule.

Our discussions with the regulators around the world as I said before the regulatory standard is adequate and well controlled trials, so and so to Ah trials, there, but certainly it will be.

Interested to hear what regulators.

Dave Ricks: Okay, the second question, more straightforward: LOXA-305 is a really uniquely specific reversible VTK inhibitor with great drug properties. That's why it's generating such remarkable data in oncology. You're asking a question that we've thought a lot about, which is, could this also translate to being a highly differentiated molecule in immunology? I think in this case, we would not pursue the same molecule. I think this is down the road, far enough in oncology, that it will be an oncology molecule. But you raise the question of whether we'd be interested in generating a sister molecule, as you said, for immunology indications. That's certainly something we are considering.

Say.

Thank you.

And it was consistent the change over the other primary Oh, yeah, sorry, David So the second question. There is is I would we change the endpoint. Yes of course, we can consider it I think we look at the totality of data that we get from Trailblazer, one and that will inform our decisions and as well as conversations with regulators, but so.

Far we havent seen anything or debt, that's leaves us to make that decision to change it.

Thank you.

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

Thank you. Our next question comes from Terence Flynn with Goldman Sachs. Please go ahead.

Dan Skovronsky: Thanks, Dan, and Steve, thanks for your questions. Next caller, please. Our next question comes from the line of David Risinger with Morgan Stanley. Please go ahead. Yes, thanks very much. And congratulations on the updates. I have two questions, please. First, when do you expect to have clarity from the FDA on whether Lilly can file with the single small phase two trial on Denenumab? And second, would Lilly consider changing the primary endpoint for Trailblazer 2, which is currently CDR Stoma boxes?

Hi, This is Dan on for parents that next day and your question I just wanted from us on lock for three or five if you could please Scott if you believe there's a path to filing for approval and the phase one two data. Thank you.

Yes, So we will go to and wait for that one.

Well, thanks tenants from the question and we're obviously very excited about the data both and C. L. L. A and mcl and so we do have ongoing discussions with the FDA regarding the potential for accelerated approval.

Honestly and this place the single arm accelerated approvals for heme malignancies, and can be challenging and so that really disquiet was going to require further discussions with regulators and we can't come again, and submissions or timing or which indications that'd be assured that tell we'll continue those conversations and we couldn't be more excited about the data as Dan mentioned I think that this molecule.

David R. Risinger: Thank you. Thanks Dave. Dan?

Dan Skovronsky: Okay, thanks, Dave. Your first question is on, you know, the potential for filing, which I think, you know, we addressed before. We haven't had those discussions with the regulators. Of course, we move quickly to understand the data and schedule discussions with regulators around the world. As I said before, the regulatory standard is adequate and well-controlled trials, so two trials there. But certainly, we'll be interested to hear what regulators say.

And really started as a molecule and focus on C. 41 mutations and then as we saw the data and the performance and the broader populations from marketable. So we'll keep that conversation is going and we'll keep you posted.

Dan Skovronsky: Whoop whoop

Yeah.

Dan Skovronsky: Dave, so the second question there is whether we would change the end point. Yes, of course, we can consider it. I think we look at the totality of data that we get from Trailblazer 1, and that will inform our decisions as well as conversations with regulators. But so far, we haven't seen anything that leads us to make that decision to change it.

Thanks, Ann and thanks for your question next caller please.

Thank you. Our next question comes from the line of Chris Schott with Jpmorgan. Please go ahead.

Great. Thanks, so much just a one on denosumab and and which one other one what are your thoughts on the hi, Tao population I guess just based on what you saw from Trailblazer is there a strong rationale of the drug could also work and in some of these patients and may just cause us a sense of what percentage of patients and trailblazer too we should expect to come from.

Dan Skovronsky: Thank you, and Dave, thanks for your questions. Next caller, please. Thank you. Our next question comes from Terence Flynn with Goldman Sachs. Please go ahead.

Terence Flynn: Hi, this is Dan on behalf of Terence. Thanks for taking our question. Just one from us. In Locker 305

That group and.

And then my second question was just you did make some changes to your 340 B program reimbursement last year makes it around just the scope of that business and your portfolio and have there been any either challenges or push backs with the implementation of that and and how we should just be kind of thinking about 340 B as we go through 'twenty and 'twenty one thank you.

Terence Flynn: Scott, if you believe there's a path to filing for approval on phase one.

Terence Flynn: Thank you.

Anne E. White: Yep, so we'll go to Anne White for that one. Well, thanks, Terence, for the question. And we're obviously very excited about the data, both in CLL and MCL. And so we do have ongoing discussions with the FDA regarding the potential for accelerated approval. Obviously, in this place, single-arm accelerated approvals for heme malignancies can be challenging.

Thanks, Chris we'll go to Dan for the first question and then Josh on 340 B.

Anne E. White: And so that really was going to require further discussions with regulators. So we can't commit yet on submissions or timing or which indications, but be assured that we'll continue those conversations. And we couldn't be more excited about the data, as Dan mentioned. I think this molecule really started as a molecule focused on C41 mutations, and then as we saw the data and the performance in the broader populations, it was remarkable.

Thank you Christopher a question about the high top population.

And notable feature of the Trailblazer trials that we excluded patients.

And who had too much time and their brain. We we believe that people, who have the highest tower and spread throughout their brain or our past appointed and overturn at least for and amyloid directed therapy.

Of course, as we fully analyze this data and and hopefully even and in time for the upcoming presentation will understand what we're seeing and this current dataset with respect to baseline Tau levels predicting response to therapy as we see that that could lead us to be either more excited or less excited about.

Anne E. White: So we'll keep those conversations going, and we'll keep you posted. Thanks, Anne. Anne, thanks for your question.

Chris Schott: Next caller, please. Thank you. Our next question comes from the line of Chris Schott with J.P. Morgan. Please go ahead. Great, thanks so much. Just one on Denonimab and then one other one. What are your thoughts on the high tau population?

Including Hi, Tao patients and trouble Acer to study and so that is something that is.

Chris Schott: I guess just based on what you saw from Trailblazer, is there a strong rationale that the drug could also work in some of these patients? And maybe just give us a sense of what percent of patients in Trailblazer 2 we should expect to come from that group? My second question was, you did make some changes to your 340B program reimbursement last year. Maybe just remind us the scope of that business in your portfolio and whether there have been any either challenges or pushbacks with the implementation of that, and how we should be thinking about 340B as we go through 2021. Thank you. Thanks, Chris. We'll go to Dan for the first question and then to Josh on 340B.

Still very much open as as we see that data and and understand it.

And we could think about changing the design there in terms of the percentage of patients that are impacted here and it's sort of depends on how you cut it.

If you start with all of the early Alzheimer's patients, which is mild plus a mild 80 plus plus mci.

That's about four and $5 million and and the U S and and double that and in Europe, and Japan combined.

Many of those patients we amyloid negative we've shown that before so you take about a third out for that a small fraction of them will be amyloid positive, but no tow at all we didn't include those patients.

And then a slightly larger fraction will be and that Tau high group. So once you exclude all of those patients. We've said, it's sort of 30% to 45% of that mild 80 to Mci population.

Dan Skovronsky: Yeah, thank you Chris for a question about the high tau population. A notable feature of the trailblazer trial is that we excluded patients who had too much tau in their brain. We believe that people who have the highest tau or it's spread throughout their brains are past the point of no return, at least for an amyloid-directed therapy. Of course, as we fully analyze this data, and hopefully even in time for the upcoming presentation, we'll understand what we're seeing in this current data set with respect to baseline tau levels predicting response to therapy. As we see that, that could lead us to be either more excited or less excited about including high tau patients in the Trailblazer 2 study. And so that is something that is still very much open.

And that would meet these enrollment criteria and Trailblazer Award.

Thanks, and Jeff Hi, Chris on 340, B you know what we've said is if you look over the last 10 years and $3 40, B segment has been among the fastest growing are certainly across the industry, but for our business as well and it's yet a rival the size of Medicaid and and our AR and our U S business, so about 10% of the business.

Now of course, the change we made was to go.

And go back to the the the legislated our intent and to provide the discounts to the actual hospitals.

Provide care and to exclude contract pharmacies that have grown over time and when we look at that business, that's probably about half of the businesses and these contracted pharmacy. So that's where we've made the change to.

Dan Skovronsky: As we see that data and understand it, we could think about changing the design there. In terms of the percent of patients that are impacted here, it sort of depends on how you cut it. If you start with all of the early Alzheimer's patients, which is mild plus mild AD plus MCI, that's about four and a half million in the U.S. and double that in Europe and Japan combined. Many of those patients will be amyloid negative. We've shown that before, so you take about a third out for that. A small fraction of them will be amyloid positive, but no tau at all. We didn't include those patients. And then a slightly larger fraction would be in that tau high group. So once you've excluded all those patients, we've set it sort of 30 to 45% of that mild AD to MCI population that would meet these enrollment criteria in Trailblazer 1.

And to not provide the pricing there now we do have a process where those contracted pharmacies.

And can apply and we've said for insulin <unk> as long as they can demonstrate that they're passing on the entire pricing that they're they're still eligible to participate but when you look at all of that together, we we knew that there was that that's.

That's where we implemented in September we knew there would be challenges and we're seeing we're seeing those challenges come but I think in terms of Ah patient impacts we haven't seen much yet so we're seeing the.

And the fact that the debt the discounts are being provided as you know as part of our change, but we don't think it's impacting patient care at this point. So everything we're seeing so far is consistent with the decision. We made we knew it would be a difficult.

The decision to implement we knew there would be some you know.

Customer concerns we knew there would be legal challenges, but I think what we saw in the fourth quarter is consistent with the guidance, we've given for 'twenty and 'twenty, one which is that we would expect this portion of the 340 B program to moderate and growth and.

Dan Skovronsky: Hi Chris, on 340B, you know, what we've said is, if you look over the last 10 years, the 340B segment has been among the fastest growing, certainly across the industry, but for our business as well, and it rivals the size of Medicaid in our U.S. business, so about 10% of the business now. Of course, the change we made was to go back to the legislated intent and to provide discounts to actual hospitals. That provide care and exclude contract pharmacies that have grown over time. When we look at that business, that's probably about half of the businesses in these contracted pharmacies, so that's where we've made the change to not provide pricing there. Now, we do have a process where those contracted pharmacies can apply, and we've said for insulin, as long as they can demonstrate that they're passing on the entire pricing, they're still eligible to participate.

Provide a a two to three point price tailwind for us in 'twenty and 'twenty, one so I think where we're on track for that at this point.

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

The next question comes from the line of Seamus Fernandez with Guggenheim. Please go ahead.

Oh, great. Thanks, So I just wanted to.

Blow up on.

The one day nanometer question, which is you know Dan can you just give us a little bit of color on the magnitude of blinding and.

In this study given the fact that you know.

Patients are obviously had almost absolute clearing of their of their amyloid plaques you know and your confidence that debt that the behavior of the placebo arms was consistent with our with with the benefits of monitoring both Pal.

Dan Skovronsky: When we looked at all that together, we knew that's where we should have implemented in September. We knew there would be challenges, and we're seeing those challenges come, but I think in terms of patient impacts, we haven't seen much yet. So we're seeing the fact that the discounts aren't being provided as per our change, but we don't think it's impacting patient care at this point. So everything we're seeing so far is consistent with the decision we made. We knew it would be a difficult decision to implement.

And amyloid and then the second question just wanted to get a bit of and update on Jennie O and however, as any O is tracking relative.

Relative to your expectations I think we're starting to see you know fits and starts I guess to some degree and in terms of capturing incremental market share, but directionally. It seems positive just trying to get a sense of where Lilly things the uptake could go and metastatic disease.

Josh Smiley: We knew there would be some customer concerns and we knew there would be legal challenges, but I think what we saw in the fourth quarter is consistent with the guidance we've given for 2021, which is that we would expect this portion of the 340B program to moderate in growth and provide a two to three point price tailwind for us in 2021. So I think we're on track for that at this point.

And then how ultimately and approval.

Of.

The the adjuvant opportunity can impact our sales or or or your market share going forward is that really the big driver or are you already seeing meaningful changes.

Josh Smiley: Thanks, Josh. Chris, thanks for your questions. Next caller, please. The next question comes from the line of Seamus Fernandez with Guggenheim. Please go ahead. Oh, great. Thanks.

And in metastatic market here. Thanks, so much.

Thanks, Seamus, we'll go to Dan for the first question and then and for the second yeah. Thanks. Thank you Seamus for this very thoughtful questions are focused on bat blinding of the study we said before that our trailblazer one will be carried this study out.

Seamus Fernandez: So I just wanted to follow up on the one question, which is, you know, Dan, can you just give us a little bit of color on the magnitude of blinding in this study, given the fact that, you know, patients obviously had an almost absolute clearing of their amyloid plaques when you're confident that the behavior of the placebo arms was consistent with the benefits of monitoring both tau and amyloid. And then on the second question, I just wanted to get a bit of an update on Verzenio and how it is tracking relative to your expectations. I think we're starting to see, you know, fits and starts, I guess, to some degree in terms of capturing incremental market share.

And with the quality that we typically used for regulatory pivotal studies are.

Fully blinded double blinded study.

You raised the possibility that there could be some unintentional unblinded as a result of amyloid clearance. We don't see that that's possible patients don't know or feel that the clearance of amyloid and their brain directly.

And investigators wouldn't have wouldnt have seen that the results of the pet scan themselves.

The other potential and any Alzheimer's study for our innovative and blinding is ARIA E.

And because sometimes that is something that can cause the side effect and we commented on the 6% of patients that had a symptomatic ARIA E or so I think.

Seamus Fernandez: But directionally, it seems positive, just trying to get a sense of where Lilly thinks the uptake could go in metastatic disease and then, you know, how ultimately an approval of the adjuvant opportunity can impact sales or your market share going forward. Is that really the big driver, or are you already seeing meaningful changes in metastatic market share? Thanks, Seamus. We'll go to Dan for the first question and then to Anne for the second.

That's certainly an important analysis I think and every study and in Alzheimer's disease is to look at the drug effect with and without Hardy outpatients and and certainly that's something that we hope to have complete and and be able to share and and in March and.

And then finally, you asked about the behavior of the placebo arm. That's a that's a great question really when we saw this data that was the first thing I wanted to look at.

Sometimes when you have small studies that look promising it's because your placebo arm did worse than typical.

Dan Skovronsky: Yeah, thank you, Seamus, for those very thoughtful questions. Focused on blinding in the study, you know, we said before that TREBLASER1, we carried this study out with the quality that we typically use for regulatory pivotal studies, fully blinded, double-blinded study. You raised the possibility that there could be some unintentional unblinding as a result of amyloid clearance. However, we don't see that that's possible.

And here we said.

We've communicated at a high level of confidence and encouragement based on the data.

So that excludes that possibility. This placebo arm is not behaving aberrantly, that's not what's driving the effect again.

Again, we'll get into the details of that and in March, but very very pleased with the performance of the placebo arm here.

Dan Skovronsky: Patients don't know or feel the clearance of amyloid in their brain directly, and investigators wouldn't have seen that, the results of the PET scan themselves. The other potential in any Alzheimer's study for inadvertent unblinding is ARIA-E, because sometimes that is something that can cause a side effect, and we commented on the 6% of patients that had symptomatic ARIA-E or so. I think that's certainly an important analysis, I think, in every study in Alzheimer's disease, to look at the drug effect with and without ARIA patients, and certainly that's something that we hope to have complete and be able to share in March. And then, finally, you asked about the behavior of the placebo arm. That's a great question.

Thanks, Dan and.

Yeah. Thanks for the question numbers anyhow. So as you noted the 'twenty and 'twenty was a really another year and very positive and clinically meaningful data for then you know and then our shares as a result, I think continue to to improve well, obviously, no CDK and them and this is he unapproved and the a b C. Setting we do think that these read out this readout.

Really drew attention to the market class. So that said, we're really confident that the current trends are a result of our strong execution and our focus on M. D C and and then the particularly this is simply a significant OS data, which are a key competitor and the space didn't have.

And we compare in Q4 and 19 to Q4 'twenty. It's it was really a remarkable period of growth as he said for versus any other we saw to your X increase and a 66%.

Dan Skovronsky: Really, when we saw this data, that was the first thing I wanted to look at. Sometimes when you have small studies that look promising, it's because your placebo arm did worse than usual. And as we said, we've communicated a high level of confidence and encouragement based on the data. So that excludes that possibility. This placebo arm is not behaving aberrantly. That's not what's driving the effect. Again, we'll get into the details of that in March, but I'm very, very pleased with the performance of the placebo arm here.

Worldwide revenue growth of 57% and U S growth of 36, and what were hearing pretty repeatedly now from thought leaders is that they're seeing and more and more and that for us anyway is a differentiator and agent.

So obviously, we've shared that didn't let me see we feel we have higher CDK four less activity and that versus others differentiated continuous dosing and mono therapy indication and then obviously the data that we saw and monarch two with primary endocrine resistant population. So I think all of that is really playing into the growth that we're seeing and the M. D C market and so.

Dan Skovronsky: Thanks, Dan. Anne?

Anne E. White: Yes, thanks for the question on Resenio. As you noted, 2020 was really another year of very positive and clinically meaningful data for Resenio. And then our shares, as a result, I think, continue to improve. While obviously no CDK is yet approved in the EBC setting, we do think that this readout is particularly drawing attention to the market class. So that said, we're really confident that the current trends are a result of our strong execution and our focus on NBC and then, particularly, the statistically significant OS data, which a key competitor in the space didn't have. As we compared Q4'19 to Q4'20, it was really a remarkable period of growth, as you said, for Resenio. We saw a TRX increase of 66%.

And we will expect to continue to see our our growth.

Sure sure market grow and that space and the adjuvant side, and as Dave and and others mentioned, we did submit to the FDA and other areas at the end of last year. So we'll look forward to regulatory action later this year and this market size is significant and the fact that it's probably an additional 50% if you match or entry criteria, 50% and increase to our core.

Current metastatic market and this high risk adjuvant population.

So that's significant and was also significant is the duration of treatment will very likely will be longer and then and the metastatic setting so patients and that study are treated for 24 months and right now we're seeing patients stay on for 17 and are more months on average and the study and many other patients are still on study. So I think that number will continue to get longer so that.

Anne E. White: Worldwide revenue growth of 57% and U.S. growth of 36%. And what we're hearing pretty repeatedly now from thought leaders is that they're seeing more and more that Versenio is a differentiated agent. So obviously, we've shared that in MBC, we feel we have higher CDK for selectivity than versus others, differentiated continuous dosing, a monotherapy indication, and then obviously, the data that we saw in Mon So I think all of that is really playing into the growth that we're seeing in the MBC market. And so we'll expect to continue to see our growth, our share of the market grow in that space. On the adjuvant side, as Dave and others mentioned, we did submit to the FDA in other areas at the end of last year, so we'll look forward to regulatory action later this year. This market size is significant in the fact that it's probably an additional 50%, if you match our entry criteria, 50% increase to our current metastatic market in this high-risk population. So that's significant.

Duration of treatment offers to upside as well, but we're incredibly excited about the data we're looking forward to bringing it to patients as soon as possible. So thanks for the question.

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

Next we go to the line of Andrew Baum with Citi. Please go ahead.

Thank you a couple of questions and first on the non a map I'm on the issue of whether potentially to them and that could be submitted on the back of the phase II data set and you have could you talk to your level of preparedness.

Particularly manufacturing do you have them be anticipated demand, but also to the P. Tau blood tests that will potentially be used to define the patient and I'm just trying to understand where are you at because there is a scenario by which you could be on the market sooner than perhaps.

And the many may believe and and that's no pick up observation broth and reflecting any day.

Anne E. White: And what's also significant is the duration of treatment will, very likely, be longer than in the metastatic setting. So patients in the study are treated for 24 months. And right now, we're seeing patients stay on for 17 or more months on average in the study, and many of the patients are still on study. So I think that number will continue to get longer. So the duration of treatment is an upside as well.

And could be personal view, and then second and could you talk to you PTK inhibitors and three of five I know, you're hiring medical liaisons already which and hematology, which suggests that you're optimistic about being able to find them and second half.

From your understanding of the community nature and its practice with C. L L.

Anne E. White: But we're incredibly excited about the data, and we're looking forward to bringing it to patients as soon as possible. Thanks for the question. Thanks, Anne. Seamus, thanks for your questions. Next caller, please. Next, we go to the line with Andrew Baum with Citi. Please go ahead. Thank you. I have a couple of questions. First on Dynanomab, on the issue of whether potentially Dynanomab could be submitted on the back of the phase two data set you have, could you talk to your level of preparedness, particularly manufacturing, given the anticipated demand, but also for the PTAL blood tests that will potentially be used?

Given the very high Tolerability of this drug and the strong efficacy even without a randomized trial do you believe that this drug could take significant market share in the first be teekay refractory or intolerant and second thank you.

Thanks, Andrew we'll go to Dan for the first question and answer the second.

And are you you raised and excellent question on on all the work that needs to be done to prepare for genetic mab.

You know.

We actually initiated manufacturing preparedness before we had this data. So this is something we do at Lilly, we always prepare for success.

Andrew Baum: I'm just trying to understand where I'm at.

And so at the same time net to our manufacturing colleagues, where we're ramping up.

Andrew Baum: And I'm going to leave you with that because there is a scenario by which you could be on the market sooner than you perhaps think...

The anti Covid antibodies, we ask them to also prepare for denied and map. So so that is well underway and and I I like what's going on all the progress we're making manufacturing there.

Andrew Baum: That many may believe, and that's an open question...

Andrew Baum: I'm pleased to have you all here. It's a pleasure. And then second, Anne, could you talk to your BTK inhibitor 305? I know you're hiring medical liaisons already, which in hematology would suggest that you're optimistic about being able to file in the second half. From your understanding of the community practice of CLL, given the very high tolerability of this drug and the strong [inaudible]

Diagnostic ecosystem also needs work, we started that both the ramping up of imaging.

And proceeding along with opportunities to bring the <unk> blood test to more patients.

And that's both underway again started before we had this data.

And that of course is useful whether we're successful and come to market or whether any other anti amyloid and tried it comes it comes to market those are preparations and there were certainly taking.

Andrew Baum: Do you believe that this drug could take a significant market share in the first BTK refractory or intolerant setting? Thank you.

Thanks, Dan and.

Dan Skovronsky: Andrew, you raise an excellent question about all the work that needs to be done to prepare for genetimab. You know, we actually initiated manufacturing preparedness before we had this data. So this is something we do at Lilly. We always prepare for success.

And thanks for the question on three or five so with the with the MSL population. It's important to remember this arm of our company and talks about the work that's going on and are across our portfolio. This is not just related to three or five but we have other assets and the portfolio that may be heading in that space. So I wouldn't read too much into that and its normal operations to make sure that recovery and the portfolio.

Dan Skovronsky: And so at the same time that our manufacturing colleagues were ramping up the anti-COVID antibodies, we asked them to also prepare genetimab. So that is well underway, and I like what's going on, and the progress we're making manufacturing there. The diagnostic ecosystem also needs work, so we started that both ramping up imaging and proceeding along with opportunities to bring the phospho-tau blood test to more patients. That's both underway, again started before we had this data, and that, of course, is useful whether we're successful in cutting the market or whether any other anti-amyloid drug comes to market. Those are preparations that we're certainly taking.

But obviously they do did you get many questions about three or five the excitement that's out there and and treating physicians and importantly, we have a number of large phase III trials that are starting as well and as you know that that field force helps us identify high quality sites to include in those programs and as far as C. L. L. It and obviously the story there is incredibly.

Exciting and we do think that we have a real contender here and particularly what we're interested in seeing and what has been seen in the past certainly and in the area of oncology and the drugs that have a meaningful treatment effect on the same target pathway and patients who have relapsed tend to have sometimes and even more pronounced effect in that first line setting and so.

Dan Skovronsky: Thanks, Stan. Anne?

Dan Skovronsky: Yes, thanks for the question on 305. So with the MSL population, it's important to remember this arm of our company talks about the work that's going on across our portfolios. This is not just related to 305, but we have other assets in the portfolio that may be heading in this space. So I wouldn't read too much into that.

And that's the and the upside here that is a potential for lots of three one times at first line setting. So this year, we're actually planning to net shape and as you know for global clinical studies and three of them are and C. L. L. And obviously two of them are and the B Teekay pretreated patients, but one is in that.

Dan Skovronsky: It's normal operations to make sure that we're covering the portfolio. But obviously, they do get many questions about 305. The excitement is out there in treating physicians, and importantly, we have a number of large Phase III trials that are starting as well. And as you know, that field force helps us identify high-quality sites to include in those programs. As far as CLL is concerned, obviously, the story there is incredibly exciting. And we do think that we have a real contender here. And particularly, what we're interested in seeing is what has been seen in the past, certainly in the area of oncology, is that drugs that have a meaningful treatment effect on the same target pathway in patients who have relapsed tend to have sometimes an even more pronounced effect in that first line setting. And so that's the upside here that is the potential for LOCSL-305 in that first line setting. So this year, we're actually planning to initiate, as you know, four global clinical studies, and three of them are in

And that head to head setting and looking at them head to head with Ibrutinib and C. O L. And obviously this is this is a riskier studying to do them and we still feel very confident and the later line setting, but we do have a belief that this molecule has a lot of potential and the first line and hence and doing the trials. So I would say as I said earlier I can't comment on.

The regulatory and likelihood those are ongoing conversations with the FDA, but regardless, we know that in this space you need randomized clinical trials to really.

Reach the patients that we wish to reach and so and.

Intention is to do those trials regardless.

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

Our next question comes from the line of Gregg Gilbert with Truest Securities. Please go ahead.

Thanks on the Covid antibodies, Dave I realize the latest state is quite fresh but to the extent.

You're worried that there could be a disconnect between the power of the data and the speed of uptake is there anything that literally plans to do proactively to help move this along I was intrigued by your comments on the prior call about some well known hospitals being slower than other hospitals.

To get trained and ready and and I think that was even from before this latest dataset and.

And then maybe for Josh on that call you. It sounded like the upper limit of $2 billion and your guidance is not necessarily set in stone if demand picks up and what's the practical limitations from a manufacturing standpoint as it relates to two.

Dan Skovronsky: Obviously, two of them are in BTK pre-treated patients, but one is in that, really in that head-to-head setting and looking at head-to-head with ibrutinib in CLL. And obviously, this is a riskier study to do. We still feel very confident in the later line setting, but we do have a belief that this molecule has a lot of potential in the first line, hence doing the trials. So obviously, as I said earlier, I can't comment on the regulatory likelihood. Those are ongoing conversations with the FDA. But regardless, we know that in this space, you need randomized clinical trials to really reach the patients that we wish to reach, and so the intention is to do those trials regardless.

<unk> 'twenty 'twenty one for the antibodies. Thanks.

Thanks, Greg and we'll go to Dave and then Jeff Okay, Yeah, I'll come and Dan, Japan, and we've since the beginning we've been working with health care systems and physicians across the country that enable uptake of the antibodies.

I guess, it's really in some ways a test of what happens when you don't have the normal commercial preparation and rollout. This was you know.

Done via government channels under an EUA and you see big differences and adoption rates and I highlighted the what seems to be a inverse relationship between the places you'd think about advanced medicine and who's actually using this.

Dan Skovronsky: Thanks, Anne. Andrew, thanks for your questions. Next caller, please. Our next question comes from the line of Greg Gilbert with Truist Securities. Please go ahead.

One of those barriers clearly his conviction on the data so I'm really pleased with the data, we announced and the last week and I think it will has to increased conviction and you know. This is also there is a class effect here too.

Geoff Meacham: Thanks. On the COVID antibodies, Dave, I realize the latest data is quite fresh, but to the extent

And the fact that other antibodies are demonstrating a promise and different settings adds to that data and I think will build confidence so hopefully that will.

Geoff Meacham: You're worried that there could be a disconnect between the power of the data and the speed of uptake. Is there anything that Lilly plans to do proactively to help move this along? I was intrigued by her comments.

We'll change theirs too.

Geoff Meacham: on the prior call about some well-known hospitals being slower than other hospitals to get trained and ready. And I think that was even before this latest data set.

Endorsements as well, we hope will change one is NIH. The other is the infectious disease Society.

And that.

And there's tons of practical problems with them at scale and infusing people with COVID-19 that had been completely worked out by numerous health systems and not worked out and many many other so we worked quite a bit with state department of health etcetera to share those practices and the <unk>.

Geoff Meacham: And then maybe for Josh on that call, it sounded like the upper limit of $2 billion in your guidance is not necessarily set in stone if demand picks up. What's the practical limitation from a manufacturing standpoint as it relates to that?

Geoff Meacham: as it relates to 2021 for the antibodies. Thanks.

Practice is chart flagging upon positive COVID-19 for at risk patients scheduling of appointments dedicated facilities and staff and for high throughput antibody and administration, where that's happening there using a lot of material and you know you can almost see actually a reduction and in health care utilization. So.

Dave Ricks: Thanks Greg. And we'll go to Dave and then Geoff.

Dave Ricks: Okay, yeah, I'll comment and jump in. I mean, we've been working with healthcare systems and physicians across the country to enable uptake of the antibodies. You know, I guess it's in some ways a test of what happens when you don't have the normal commercial preparation and rollout. This was, you know, done via government channels under an EUA, in Adoption Rates, and I highlighted what seems to be an inverse relationship between the places you think about advanced medicine and who's actually using it.

And we're actually running and experiment like that and new Mexico to actually prove it and.

As well as with United Health care, but and I'm optimistic that we'll see the the right of use grow and it moved from about 20% and December at about double that now and.

We hope to see more progress.

Going forward.

Hey, Jeff Yeah.

Thanks, Greg So what we've said for this year is a guidance range for for Covid antibodies is $1 billion to $2 billion.

Dave Ricks: One of those barriers clearly is conviction in the data, so I'm, you know, really pleased with the data we announced last week, and I think it will, has to, increase conviction, and, you know, this is also, there's a class effect here, too. And the fact that other antibodies are demonstrating promise in different settings adds to that data and, I think, will build confidence. So hopefully, that will change. There are two endorsements as well, which we hope will change. One is NIH, and the other is the Infectious Disease Society.

And of course, there's a lot of uncertainty and that although with what we've announced this morning on the call. The next agreement that we've signed with the U S government and.

It's probably high probability for a $1 billion and the first quarter and that's just the purchase agreements that we already have I think then to get past that a we'd have based on what we've already committed to in terms of manufacturing probably about another 500000, bamboo and never map doses available and the first half of the year and.

Mono therapy and a million combo.

Dave Ricks: That said, there are tons of practical problems with infusing people with COVID-19 that have been completely worked out by numerous health systems and not worked out by many, many others. So we work quite a bit with state departments of health, et cetera, to share those practices. You know, the best practice is chart flagging upon positive COVID-19 for at-risk patients, scheduling of appointments, and dedicated facilities and staff for high throughput antibody administration. Where that's happening, they're using a lot of materials, and you can almost see a reduction in health care utilization.

So you know if we if we sold all of that and it's weighted heavily towards the U S or high income countries, you could get above $2 billion, but we.

We don't have it and are in any way with.

The U S government or any other government for the combo, yet and there's a lot to still play out I think in terms of a vaccine and and Oh, you know where these these products can be utilized if we get into the second half of the year I think we can continue at the pace of production of millions.

A million plus doses available you know per quarter I don't think that manufacturing piece is going to be as a as much of a barrier and the second half of the year. If we stay on the course of vaccines and and otherwise so clearly we could be above $2 billion for the year, but theres a lot of uncertainty and will continue to monitor this number.

Dave Ricks: So we're actually running an experiment like that in New Mexico to actually prove it, and as well as with UnitedHealthcare. But I'm optimistic that we'll see the rate of use grow. It moved from about 20% in December to about double that now.

And provide updates as we have more agreements and more approvals.

And <unk>.

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

Josh Smiley: We hope to see more progress going forward. Yeah, thanks, Greg. So you know, what we've said for this year is the guidance range for COVID antibodies is one to $2 billion. And of course, there's a lot of uncertainty in that, although with what we've announced this morning on the call, the next agreement that we've signed with the US government is probably a high probability for a billion dollars in the first quarter. That's just the purchase agreements that we already have. I think then, to get past that, based on what we've already committed to in terms of manufacturing, probably about another 500,000 Bamlanivimab doses available in the first half of the year in monotherapy and a million in combination. So you know, if we sold all of that, and it's weighted heavily towards the US or high-income countries, you could get above $2 billion. But we don't have an EUA with the US government or any other government for the combo yet.

Next we go to the line of Ronny Gal with Bernstein. Please go ahead.

And good morning, Congratulations and nice result, and I will continue and the traditional fast and one question about Manhattan, and a map and one other non banana map I guess, that's the bar that you can see from the SBA is one connect well internally correlate to trial and and data support elsewhere. When you look at your program it looks like and support you could provide us from.

The removal of plaque from.

Early trials and a question for you and is the understanding that block removal is related to to clinical benefit is solid enough that you can use that and supporting data or the logic for early approval based elsewhere.

As for and non medical and animal question I was going to go back to the 340 b prices.

And our increasing from D C and it might be and action on this issue before the end of 'twenty and 'twenty, one and you just want to kind of confirm that you have not assumed in your model and cool impactful and the entire year, but there were some from sort of a partial year, some channel and some sort of a partial impact that you've modeled in.

Josh Smiley: And there's a lot to still play out, I think, in terms of vaccines and, you know, where these products can be utilized. If we get into the second half of the year, I think, you know, we can continue at the pace of production of, you know, million plus doses available per quarter. I don't think that manufacturing piece is going to be as much of a barrier in the second half of the year if we stay on the course of vaccines and otherwise. So clearly, we could be above $2 billion for the year, but there's a lot of uncertainty, and we'll continue to monitor this number and provide updates as we have more agreements and more approvals.

Thanks, Ronny and we'll go to Dan and then Josh.

Thanks, Ronny, it's a really good question that you're asking which is how strong is the biomarker evidence here and and how can that be used to support regulatory decisions. I certainly think that's the direction that field is going so in other words, you know when I look across all of the trials that have read out again. This is the first plaque removing antibody that has had a positive study.

And that hit its primary endpoint on the Prespecified statistical analysis, but even the other ones that didn't do that when you look across the totality of evidence.

And you get a sense that.

There's a correlation between plaque removal and general and better cognitive performance.

Josh Smiley: Thank you. Thanks, Josh. Greg, thanks for your questions. Next caller, please. Next we go to the line for Ronnie Gale with Bernstein. Please go ahead. Good morning. Congratulations on the nice result.

Here, we have probably the most significant plaque removal the fastest steepest plaque removal and a very meaningful clinical effect. So it's another point in this sort of dose response curve, comparing amyloid plaque removal and cognitive changes across different trials.

Ronnie Gale: And I will continue the tradition of asking one question about Nanomab and one other. So on Nanomab, I guess, Bar that you can see from the FDA is one kind of well-internally correlated trial and data support elsewhere. When you look at your program, it looks like the support you could provide is from removal of plaque and some earlier trials. I guess the question for you is... is the understanding that clock clinical benefits solid enough that you can use that as supporting data?

And as that gets filled out further and further by additional experiments I think amyloid plaque removal could someday become an important surrogate that could add eight and a regulatory approval of both drugs are are we there today and I don't know that that's a question for regulators and for the field and and something that we certainly have believed and for many years.

And and we will continue to take off.

Thanks, and Jeff. Thanks, Ronny I, you know as I mentioned earlier, we've guided to a two to three point a price benefit in 'twenty and 'twenty one as a function of the 340 P changes that we've made we've been very clear on 340 B that the reason for the changes that we're providing discounts that patients don't.

Ronnie Gale: or the

Ronnie Gale: or the like.

Ronnie Gale: for early approval based out. As for a non-denominational question, I was going to go back to the $340B prizes. You know, the signs are increasing from DC that there might be an action on this issue before the end of 2021. I just want to kind of confirm that you have not assumed in your model full impact for the entire year, but there is some sort of partial assumption or some sort of partial impact that you've modeled in. Thanks, Ronnie. We'll go to Dan and then Josh.

Debt and we want the program needs to be reformed and and cleaned up so our assumption is in 'twenty and 'twenty. One there will be changes, whether and as I mentioned earlier. We also have mechanism mechanisms for a contract pharmacies to get the discounts we want to ensure that our patients on insulin I couldn't get the pass through discounts. So.

Dan Skovronsky: Thanks, Ronnie. It's a really good question that you're asking, which is how strong is the biomarker evidence here, and how can that be used to support regulatory decisions? I certainly think that's the direction the field is going. So, in other words, you know, when I look across all of the trials that I've read out, again, this is the first plaque-removing antibody that has had a positive study that hit its primary endpoint in the pre-specified statistical analysis. But even the other ones that didn't do that, when you look across the totality of the evidence, you get a sense that there's a correlation between plaque removal in general and better cognitive performance. Here we have probably the most significant plaque removal, the fastest, deepest plaque removal, and a very meaningful clinical effect.

We're assuming and our 'twenty 'twenty, one guidance debt Oh, no not a full financial benefit for the full year that there will be changes and modifications through the year either.

You know as we try to work to ensure patients get the benefits of the discounts or if there are some administrative or legislative changes.

Great. Thank you.

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

Our next question comes from the lineup and Mel dive on with Mizuho Securities. Please go ahead.

Great. Thanks for taking my questions. So I hope I have a couple on the Alzheimer's theme. So one just on the second Alzheimer's and Trump and I have two.

Yeah and issue, we've seen with other CNS drugs, and maybe not as much and Alzheimer's.

And you get these positive results everyone gets excited and but then the second trial and you might have to manage more of a placebo response or.

Dan Skovronsky: So it's another point in this sort of dose response curve comparing amyloid plaque removal and cognitive changes across different trials. As that gets filled out further and further by additional experiments, I think amyloid plaque removal could someday become an important surrogate that could aid in the regulatory approval of drugs. Are we there today? I don't know. That's a question for regulators and for the field and something that we certainly have believed in for many years and will continue to take up.

And properly getting patients into the trial. So I'm just wondering if theres anything youre doing it.

Differently or more carefully and make sure from a second trial and you don't have you know patients who maybe they get in to the total other I shouldn't have.

And anything to manage the placebo response, especially Wendy and pointed this sort of clinical rating scale like a CD or some other boxes and then my second questions are unrelated, but partially related to phase one and you mentioned the tau more from our U terminated and just wondering if you can share any.

Dan Skovronsky: Thanks, Dan. Josh?

Josh Smiley: Thanks, Ronnie. You know, as I mentioned earlier, we've guided to a two to three point price benefit in 2021 as a function of the 340B changes that we've made. We've been very clear on 340B that the reason for the change is that we're providing discounts that patients don't get, and we want the program to be reformed and cleaned up. So our assumption is in 2021 there will be changes, and as I mentioned earlier, we also have mechanisms for contract pharmacies to get the discounts. We want to ensure that patients on insulin can get the pass-through discount. So we're assuming in our 2021 guidance that, you know, not a full financial benefit for the full year, that there will be changes and modifications through the year, either as we try to work to ensure patients get the benefits of the discounts or if there are some administrative or legislative changes.

Details behind that decision. Thanks.

I think some will go to Dan for both of those yeah. Thanks, Rommel. It's a it's a good point you raise of course are the placebo effect getting stronger and in second trials is something that's been seen a lot and psychiatry and sometimes and in pain studies.

As you pointed out I'm not sure that's such a strong effect and in Alzheimer's disease, one thing that encourages us here and and I think would allow us to see a strong signal even even if there's some some of that here is.

Is oh, maybe two things and encourage US first just the magnitude of the effect that we're seeing overall.

Which you know as I said had hit stat, Sig, even and the small trial and and travelers to is much bigger.

And is the consistency across endpoints and time points and statistical methods.

And that gives us additional competence as well.

With respect to the your second question, which was the Tau more from or for the Alzheimers program here with AC immune and we decided to pursue other promising tau more from her candidates from <unk> research platform.

Josh Smiley: Great, thank you. Thanks, Josh. Ryan, thanks for your questions. Next caller, please. Our next question comes from the line of Mamil Devan with Mizzouho Securities. Please go ahead.

Geoff Meacham: for taking my questions. So I also have a couple on the Alzheimer's theme. So one just on the second Alzheimer's entrope, which is, you know, an issue we see with other CNS drugs, maybe not as much an Alzheimer's disease. So you get these positive results, everyone gets excited.

And therefore, we terminated this phase one molecule that's probably all we say right now.

Thanks, Dan well.

Thanks for your questions next caller please.

Yeah.

Thank you. Our next question comes from the line of Carter Gould with Barclays. Please go ahead.

Geoff Meacham: So then in the second trial, you might have to manage more of a placebo response or, you know, improperly getting patients into the trial.

Good morning, guys and congrats on the progress Dan and I guess I'd keep the trend of Alzheimers first and I guess just can you talk first around your longer term view towards a combination approaches with the non and map or you know, particularly with and anti Tau inhibitor and then you had good momentum across the pain portfolio and the quarter and you've got a number of phase III studies reading out.

Geoff Meacham: I'm just one.

Geoff Meacham: I'm just wondering if there's anything you're doing differently or more carefully to make sure that for the second trial, you don't have your patients.

Geoff Meacham: Who may be getting to the...

Geoff Meacham: for anything to manage the placebo response, especially when the endpoint is this sort of clinical rating scale, like a CDR.

With your rep irregular and antibody any color there on your level of confidence and if those data represent the key inputs regarding a get go no go decision to phase III or will you need additional phase two work longer safety data and any any commentary and how you see that co existing with it doesn't matter. If that's approved thank you.

Geoff Meacham: boxes. And then my second question is unrelated, but I guess partially related to phase one. You mentioned the Tau.

Geoff Meacham: more from RU Terminated. I'm just wondering if you can share any details behind that decision.

Thanks, Kevin and Dan Great Carter to too good and interesting question. So I'm combination of purchase for Alzheimer's I do think that's what the future holds.

Dan Skovronsky: Which, you know, as I said, it's that big even in the small trial, and trebles, too, are much bigger. Second, there is consistency across endpoints and time points and statistical methods. That gives us additional confidence as well. With respect to your second question, which was about the Tau Morphomer for the Alzheimer's program here with ACIMMUNE, we decided to pursue other promising Tau Morphomer candidates from ACIMMUNE's research platform, and therefore, we terminated this Phase I molecule. That's probably all we can say right now.

One of the really neat.

And <unk> things about Tonight I Mab is that we we just treat until amyloid plaques are removed. This is not a drug that we anticipate patients will be taken for the rest of their lives once they're clear of amyloid plaques, we stopped treatment with this drug and we know from from prior data that plaques don't come back. So you can imagine clearing and pace.

And of amyloid plaques and then treating them with another mechanism that could be complementary for example, and anti tau drug or and immuno modular Tory drug.

Dan Skovronsky: Thanks, Dan. Thanks for your questions.

And for Alzheimer's disease, So that's certainly something.

Carter Gould: Next caller, please. Thank you. Our next question comes from the line of Carter Gould with Barclays. Please go ahead. Good morning, guys.

Something that we're considering and and quite likely we will pursue and the future.

Well, thanks for noting and momentum in the pain space. This is and area that is just so underserved by the pharmaceutical industry I think there's a variety of reasons and including regulatory thresholds that have held back investment and an area that represents.

Carter Gould: Congratulations on the progress. Dan, I guess to keep up the trend of Alzheimer's first, I guess, just can you talk first about your longer-term view towards a combination approach with an Onomab or, you know, particularly with an anti-tau inhibitor, and then you had good momentum across the pain portfolio in the quarter, and you've got a number of phase two studies reading out with your epiregulant antibody. Any color there on your level of confidence, and if those data represent the key inputs regarding a get-go-no-go decision for phase three or four, will you need additional phase two work, longer safety data, and any commentary on how you see that coexisting with tezumab, if that's approved?

One of the greatest unmet medical needs. This is why patients are the number one reason why patients see a doctors because they are there and pain.

And we know the drawbacks to current therapies. So we designed our platform pain study, which actually tests and test multiple molecules against multiple indications and.

And we can keep funneling molecules in and and GAAP results out depending on the strength of the efficacy here that'll inform next steps, but we're confident that this study is well designed to to show us whether we have a meaningful treatment effects or not and of course, a hold back and and paint as I said before is is there.

Dan Skovronsky: Thank you. Thanks, Carter. Dan?

Dan Skovronsky: Great, Carter, two good interesting questions. So on combination approaches for Alzheimer's, I do think that's what the future holds. One of the really neat things about Nanomab is that we just treat until the amyloid plaques are removed. This is not a drug that we anticipate patients will be taking for the rest of their lives. Once they're clear of amyloid plaques, we stop treatment with this drug. We know from prior data that plaques don't come back.

Tori bar, which is heavily weighted towards safety and typically that takes a large number of patients to discharge certainly <unk>. A perfect example of that with so many patients studied and and are well understood signal here.

And both efficacy and potential safety that that needs to be resolved through the FDA.

Dan Skovronsky: So you can imagine clearing a patient of amyloid plaques and then treating them with another mechanism that could be complementary, for example, an anti-tau drug or an immunomodulatory drug for Alzheimer's disease. So that's certainly something that we're considering and quite likely we'll pursue in the future. Thanks for noting momentum in the pain space. This is an area that is just so underserved by the pharmaceutical industry. I think there are a variety of reasons, including regulatory thresholds that have held back investment in an area that represents one of the greatest unmet medical needs. This is why patients, the number one reason why patients see a doctor is because they're in pain.

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

Yes, and the next question comes from Kerry Holford with Bear and Baird. Please go ahead.

Hi, Thank you Adam.

And couple of left from me piece Adsense.

I Wonder if you can talk.

Alright and roll it out.

And can apply here and what are you trying to gene and thank you kila.

And I think that's one version of it and.

And when might be and see the pace of readouts and they need aspects.

And when might we see these potentially come to market.

Dan Skovronsky: And we know the drawbacks to current therapies. So we designed a platform pain study that actually tests and can test multiple molecules against multiple indications. And we can keep funneling molecules in and getting results out. Depending on the strength of the efficacy here, that'll inform next steps. But we're confident that this study is well designed to show us whether we have meaningful treatment effects or not. Of course, a holdback in pain, as I said before, is the regulatory bar, which is heavily weighted towards safety. And typically, that takes a large number of patients to discharge. Certainly, Tenezumab is a perfect example of that, with so many patients studied and a well understood signal here on both efficacy and potential safety that needs to be resolved through the FDA.

And then my second question and just more housekeeping in nature, and neutral, which would put a stocking benefit in Q4, I think had been 120 million.

And that was drunk stat, Pak and M&A, and what he and expenses or wind into the next quarter.

Okay.

Thanks, Carrie and good as Dan for the question on the prevail acquisition and then Josh on the stock and glad I think Barry we're really excited to have prevail joined Lilly.

This is a really a great gene therapy platform, why we picked a and a great team. Those are clearly two of the reasons why why are we picked prevail.

Also I think there's just a natural synergy with the work we do at Lilly were extremely strong and neuroscience, we have a deep commitment to the space and.

And therefore, as we thought about what's our entry point into gene therapy, and we believe gene therapy would be and important treatment modality across therapeutic areas and the future. It made sense to enter gene therapy to begin our efforts here and and neuroscience.

Dan Skovronsky: Thanks, Dan. Carter, thanks for your questions. Next caller, please. Yes, and the next question comes from Kerry Holford with Berenberg. Please go ahead.

Kerry Holford: Hi. Thank you. Just a couple left for me, please. Firstly, on Prevea, I wonder if you could talk a little more about it.

Prevail, it's got two exciting programs and the clinic already one is for Parkinsons disease with GBA, one mutations and its a GBA one gene transfer.

Kerry Holford: about this decision to acquire it here. What attracted you to this?

Kerry Holford: Thank you very much for joining us on this particular gene therapy platform versus others, and when might we see the data read out to the lead assets, and indeed when might we see these potentially come to market? And then my second question is just more housekeeping in nature.

And Theres a lot of face validity to that kind of approach and we're looking forward to seeing data from that the other similarly, well validated target here and in a frontal temporal dementia with a G R and mutations and Uh Huh. That's also I think exciting in terms of timelines to market I think it's these programs are still very early.

Kerry Holford: You talked about a stocking benefit in Q4. I think it was 120 million. Could you detail which drugs that impacted primarily and whether you'd expect?

We're just and the first few patients here and well have to see what the data showed a important those timelines.

Thanks, and Jeff. Thanks, Kerry Yeah on inventory, what we said is if you look at Q4, 'twenty and 'twenty inventory and the U S inventory levels versus Q4 of 2019 were $120 million higher and we're not concerned about that and to 2019 was an unusually low year.

Kerry Holford: and unwind into the next quarter. Thank you. Kerry, we'll go to Dan for the question on the Prevail acquisition and Josh on the stocking question. Kerry, we're really excited to have Prevail join Lilly.

Dan Skovronsky: This is a really great gene therapy platform, why we picked it, and a great team. Those are clearly two of the reasons why we picked Prevail.

And when you just look and days of stock so the 100 and twenties inline with our expectations, but now as we look into Q1 'twenty 'twenty. One we do expect that that are $120 million will burn off and it's it's across the portfolio, but but you know as you would imagine true licit. He's one of the products, we see a little bit extra and Tulsa and I think some and this is a function of the.

Dan Skovronsky: Also, I think there's just a natural synergy with the work we do at Lilly. We're extremely strong in neuroscience, we have a deep commitment to the space, and therefore, as we thought about what our entry point into gene therapy, and we believe gene therapy will be an important treatment modality across therapeutic areas in the future, it made sense Prevail has two exciting programs in the clinic already. One is for Parkinson's disease with GBA1 mutations, and it's a GBA1 gene transfer. There's a lot of face validity to that kind of approach, and we're looking forward to seeing data from that. The other similarly well-validated target here is frontal temporal dementia with GRN mutations, and that's also exciting. In terms of timelines to market, I think these programs are still very early. We're just in the first few patients here, and we'll have to see what the data show to inform those timelines.

Anticipation of increased volume for adults as a as a function of the ESI win and it'll.

Go into that went into effect on January 1st and we also see some on Alimta, we did see some purchasing patterns through the year and oncology I think some of which was related to the pandemic and some delays and in and infused products, but those are probably the three biggest products, where we see this on and so we would expect that $120 million to burn off and.

Q1 is as it normally does the other piece, though that we want to make our investors aware is remember last year in Q1.

We saw a $250 million build and inventory on a worldwide basis. This was as customers were stocking up and anticipation of the walk downs that were that were coming on with the pandemic. So I think if you put those two things together the $250 million a build last year and what we assume to be $120 million.

Dan Skovronsky: Thanks, Dan. Josh?

Josh Smiley: Thanks, Kerry. Yeah, on inventory, what we said is if you look at Q4 2020 inventory levels in the U.S. versus Q4 of 2019, we're $120 million higher. We're not concerned about that. 2019 was an unusually low year when you just look at days of supply. So the 120 is in line with our expectations. But now, as we look into Q1 2021, we do expect that $120 million will burn off. And it's across the portfolio. But as you would imagine, Trulicity is one of the products we see a little bit extra in talts. And I think some of this is a function of the anticipation of increased volume for talts as a function of the ESI win that went into effect on January 1st.

Burn this year, that's about $370 million of a headwind when you just do year over year compare in and growth and you know that could be up till it six points or something and again, it's not a concern and that's built into how we think about the year, but we do want to remind investors on that piece now and I think oh throughout the year, we're going to have some.

Strange compares and remember that we sold $871 million and Bam Bam and they have a mab and Q4.

We expect to have significant sales this year as well so we'll tease all of that as we go through but on the underlying base business. You you should expect to see and inventory negative growth the fact and in Q1.

Josh Smiley: And we also see some on Olympta. We did see some purchasing patterns through the year in oncology, I think some of which were related to the pandemic and some delays in infused products. But those are probably the three biggest products where we see this on. So we would expect that $120 million to burn off in Q1 as it normally does. The other piece, though, that we want to make investors aware of is that last year in Q1, we saw a $250 million build in inventory on a worldwide basis. This was as customers were stocking up in anticipation of the lockdowns that were coming with the pandemic. So I think if you put those two things together, the $250 million build last year and what we assume to be $120 million burn this year, that's about $370 million of headwind when you just do year over year comparisons in growth. And, you know, that could be, you know, up to six points or something.

Thanks, Josh Kerry Thanks for your question and we'll go to Dave now for the close.

Great. Thanks, Kevin and the team. We appreciate everyone's participation in today's call and of course, your interest and Eli Lilly 'twenty and 'twenty was a strong year for the company and we anticipate an important year in 'twenty and 'twenty, one a lot of questions related to Alzheimer's today, where we're excited about that as well, but just a reminder, we have upcoming readouts for.

And it <unk> tied with sustained two three and five over the coming weeks and months as well as a number of Readouts. This year in our immunology portfolio for bear sitting and labor Kisan, Mab and Americas, and Mab and important indications. The company is a broad and diversified set of opportunities ahead for additional innovation for patients.

With our strong lineup of marketed products as well and this industry, leading pipeline and we believe we continue to be a compelling investment.

Josh Smiley: Again, it's not a concern. It's built into how we think about the year. But we do want to remind investors about that piece. Now, and I think throughout the year, we're going to have some strange comparisons. Remember that we sold 871 million dollars in Bama, and Bama Nivamab in Q4.

So thanks for dialing in please follow up with the IR team. If you have any additional questions and hope everyone has a great day and agree weekend take care.

Thank you, ladies and gentlemen that does conclude our conference for today, we thank you for your participation and for using AT&T conferencing service.

Josh Smiley: We expect to have significant sales this year as well, so we'll tease all that as we go. But on the underlying base business, you should expect to see an inventory negative growth effect in Q1.

You may now disconnect.

We're sorry your conferences ending now please hang up.

Josh Smiley: Thanks, Josh. Kerry, thanks for your question. And we'll go to Dave now for the close. Great. Thanks, Kevin.

Dave Ricks: And to the team, we appreciate everyone's participation in today's call and, of course, your interest in Eli Lilly. 2020 was a strong year for the company, and we anticipate an important year in 2021. A lot of questions related to Alzheimer's today.

Dave Ricks: We're excited about that as well. But just a reminder, we have upcoming readouts for terzipatide, which will sustain two, three, and five over the coming weeks and months, as well as a number of readouts this year in our immunology portfolio for baricitinib, leverkizumab, and mirakizumab and important indications. The company has a broad and diversified set of opportunities ahead for additional innovation for patients. With our strong lineup of marketed products as well as this industry-leading pipeline, we believe we continue to be a compelling investment.

Dave Ricks: So thanks for dialing in. Please follow up with the IR team if you have any additional questions and I hope everyone has a great day and a great weekend. Take care. Thank you, ladies and gentlemen. That does conclude our conference for today. We thank you for your participation and for using the AT&T Conferencing Service. You may now disconnect. We're sorry, your conference is ending now. Please hang up.