Q3 2022 Eli Lilly and Co Earnings Call

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Ladies and gentlemen, thank you for standing by and welcome to the Lilly Q3, 2022 earnings Conference call. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will be given at that time should you require.

During the call. Please.

Press Star, then zero and an operator will assist you offline and as a reminder, your conference is being recorded I would now like to turn the conference over to your host Joe Fletcher Senior Vice President of Investor Relations. Please go ahead.

Thank you Lois and good morning, Thank you for joining us for Eli Lilly <unk> Company's Q3, 2022 earnings call I'm, Joe <unk> Senior Vice President of Investor Relations and joining me on today's call. Our call are Dave Ricks, Lilly's, Chairman and CEO and not Ashkenazi Chief Financial Officer, Dr. Dan <unk>, Chief scientific and medical Officer.

And white President of Lilly Neuroscience, <unk> President of Lilly International Jake Van <unk> CEO of block So at Lilly, Mike Mason, President of Lilly diabetes, and Patrik Jonsson, President of Lilly Immunology and Lilly USA. We're also joined by Mike Spring, another can do well and Lauren <unk> of the Investor Relations team.

During this conference call, we anticipate making projections and forward looking statements based on our current expectations. Our actual results could differ materially due to several factors, including those listed on slide three.

Additional information concerning factors that could cause actual results to differ materially is contained in our latest Form 10-K, and subsequent forms 10-Q, and 8-K filed with the Securities and Exchange Commission. The information we provide about our products and pipeline is for the benefit of the investment community. It is not intended to be promotional and is not sufficient for prescribing decisions as.

As we transition to our prepared remarks. Please note that our commentary will focus on non-GAAP financial measures now I'll turn the call over to Dave.

Well thanks, Joe.

Over the last three months, we continued to successfully execute our strategy on the commercial front, we drove strong volume based growth of our recently launched medicines, including Mongiardo, which has seen an impressive initial uptick.

At the same time, we advanced our late phase pipeline progressing towards potential launches of four new medicines by the end of next year.

While also investing in our early stage pipeline and new modalities like gene therapy.

To meet the growing demand for our products and prepare for future launches. We have also continued to invest in expansion of our manufacturing footprint.

I would highlight two areas of high unmet need where Lilly is progressing new medicines to improve patient outcomes obesity and alzheimers disease.

At obesity, we are pleased that the FDA has granted fast track designation for <unk> for adults with obesity.

Enabling us to potentially bring this promising medicine to patients even sooner.

We're also initiating surmount MMO, our phase III morbidity and mortality in obesity study to evaluate improved outcomes for patients with obesity.

In Alzheimer's disease, our phase III Trailblazer, Oh, two study for Danone, a mab continues to progress towards the top line readout in mid 2023.

And we continue to work with the FDA to pursue an accelerated approval based on our trailblazer all data.

We also announced completion of our submission for <unk> in atopic dermatitis in both the U S and the EU.

We've already completed submissions for Danone, a mab per day bird Nib Mirror Kisan Mab, we are excited by the potential to launch for new medicines between now and the end of 2023.

We are experiencing an unprecedented rate of new product launches for Lilly and undoubtedly one of the most impressive rates in our industry.

Turning to our strategic deliverables on slide four Q3 revenue grew 7% in constant currency worldwide volume grew a robust 14% key.

Key product growth grew 19% and now account for 70% of our core business revenue.

A reflection of the youth and durability of our marketed product portfolio.

We're encouraged to see the continued global adoption of products like <unk>, <unk>, <unk>, and our anchor 10 medicines, including <unk> and <unk>.

Our non-GAAP gross margin was 79% in Q3, which is in line with the same period last year our.

Our non-GAAP operating margin was 28, 9%, which includes a negative impact of approximately 90 basis points attributed to acquired in process R&D and development milestone charges.

For pipeline milestones, we shared several important updates since our Q2 earnings call.

Including FDA fast track designation for <unk> for adults with obesity with completion of our rolling submission expected by mid 2023.

<unk> in Japan approval for <unk> for the treatment of adults with type two diabetes.

U S and EU submission of <unk> for moderate to severe atopic dermatitis.

And FDA accelerated approval for <unk> in Ret fusion positive advanced or metastatic solid tumors, regardless of tumor type and traditional approval in adults with locally advanced or metastatic ret fusion positive non small cell lung cancer.

Dan will discuss this in more detail later, but we are excited to have announced the acquisition of <unk>, which aims to accelerate efforts in gene therapies that promise to restore improve and preserve hearing for patients living with disabling hearing loss. This.

This acquisition demonstrates our continued commitment to advancing genetic medicine at Lilly.

And finally, we distributed nearly $900 million in dividends to our shareholders.

On slide five you'll see a list of key events since our Q2 earnings call, including several important personnel COVID-19 antibody in ESG or updates.

We announced the upcoming retirement of Steve Frye, our executive Vice President of human resources and diversity following more than 35 years at our company.

Like to thank Steve for playing a key role in advancing our diversity equity and inclusion agenda and leading our efforts to be the premier employer in our region in our sector.

We also welcome Eric Dozer, who will succeed Steve Eric is nearly 25 years of experience at Lilly and a strong track record of developing people and teams that deliver impressive business results.

I am confident he is the right leader to progress our people strategy, which is vital for Lilly to achieve our ambitious growth objectives ahead.

In August we began to make our COVID-19 antibody <unk> available for purchase to states hospitals and certain other providers through a sole distributor.

In Q3, we shipped an additional 600000.

60000, I should say doses of <unk> to the U S government for approximately $110 million.

These are to be used for the financially vulnerable patients through a product replacement program.

At this time, we are not anticipating any further U S government orders for them to logo map.

With regards to our ESG efforts, we published our inaugural sustainability bond allocation and impact report highlighting the allocation of approximately 128 million euros across a range of sustainability projects since the issuance of the sustainability bond in September of 'twenty one.

For more information about this and the many other aspects of our ESG program you can visit our Lilly ESG website.

Now I'll turn the call over to a not for a more detailed review of our Q3 results.

Before I review the financial results for Q3, let me highlight a change in how we expect to communicate our acquired IP R&D and development milestone charges.

In mid October we filed an 8-K with the SEC provide investors earlier Cleary and the impact from the acquired IP R&D and developing Nelson charges for Q3 in.

In future quarters, we generally expect to provide this information quarterly update on our Investor Relations website.

Now moving to our results slide six summarizes <unk> financial performance in the third quarter of 2022, and I'll focus my overall comment on non-GAAP performance.

A few notable items affected year over year comparisons in Q3 foreign exchange rates had a roughly 430 basis point impact on revenue this quarter as Q3 revenue grew by 2% or 7% on a constant currency basis.

We recognized $86 million of revenue related sales collaboration agreement for the rights to sell and distribute <unk> in Japan.

We experienced the first full quarter impact of Alimta U S patent expiry.

And the increase in sales of COVID-19 antibody and a decrease in sales of ILUVIEN for the treatment of COVID-19 impacted our results.

When excluding revenue from Alimta, which is now a pattern across the EU, Japan and the U S. COVID-19 antibodies and ILUVIEN for the treatment of COVID-19 revenue grew 9% for the quarter or 14% in constant currency highlighting solid momentum for our core business.

Gross margin was roughly flat year over year, the impact of lower realized prices and increased expenses due to inflation and logistics costs were offset by favorable product mix, including the impact of lower sales of ILUVIEN for the treatment of COVID-19.

And the favorable impact of foreign exchange rates.

Total operating expenses increased 1% this quarter.

Growth in marketing selling and administrative expenses and R&D expenses were largely offset by lower acquired IP R&D and development announcement charges that reduced operating expense growth by nearly 350 basis points.

Marketing selling and administrative expenses increased 2%, primarily driven by the increased costs associated with the launch of Mongiardo personally offset by the favorable impact of foreign exchange rates.

R&D expenses increased 6% driven by higher development expenses for late stage assets.

The offset by the favorable impact of foreign exchange rate and lower development expenses for COVID-19 antibody.

Operating income increased 6% in Q3, primarily due to higher gross margin, partially offset by higher operating expense.

Operating income as a percent of revenue was 28, 9%, which includes the negative impact of approximately 90 basis points attributed to the acquired IP R&D and development milestone charges.

Our Q3 effective tax rate was 10, 7% a decrease of 360 basis points compared to the same period in 2021.

This decrease was primarily driven by the favorable tax impact related to the implementation of the 2017, Texas.

At the bottom line earnings per share increased approximately 12% this quarter to $1 90 698 per share.

The IP R&D and development milestone charge had a negative impact of <unk> in Q3 2022 compared to <unk> 17 in the same period last year.

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

This quarter foreign exchange movement, primarily related to the weakening of the euro against the U S dollar decreased revenue by 4%.

Moving to our performance by key geography, this quarter U S revenue grew 11% driven by volume growth of 15%.

Excluding revenue from Alimta, COVID-19 antibody and ILUVIEN for the treatment of COVID-19 revenue in the U S increased 20% driven primarily by key growth products.

U S volume growth was partially offset by net price decline of 4% driven primarily by lower realized prices for <unk> due to segment mix and the list price reduction for insulin <unk> for injection.

Moving to Europe revenue grew 11% in constant currency.

Driven primarily by volume growth for <unk>, <unk> and <unk>.

We're encouraged by the momentum of our business in Europe and expect continued growth is the impact from the patent expiry for Alimta, which lost exclusivity in June 2021 receipts from base period comparison.

For Japan, Q3 revenue decreased by 2% in constant currency.

Both of our new medicine in revenue related to a sales collaboration agreement for the rights to sell and distribute monster in Japan was more than offset by the continued impact of declines in off pen product, primarily cymbalta and Alimta, which both face generic entry in June 2021.

We expect to return to growth in Japan, beginning in 2023, as we continue to scale, our key growth products and the impact of patent exploration subside.

In China revenue declined 10% in constant currency as we continued to be impacted by the theory Covid policy measures.

We're also seeing the impact of increased competitive pressures for private from local competitors with an ordeal axis.

In addition, we experienced the first full quarter of the pricing impact of volume based procurement for human lung.

As we expect to maintain a high level of access for innovative portfolio. We believe our volumes should accelerate to drive net growth in the future.

Revenue in the rest of the world decreased 6% in constant currency in Q3, primarily driven by customer buying patterns and the year to date growth of 8% in constant currency in this region is more representative underlying trends.

As shown on slide nine our key growth products continue to drive robust worldwide volume growth.

These products drove approximately 18 percentage points of volume growth this quarter and continued to underpin our current performance and future outlook.

Slide 10 further highlights the contribution of our key growth products. This quarter. These brands grew 19% or 25% in constant currency generated $4 6 billion in sales and made up 70% of our core business revenue.

Products like Virginia, Tulsa in dermatology and your audience have outpaced competitors growth and are leaders in new to brand share of market within their respective classes.

In the injectable Incretin market, we continue to see significant opportunities for further class growth.

In addition to lunch or a successful launch in the U S to elicit he has continued to experience strong growth globally.

To date, our our increase in manufacturing production is ahead of our internal plan and we remain focused on sustaining this performance.

Strong demand for <unk>, partially due to ongoing limited availability of competitive <unk> continues to challenge our ability to meet the extending the men in most international markets and those situations. We are working hard to supply market demands, while minimizing impact to existing patients.

Including communication in these markets not to initiate new patient centricity.

In the U S script volume remains robust and while we build more capacity wholesalers may experience intermittent restocking delays of <unk> orders.

Moving to slide 11, we're pleased with the rapid uptake of lunch or in the first four months since launch approximately 70% of <unk> new therapy starts are patients naive to the type two diabetes injectable interesting class.

And less than 10% are switches from <unk>.

We are progressing payer negotiations and has more than doubled the level of access to approximately 45% of total commercial and part D lives.

And as we extend acts as the proportion of paid script should start to increase.

Our focus is to make them under available for type two diabetes patients.

We intend to take actions designed to ensure access and supply for these patients.

These actions may negatively impact prescription volumes that are not expected to impact net revenue.

We have seen unprecedented demand for <unk> type two diabetes launch in the U S.

Bolstered by strong efficacy and a positive customer experience.

Availability of competitors <unk> also is a key factor as we assess lunch or is demand and supply.

To meet this rapidly growing demand across our existing business, we have plans to add substantial additional manufacturing capacity in.

In 2023, we expect the RTP site in North Carolina to become fully operational and that capacity coupled with additional actions in extensions and other sites as.

It will result in doubling loonies, increasing manufacturing capacity at the end of 2023.

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

For the first nine months of the year, we invested $6 $8 billion to drive our future growth through a combination of R&D expenditures business development ounces and capital investments. In addition, we returned approximately $2 $7 billion to shareholders in dividends and repurchase.

$1 5 billion in stock.

Our capital allocation priorities are to fund our key marketed products and expected new launches bolstering manufacturing capacity invest in our pipeline and pursue opportunities for external innovation to augment our future growth prospects and return excess capital to shareholders.

Slide 13 is our updated 2022 financial guidance.

Our full year revenue outlook now includes an additional $300 million of headwinds from foreign exchange rates since our previous guidance update.

For a total impact of roughly a $1 billion.

Foreign exchange hasn't headwinds of revenue for the full year compared to our original guidance.

Our outlook for gross margin SG&A and research and development remains unchanged.

Our guidance now includes acquired IP, R&D and develop and Nelson charges of approximately $670 million, reflecting total charges in the first nine months of the year.

We have not recognized material material acquired IP R&D or developing Muslim charges to date in Q4.

And this guidance does not include any impact from the potential acquisition for potential business development or acquisition and the remainder of the year, including pending acquisition of course.

Our non-GAAP operating margins remain unchanged at approximately 29%.

On a reported basis operating margin is now expected to be approximately 26% driven.

Driven by the intangible asset impairment for a GBA one gene therapy due to changes in estimated launch timing.

Our non-GAAP range for other income and expense remains unchanged on a reported basis. Other income and expense is now expected to be expense in the range of $600 million to $700 million, reflecting the net impact of net losses on investments in equity securities During Q3 2022.

Our tax rate and EPS in the first nine months of the year includes the favorable impact of the provision in the 2017 tax at <unk>.

That requires capitalization and amortization of research and development expenses for tax purposes, our financial guidance for the full years continues to assume this provision will be deferred or repeal by Congress.

That's it for the full year 2022.

Assuming this deferral of repeal occurs before the end of the year, we expect our Q4 non-GAAP tax rate to be approximately 22%, which includes the cumulative tax effective immediately expensing research and development costs for the full year 2022.

If this provision is not defer the repealed effective this year than we would expect our reported and non-GAAP tax rate to be approximately 10% to 11%.

Based on these changes we have lowered our reported EPS guidance by 46 cents to now be in the range of $6 52.

To $6 65 per share and lowered our 2022 non-GAAP EPS guidance by 20.

To be in the range of $7 70.

To $7 85.

The 20th reduction of our non-GAAP EPS range is driven by the negative impact of foreign exchange rate as well as the six cents impact from the incremental acquired IP R&D and developing melson charges in Q3.

Now before I turn the call over to Dan I'd like to provide a few thoughts on the pushes and pulls across the P&L. If you begin to think about next year.

Starting with revenue we are confident in the growth outlook of our core business, we expect to build on that positive momentum across our key growth products, including the continued strong launch of mantra and launches of new products will.

While we anticipate that initial revenue from our next wave of potential launches will be modest in 2023 with only partial revenue. We do expect that the non med printer burden in New York because of that and lever kisan them will serve as additional catalyst for continued growth.

In 2023, we will see the full year impact of Olympus patent expiry in the U S.

New generics have eroded alimta sales started in mid Q2, and we anticipate a low single digit headwind from foreign exchange rates.

As for revenue from COVID-19 antibodies, we will continue to make them to Logan that available for purchase.

However, the demand for these therapies will depend not only on COVID-19 case counts, but also an evolving variance and available therapies.

We continue to believe that COVID-19 antibodies.

And that would be a major driver for long term growth for Lilly.

We will invest in our future as we advance promising R&D opportunities.

And our manufacturing capacity and support the potential launch of multiple new products.

Assuming inflation perspective.

We expect to see that impact in 2023 as well.

Also we will be making a significant investment in one of our most important asset our talented workforce through increases in compensation. There are partially due to inflation pressures, but also to ensure that we have the right capabilities to deliver on the promise of our future growth.

While these investments and slower operating margin expansion in 2023, they are critical to maximizing pipeline and new launch opportunities to help sustain top tier revenue growth and operating margin expansion over the mid to long term.

We look forward to sharing more details on our 2023 guidance call on December 13th now I'll turn over the call over to Dan to highlight progress in R&D.

Thanks for the 2022 has been another outstanding year for R&D at Lilly. In addition to a majority approval. We've now completed regulatory submissions for four new medicines that could all launch by the end of 2023 pretty brutal nib mirror Kisan, Mab, <unk> mab and isn't that a map.

In addition, we advanced our early stage pipeline with promising next generation assets in all of our key areas plus we've continued to improve our capabilities and advance our projects and our growing nucleic acid medicine portfolio.

Before I share in R&D update for our core business. Let me briefly add to have nots update on COVID-19 antibodies, while we've made them till ever map commercially available. We're also closely watching the emergence of new highly mutated strains.

Based on pseudo virus data, we do not believe that that to 11, Apple neutralized against the new Btu variance.

However, we do have potentially broadly neutralizing antibodies in our labs that we can consider bringing forward. If there is a need and an aligned path forward with health authorities.

Moving to our core R&D portfolio Slide 14 shows select pipeline opportunities as of October 28th and Slide 15 shows potential key events for the year.

I'll cover important developments since our last earnings call by therapeutic area.

Starting with diabetes and obesity, we have several updates for tours appetite.

For type two diabetes. In addition to the U S approval of <unk> in Q2, we're pleased to announce recent approvals in the EU and Japan.

For chronic weight management, we're pleased that the FDA has granted fast track designation purchase appetite.

Fast track designation is designed to facilitate the development and expedite the review of new therapies to treat serious conditions that have the potential to fill an unmet medical need.

We plan to initiate a rolling submission this year that will be primarily based on the results from the surmount, one trial, which is complete and surmount too which is expected to be complete by the end of April 2023.

Assuming positive surmount two results, we expect to complete the rolling submission with these data in mid 2023 for potential regulatory action as early as late next year.

We're working hard to bring <unk> appetite to adults living with obesity as soon as we can.

We also presented the trial design of tours appetites surmount MMO, our phase III morbidity and mortality in obesity studies.

Surmount MMO evaluates treatment Richard's appetite compared to placebo in adults living with obesity without diabetes and measures the effects of Tricia appetite on a broad set of outcomes beyond traditional cardiovascular events.

As our primary endpoint, we are measuring the occurrence of a cardiovascular event from a five point CV composite that includes all cause mortality.

We've also incorporated key secondary endpoints, including traditional maze three events.

Reducing the risk of developing type two diabetes.

And the adverse renal outcomes.

And surmount MMO, we're studying both primary and secondary prevention of events and a broader at risk population more representative is that seen in clinical practice.

This amount time in most study has now initiated and we look forward to sharing the results in the future.

Surmount MMO is just the latest edition to switchers appetites development plan, where our goal is to not only demonstrate chronic weight management, but also to demonstrate improvement across multiple outcomes as a result of weight loss.

We're extremely confident in to jeopardize potential to impact health outcomes of patients living with type two diabetes obesity and other obesity related metabolic outcomes.

Transitioning to the rest of our diabetes portfolio. We started two more phase III studies for a weekly basal insulin FC and expect to start the fifth and final registered duration study in the <unk> program in the coming months.

We also received FDA approval for the tempo smart button and medical device and key component of released forthcoming tempo personalized diabetes management platform.

We're excited to begin to introduce this platform to the marketplace. This year.

Moving to oncology in line with expectations previously communicated we've now performed another interim analysis for monarch E. R. Adjuvant high risk early breast cancer study of <unk> in combination with endocrine therapy for the treatment of adult patients with HR positive her two negative node positive early breast cancer at high <unk>.

Recurrence.

The results of this analysis will be presented at the San Antonio breast cancer Symposium next month.

We're excited by what we've seen and we look forward to sharing the data publicly.

Presenting <unk> as the only CDK four six inhibitor approved in the adjuvant setting and we're enthusiastic about presenting his ability to substantially reduce the risk of developing incurable life threatening metastatic disease.

We also announced that the FDA granted accelerated approval to return for pretreated adults with locally advanced or metastatic solid tumors for the ret gene fusion, regardless of tumor type.

And also granted traditional approval for <unk> in adult patients with locally advanced or metastatic non small cell lung cancer with a ret gene fusion is protected by an FDA approved test with.

We're grateful to have the opportunity to deliver meaningful clinical benefits to more patients across more tumor types, where their tableau.

We also began dosing patients in our fifth phase III study for <unk> prudent at.

This latest trial as a head to head study evaluating pretty brutal against Ibrutinib and PTK inhibitor naive patients with chronic lymphocytic leukemia.

As a reminder, pretty brutal <unk> is currently under priority review at the FDA for mantle cell lymphoma previously treated with a <unk> inhibitor with regulatory action expected in early 2023.

We also continue to have discussions with the FDA about potentially accelerating the approval pathway for CLO in patients previously treated with a <unk> inhibitor.

Switching to immunology.

We presented detailed week 52 results from the <unk> phase III monotherapy studies in patients with moderate to severe atopic dermatitis are two recent dermatology conferences the.

The maintenance data showed that <unk> provided robust and durable skin clearance with improvements in itch sleep and quality of life amongst patients who achieved a clinical response in the 16 week induction period.

Notably the results also suggested that less frequent dosing of <unk> Mab can provide similar improvements to once every two week dosing.

Based upon the data we've collected across our trials in over 2000 patients. We believe <unk> could become a first line biologic for treatment of moderate to severe atopic dermatitis. The disease, where there is significant need to provide new options for a large and diverse patient population.

As part of our efforts to reach a diverse patient population. We've recently initiated an innovative clinical trial to evaluate <unk> for people with skin of color, who have a disproportionately higher prevalence of atopic dermatitis and often struggle with more severe forms of the disease.

We have now submitted a BLA to the FDA and <unk>.

Our morale who holds rights to develop and commercialize <unk> Mapper Dermatologic indications in Europe has submitted to the EMA for authorization.

We expect regulatory decisions in both the U S and the EU by the end of next year.

Together with all morale and we look forward to potentially bringing this important medicine to patients who suffer from this chronic disease.

Shifting to our efforts in genetic medicines Youll see that we have now advanced our <unk> III SA RNA to phase two development and atherosclerotic cardiovascular disease. This is our first SA RNA asset to advance to phase III and with this molecule alongside our L. P Little ASI RNA, where we shared.

Proof of concept data last year, we're optimistic about the prospect of improving cardiovascular outcomes using our portfolio of genetic medicines.

Within gene therapy, we're excited about the opportunity to help patients with fatal neuro degenerative diseases, where we're advancing our prevail therapeutics programs, we particularly look forward to sharing biomarker results from our pro granular in gene therapy program at an upcoming scientific meeting for frontal temporal dementia.

Building on our gene therapy experience would prevail, we're thrilled to welcome our crews and their talented team who will bring a transformational gene therapy approach to treating genetically defined hearing loss.

Hearing loss is an area of severe unmet need that historically has not been a focus of pharmacologic development and we believe treatment of century neuronal hearing loss through gene therapy delivered to the inner ear is an area ripe for technologic advances for the benefit of patients.

Finally, let me turn to Alzheimer's disease, where there've been a number of important developments since our last call.

As a company dedicated to the fight against Alzheimer's We were pleased to see the positive top line phase III results for <unk>.

Following day net of maps Trailblazer ALS study <unk> study may further support the benefit of removing amyloid plaques for people with early symptomatic Alzheimer's disease.

These data certainly reinforce our confidence in <unk> and the forthcoming readout from our phase III Trailblazer ALS II study, which is expected by the middle of 2023, and which if positive will form the basis of our application for traditional regulatory approval.

In the meantime, we continue working with the FDA to seek accelerated approval in early 'twenty three based on our Trailblazer ALS data.

The ability availability of and access to safe and effective therapies is important to slow the devastating impact on the estimated $6 5 million Americans and 35 million people worldwide living with this disease and their loved ones.

While we acknowledge the hard work ahead to bring these therapies to patients in need we are excited and we are confident in our Alzheimer's disease portfolio and the potential impact our drugs can have on patients.

Accordingly, we initiated trail runner ALS won the first trial in our phase III program for <unk>. Our next generation anti amyloid antibody <unk> has demonstrated deepen rapid amyloid plaque clearance and provides the opportunity to explore flexible dosing regimens for patients.

Finally, and trailblazer hours for our head to head trial, comparing <unk> to <unk> on amyloid plaque lowering in patients with early Alzheimer's disease. We have now achieved positive results on the co primary endpoints of amyloid lowering as expected with a consistent safety profile to previous to <unk>.

Please.

For this study the incidence of ARIA E. In the Banana map group was 21, 1% with two 8% of genetic <unk> treated patients showing symptomatic ARIA E, suggesting the potential that rates of plaque clearance are not directly linked to rates of ARIA development.

We will share the detailed results at the upcoming CPA deep meeting in late November including the relationship between the degree of amyloid plaque removal and plasma possibly tau as.

As well as radiographic RF.

While we focus most of our remarks today on late stage assets Youll also notice we have a number of developments across our early stage portfolio as shown on the slides.

Across the pipeline in Q3 was another productive quarter at Lilly.

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

Dan before we go to Q&A, let me briefly sum up the progress we've made in the third quarter. We continued to grow our recently launched medicines, including <unk> strong U S launch at.

At the same time, we continue to advance our pipeline progressing towards potential launches for four new medicines by the end of next year, while also internally and externally investing in our early stage pipeline and discovery capabilities.

With the progress we've made we remain confident in our long term growth prospects.

Now I'll turn the call over to Joe to moderate the Q&A session.

We'd like to take questions from as many callers as possible. So we ask you. Please limit your questions two per caller.

Please provide the instructions for the Q&A session and we are ready for the first caller.

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

Hana and acknowledgment Tom that you've been placed in the queue and you may remove yourself from queue at any time by repeating the one man if you're.

On a speakerphone please pick up your handset before pressing the number and once again if you have a question. Please press one zero. The first question is from Chris Schott from J P. Morgan. Please go ahead.

Great. Thanks, so much for the questions I just had two here on Maduro I guess the first is just on gross to net trends, we should be thinking about from here. I think you are talking at this point about 45% access. So can you talk about where that will be trending as we look out into maybe early 2023 and when do you think you'll be at a point.

Where the drug will have similar access to what we see with Thrill City. Currently and then my second question I'm Andre was on manufacturing capacity, given what's been really an exceptional watch so far it sounds like you're in a position to double capacity by end of 'twenty three I guess, the kind of bigger picture question I'm asking is do you see any capacity issues that couldnt.

Limit uptake at all of <unk> as we look between now and when that additional facility comes online. Thanks, so much.

Thanks, Chris I think maybe I'll go to Mike for both the first question on gross to net trends in access and for some commentary on manufacturing capacity Mike.

Okay, Hey, thanks, Chris for the questions I appreciate that.

As we guided before launch.

We recommend that you look at more revenue it was a better a better indicator of our performance then net revenue.

We took two decisions that we're really focused on looking at generating long term value for money Sheryl first we decided to put in place a bridging program.

That would bridge people, who have type two diabetes.

With a low out of pocket costs of $25 until they achieved formulary access on their insurance, we're confident that we're going to build and we still are confident that we're going to build a good broad access for one barrel well.

Wanted to make sure that that that we had a bridging program in that then allowed us to be disciplined and patient as we gained access we wanted to make sure that we look for the long term not the short term.

Two short term focus then youre going to be driven to grain access quickly and not make the right pricing decisions. So we thought the bridging program.

Tied with the discipline negotiation approach was the best approach and that's the one we've taken and that's the one we've held true to during our launch so what we'll see is net price will increase as we gain payer access.

In the third quarter, we had 22% of people with commercial and part D insurance had formulary access one general.

As of October <unk> that jumped to 45%.

What what we anticipated those will still take a discipline.

Moderator to approach to make sure we get the best access for the right price point and we're still very confident that we will grow and we will achieve broad access.

The upcoming future.

We are also adjusting.

Adjusting our bridging program to further ensure that utilized for people with type two diabetes, which will impact new start volume, but should impact net revenue.

So we expect over the upcoming quarters at net price will grow four months' apparel as.

As it comes to supply.

Our supply chain has performed exceptionally well since launch we're taking actions to maximize production supply for our current facilities, while we ramp up our new manufacturing facilities that you referenced the U S. Monitor launch is really unprecedented with viral nature given just tremendous.

Satisfaction.

And the visible results that people experience that really smart many conversations with them that type two diabetes community, which then breeds greater enters the type two diabetes community a community for Newmont Journal.

It is a dynamic situation given the uncertainty of competitor DLP supply.

That <unk> patient.

Prescription abandonment long term adherence and dose titration rates haven't yet reached steady state, which are all important forecast assumption.

Assumptions, so given the dynamic nature of this it's reasonable to assume that weekly production forecast won't perfectly aligned with weekly demand at each week. So this will produce some incremental delays in meeting wholesale orders for some dosage strengths as we ramp up our supply chain.

As this happens our teams will work hard to avoid or minimize any short term impact for people living with type two diabetes, but stepping back and taking a look at the longer term picture. We're in a great position, while Gerald launches going extremely well because patient experiences have been tremendous and they are of high interest in the product profile, we expect one.

<unk> launch has fueled significant market growth.

Which I think just gives us more confidence in the future.

We had the foresight to initiate significant manufacturing capacity expansion before Montreal, even launch because we saw the potential of the product. So we're in a very good long term position with one journal.

Thanks, Mike next question.

The next question is from Karen <unk> from Morgan Stanley . Please go ahead.

Hi, Thanks for taking the questions maybe two follow ups for me so just on the manufacturing side.

Is that.

Kind of supply challenges, you're going to run into kind of expected through the first half of the year I am.

Just wonder if theres any way you can bring north Carolina onboard any sooner I know you've guided to year end, but just maybe help us think about anything you can do to kind of bring that online sooner and then the bridging program like you mentioned you made some changes there.

So the percentage of patients not with type two diabetes.

It may be different on the forward can you tell us what that represents currently and how we should think about that change to volume on the forward. Thank you.

Thanks, Terence Mike.

Yes, all manufacturing supply.

I'll reinforce that our main can raccoon supply and teammates have delivered exceptional results.

They continue to look for every way to maximize our production supply.

They have all hands on deck to get the.

Research Triangle Park facility online as soon as possible.

And is that the facility is available we will make good use of that supply. So we're confident in our ability of our manufacturing costs.

Personnel, and our leadership, there and where it is.

I've said before we're very confident in the long term potential of tours appetite.

With the bridging program.

Question was more around kind of off label use of Montero and kind of how much it was.

As you know <unk> was approved in the U S for patients with type two diabetes and we have just excellent processes in place to ensure that all promotional activities are in line with our approved label.

Pleased with our discipline on label promotional execution. The launch of <unk> has been very disciplined and in line with everything that we wanted.

So.

We've been encouraged by both patients and physicians prescribing experiences.

And this has driven a very high interest in Monteiro.

We don't have perfect data to suggest what diagnosis of patient has.

The best data that we have is to look at.

B.

Whether those individuals who are starting mongrel.

Whether they have previously been on a diabetes medication are not given that our promotion is focused solely on type two diabetes, we would expect to see the majority of people who use them on Gerald for type two diabetes and that's what we've seen while we see fluctuation from week to week in the third quarter. We saw about two thirds of new patients starting on journal with a.

History of type two diabetes medications for the remaining one third of patients who are classified as naive to treatment diabetes treatments. These individuals could either be newly diagnosed type two diabetes patients are individuals who haven't yet been diagnosed with type two diabetes.

Thanks, Mike lowest next question. Thank you. The next question is from Omar Saad from Evercore. Please go ahead.

Good morning, guys. Thanks for taking my question, maybe a quick one a quick couple of questions on <unk>.

If you could speak to the inventory contribution to the third quarter U S sales.

And.

I was just trying to compare.

And that.

$1 for Rx early into the launch and compared versus households have you did early into the launch and I think what stands out is the revenues per Rx for several fold higher for <unk>, perhaps if you could speak to any specific differences in the types and extent of patient support you did early in two or three launch versus what you're doing in general clearly the volumes.

Major League Major league surpassed our Felicity that early on.

Thanks, Omar so might go back to you on both questions first one on inventory contribution to Q2 sales and then the second on the gross to net.

And how that would compare versus what we saw with <unk>.

Okay. Good question inventory count.

<unk> two.

Q3 sales was 40%, but I also.

Note that.

Soon as a product shipped our product, we accrue for rebates and discounts whether that product is used to supply patient demand in the pharmacy or whether that's used in the channel four for inventory.

As it comes to gross to net the big changes if you look at the true luxury launch versus the.

<unk> launches, we did not have a bridging program with the launch of <unk> like we do from Ontario.

Thanks, Mike.

Lewis next question.

Next question is from Steve Scala from Cowen. Please go ahead.

Thank you very much.

Does Lilly think FDA is requiring it to submit results from surmount too for the troops appetite obesity filing when that study would not seem particularly relevant given that it is in diabetics does not select for obesity and its smaller than surmount, one and given that the FDA requested.

<unk> of tenuous value could it be relaxed, perhaps on an interim look at surmount too. So that's the first question.

Second why did Lilly cell co promotion rights to <unk> in Japan. When it is I believe Lilly second largest market.

As a large footprint there presumably wound Giro is a critical long term driver to Lilly and do so for only $86 million.

Granted Lilly has done this before such as selling rights to see Atlas in China, but that was that one at a point when <unk> was in steep decline, whereas marine gyro is your future. Thank you.

Thanks, Steve So first for the question about the FDA submission for <unk> appetite for obviously will go to Dan and then your second question around the co. The collaboration agreement in Japan, We will go to <unk> Dan.

Thanks, Steve for the question on on Surmount too here and FDA requirements, maybe I'd just start off by relieving any worries that there is any specific concerns or the data or safety or anything like that we don't see anything.

So as such is that driving FDA concerns.

I think the.

FDA discussion around having two trials is just to be consistent with FDA guidance for adequate and well controlled studies in chronic weight management debt for that indication, having multiple studies in a population with obesity.

With primary endpoints.

To find a.

As for the guidance on thresholds of weight loss is the requirement.

Thats the requirement were being held to the two studies.

Thanks, Dan do.

Do you want to take the question around the Japan <unk> appetite.

Yes. Thank you for the question Youre right, Japan is a critical market just to clarify the $86 million that we recognized for revenue in payment from Mitsubishi Mitsubishi Tanabe was for an upfront payment for collaboration which is consistent with the partnerships that we've had in Japan for a number.

Our growth brands.

I'd like to turn the city like in reality, we've had success in having strategic partnerships with local Japanese companies to successfully commercialize.

Our innovative treatments, we believe that this partnership will allow us to maximize the value tiers appetite in Japan.

And Mitsubishi Tanabe does have significant scale and experience in diabetes and together, we will collaborate and just to clarify we will preserve the economics on ongoing economics for the launch and sales of my job in Japan.

Formula.

Thanks, Elia lowest next question the.

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

Good morning, guys. Thanks for the question.

Mike You mentioned, a low switch rates among jar from Felicity, but what was the driver of sequential trends for Felicity.

Maybe how do you see cannibalization playing out in the next few years.

And then the second question for Dan on <unk> appetite and obesity you guys added MMO study, but there there are a lot of other additional indications beyond what you guys have talked about.

Obesity plays a role like acute coronary syndromes or other broad cardio indications come to mind. So how do you guys plan on prioritizing the clinical investments from here <unk> like whats the math. Thank you.

<unk>.

Thanks, Jeff So Mike we'll go to you for the question around sequential trends and what we expect might expect in terms of ongoing switch rates and then Dan will go to you for prioritization of tours appetite development plans Mike.

Yes, what you typically see is actually the switching for a new product into anchor during class.

It's typically the switch rates.

People switching from another <unk> 10 to the launch of curtain those rates will actually go down over time, and so that's what I meant and anticipate the real opportunity here is to grow the market and make sure that.

People are being proactive to treat type two diabetes.

Thanks, Mike.

Jeff Thanks for the question on future indications for <unk> appetite. There there are many that we can consider as you point out.

Weight loss and rich restoration of sort of normal metabolism, which we think may be possible with ministers appetite is going to have benefits in a lot of metabolic and obesity related diseases. So how do we pick which ones to pursue and win I think initially our thinking has been around generating a body of data.

That shows that a drug such as <unk> when driving weight loss Ken.

It lead to downstream health benefits. So that's what drives them in most study we have.

Our heart failure study sleep apnea study.

Or that are all ongoing.

When we think about adding more at sort of where can we see.

Improvements in that medical understanding of the dangers of obesity and the benefits of weight loss and restoration of normal metabolism. That's how we think about it rather than how big is this patient segment or how big is the next patient segment, noting that almost all of those patient segments will already have obesity as an underlying disease, which we expect to have.

Indicated.

Next year as I commented earlier, and finally, I think one more consideration here Jeff.

For us as well.

We see fighting obesity is a long term goal for Eli Lilly and company and so there'll be multiple generations of drugs here, we hope and we will have lots of opportunities to contribute to our medical understanding of weight loss.

Okay.

Thanks, Dan.

Next question.

Next question is from Mohit Bansal from Wells Fargo. Please go ahead.

Thanks for taking my question.

And so maybe I'll ask a question.

When giro growth in BCD.

So when you talk about 100 million patient population, which are obese not diabetes.

They're talking about family convention, but if you look at the current trial.

Our moral that can do prevention.

Type of setting so.

<unk>.

The question is how important is.

Getting a primary prevention trial done to get to the broadest patient population in obesity market.

Thank you.

Yeah.

Thanks for the question you were a little bit equity there I think we got to just around the patient population for obesity and how to maximize that opportunity. Mike do you want to do you want to take that.

Yes, Im happy to.

To answer that question actually you know with with obesity.

It's actually kind of counter to what typically happens is a product typically you'll get it out.

A finite.

Ah patient segmentation that you try to expand that with additional indications.

With the BC or youre going to have the broadest indication for people, who either have a BMI of 27 with a risk factor our BMI over 30, which is a massive population.

In the U S and globally and so the additions of our trials arent necessarily to to expand the patient population, but he has to demonstrate that proactively treating obesity.

We will improve health outcomes in order to drive physicians to write and payers to to give access for the product.

Thank you Mike.

Lowest next question.

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

Oh, great. Thanks for the question. So a couple of quick ones, so with regard to the.

North Carolina facility and expanding manufacturing capacity.

In terms of API versus.

The actual.

Hands until finished manufacturing.

Just update us on what really is.

The potential expansion of manufacturing there, it's my understanding that.

The potential bottleneck is going to be.

More related to the pen manufacturing.

And it's my understanding also that this is largely the true Liberty patent and the <unk> patent is going to be the main manufacturing point or pretty much all of your biologic capacity as well as for <unk>. So just trying to get a better understanding of that and then second just on the insulin.

There are a number of questions around the change to the Penny rule and how Lilly.

Competitor Novo, we're going to manage through that as many of the influence could actually be.

Sort of paying.

B.

Medicated feeds for the benefit of actually providing insulins.

So just trying to get a better understanding of how lilly hopes to manage that outcome.

Outcome in particular, it seems wildly unfair to the industry.

Thanks, Jamie So I think for the first question on the kind of North Carolina manufacturing facility at Amex, I'll hand over to Dave and David If you want to comment also on the insulin.

I think he is referring to the amp cap dynamics, I can and Mike jump in if I get that wrong.

So just to step back on capacity, we did make some comments today.

To this end we've taken actions in the quarter.

Too slow demand internationally on solicited primarily because of the <unk>.

Constraints.

By a competitor, which has shifted demand to list. The internationally should that happen domestically of course that will I think we're just trying to give fair balance to say that.

That would be an increase in demand we'd have to manage to as well, but we are producing above our plans right now.

See that continuing and the next step up Seamus that we expect.

In capacity will be North Carolina.

Which will happen towards the end of next year.

Just for clarity there is actually two sites in North Carolina, One we announced in 2020 and one more recently down the road in Concord near Charlotte.

That second facility will also come online beginning in 'twenty four with some capacity in early 'twenty five more fully so the.

The company has taken some pretty aggressive investment steps and those steps and North Carolina are focused on what we'll call the parental filling in the drug finishing process, which is the device that is used for <unk>, but also on zoro.

We take a platform approach so.

That device is also used for other Lilly biologics and.

It gives us flexibility to to match.

Supply and demand more <unk>, although mikes comments, we're well placed earlier that it's not perfect bike inside of 90 days, we can't perfectly match every SKU too.

Demand to every SKU produced but it does give us a lot of agility those two sites in North Carolina I'll point out I think is enough said.

Our huge so the first one will literally double our global capacity when its online in the second side is a similar size. So we've taken some some big capex decisions and it looks well placed given the early uptake among genre, which looks quite substantial.

Those do not speak to the API side API as a different supply chain. We've also taken actions to expand that capacity. It's currently not the bottleneck and is not expected to be the bottleneck.

Which is the peptide synthesis process we use.

Of course big.

Big caveat around all of this is of course things can go wrong.

Regulatory.

Approvals are required to bring the new sites online and an on time fashion, but that's our current outlook and as Mike said long term, we're extremely confident we can supply a massive volume of <unk>.

<unk>.

But the step ups do take a little bit of time and should we have a lapse in competitor supply that will challenge our ability to meet demand I think that's the main message.

From today.

As it relates to the Amp cap, you're right that beginning in January of 'twenty four.

The cap on.

Payments or rebates to Medicaid programs for medications that have a CPI penalty that pushes them.

Of 100% rebate will be lifted and we will be required to pay states to use our product.

In that situation, we have not announced our plans to deal with that although we are formulating plans to deal with that and of course, the best thing to do is keep inventing new things, which.

Which reset that calculation and as you know we've got our phase III program for a weekly insulin and we are.

Progressing efforts on glucose sensing insulin.

Got I think an exciting new approval on connected care as well.

So all of those efforts I think are the long term approach tactically, we will we'll manage through that.

Event at the end of 'twenty three early 'twenty four.

Thanks Seamus for the question lowest next question. The next question is from Chris Giovanni from Goldman Sachs. Please go ahead.

Yes. Thank you two questions one on the obesity opportunity for terms that the tide and the regulatory requirements there.

<unk> three and four I believe are expected to complete also on the first half of next year should we be clear in terms of not anticipating that data from those studies are required or that youll be planning to submit to the FDA and if you work to would that have any potential implications on the timeline for potential approval and processing.

You highlighted some data on Brazil, you know that we're going to see yet sbcs can you just maybe contextualize for us.

We believe.

Potential impact.

Terms of the adjuvant metastatic split and anything in terms of how that might influence the trajectory of present, preventing them from a revenue standpoint, once we see that data. Thank you.

Thanks, Chris Okay for the first question on <unk>.

<unk> obesity and the regulatory requirements around three and four will go to Dan and then well go to Jake for the <unk>, San Antonio Breast conference maybe preview. Thanks.

Thanks, Chris our understanding is that we'll submit based on sort of my one and surmount too as we said and we don't anticipate needing surmount three and four for that submission. So no implications to timeline from those study readouts.

Jay Cohen agenda jumping on presenting them.

Yes, sure so yes.

Dan mentioned in the prepared remarks, we conducted a preplanned interim analysis of monarchy as we had talked about early in the year that we were going to do that so we of course, we looked at all of the endpoints <unk> PFS and overall survival will be presenting those at San Antonio.

Really pleased with what we've seen across the study.

In both the ITT population cohort one as well as the currently labeled indication I think theres two components to think about here. One is how does the data continue to evolve with increased follow up.

And the second is how does the new analysis.

Look as it relates to potentially expanding our labeled indication over time.

Obviously I wanted to be careful about previewing the data themselves, but I think those are the two.

Questions.

You ought to think about as you see the data in December .

Thanks, Craig and thanks, Chris for the questions lowest next question next.

The next question is from Colin Bristow from UBS. Please go ahead.

Hey, good morning, and congrats on the quarter.

Two from my side first on our PCT, there's been quite a bit of discussion around amgen's upcoming one phase III data and so could you give us your thoughts on gift agonism versus antagonism and just on your development plan could you just remind us.

So im triple Gms's tied and then on the outside let's call. It I'm just wondering on banana, Matt with any part of your decision to pursue it.

Dosing strategy with regards to stopping when you achieve ammonoid negativity.

All of that related to anti drug antibody just I'm just thinking about this given there's some data, suggesting re dosing or maintenance dosing may actually be beneficial. Thank you.

Thanks, Colin will go to Dan on both questions first one around obesity amgen's data.

And then the second one around all timers and discrete dosing related to antidrug antibodies.

Yes, thanks, starting with how do we think about obesity and <unk> in general as much as possible here. Our strategy has been to mimic the body's own response to food, so and curtains, our homerun submitted by secreted rather by year.

Gastrointestinal track in response to eating which then lead to feelings of satiety and increased calorie expenditure decreased crude intake.

How they work and Gi P is one of the major and curtains. So it made sense to pursue a strategy of agonism of that hormone.

We're waiting to see amgen's data to understand if antagonism could also have a surprising affect different than the biological effect of acreage. It's normally in humans with respect to triple G and manage the tide.

I think triple G is our next generation Incretin. That's further ahead in development and we've previously communicated that we expect to have internal phase II data.

Yet this year and use that data to make a decision whether this proceed to phase III or not.

In which case, we might wait for <unk> data that thinking is still consistent.

Consistent and on track.

Yet this year.

The second line of question here was around genetic mab discrete dosing strategy and youre, referring here to the notion that we pioneered that once plaques are clear you can stop taking a plaque clearing antibody that was based on our understanding of the biology, nothing to do with anti drug antibodies, but certainly.

We see it as a benefit for patients to not have to continue to take a drug.

In the absence of having the target or the disease in their brain that that's still ongoing it's pretty specific idea to donato mab.

I'm turning to tug in antibodies that are specific to plaques.

Because once a box or gone their stomach for the antibodies to do.

Our own data that we've shared show that there is.

No reversion really of adverse biomarkers in patients who've come off therapy. So so far the data that we have in hand, although it's still early support cessation of dosing is appropriate.

Look to trailblazer, two to confirm that hypothesis.

Alright, thank you.

Thanks, Colin for the question lowest next question.

The next question is from David Risinger from SBB Securities. Please go ahead.

Okay.

I guess first although there was 22% coverage in the U S. In the third quarter that didn't fully translate into net revenue. So could you provide some more color on why that was the case was it because formulary access at the national level may not immediately translate to.

<unk> for certain downstream customers of payers because additional negotiations may be required I thought that might be a factor and this will help us better understand how to.

Think about the 45% coverage that you have.

As of October one.

And then second with respect to ex U S sales prospects I'm not sure. If you provided this yet but could you talk about how we should think about.

Sales.

To Mitsubishi in the fourth quarter sequentially, and how we should think about ex U S rollout plans in the context of the risk of demand outstripping manufacturing capacity.

And one other just a quick one just to tie to the first question about the U S. Sales there was a comment about 40% of the sales being.

From stocking, but it wasn't clear if that was a U S comment. So if you could just clarify that when you address the first question. Thank you.

Thanks, Dave for the question. So for the first one we'll go to Mike to discuss a bit about coverage and I think maybe what youre getting at is around the co pay card and then for the second one will go to <unk> to talk about O U S sales.

Sales prospects and dynamics and timing so Mike.

Okay. Thanks, David for the question, yes the percent.

That was come from channel wasn't U S figure.

When you look at our data and you look at percent covered scripts.

That were paid versus paid through the savings card.

That rate in since launch has closely match our access rates. So I would say that's the best indicator for kind of the percent that are are paid versus going through the bridging program.

Thanks, Mike earlier on or U S.

Yeah, maybe first on Mitsubishi Tanabe and dynamics.

The upfront payment basically the economics.

Upfront payment and the future economics would be when we actually start commercializing selling non gennaro in Japan market because that is a one time upfront payment and so that's how I would look at the economics for the future in terms of overall commercialization of non <unk> outside of the U S.

I think one of the aspects that's important for us to determine as the ensuring that whenever we enter a market that we can ensure that we can appropriately supply.

Nanchang, because thats the type two patients.

Given the market and we will evaluate that as well as still got bar access as you may know for most markets outside of the U S. It takes time and there's typically a lag between the approval and also gaining access.

Two patients from reimbursement and so we don't anticipate that being a significant.

Delay in the full commercialization and launch outside the U S. But of course, we will look and monitor and ensure that we have adequate supply.

We enter a market.

Great. Thanks, Dave for the questions lowest next question.

Our next question is from Louise Chen from Cantor. Please go ahead.

Hi, Thanks for taking my questions here. So first question I had for you is how you see the market for all <unk> and Injectables playing out over time and then the second question I had for you is do you think a positive outcome and Novo select study will be enough to convince payers that the opportunity here or do you think they will have to look.

For a broader study like Youre surmount MMO and I don't know if you said this before or not but where you have an interim look and your surmount MMO data. Thank you.

Thanks, Louise Mike I'll, let you kind of handle both first one is around what we see for the market for oral glimpse and then around <unk>.

Prospects for positive select study.

Okay.

Okay.

Oral GOP market I mean in our market research.

Consumers are very interested in oral products, both in type two diabetes and obesity and so the prospects of an oral anti obesity product is very attractive. So we're very encouraged by that opportunity and are excited by our MBA program.

It comes to them.

The positive CV.

Study, if nowhere is able to get that with.

<unk> tied.

To me it's.

It's more of a opportunity to show the benefits of of our products on the cloud. So I think any any additional benefits that are represented by whether it be our trials of our novel trials are going to help the class and help more payers and more more health care provision professionals take action on the product and so.

I think.

The trial will provide good information and good data for health care professionals, and payers and while our trial is a little bit different and we think is a little bit broader in nature. We think that will also expand and so it's to me it's not a <unk>.

Comparing our study Mr. Mount MMO study versus select.

More new information, that's going to be good for the class for health care professionals.

We really should be treating obesity, a lot more proactive than what we do today and I think those trials will show.

The need for that.

Maybe if I could jump on this one.

Speaking to a lot of analysts.

Desire to anchor on one event that will then trigger broad commercial access for obesity or not and I don't really think we think it's going to play out that way that already there are.

Commercial payers, who reimburse.

Medicines for chronic weight management in obesity, it's a small number we think the data accumulates over the course of the balance of the decade that that will become the norm just like we expect in a hypertensive to be paid for.

Course, the big action might relate to <unk> and the government coverage in the U S or similar efforts ex U S.

And those will be more binary, but I wouldnt encourage investors to think about this sort of waiting for one definitive dataset, but rather a more accumulating.

Effect over time, where commercial access will slowly open up over the next many years due to both.

These efforts and others efforts to prove that the health benefits of chronic weight management.

Very good.

Lowest next question.

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

Thank you a couple of questions. Please.

On <unk>.

On the timelines on controls potentially disrupt could be launched as early as 25 under accelerated approval one year or so post the introduction of roche's subcutaneous.

Do you expect the evolving a beta data results and removing of the existing NCD.

In order to allow it to compete effectively that's the first question obviously at that point you already have the patient data, but it will be subcutaneous potentially and then second question.

Getting back to your <unk>.

Oral <unk> one agents you have backstrom blinds.

Diabetes and obesity phase two trials could you talk to how you look at the commercial potential for this market. It strikes me that the GPP full market is worth about $13 billion and that's on top of what happened right analysis is doing so once you solve if you manage to solve the drug interaction.

Is that not possibility that this could be a very major contributor to your revenue growth independents the majority going forward.

Thanks, Andrew for the question. So for the first one on return of tug and the timelines, maybe hand, too and to chime in as well as the NCD removal.

Dynamics and then for the second one on the commercial potential for oral Calypso will go back to Mike.

Thanks, So much for the question on <unk>, obviously, we're excited that we've initiated the phase III program and as you noted we have started the first study which is to assess amyloid lowering we have a broader phase III program that we're initiating as well looking at the clinical endpoints as we've done for dynamic AD, but we're.

Cited about what we're seeing so far with rent turn on time, which was the next generation until youre going to see us continue to invest in the 80 platform going forward.

Based on <unk> nanometers compelling data in that where we're seeing early it was <unk> turn it Doug and as you said it offers the convenience of an additional dosing form that we think offer a lot of convenience to patients on your question around the NCD. Obviously, we hope now that CMS, we now have the phase II data from <unk>.

<unk>, which clearly showed clinical benefit as well as clearance of plaque now we have little I cant imagine data large phase III study also showing clinical benefit.

Certainly it's our position that this is time for CMS to reconsider. This decision. So certainly we would hope that this this resolved before returning tug reads out obviously the timeline, though it is not clear so what youll see us do and I'm sure ESI is doing the same is.

As soon as we have that phase III data requesting reconsideration and moving forward with the evidence.

Evidence that demonstrates this to date, we cannot see a reason that CMS will continue to prevent alzheimers patients from getting these medicines.

And as we've stated in the past we believe <unk> really is a very.

Restrictive method to to provide to the patient census disease also leads to disparity we've seen in care for all timers disease. So it certainly I hope that this will be resolved by the time, we have rhem turn it tongue.

Available to patients.

Thanks, and Mike anything to add in terms of the oral glib commercial opportunity.

So Andrew I think you're thinking about it correctly when <unk> launched we expected it to grow the class.

Non impact the injectable market and Thats exactly what happened it was more additive to the class.

And then as <unk> launched we only see 1% of bond journals.

Demand coming from <unk>.

<unk>, our oral <unk>, so I think youre right I think it is additive versus subtractive and we're very pleased the opportunity I think in the oral market.

What's going to be key is right <unk> have some.

Interactions with water and food, which had some dosing limitations, which can impact the efficacy of the product. If it has not followed closely as well as there's a gap between the efficacy of oral <unk>.

<unk> and Injectables. So I think as you get alternatives in place that doesn't have that that food and water interaction as as the efficacy of the world's increase.

You'll see the market potential even being higher and Thats exactly what we plan to deliver hopefully with MPI.

Thanks, Andrew for the questions lowest next question.

The next question is from Evan <unk> from BMO capital markets. Please go ahead.

Hi, guys. Thank you so much for taking my questions one on <unk>. It seems like its majority hall.

Looking at the outcome trial can you comment on kind of the relative risk reduction you'd like to see in the primary endpoint. If you can't comment on any of the SaaS plan talk more about the need for outcomes to gain payer access over time and my second question is on clarity and I. Appreciate your positive comments around the trial, but do you believe the bar for efficacy.

He had been rates with these data and can you just remind us why you believe that your endpoint Ics will be sufficient for full FDA approval and any potential coverage by CMS and other payers. Thank you guys.

Thanks, Evan so for the first question on <unk>, the kind of outcomes trials and what we'd need for payer access I'll hand that over to Mike and then for the clarity I'll hand over to Anne.

Okay, maybe I'll take another shot at at obesity access and how we see it develop over time I think Dave talked about.

And thats going to take a.

Steady drumbeat of evidence and every payer every employer will make their decision.

Independently and that will grow over time.

The other approach that we're taking is we're we're studying.

<unk>.

For other indications for people, who live with obesity like heart failure and sleep apnea.

These are indications that are already supported by commercial and Medicare part D.

And so we believe that as we get access and demonstrate.

Efficacy there and good indications of that in itself will unlock subsets of payer access for people, who live with the <unk> who have sleep.

Sleep apnea are up heart failure.

As we continue to build toward are the results of the MMO studies. So I think it will grow over time, but I think those two events are important Vince in the lifecycle of <unk> appetite.

Thanks, Mike and thanks for the question on the clarity and maybe getting to your question. We absolutely see the data that we saw there is clinically meaningful and clearly patients families care partners highly value a delay in loss of independence and abilities, and so a 20% to 30% flowing in the disease.

We've initiated in the earliest stages of disease should mean additional time and the more functional lesson paired stages. So we're excited about those results and we do think that there are clinically meaningful in this space and so we look forward as we've said to what we'll see with <unk>. There are many reasons that we're extremely confident about <unk>.

And those Havent changed so obviously, it's a positive phase III study that we were able to produce the choice of the endpoint that we have in our study as you commented patient selection strategy and then importantly, the speed and the depth of plaque clearance. So we remain very confident in what we'll see out of our upcoming readout on TV too and then on your question.

And I address I think that just as we've said in the past we believe that <unk> is the most robust endpoint in this space and we've always believed that CVR sum of boxes can be a bit of a noisy endpoint and so indexing on exact numbers, it's probably not the best move there, but on trailblazer, we powered it for I address we showed a 32% selling.

We definitely see as clinically meaningful and we believe that <unk> will always perform closest to the truth, but in a large enough study. We expect all the endpoints will will move. Similarly, so we continue to be confident about the choice of the Iris we continue to be confident about the <unk> readout that we'll see in mid 2023.

Okay.

Thanks, everyone for the questions lowest next question. The next question is from Tim Anderson from Wolfe Research. Please go ahead.

Alright. Thank you if I could just stay on all timers for a minute.

Just your latest views on the next big readout here coming up.

<unk> data to put it bluntly do you expect that this readout is going to fail, even downstream of Mccann Mab. It seems to me like you guys are still cautious on that data what's your latest thinking.

<unk> question, not mentioned pushes and pulls in 2023 and something about <unk> nanometer. My question is.

Are you expecting demand I Mab approval in 2023, and then third question just your views of the area eat data by Mccann <unk> and whether you think thats important and clinically differentiating.

Does that does seem to be a real issue that that kols talk about a lot and they have the best data so far.

Thanks, Tim So you've got an extra question in there too, but we will go to and maybe to comment.

High level on <unk>.

Roche and then also on the pushes and pulls for demand <unk> expectations for timing and then finally, if I can map differentiation maybe.

Maybe on the Roche, maybe Dan give your thoughts first.

Okay, and then I think your last question there Tim was on an R E rates, which ill.

Maybe take as well.

So.

I think I've said.

<unk>, there's a number of factors here that can help us in predicting results of amyloid lowering drugs.

Probably the most important one in our view is the degree of amyloid lowering and there. We're really pleased with what we've seen with <unk> <unk> is probably also a pretty powerful amyloid lowering drug.

Certainly a positive readout from our phase III of one of these three drugs has got to increase your odds of success of one or both of the other two.

Just sort of remind us all that Alzheimer's is been a risky area with studies that are sometimes hard to predict so we take some caution of course, we'd love to see more positive studies and more.

<unk> produced for patients good news for patients I think.

Before I turn it over to Anne for the other question just sort of take ARIA E and we cannot have data I think it's a little bit hard to do cross trial comparisons of <unk> rates for couple of reasons that I think are important and maybe we can talk more about at our scientific presentation at Cta D. Just sort of noting that triple S. Four is probably the first time.

Anyone has ever done within trial comparison of two different two different drugs.

To be able to compare.

Why is that important.

When youre looking at two different trials first of all you have different patient populations.

Think we'll probably learn over time that our air rates depend on the stage of disease and are more common in patients with more severe brain pathology I think that's likely to be true second.

Even in the same population how you measure ARIA can be very different in different trials. For example, Mccann map has different timings of MRI. Then Donato map has used if you have more mris or earlier mris as we do I think you're more likely to pick up more radio graphic ARIA. So.

That's another caution on cross trial comparisons however, I do see our rates is important, particularly the symptomatic ARIA that results in serious consequences and some patients and thats, probably what we need to focus on is the serious events.

Other than radiographic ARIA.

And then the timing so as I think Dan mentioned during his words that we expect the data readout for trailblazer two in mid 'twenty three so our intention is to submit the data rapidly and we expect a timely review from the FDA for a supplemental submission so that could lead towards additional approval in the first half of 2024.

And Tim we certainly as I've mentioned, we expect that we would drive for reconsideration, we certainly hope that CMS would take that phase III data and not wait for additional approval to assess the situation, but then maybe <unk> comment we expect really limited uptake in the time of accelerated approval, which was he said isn't early 'twenty three based on how the CET.

He is currently written.

So that's the timeline that we're on.

Thanks, Tim for your question I think we have two more.

Questions.

Lowest next question.

The next question is from Kerry Holford from Baird. Please go ahead.

Thank you.

St.

Yes.

And then following on from that just keen to understand why you are paring away.

Traditionally.

Yes.

Guidance.

Okay.

Well evident.

Even with that additional hedge.

Your claim and Hawaii.

More turnkey models.

Can you can maintain that pace.

And Paul I think you correctly criteria, whether it could provide event.

And then secondly, a question on Ericsson.

You've taken the decision to knees.

Earnings payout TTM screen.

Hey, Terry cardiovascular disease.

It can be.

Staying with skincare category.

Participation.

<unk> two is positive.

We anticipate taking in the pipeline.

Relates to a tumor and alignment.

Or might you need you can see the partnership.

He'll talk price is around this genetic mutation with gander.

Thanks, Carrie Okay. So first question on surmount MMO design and second one on <unk> <unk> III and <unk>, maybe more in general Dan Yes, Thanks to two thoughtful questions. There Kerry so starting with the surmount them well you should ask why did we.

Why are we doing it more typical CV outcome studies.

Of course, you'll know that.

For drinks and diabetes, there was sort of an FDA requirement around this asset.

<unk> People's attention on on discharging them.

Risk and then ultimately we discovered that certain classes of drugs can can actually provide a benefit here. We're trying to go even beyond that observation and demonstrate what we believe to be true, which is that correcting obesity and correcting metabolism and these patients can have a wide range of benefits and so that's why we've done two things here we've gone beyond.

The traditional cardiovascular endpoints this isn't primarily a cardiovascular drug it's a drug that corrects metabolism.

We think that will have broader benefits, including hopefully and importantly, all cause mortality.

And then second we've got to a broader population. So that we can show that the benefit in that group. So that's our thinking here I think it's a natural evolution of this class of drugs as we go forward with respect to an <unk> <unk> three.

Asking about our phase II and what do we do if we get a positive result of course. The reason we do these phase II trials is to look for promising drugs for patients I think in cardiovascular you rightly point out that it is a high risk area with big Phase III studies that sometimes carry risk into them.

This case theirs.

Reasonable understanding of this mechanism and how to translate from two to three phase II to phase III, but still we're focused on is finding a large effect size drug here and if we can see a big.

In phase II that would predict a positive strong signal in the phase III cardiovascular outcome study and that's exactly what we'll do in terms of whether that's the thing really does alone or partners.

Really premature to talk about anything like that.

Thanks, Carrie Lewis I wanted to I guess, the last question and that's from Robert.

Connectors.

Louis Securities.

Please go ahead maam.

Please go ahead with your question.

Great. Thank you I guess my first question is on one's Europe . So we talked you talked about the whole call I think about.

Supply in trends, but can you talk a little bit about the individual dose thing like what doses are being used the most.

If you do incur like high higher than what you predict demand.

What dosage levels might be greatest impact I think you had 30% switching presenting is at the low doses.

Yes.

And second on Alzheimers, we're hearing a lot of doctors.

A doctor and say that you have the mindshare of of wait for a beta class drug can you talk a little bit about what you think is the most important thing that resonate with doctors.

Have you is it quick window, saying is at the magnitude of benefit as we think about.

The speed of pulp.

Thanks.

Thanks, Robin So Mike do you want to handle the question on the dosing dynamics and then with regard to <unk>.

And that Mindshare question, and we will feel that Mike.

Yes, I'm happy to answer that question.

Dosing titration in the World World is different than our clinical studies in our clinical studies, we needed to test what the dose.

Response was going to be at 510 in <unk>. So in our clinical studies, we titrated every four weeks up to additional doses in order to be able to have expedited trials and show the benefit and real world. What you see is that people will start on the dose.

Two and a half ago to five and then.

What we're seeing is that physicians will hold there and see how they respond and five milligrams provides really good efficacy for people living with type two diabetes, if they need more of them and then they'll escalate the dose it may not be at the four week market may be at a three month Mark. So those trends are still are established in the marketplace, but the vast majority of our of our vault.

<unk> is in the two and a half and five milligrams I want to make sure you're not reading too much into my earlier comments around.

Shortages at any particular dose.

My comments earlier were just saying hey, there's a lot of factors that's going on there's a lot of dynamics.

<unk> got a plan your manufacturing down at the SKU dosing levels.

A month or two ahead of actually when it's produced so every dose line up perfectly with what the demand is needed for that week in the marketplace. It may not and if it does then a dose or two may not be able to get the order that we can then we'll we'll adjust quickly and our team work very closely and very hard to make sure it doesn't impact patients.

Great and then thanks for the comments on having the mind share and we appreciate that and I think as I reflect on that question, which is a good one I think it's built over the decades that we've been investing in the Alzheimers space. So we've been at this for more than 30 years invested quite a bit of time and resources in this.

And I think it led to first of all diagnostics being significantly involved in this space with the launch of Amazon and that we have talented and then we also intend to launch a P. Tau blood diagnostic next year, which could really improve access and diagnosis of these patients and so I think it starts out there with showing our commitment to make it.

Sure that the right patients.

These therapies and I do believe that that was one of the pivot point for how we now have successful trials in this space by the ability to really confirm that people have this diagnosis all of that learning over the years all of the insights from the trials that we've had some of the setbacks. We experienced led to the first positive trial that has happened in this space.

Trailblazer halls, and and showing both significant and rapid clearance of amyloid plaque, but then most importantly to everyone showing that that truly slows the progression of the disease and so it's really I think some of that my insurance built on the the.

The commitment that we've shown to this space.

Had to making sure that patients truly get diagnosed and that and that's what we're spending a lot of time in the first few months certainly of next year as we work towards access for these patients is to make sure that we can drive early and accurate diagnosis.

So pleased with how <unk> has continued to perform as I said, we believe and I think like Mccann and <unk> results.

<unk>, what we saw on Trailblazer all is that.

Clearance of plaque is the key to this disease and we know that dynamic App does that we look forward to sharing the TV for data at <unk> I think you'll see how that reinforces what we saw on trailblazer, all and then the design and what we believe will be the performance in TV too. So I think I think that we deserve that mind sure, but I think it's been earned.

Over many years of supporting and investing in this space that has led to positive trials for us and for others. So.

It's rewarding I think for many of the scientists here see the culmination of this so but again exciting time cusp of real meaningful movement for people with Alzheimer's disease, and we really look forward to that to that readout next year and our accelerated approval early next year as well. Thank you.

Thanks, Robert for the question.

Okay.

Lewis.

I think we got it.

And there is no further question. Thank you. Thank you alright, thanks, Joe and thanks to the resolutely team I appreciate everyone hanging with us on today's call.

And for your interest in our company and please follow up with the IR team. If you have any questions that we did not address.

Everyone have a great day.

Thank you ladies and gentlemen, this conference is available for replay beginning at <unk> today and running through November eight at Midnight you may access the AT&T replay system at anytime by dialing 806, 20710, 401 and entering the access code three zero.

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And one moment speakers.

Okay.