Q4 2022 Eli Lilly and Co Earnings Call

February 2, 2023

Yeah.

Okay.

Ladies and gentlemen, thank you for standing by and welcome to the Lilly Q4, 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 assistance during the call. Please press Star then zero and an operator will assist you offline.

As a reminder, today's conference is being recorded.

Now I'd like to turn the conference over to our host Joe Fletcher Senior Vice President of Investor Relations. Please go ahead.

Thank you Louis good morning, and thank you all for joining us for Eli Lilly and company's Q4 2022 earnings call I Am Joe Fletcher and joining me on today's call are Dave Ricks, Lilly's, Chairman and CEO , not Ashkenazi Chief Financial Officer, Dr. Dan <unk>, Chief Scientific and Medical Officer, Anne White President of Lilly Neuroscience Julia you.

President of Lilly International Jake Van <unk> CEO of blocks are 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 what how and learns erkki from 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 secure.

<unk> and exchange Commission the information, we provide about our products and pipeline is for the benefit of the investment community. It's 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 and now I'll turn the call over to Dave.

Thanks, Joe 2022 is a year of strong pipeline and commercial performance for Lilly.

We delivered top and bottom line growth in 2022, despite the impact of the Olympics low in the U S and significant FX headwinds.

And delivered another remarkable year of pipeline progress.

We began 2023 with multiple updates to our late stage pipeline.

In our Q2 2022 earnings call last August we announced the filing of submissions for two assets with the FDA under an accelerated approval pathway.

Hirschberg, nib and mantle cell lymphoma, and Denosumab and early symptomatic Alzheimer's disease last month, we received responses from the FDA on both these assets on.

On January 19th we announced that the FDA issued a complete response letter for accelerated approval of <unk> due to the limited number of patients with at least 12 months of drug exposure.

There were no other deficiencies cited.

We will continue to work with the FDA to evaluate the best pathway to make this potential treatment option available to patients and look forward to results next quarter for the Trailblazer, Oh, it's two phase III confirmatory trial.

Which will form the basis of Danone and maps application for traditional approval.

We have consistently stated that we would that we would expect very limited uptick before CMS supports coverage at.

At the time, we submitted for accelerated approval, we had hoped that there would be more movement from CMS to provide access to these medicines for people with Alzheimer's disease.

Unfortunately, this has not yet materialized, we maintain conviction that given the impact of this devastating disease and significant unmet need positive confirmatory data and FDA traditional approvals should be sufficient to support global reimbursement.

Patient access necessary for broad use of done on a map over time.

Also in the month of January we received FDA approval for <unk>, the first and only non covalent <unk> inhibitor for adults with relapsed or refractory <unk> mantle cell lymphoma.

After at least two lines of systemic therapy, including a <unk> inhibitor.

<unk> is a highly selective kinase inhibitor, whose novel reversible binding mechanism and pharmacology may allow for extended targeting of the beat Teekay pathway.

Following treatment with a covalent PTK inhibitor.

We are pleased with the recent approval of <unk> and we remain confident in the long term opportunity for Denosumab. We also look forward to the potential launch of two of our immunology assets later this year with mirror Kisan Mab and lever Kismet.

And <unk> for obesity.

This current wave of new launches along with the ongoing focus and progress in our next wave of R&D innovation underpins, our long term outlook to drive top tier revenue growth and expand our margins over time.

On slide four you can see the progress we've made on our strategic deliverables, excluding revenue from COVID-19 antibodies revenue on a constant currency basis grew 10% in Q4 and 5% for the full year.

Volume in our core business again, excluding COVID-19 antibodies grew 13% in Q4 and 12% for the year.

This volume driven performance was attributed to our key growth products, which grew 21% last quarter.

For pipeline milestones. In addition to the recent FDA approval of <unk>, we have shared several important updates since our Q3 earnings call.

Positive phase III readout in FDA and EMA acceptance of the regulatory submission for <unk> for adults with chronic kidney disease.

The initiation of a rolling submission in the U S for <unk> in obesity.

And FDA granting a fast track designation for tours appetite and obstructive sleep apnea.

We also continue to put our cash flow to work to create long term value.

In late January we announced plans to invest an additional $450 million for expansion of our research Triangle Park manufacturing site in North Carolina to further augment our manufacturing capacity for the years ahead.

On the business development front, we closed the acquisition of a kudos to expand our gene therapy capability and we entered into a strategic strategic research collaborations with a focus on new modalities and technologies.

Finally, we continue to return capital to investors in Q4, we distributed nearly $900 million to shareholders via the dividend and we announced a 15% increase to the dividend for the fifth consecutive year.

Moving to slide five you'll see a list of the key events since our Q3 earnings call, including several important regulatory clinical business development and ESG updates we are discussing today or that were discussed during our guidance call on December 13th.

One item I would like to highlight is the collaboration we announced in December with <unk> pharma.

To deliver a sustainable supply of affordable high quality insulin to at least 1 million people living with diabetes and low to middle income countries, most of which are in Africa.

As an important collaboration with a local company to Bruce to produce low quality low cost high quality medicines, sorry, strengthening capacity and building self reliance for insulin manufacturing within the African region will provide a more sustainable supply in the long term.

With this agreement <unk> will sell insulin API to ever pharma at a significantly reduced price and provide pro bono technology transfer to enable <unk> to formulate fill and finish insulin vials and cartridges.

We're proud to be a part of this novel arrangement, which aligns with our 30 by 30 goal of improving access to quality healthcare for 30 million people living in limited resource settings annually by 2030.

Now I'll turn the call over to or not to review, our Q4 and full year 2022 results.

Thanks, Dave Slide six and seven summarize financial performance in the fourth quarter and full year 2022.

I'll focus my comments on non-GAAP performance.

As Dave mentioned, we're pleased to report 10% growth for our core business in Q4 on a constant currency basis, driven by strong volume growth.

Couple of notable items affected year over year comparison.

The first is COVID-19 antibody revenue in Q4, 2022, which compared to the prior year and declined 96% from approximately $1 1 billion in Q4, 2000 $21 million to $38 million in Q4 2022.

Mr. Logan that is currently not authorized for emergency use in any U S region, and we continue to expect no COVID-19 antibody revenue for 2023.

Second is the continued foreign exchange headwinds compared to 2021.

Which resulted in a 415 basis points dampening of revenue growth in Q4.

Key growth products grew by 21% and accounted for 70% of our revenue this quarter.

For the full year 2022 revenue excluding revenue from COVID-19, antibodies grew 2% or 5% on a constant currency basis.

Our non-GAAP gross margin was 85% in Q4, an increase of approximately 440 basis points, primarily driven by lower sales of COVID-19 antibodies, partially offset by lower realized prices and increased expenses due to inflation and logistics costs.

Total operating expenses declined 1% in Q4.

Lord acquired IP, R&D and development milestone charges were largely offset by higher marketing selling and administrative expenses and higher R&D expenses.

Marketing selling and administrative expenses increased 3% in Q4, primarily driven by cost supporting the launch of new products and indications, partially offset by the favorable impact of foreign exchange rates.

R&D expense for the quarter increased 5% driven by higher development expenses for late stage assets, partially offset by favorable impact of foreign exchange rate.

Operating income declined 7% compared to Q4 2021, driven by lower revenue, partially offset by lower operating expenses.

Operating margin for Q4 was 27, 4%, which includes a negative impact of approximately 330 basis points attributed to acquired IP R&D and developing milestone charges.

Full year operating margin was 27, 8% an increase from 26, 8% in 2021.

Our Q4 effective tax rate was seven 3%, bringing our full year 2022 effective tax rate at 10, 3%.

As we shared during our guidance call in December we had assumed that the 2017 tax act provision required capitalization and amortization of research and development expenses for tax purposes would be deferred or repealed by Congress in late 2022.

However, no legislative action was taken relate to this provision which resulted in a lower effective tax rate for 2022 versus the guidance range. Previously shared in addition, this provision data increased our tax payments in 2022.

Approximately one.

$2 billion.

At the bottom line earnings per share declined 4% in Q4 and increased 7% for the full year.

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

This quarter U S revenue declined 10% excluding revenue from COVID-19 antibody revenue grew 11% in the U S.

Volume driven growth was led by <unk> <unk> and <unk>.

Net price was flat in the U S. This quarter for the full year. The net price decrease of 3% in the U S was in line with our expectations.

Moving to Europe revenue in Q4 increased 8% in constant currency, driven primarily by volume growth for Georgia Felicity in Brasilia.

We remain encouraged with the momentum of our business in Europe .

In Japan revenue in Q4 decreased 6% in constant currency.

Revenue growth in Japan continues to be negatively impact, albeit less so than in prior quarters by decreased demand for several products that have lost patent exclusivity, including the Alimta and Cymbalta, we expect to return to growth. This year as we scale key products and launch lunch hour.

In China revenue grew 2% in constant currency as continued volume growth was mostly offset by lower realized prices for <unk> as a result of the volume based procurement process Andrew.

And for products listed on the NR deal as well as by COVID-19 disruption.

Revenue in the rest of the world increased 11% in constant currency this quarter driven by approximately $130 million of one time revenue associated with the sales of the company's right to Alimta in Korea and Taiwan.

As shown on slide nine our key growth products continue to drive robust worldwide volume growth contributing 15 percentage points of volume growth this quarter.

As mentioned previously the decline in COVID-19 antibody volume with substantial in Q4, 2022, and was largely offset and largely offset volume growth from key products.

While we will face similar prior periods headwinds from COVID-19 antibody revenue through the first three quarters of 2023, our long term growth prospects are underpinned by our innovative pipeline and key growth products, including one genre.

Slide 10 further highlights the contributions of our key growth products. This quarter. These brands grew 21% or 27% in constant currency generated $5 $1 billion in sales and made up 70% of our total revenue.

While lilly's <unk> portfolio understandably generates high interest we continue to see tremendous growth both in percentage and absolute terms for other key products, including <unk> and Jordan presenting a sales in the quarter grew 100% driven mainly by the edge of an indication.

<unk> sales grew 42% and the product retains the leadership position in a competitive market globally.

Demand for our <unk> portfolio remained strong both for <unk> globally and <unk> in the U S and we remain focused on bringing additional capacity online to meet this robust demand and upcoming launches.

In terms of supply as mentioned in our guidance call in December given strong demand for <unk> product. There has been intermittent delays, the wholesalers and pharmacies and receiving certain doses levels of <unk> in the U S. We continue to update the FDA on the situation and the FDA has been posting two as website details regarding this.

The doses and expected timing.

Meet this rapidly growing demand across our <unk> business, we have announced plans to add additional substantial capacity in the years ahead and.

Most proximal of these efforts is our RTP side, North Carolina, where progress continues as planned and we look forward to the startup production later this year.

Moving to slide 11 lunch or a strong launch uptake continues underpinned by differentiated efficacy profile and positive customer experiences.

For Q4, approximately 75% of <unk> new therapy starts are patients new to the type two diabetes injectable Incretin class.

And fewer than 10% of switches from <unk>.

As we mentioned in our Q3 earnings call in early November we took actions in Q4 to reinforce the intended use of them on <unk> savings program by type two diabetes patients.

We indicated at that time that these actions could negatively impact new prescription volumes, but were not expected to impact net revenue.

As anticipated we believe the new prescription volumes beginning in late November were impacted by these actions with some week by week volatility driven by end of year seasonality.

We continue to build payer access for <unk> for type two diabetes as of January 1st Axis, just over 50% for patients with type two diabetes across commercial and part D.

Regarding the percentage of paid scripts for Q4, we estimate the percentage of paid script per months yard to be approximately 40%.

<unk> paid script defined as those prescription outside the 25 non covered co pay card, but inclusive of the 25 coverage copay card.

As we expand payer access the proportion of paid scripts should continue to increase.

On slide 12, we provide an update on capital allocation in 2022, we invested $9 6 billion.

To drive future growth through a combination of R&D expenditures.

Business development out lease and capital investment in.

In addition, we returned approximately $3 5 billion to shareholders in dividends and repurchased 1 billion and a half in stock.

Our capital allocation priorities remain unchanged and are oriented towards achieving our strategic deliverables of top tier revenue growth and speeding life changing medicines to patients.

We do this through investments in our current portfolio to drive new launches investment our manufacturing capacity and in our future innovation through R&D and business development.

And we returned capital to shareholders through dividend payments and share repurchases.

Slide 13 provides an updated 2023 financial guidance.

The only change we've made from the guidance we provide in December is to update our effective tax rate, which resulted in an updated EPS range.

During December guidance call, we shared that the effective tax rate for 2023 will be approximately 16% based on the assumed deferral or repeal of the tax provision requiring capitalization of R&D.

Since this provision was not defer to retail in 2022 and given the uncertainty around if and when such action will take place in 2023, we have updated our tax rate from 16% to approximately 13%.

This update to our effective tax rate results in new EPS range of $7 92.

The $8 <unk> on a GAAP basis, and $8 35 to <unk>.

$8 55.

On a non-GAAP basis.

Regarding FX rates there has been a general weakening of the dollar since we set our initial 2023 financial guidance last year. However.

However were not adjusting guidance for FX changes. This time as we're only one month into the year and FX markets can we can be quite volatile.

As I shared in December the most significant headwind in revenue growth in 2023 versus 2022 will be the impact of COVID-19 antibody sales.

This year over year comparisons will be most pronounced in Q1 2023, given that we had a $1 billion $5 of COVID-19 antibody sales in Q1 2022.

To a lesser extent the loss of exclusivity of Alimta in the U S. In Q2, 2022 will also impact year over year growth in the first half of 2023.

Still the midpoint of our 2023 revenue guidance range represents roughly 7% of growth or 50% growth for our core business, excluding COVID-19 antibody.

This year holds tremendous promise for us to help patients as we execute on the current wave of potential launches, while maintain our commitment to investment in progress future innovation.

We expect this ongoing focus on disciplined execution and investment will help drive top tier revenue growth through at least 2030.

Now I will turn the call over to Dan to provide an update on our pipeline. Thanks.

'twenty two is a really productive year for Lilly R&D as we advanced our late stage assets <unk>.

<unk> to nanometer up pretty brutal nib, Mira <unk>, Mab and Leverages, a mab to key regulatory submissions and we obtained the approval for a majority.

We launched <unk> for type two diabetes in mid 2022.

As Steve shared we received an approval last week for Peter Bruton, It now known as J perk up.

By the end of this year. We also have the potential to launch two new immunology assets with Mira <unk> map and Leverages a map.

And for genetic map, we're looking forward to our phase III readout mid year, which if positive will form the basis of our submission for traditional approval.

In 2022, we also gain clarity on the next wave of assets that have entered or will soon enter phase III Registrational trials. Those are served breast cancer or.

Our weekly insulin for diabetes.

Terna tug in Alzheimer's disease.

And as shared in our December guidance call. We now have four <unk> and read a true tied in diabetes and obesity.

Given the updates we provided in mid December today, I'll, just briefly highlight progress since our last earnings call.

Slide 14 shows select pipeline opportunities as of January 30th in slides 15, and 16 show a recap of 2022 key events and potential key events for 2023.

Starting with diabetes and cardiovascular disease in November we shared results from the <unk> phase III trial in collaboration with Boehringer Ingelheim has the largest and broadest <unk> inhibitor trial and CK D to date. The results showed a significant benefit of giants and reducing the relative risk of kidney disease progression or cardiovascular.

By 28% compared with placebo in people with chronic kidney disease.

Overall safety data were consistent with previous findings confirming the well established safety profile of <unk>.

<unk> is a leading cause of death worldwide affecting over 850 million people globally and $37 million in the U S with.

We've submitted to the FDA and EMA for approval and expect to make submissions to other regulatory agencies in the coming months.

In January we started quint, one phase III study comparing fixed dose escalation of release weekly insulin to insulin <unk> and insulin naive type two diabetes patients with this initiation all five studies in the phase III program are now underway.

Moving to earlier stage assets in our diabetes and CV pipeline in Q4, we advanced two assets into phase III that aimed to lower LP little a well known risk factor for atherosclerotic cardiovascular disease.

The first is an oral <unk> inhibitor, a small molecule that disrupts the interaction between the April a protein and a lipoprotein particle.

And the second uses <unk> to disrupt the production of <unk> in the liver.

We shared proof of concept data on the <unk> asset during our December 2021, R&D Investor meeting. This is our second ESI RNA asset to advance to phase III. Following our <unk> III ESI RNA, which entered phase two earlier in 2022.

We also recently moved in SA RNA asset targeting apoc, III and cardiovascular disease into phase one.

Our genetic medicines portfolio is advancing and we remain optimistic about the prospects of improving cardiovascular outcomes with these molecules.

Lastly, we discontinued our phase <unk> inhibitor.

In oncology, we are of course pleased with the recent approval of <unk> and we look forward to continuing the substantial ongoing development program for the molecule in the years ahead J.

<unk> is the second product approved from our 2019, Laakso oncology acquisition, which reshaped our oncology efforts at Lilly.

It <unk> at Lilly is growing NME portfolio now includes a number of emerging assets shown in our pipeline, including our <unk> three program, which recently dosed its first patient.

Also in Q4, we dosed the first patient in Amber for our second phase III trial for inland <unk>, our oral <unk> <unk>.

<unk> four will study <unk> in the adjuvant setting.

As a sequential sequential monotherapy in patients who previously received two to five years of adjuvant endocrine therapy for ER positive her two negative early breast cancer with increased risk of recurrence.

Lastly, turning to <unk> as noted in our guidance call at the San Antonio breast cancer Symposium in December we shared the latest interim analysis for monarch E. R. Adjuvant high risk early breast cancer study over them a cyclic in combination with endocrine therapy for the treatment of adult patients with HR positive her two negative node pause.

<unk> early breast cancer at high risk of recurrence.

We've now submitted an NDA to the U S FDA to potentially expand our adjuvant indication beyond the currently indicated cohort 167 greater than 20% population.

In immunology, we are looking forward to potential FDA approvals later this year for <unk>, but also of colitis, which we expect in the first half of the year and Leverages <unk> in atopic dermatitis, which we expect in the second half of the year.

Looking earlier in our immunology pipeline as mentioned in our guidance call. We presented exciting proof of concept results for our PD, one agonist antibody pair solar mab and rheumatoid arthritis at the ACR Conference in November and we have now initiated global dose ranging phase <unk> study.

Moving to neuroscience, we've advanced our into phase two our <unk> inhibitor for chronic pain.

Newly acquired rights to this asset from Asahi cost say pharma in early 2021.

With regards to day minimum as Dave mentioned, the sole deficiencies cited by the FDA to our submission for accelerated approval was the number of patients with at least 12 months of drug exposure.

The phase III Trailblazer, ALS trial on which the accelerated approval application was based allowed patients to complete their course of treatment with the nano mab when they reached a predefined level of amyloid plaque clearance.

Due to the speed of plaque reduction that we saw many patients were able to stop dosing as early as six months into treatment.

Starting in fewer patients receiving 12 months or more of genetic map dosing.

We remain confident in the potential of <unk> as a new treatment for people with early symptomatic Alzheimer's disease and look forward to sharing results from the phase III Trailblazer <unk> II study in Q2 of this year.

In summary, while 2022 was an outstanding year of pipeline progress. We're fully focused on the work we need to do in 2023 to make our next set of potential medicines a reality for patients.

We look forward to providing additional updates throughout the year alright.

I will turn the call back to <expletive>.

Thanks, Dan before we move to Q&A, Let me summarize the progress we made during 2022.

We delivered strong revenue growth in our core business propelled by our key growth products, we launched <unk> for patients with type two diabetes, while advancing and expanding our development program for <unk>, including the start of the surmount MMO outcome study and the initiation of a rolling submission for chronic weight management.

In 2022, we submitted regulatory applications for important pipeline products like <unk>, <unk> and Leverages a map.

And in 2023, we've already received approval for <unk> and are poised to advanced <unk> and the regulatory process, assuming positive data from the Trailblazer <unk> two phase III study.

In addition, we continue to invest in our pipeline or capacity or capabilities and our people.

Finally, we returned $5 billion to shareholders via the dividend and share repurchases and for the fifth consecutive year announced a 15% dividend increase for 2023.

With continued growth in <unk> in our key products, including <unk> <unk> and <unk>, we expect our core business revenue to grow by mid teens in 2023.

We are energized by the launch opportunities before us this year and no strong launch execution is key to our long term success.

Taken together, we believe that we are well positioned to deliver top tier revenue growth through at least 2030 and to deliver on lilly's mission to make life better for people around the world.

So now I'll turn it over to Joe to moderate the Q&A session.

Thanks, Dave we'd like to take questions from as many callers as possible and conclude our call in a timely manner. So we ask that you limit to one question or one two part question per caller as we'll end the call at 11 15.

Lois. Please go ahead and 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 <unk>, one and then zero on your Touchtone phone you will hear tone, indicating that you had been placed into queue and you may remove yourself from queue at any time by repeating the one zero command if you're on a speakerphone. Please pick up your handset before pressing the number and once again.

And if you have a question please press the one zero.

Our first question is from Colin Bristow from UBS. Please go ahead.

Hey, good morning, and thanks for taking the questions.

Just first on <unk>.

It looks like the net price dropped to gains in <unk>.

Can you just walk us through.

T J.

And just update us on how you expect this to trend over the course of the year.

And then just maybe looking out.

I went to the future of your visa people.

Beyond just <unk> do you have any interest in mechanisms that target.

The microcontroller topline side of the equation that would be helpful. Thank you.

Thanks, Colin well go to Mike for the first question on gross to net and price from Enduro, and then hand over to Dan.

Four kind of broader obesity mechanistic commentary Mike.

Yes. Thanks for the question I think the best way to answer that is yes.

Take a look at what we saw.

<unk> Monteiro paid scripts in Q4, and then how we think that will progress.

Over 23.

In the fourth quarter, we classify about 40% of them on journals scripts as paid which we define as patients that foreign supported by our 25 dollar non covered savings program.

Our savings program as we discussed at launch was designed to bridge people living with type two diabetes to access.

As we discussed in the Q3 earnings call. We have adjusted our program to better ensure it's being used for people, maybe only with type two diabetes.

These adjustments included removing our 25 dollar non covered benefit from our savings card for new patients.

We didn't make any adjustments for existing patients who savings cards are set to expire on June of this year June 30th.

As expected these changes have reduced new patient start volume, while increasing the percent of new patients with a history of diabetes treatments.

And the percent with formulary coverage I think.

The way I would look at our savings program right now for new patients is that we have graduated from the bridging program and now are kind of.

In fact, those savings program to really focus on covered patients that you would do.

And kind of a normal lifecycle of a product.

Thus, we expect that wound journals percent of paid scripts and a net revenue per script to increase.

Through 2023, as we continued to increase access and <unk>.

<unk> new starts.

We remain disciplined in our access discussions so we can maximize long term value from the start our value our approach was to make sure that.

We capture value in the long term versus the short term and we've remained very disciplined on that we have just over 50% access for lives in part D and commercial segments for people living with type two diabetes.

Pleased where we're at on the access front.

Whereas the way our contract is contracting has turned out at this point. So hopefully that helps provide some some color to our gross to net.

In Q4 thanks.

Thanks, Greg.

It's gone for your question on future mechanisms for treating obesity.

I assure you we're not done innovating on behalf of people with obesity, there's a lot we can still do.

Keep your eyes open for more to come from literally lapse on <unk> and related.

Some mechanisms, but also broadly interested in a variety of new non anchor Gen patient mechanisms.

You specifically asked about one mitochondrial uncoupling.

But there are several others I think that also.

I promise for patients.

Just sort of put a note of caution, though treating obesity, we need to have a very high bar for the types of medicines. We develop remembering that this is a chronic often lifetime disease and are highly prevalent population. We need medicines that are first and foremost are extremely safe and really highly well tolerated.

So that's what we're looking for in future mechanisms.

Okay.

Thanks, Colin lowest next question.

The next question is from the line of Chris Schott from J P. Morgan. Please go ahead.

Great. Thanks, very much just one follow up on the last set of questions is it still reasonable to think about a net one zero price that could be above that of <unk> as we look out to 2024 or whenever you achieve kind of comparable payer access and then my question was on <unk> I know there wasn't a huge revenue opportunity tied to the accelerated approval but.

You had talked about using that gap between accelerated approval and full approval to really ramp physician education and infrastructure et cetera, how do you kind.

Kind of managed through that now I guess, where we're going to have maybe a full approval that could be occurring closer into a CMS decision maybe elaborate a bit on what that means for dinner automap overtime. Thank you.

Thanks, Chris we'll go to Mike for the question about majority of price kind of over time and how it might compare to <unk> and then and on your <unk> question.

About activity that.

That would occur to ramp up HCP education, Mike.

Yes. Thanks for the question I can't get into real specifics about our net price for obvious reasons, but.

Address the question this way.

If you look at.

When we have.

We think it will reach broad access from Ontario, and regional intimately similar access levels that we have for <unk>.

Theres nothing differently about how we'll promoter house or patients on <unk> versus <unk>.

At the end of the day, it will come down to our net price negotiations with payers.

We believe that that <unk> has a better profile.

We invest a lot of innovation in there and we do believe that it should have a better net price centralistic.

Thanks, Mike and.

Yeah. Thanks, Chris for the question on physician education and readiness. So as you said.

The accelerated <unk> not going to provide access for the vast majority of patients. So it doesn't impact us in that way.

Obviously accelerate approval would have made it maybe a little bit easier to do some of the things that we wanted to do but there is still a great deal that we can do actually have been doing to make sure that the health care system is ready for these medicine. So we began working on that things such as developing the diagnostic ecosystem are incredibly important making sure that there's better integrated alzheimers.

These pathways.

To make sure that physicians can appropriately identify refer infused. These patients. So that's the area of focus right now certainly diagnosed diagnostics are a key area of focus for <unk> continued to expand our network.

To make sure that we're ready for patient diagnosis, and then as well we continue to be committed to P. Tau blood tests and intend to launch that this year. So so many things going on that I think can make us very ready for traditional approval and making sure that people can.

Access to this medicine medicines.

Thanks, Chris for the questions lowest next question. The next question is from Seamus Fernandez from Goldman Heim. Please go ahead.

Oh, great. Thanks for the question so.

Dan I wanted to ask you.

If you could talk a little bit about where you see the oral <unk> one.

Developing and how your product is likely to be positioned.

It's a little bit of this I think is also.

What you think the unmet need is.

Outside of where the sort of very robust weight loss that we see from one zero.

And then just an add on to that.

How do you see the oral market developing in terms of other.

Potential agonists is that something that Lilly is pursuing.

And hoping to further develop.

Combination there as well thanks.

Thanks, Seamus can we go to down those questions.

Thanks Seamus.

Maybe Mike wants to add on some of the marketplace questions, but clearly RBC is a huge problem in the U S and around the world.

<unk>.

100 million Americans potentially.

With obesity in reaching 1 billion people around the world pretty soon.

That's probably not a market that even all of the interested companies.

Could address solely with Injectables. So just given the scope of the problem around the world, we're going to need oral <unk> ultimately, it's our goal to have oral <unk> that can match the safety tolerability and efficacy of Injectables. So I think our oral <unk> one is.

Our first attempt in this space and has really good prospects for meeting that initial goal, but then noting of course that the injectables are going to get better over time, and the orange will catch up as well.

Second part of your question was how does how do the oral is catch up and I think you're sort of alluding to an obvious issue, which is right now our oral <unk> one another oral in the space.

Our single mechanism single and curtain agonists I think we've seen with great drugs like <unk> and competitive products, what single agonist against <unk> can achieve it's not as good I think is what can be achieved with dual agonism for <unk> appetite or hopefully even trip.

Triple Agonism with Triple G.

And so you can bet, we're working on oral solutions that can bring additional and curtain activity to patients that a pill.

Ready to disclose today, but we're working hard.

Okay. Thanks, Dan Alright lowest next question next question is from the line of Geoff Meacham from Bank of America. Please go ahead.

Good morning, guys. Thanks for the question accumulated ones on <unk> appetite.

Dan I know you have surmount four coming up which is the maintenance study, but how has your thinking evolved if at all on the potential duration of <unk> appetite to use either based on longer exposure from clinical studies or in the real world and do you think that could inform payer discussions.

And then Mike on majority of a moving target, but how does the prescriber base.

Compare with <unk> Im trying to get a sense for maybe the endocrinology versus primary care mix and utilization in obesity. Thank you.

Great. Thank you Geoff So we'll go to Dan for the question on surmount floor and duration of trees appetite and then to Mike on the question of how the prescriber base from a gyro compares with <unk>, Yes, sure as I was just saying I mean obesity is clearly a chronic often lifetime disease and for such diseases patients often need to take therapy for.

Chronically.

Potentially.

Life of the disease here.

A lot of times in medicine that doesn't happen of course people come off of therapies, because either the therapy is working and I think they don't need anymore or there is a benefit they can't see.

Im not sure either of those or the case for a drug like <unk> appetite people clearly can observe the benefits the drug is having on their health.

And.

Perhaps unfortunately, but not different really than any other drug that we have for any other disease. When you stop taking the drug it's likely that it can no longer work.

And patients may see that as well. So I think those factors will combine to have a pretty long duration of therapy, we have to wait and see in the marketplace. Maybe Mike has some early signals from from patients, but still pretty early on.

Thanks, Mike.

Yes, no hard data yet on that but qualitatively what we hear.

With patients who've used on zoro.

They like and would be realized once they start using it is that it really does reduce the appetite.

They enjoy the benefits of reducing appetite it helps them looser.

Lose weight and stop being is consumed as much today about about eating.

And we do know that win.

We hear from our investigators in our studies is that win.

People stopped taking.

On gyro that their appetite.

It goes back to the levels. It was before so that's something very noticeable something that a patient values from taking the therapy and then when they stopped the therapy.

They then see this reversed and so we do believe that people are going to stop and see if they can lose way that they can great, but I do think that they're going to see a very powerful signal very quickly reinforce going back on the product. So I do think that will help reinforce the chronic use of <unk> appetite.

For type two diabetes and eventually for RBC, if we get approved.

The question on <unk>.

John If you looked at <unk> use right now and compare it to how many customers are using app versus <unk> at this time.

Our broader population that we saw with <unk> just because the market is a lot bigger a lot more people who are writing the treatment. If you compare <unk> to the number of <unk> riders today.

There are more people writing solutions, just because it's been on the market longer.

They've gone through the adoption curve and <unk> has better access access in.

In.

Especially on Medicaid with that drives additional prescribers to use that so overall I'd say the Mcdonald is within the universe.

The doctors, who write realistic at this point.

Thank you Jeff for the question lowest next question. The next question is from Tim Anderson from Wolfe Research. Please go ahead.

Thank you I have a question on <unk>.

I'm wondering if you would agree that there is highly likely you're going to be higher area an area each rates with your drug versus.

We can't imagine when trailblazer, all two reports out the prior data would certainly suggest that yes.

So relative to Mccann <unk> doesn't that create a potential risk benefit conundrum for FDA, assuming efficacy comes in around the same levels.

The bottom line here is there a regulatory concern to contemplate maybe this is why FDA issued the CRM all they want us to use the full results from your second study you don't just want to capture a few more patients to bringing that total to 100 or am I being too bearish here. Thank you.

Thanks, Tim for the question will go to Dan for this yes, maybe I answer the second part of the question first which is around why did the FDA issued a CRO.

I think that the FDA regulations actually suggest that FDA should lift all deficiencies in the CRM, we were pretty explicit copying some of the fda's own onwards here to investors about what was in the <unk>.

<unk>.

Didn't discuss issues like our.

Focused on the.

12 months exposures.

Nothing further to speculate there.

I think your question on rates of ARIA E H comparing across drugs is a complicated one.

We did this head to head study against <unk> I think it is important to us studies like that to compare rates of ARIA.

We've learned that breach of <unk> are highly dependent on the type of patient to enroll the stage of disease and underlying pathology based.

Baseline characteristics of their brain scans, which are different across <unk> trials in Dynamo trials as well as exactly how you do the mris and read them. So I'm personally not going to get worked up about rates of asymptomatic radiographic only ARIA in any drug.

I don't think anyone really understands what that means what we should be focused on though is rates of symptomatic ARIA. So patients with ARIA that turns into something that experience not just a radiographic binding.

And particularly rates of serious.

Adverse events, resulting from <unk>, we know that in some patients.

Can can be dangerous even fatal as we've seen from the economy experiences. So that's what we'll be looking out for I think.

We still have all the caveats about cross trial comparisons here, but it's a bit easier to compare those symptomatic or serious events.

I think in trouble I sure want our numbers are very similar to other members of the class.

Trailblazer for the numbers look very very good for that.

We'll wait and see what we have and Trump laser tube by level of concern over that is not high.

Thank you Lois next question.

Next question is from the line of payment plan.

Stanley. Please go ahead.

Hi, Thanks, so much for taking the question maybe a two part one for me I guess first on Maduro manufacturing I was just wondering if you can tell us if the FDA has completed the inspection of your new North Carolina facility yet.

And then the other question relates to tours upside for obesity I was wondering if you've had any initial payer conversations.

And if you are planning to use a priority review voucher for that filing. Thank you.

Thanks, Terence I'll hand over to not for commentary on the manufacturing question and then to Mike on the question about whether theres been any payer conversations on obesity.

Curious as to your question on <unk>.

The RTP side in North Carolina is progressing on schedule as we had planned.

We can't comment on specifics on the FDA interactions that we're expecting that site to start producing.

This year and it's progressing towards that goal I will mention important to think about we talk about RTP I think because of the proximal nature of when this site is going to come online. Obviously this is the next large.

<unk> node, that's going to come online in terms of capacity for <unk> portfolio, but we are making substantial investments beyond RTP. So we've announced a second site in North Carolina, very large site and Concord.

When we've announced the expansion of the RTP sites additional sites in Indianapolis, North of Indianapolis, and a site in Ireland and as we look at our capital investments in manufacturing sites this year alone.

It's probably the largest we've ever had Dublin will be heading 2022, we're looking at about $3 $3 billion of investments just this year. So we're looking at a substantial expansion of capacity.

Really across the globe to support not just monetary obviously, but the rest of the portfolio and we have visibility into what's coming as well as the fact that as we've talked about before we have several products that are part of the same manufacturing network and the same auto injector platform. So that helps us kind of build that capacity across.

The Atlantic portfolio.

Thanks, a lot Mike on the second question.

And I think.

Good thing to focus on is access and obesity I mean do you look at the massive size of the obesity market and 110 million people in the U S 650 million people globally, but you really see that the.

Historically that the obesity market has really been slow to develop and it's really because the.

Treatments have been adequate.

So.

Question, we had going into this market was.

If a safe and efficacious treatment was developed.

Good.

Consumers and healthcare professionals and payors be interested in using it.

Well based on what we've seen in the marketplace over the past year and on our market research is clear that consumers and healthcare professionals will adopt.

Efficacious safe and diabetes medication pace.

Patients can have access to it so it does come down to payer access and we're highly focused on doing that.

Novo recently stated in their call that 40 million Americans have access to our being city.

And the way that they talked about it whats payer access and that employers opting in to that.

If thats and Thats, where were at today that would be a great starting point for access.

We're we're deep into conversations with payers to understand the market and all of that access discussions how it started yet but will shortly.

But our focus long term is to improve access for diabetes medications, we are investing significantly to demonstrate the potential health outcome benefits for people using tours appetizers live with obesity. We're also investing in phase III programs for people, who live in sleep apnea or heart failure and these should unlock.

<unk> segment access for people, who live with obesity in commercial and part D.

In addition in my career I've seen the power of consumer interest in helping to improve access for medication.

And what we've seen over the last year or is that people, who live with the BC are highly engaged and willing to budge access effective treatments.

They will have an important role in voice with employers and the congressional representatives advocate for access.

It will take time to establish our ultimate.

Joel I'm more encouraged than ever by our potential unlock the VC market and help a lot of people show up.

Encouraged but obviously a lot of work still to be done.

Thank you both and thanks Terence for the question lowest next question.

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

Thank you question for or not I'm, not going to get the legislative particulars correct, but just to be clear. It doesn't Lilly typically guide on tax rate, assuming an adverse U S situation and doesn't typically adjust that until late in the year.

And this year it is assuming no adverse situation, but much earlier in the year.

So can you clarify why you are doing something different this year.

Since it is a profound impact on earnings.

If I could just add on L. P E D wave.

Way behind how can you catch up thank you.

Thanks, Steve I'll go to it not for the question on the tax rate assumptions and then I'll go to Dan for your LP Little a question. Thanks, Steve.

Here is how we look at this and I wouldnt reach to read too much into it last year, we had a SKU based on very broad support for change.

In this 2017 tax provision that this will in fact be enacted by Congress.

We assumed late in the year, but it hasnt happened. So at this point the only thing we're doing is reflecting reality of the situation we're in.

If it does get repealed or deferred obviously, we will update accordingly.

I don't think the likelihood of that is their asics still could happen. This year, but it does take Congress Congress will need to app to get this to get this going so we're simply reflecting the current situation.

Okay.

I'll start with the LP Little a question.

We have two <unk> program. So maybe the easiest one to comment on first is the oral program. This is a first in class.

Probably the only one in clinic care.

And oral medications. This target is really a huge feat of molecular engineering I'm Super excited to see the data from this molecule develop and obviously the market opportunity for an oral drug for such a widespread condition.

<unk> is very important.

In terms of the ESI RNA, you're right to note that our competitors is ahead of us.

Really just starting the Cbot study, it's a long road to get these drugs to market with the outcome studies or.

Needed here to.

To show the benefit I, probably don't get into our differentiation strategy, but.

Of course, we have some ideas here and we will move as quickly as possible I don't see this as a winner take all space.

Maybe just to add.

Steve I will add on the <unk> comment I think we feel good about where we are with that but just on the tax thing where there was a difference here.

Where you described it is adverse.

Beneficial rate so.

<unk>.

Okay.

From a.

GAAP and non-GAAP accounting and of course, it has a benefit on EPS growth, but actually from a cash perspective. It goes the other way. So we just wanted to be clear upfront because it's not a one way benefit we're taking early in the year.

Adverse cash.

Impacts throughout the year and a positive effect on the P&L, it's a little bit different from maybe past past assumptions we've made.

Lowest next question.

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

Hi, Thanks for taking my question.

Ask you what do you think is the minimum amount relative risk reduction you'd have to see in an outcome study.

BCE for payers to be convinced that theres something here. Thank you.

Yes.

Thanks Louise.

Nick do you want to chime in on that around the minimum amount of relative risk reduction, we'd expect an outcome study for obesity.

Yes, no. It's a good question I mean first of all I don't think its a.

Binary.

Point, where.

All payers are looking for that outcome in order to provide access I think youre going to see a lot of payers you already see a lot of payers, who can provide access for that in <unk>.

Have an.

An extensive phase III program.

Only in CV outcomes, but also the sleep apnea and heart failure and ability to begin to to really.

Talk about hard outcomes.

For many patients who live with the BDC with the CV outcomes that we have today I mean, we're quite confident.

And in our program and based on what we see with sharing of risk reduction.

And blood.

Blood pressure.

In lipids.

We're fairly confident in our CV profile as well as what we saw with the surpass data.

And our meta analysis and the surpass program. So I will give you an exact number but I think we're pleased with where we're at and I think we'll be able to demonstrate outcomes that payers will be big.

Excited about.

Thanks Louise for the question lowest next question.

That comes from David Risinger from SBB Securities. Please go ahead.

Okay.

David are you there.

Okay.

We don't have Dave or he is on mute lowest next question.

The next question is from Chris <unk> from Goldman Sachs. Please go ahead.

Thank you if I could ask a question on mountain <unk> and the interplay with Citi.

Commented in the past that in terms of patients on trial.

And about less than 10% that seems to be a little bit higher now.

Can you share any thoughts and observations about how you see this progressing on the forward through this year.

Thanks, Chris for the question, Mike We'll go to you for that question on the cannibalization from <unk> figure and how that will.

<unk>.

Okay, Yes, I mean on that nothing has changed over what we had talked about earlier that less than 10% of our oral scripts.

We get formal Giro comfort solicited that hasn't changed over time, it's still a little bit less than 10%.

Yeah.

Okay. Thank you next question.

And that comes from Humira that Pam.

Evercore. Please go ahead.

Hi, guys. Thanks for taking my question.

There's been a heightened investor focus I feel on the phase III primary endpoint for now.

And I wonder.

And I wonder if there's been any incremental interactions and or agreement with FDA on the primary endpoint for phase three it's a question I get a lot from investors and also how are you thinking about this upcoming phase III. If there were to be a scenario, where the MRM on ctr doesn't agree with I address on the Bayesian analysis. Thank you.

Thanks, Newmar will go to Dan for the question on endpoints.

Clearly I think there's a lot we can learn from competitor readouts here and so.

Looking at the only kind of our data and our eyes I think it actually further validates an endpoint like address if you just look at the.

For spot for example, there's a lot more homogeneity in effect on an endpoint like hey, Jess versus SEDAR sum of boxes. So we feel more confident I would say than ever before that an endpoint like that is the right way to go.

On the other hand, I think you could take the position that since we're kind of about <unk>. Some boxes people might say well then it's achievable and you guys should do it too. So there's some pushes and takes there but on the whole whole still feeling good about hey, dresses as a primary outcome.

When you asked what happens if you hit one outcome and not the other that is surely a dip.

Difficult situation to be in we want to understand why that happened.

If that were to happen, where the irregularity and CVR sum of boxes that could explain it what did the rest of the secondaries look like.

Always best to hit all of your outcomes in a clinical trial.

Failing that you want to hit your primary end as Betty secondaries as possible, so, let's wait and see.

Thanks tumor lowest next question.

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

Great. Thank you very much for taking my question.

Maybe a question regarding your next generation of <unk>.

On the mainland.

New tag.

But how does it.

And once we do 90, Matt.

Asking because youre running a phase three trial with sub Q here, so what would be the read through for this particular asset based on the outcome of the 90 minute phase III trial.

Dan you want to talk a little bit about returning to Doug Yeah, I think you've got it basically right <unk> is a new medicine, a new molecule.

But it is an antibody against the same type of epitope that <unk> has which is this and through PG farm of VA beta so very equivalent mechanism of action, maybe a little better potency and certainly better drug properties, including <unk> and formulation. Thanks. So the rationale here is to.

<unk> improved dosing options to patients could we get even faster <unk> clearance.

Compete with fewer doses could it be subcutaneous those are the types of things that we're currently exploring the phase III is designed with a bit of a run in where in that portion right now.

To finalize our dosing strategy and then expand it obviously if.

<unk>.

As disappointing.

It would be read through through <unk> on the other hand, if 10 nanometer exceeds expectations I would expect that to read too.

Bob.

Thank you Mohit.

Next question.

The next question is Evan Siegelman from BMO. Please go ahead.

Hi, guys. Thank you so much for taking the question how much of the discussion on Medicare coverage in all timers.

That Medicare really doesn't pay for obesity drugs can you just talk about your efforts to help Medicare patients get coverage for obesity drugs, including potentially undrawn. If when approved maybe you have some parameters around what that additional population could look like from a revenue opportunity perspective. Thank you.

Yeah.

Thanks, Evan for the question I hand over to Mike Mike do you want to talk about.

For Medicare to cover obesity.

Okay sure Yeah. Good question I mean, it's going to take legislative.

Action in order to allow it.

Diabetes medications to be covered on Medicare part D.

There is the treat and reduce obesity act.

The acronym for that is true.

Yes.

A large growing bipartisan support for <unk>.

Well over a 100.

Congressmen and senators are people and senators.

Our behind the program.

It's growing more and more support.

Cros.

Across Washington.

We're eager to see the van seamlessly process it would be great for the company country American needs to take action address and reduce the number of people with obesity.

Isolation would be an important step toward this goal.

Support.

Legislation and continue to work.

To advocate for.

Thanks, Mike.

Next question.

The next question is from Jon Cohen from Credit Suisse. Please go ahead.

Oh, Thanks for squeezing me in Trung Nguyen from credit Suisse.

Last month, the American Academy of Pediatrics for lease that guidelines to treat childhood obesity.

In those guidelines they recommended a lifestyle intervention, obviously as the core components, but also they said.

Would consider treatment with anti obesity medications, so I thought.

Yes.

Your thoughts on <unk>.

Anti obesity medications in children is this scenario that you are moving into or considering moving into do you have any trials with children adolescence. Thank you.

Thanks, John for the question Mike.

To you again comment on these recent guidelines that were put out.

Yeah. Thanks, I mean, this is a significant unmet need.

Back to the question that we asked earlier about the treat and reduce obesity Act.

We need to prove the outflow of America, we have too many people.

With obesity in the U S and that includes unfortunately.

And lessons.

So I think they took the right action in order to really identify as an issue.

Health care professionals do need to pay.

A close attention to.

We obviously always advocate for diagnostics sizes. The first approach of this for the best not successful then you really only option at that point is medication.

We do think it's important and responsible for us to test.

There is appetite.

<unk>.

Fees in adolescence, and we have activity ongoing to do that.

Thanks, Mike and thanks for the question lowest next question.

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

Great. Thank you for taking the question I guess, one for or not.

Back in December you, you highlighted austerity measures in Europe as a potential risk.

At that time that was a bit of a unique position we hadn't heard that from many companies since that time, we've heard kind of similar messaging from some but not all.

Apologies if I missed it I don't think I heard anything today on this front. So I know, it's only been sort of 45 days or so since you made those comments, but any advances and sort of how youre thinking about this in any specific products or countries. We should think about that impact. Thank you.

Thanks Carter for the question I'm going to hand, this over to a user who's our president of Lilly International to comment on the European austerity measures.

I appreciate the question there've been a number of markets in Europe that have taken some austerity measures.

Partially due to Ukraine crisis in energy prices and inflation in Europe , we have seen Germany, France, obviously the U K.

Voluntary system, we think is broken and so we exited that and so there are some austerity measures in there we've contemplated that into our guidance for 2003 and the overall impact is modest relative to historical.

Declines in pricing in prior years, we expect that to continue to be in that.

Mid single digit decline in price in Europe .

Thanks Elliot Thanks Carter for the question Lewis next question.

The next question.

Is from Andrew Baum.

Please go ahead.

Thank you a question on U S commercial access for <unk> one agonist.

First could you share with us how you're thinking about modeling the impact of the IRI in terms of GOP, one uptake increasing as a result of the copay cap.

Additionally, benefiting from the reduction in free drug program, how significant is it given the patients still gonna find $2000 per annum.

And then second in relation to the oil DPP four market, which is something that's very very substantial 14 billion dollar market.

You have a cash we have drugs extensively which may offer considerable advantages and efficacy for the license EMEA and white, but I'm reminded of the stickiness of the south <unk> in the prior period.

To what extent do you think managed market is going to preclude your ability to penetrate that segment with all but one is just on the basis of generic DPP fours. Thank you.

Thanks, Andrew for the wide ranging question on diabetes I'll hand over to Mike first to talk about your question regarding potential impact of the IRI on access for quick ones and then the second question around how oral glib might fit in given the stickiness of some of the.

Older diabetes medications Mike.

Yes, good questions.

The iras side of it.

We will benefit patients who.

With diabetes.

Use of <unk> in Medicare part D.

Out of pocket costs will go down.

I would say a small to moderate impact on DLP sales or just.

Lower rates of abandonment than what we'd see at higher out of pocket costs.

As it comes to the oral DPP four <unk>.

Perceptions of oral DPP four separately decline over the last five years and really being replaced by FCC twos and DLP. So I don't I don't see much of an impact of DPP fours.

Going off patent in the U S or other markets.

Thanks, Mike and lowest I think we have one final question in the queue. So let's go to the last question.

And that is from Robin can ask this.

Sure I'm.

I'm sorry, <unk> Securities. Please go ahead.

Great. Thanks for the question I was just thinking more about some of the launches that are coming up I know this is maybe a little bigger outlet for mercury.

I always get this wrong, but for you see can you just talk a little bit about given how much promotion there than for <unk>.

And were in Vogue as you move into Q also crohn's that with data reading out soon like how do you feel like competing in that market as you start launching DTC heavy because it seems like theyre very very prominent.

About the launch dynamics and then second for Libra.

The same question here on any topic dermatitis is getting pretty crowded.

It kind of pushes and pulls might you need to use.

To get a quicker uptake in atopic derm.

Thanks Robin for the questions I'll go to Patrick Johnson for both of these first on <unk> and competition in the UC market and then on <unk>.

Trick.

Thank you very much but overall, we feel very good with the data we have seen omitted cancer mob. If we look at the 52 weeks, where more than 50% of clinical remission and we'd see a statistical and clinically meaningful improvement.

Loss, both clean because it seem to matter he can call pick and histologic endpoints, but I think it's important that if you look at the patient populations with one strategy.

We saw the same brassard across with bio naive and the.

Ah patients so I think about it three new and potential for a launch will also demonstrated on it when I talked about I think taking the important for patients.

More than 40% of the patients.

Either completely or to almost about one <unk> at week 52. So therefore, we believe we have a thoughtful cost asset here that probably initially will be used mainly second line for both have haven't responded.

Approximately two TNF since Ebola, but we believe that long term we are positioned for that first line pay your spending treatment, although its rapid colitis.

And then.

Yes, so the outlook for Medicare from RBC.

I think from a competitive landscape perspective.

We don't have head to head data, but if we compare the.

The data we've seen so far we believe it.

So very favorable both us with whats currently in the marketplace as well as what's in the pipeline with Oba companies across the JAK inhibitors, that's one piece and <unk> 23 U S win so exciting to launch media, but thoughts half a bcf.

When it comes to Liberty I think actually we are uniquely positioned to really upgrade the expected outcomes of patients with atopic dermatitis.

He had an asset that is actually targeting the most relevant cytokine when accounts are tweeting atopic dermatitis IL 13, and it is also that with the high binding affinity.

High potency and a slow off rate and I think that probably explains the data we've seen so far we're extremely pleased with the phase III data and we sold more than 80% of patients achieving skin clearance.

At week 16, maintaining that at week 52, but also very importantly.

Statistically and clinically meaningful improvements across both each which is probably the most disturbing factor for patients with atopic dermatitis sleep and quality of life and we saw similar to occur.

Across both the Q2, <unk> and Q4 <unk>.

Okay formulation, we actually believe that Liberty can sum up has a potential to become a thoughts line biologic. It's important tool to have in mind, but we announced the submission at the Q3 earnings call and we expect that.

Traditional regulatory pathway, we would not launch until most likely Q4 of 2023, but there are lots of excitement from both hands kept provide us a fort Belvoir community. That's weighed on the payers to get labor to tell the market.

Thank you Patrick Dave to wrap up great I think that's the last question and I appreciate the questions across the portfolio and we appreciate your participation in todays earnings call and your interest in our company 2022 was another productive year for the company and we generated strong financial results and delivered important pipeline progress in each of our core therapeutic areas.

Half of the patients we serve.

We aim to continue our momentum in 2023 and execute on the meaningful launch and pipeline opportunities that we have ahead of us. So thanks for dialing in and please follow up with IR. If you have questions that we didn't get to today have a great day.

Thank you and ladies and gentlemen, this does conclude our conference for today in this conference will be made available for replay beginning at one o'clock today.

Through February 9th at Midnight, you May access the AT&T replay system at anytime by dialing 866, <unk> 7101, and entering the access code.

<unk> eight <unk> nine.

Nine zero International Dialers can call 02970847 again those numbers are 1866 207, one thing about four one.

10.0 to 97087 with the access code four to eight nine.

950, and that does conclude our conference for today. Thank you for your participation.

And AT&T Keybanc conference and you may now disconnect.

Yes.

Okay.

Yes.

Yeah.

Okay.

Yes.

Okay.

Yes.

Okay.

Yes.

Yeah.

Okay.

Sure.

Yes.

Okay.

Yes.

Okay.

Great.

Okay.

Yes.

Okay.

Sure.

Yes.

Okay.

Yes.

Yeah.

Yes.

Okay.

Yes.

Okay.

Yes.

Okay.

Yes.

Okay.

Yes.

Okay.

Yes.

[music].

Yeah.

Okay.

Yes.

Okay.

Yes.

Okay.

Yes.

Okay.

Yes.

Okay.

Yes.

Sure.

Okay.

Thanks.

Okay.

Yes.

Thanks.

Yes.

Okay.

Yes.

Right.

Okay.

Yes.

Okay.

Yes.

Sure.

Yes.

Okay.

Yes.

Okay.

Yes.

Okay.

Yes.

Thanks.

Okay.

Yes.

Okay.

Yeah.

Okay.

Yes.

Okay.

Yes.

Okay.

Sure.

Okay.

Yes.

Okay.

Yes.

Okay.

Yes.

Okay.

Yes.

Okay.

Yes.

Okay.

Yes.

Okay.

Yes.

Okay.

Yes.

Yeah.

Yes.

Okay.

Yes.

Sure.

Yes.

Okay.

Yeah.

Yes.

Okay.

Yes.

Okay.

Yeah.

Okay.

Ladies and gentlemen.

Thank you for standing by and welcome to the Lilly Q4, 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.

If you require assistance during the call. Please press Star then zero and an operator will assist you offline.

As a reminder, today's conference is being recorded I would now like to turn the conference over to your host Jill Fletcher Senior Vice President of Investor Relations. Please go ahead.

Thank you Louis good morning, and thank you all for joining us for Eli Lilly <unk> Company's Q4 2022 earnings call.

I'm, Joe Fletcher and joining me on today's call are Dave Ricks, Lilly's, Chairman and CEO .

Eskenazi, Chief Financial Officer, Dr. Dan <unk>, Chief scientific and medical Officer, and White President of Lilly Neuroscience, <unk> President of <unk> International Jake Van <unk> CEO of lock 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 on Lauren's erkki from 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.

<unk> Form 10-K, and subsequent forms 10-Q, and 8-K filed with the Securities and Exchange Commission the information we.

We provide about our products and pipeline is for the benefit of the investment community. It's not intended to be promotional and is not sufficient for prescribing decisions.

As we transition to our prepared remarks. Please note that our commentary will focus on non-GAAP financial measures and now I'll turn the call over to Dave. Okay. Thanks, Joe 2022 was a year of strong pipeline and commercial performance for Lilly we.

We delivered top and bottom line growth in 2022, despite the impact of the Olympics low in the U S and significant FX headwinds.

And delivered another remarkable year of pipeline progress.

We began 2023 with multiple updates to our late stage pipeline.

In our Q2 2022 earnings call last August we announced the filing of submissions for two assets with the FDA under an accelerated approval pathway.

Burton and mantle cell lymphoma, and then on a map and early symptomatic Alzheimer's disease.

Last month, we received responses from the FDA on both these assets on January 19th we announced that the FDA issued a complete response letter for accelerated approval of <unk> due to the limited number of patients with at least 12 months of drug exposure there.

There were no other deficiencies cited.

Which will form the basis of Danone <unk> application for traditional approval.

We have consistently stated that we would that we would expect very limited uptick before CMS supports coverage at.

At the time, we submitted for accelerated approval, we had hoped that there would be more movement from CMS to provide access to these medicines for people with Alzheimer's disease.

Patient access necessary for broad use of Denosumab overtime.

Also in the month of January we received FDA approval for <unk>.

The first and only non covalent PTK inhibitor for adults with relapsed or refractory mantle cell lymphoma.

After at least two lines of systemic therapy, including a <unk> inhibitor.

<unk> is a highly selective kinase inhibitor, whose novel reversible binding mechanism and pharmacology may allow for extended targeting of the <unk> pathway.

Following treatment with a covalent PTK inhibitor.

And of <unk> for obesity.

This current wave of new launches along with the ongoing focus on progress in our next wave of R&D innovation underpins, our long term outlook to drive top tier revenue growth and expand our margins over time.

Volume in our core business again, excluding COVID-19 antibodies grew 13% in Q4 and 12% for the year.

This volume driven performance was attributed to our key growth products, which grew 21% last quarter.

For pipeline milestones. In addition to the recent FDA approval of <unk>, we have shared several important updates since our Q3 earnings call.

Positive phase III readout in FDA and EMA acceptance of the regulatory submission for <unk> for adults with chronic kidney disease.

The initiation of a rolling submission in the U S for <unk> in obesity.

And FDA granting us fast track designation for tours appetite and obstructive sleep apnea.

We also continue to put our cash flow to work to create long term value.

Moving to slide five you'll see a list of the key events since our Q3 earnings call, including several important regulatory clinical and business development and ESG updates. We are discussing today or that were discussed during our guidance call on December 13th.

One item I would like to highlight is the collaboration we announced in December with <unk> pharma.

To deliver a sustainable supply of affordable high quality insulin to at least 1 million people living with diabetes in low to middle income countries, most of which are in Africa.

As an important collaboration with a local company to Bruce to produce low quality low cost high quality medicines strengthening capacity and building self reliance for insulin manufacturing within the African region will provide a more sustainable supply in the long term.

Now I'll turn the call over to not to review, our Q4 and full year 2022 results.

Thanks, Dave Slide six and seven summarize financial performance in the fourth quarter and full year 2022.

I'll focus my comments on non-GAAP performance.

As Dave mentioned, we're pleased to report 10% growth for our core business in Q4 on a constant currency basis, driven by strong volume growth.

Couple of notable items affected year over year comparison.

The first is COVID-19 antibody revenue in Q4, 2022, which compared to the prior year and declined 96% from approximately $1 1 billion in Q4, 2000 $21 million to $38 million in Q4 2022.

Mr. Logan that is currently not authorized for emergence Houston any U S region, and we continue to expect no COVID-19 antibody revenue for 2023.

Second is the continued foreign exchange headwinds compared to 2021.

Which resulted in a 415 basis points dampening of revenue growth in Q4.

Key growth products grew by 21% and accounted for 70% of our revenue this quarter.

For the full year 2022 revenue excluding revenue from COVID-19, antibody grew 2% or 5% on a constant currency basis.

Our non-GAAP gross margin was 85% in Q4, an increase of approximately 440 basis points, primarily driven by lower sales of COVID-19 antibody, partially offset by lower realized prices and increased expenses due to inflation and logistics costs.

Total operating expenses declined 1% in Q4.

Lord acquired IP, R&D and development milestone charges were largely offset by higher marketing selling and administrative expenses and higher R&D expenses.

R&D expense for the quarter increased 5% driven by higher development expenses for late stage assets, partially offset by favorable impact of foreign exchange rate.

Operating income declined 7% compared to Q4 2021, driven by lower revenue, partially offset by lower operating expenses.

Operating margin for Q4 was 27, 4%, which includes a negative impact of approximately 330 basis points attributed to acquired IP R&D and development milestone charges.

Full year operating margin was 27, 8% an increase from 26, 8% in 2021.

Our Q4 effective tax rate was seven 3%, bringing our full year 2022 effective tax rate at 10, 3%.

As we shared during our guidance call in December we had assumed that the 2017 tax provision required capitalization and amortization of research and development expenses for tax purposes would be deferred or repealed by Congress in late 2022.

Approximately one.

$2 billion.

At the bottom line earnings per share declined 4% in Q4 and increased 7% for the full year.

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

This quarter U S revenue declined 10% excluding revenue from COVID-19 antibody revenue grew 11% in the U S.

Volume driven growth was led by <unk> <unk> and <unk>.

Net price was flat in the U S. This quarter for the full year. The net price decrease of 3% in the U S was in line with our expectation.

Moving to Europe revenue in Q4 increased 8% in constant currency, driven primarily by volume growth for Jordan Felicity in Brasilia.

We remain encouraged with the momentum of our business in Europe .

In Japan revenue in Q4 decreased 6% in constant currency.

In China revenue grew 2% in constant currency as continued volume growth was mostly offset by lower realized prices for <unk> as a result of the volume based procurement process Andrew.

And for products listed on the NR deal as well as by COVID-19 disruption.

As shown on slide nine our key growth products continue to drive robust worldwide volume growth contributing 15 percentage points of volume growth this quarter.

As mentioned previously the decline in COVID-19 antibody volume with substantial in Q4, 2022, and was largely offset and largely offset volume growth from key products.

So lilly's increase in portfolio understandably generate high interest we continue to see tremendous growth both in percentage and absolute term for other key products, including <unk> and Guardian, presenting a sales in the quarter grew 100% driven mainly by the edge of an indication.

<unk> sales grew 42% and the product retains the leadership position in a competitive market globally.

Demand for our ingredient portfolio remains strong both for <unk> globally and <unk> in the U S and we remain focused on bringing additional capacity online to meet this robust demand and upcoming launches.

In terms of supply as mentioned in our guidance call in December given a strong demand for existing product. There has been intermittent delay to wholesalers and pharmacies and receiving certain dose levels of <unk> in the U S. We continue to update the FDA on the situation and the FDA has been posting to his website details regarding this.

The doses.

Unexpected timing.

To meet this rapidly growing demand across our <unk> business, we have announced plans to add additional substantial capacity in the years ahead and most proximal of these efforts is our RTP side, North Carolina, where progress continues as planned and we look forward to the startup production later this year.

Moving to slide 11, one of our strong launch uptake continues underpinned by differentiated efficacy profile and positive customer experiences.

For Q4, approximately 75% of <unk>, new therapy starts Ah patients new to the type two diabetes injectable Incretin class and.

And fewer than 10% of switches from <unk>.

As we mentioned in our Q3 earnings call in early November we took actions in Q4 to reinforce the intended use of the <unk> savings program by type two diabetes patients with.

We indicated at that time that these actions could negatively impact new prescription volumes, but we are not expected to impact net revenue.

As anticipated we believe the new prescription volumes beginning in late November were impacted by these actions with some week by week volatility driven by end of year seasonality.

We continue to build payer access for <unk> for type two diabetes as of January 1st Axis, just over 50% for patients with type two diabetes across commercial and part D.

Regarding the percentage of paid script for Q4, we estimate the percentage of paid script from <unk> to be approximately 40%.

With paid script defined as those prescription outside the 25 non covered co pay card, but inclusive of the 25 coverage copay card.

As we expand payer access the proportion of paid scripts should continue to increase.

On slide 12, we provide an update on capital allocation in 2022, we invested $9 6 billion.

To drive future growth through a combination of R&D expenditures.

Is this development outlay and capital investment.

In addition, we returned approximately $3 5 billion to shareholders in dividend and repurchased $1 billion of half in stock.

Our capital allocation priorities remain unchanged and are oriented towards achieving our strategic deliverables of top tier revenue growth and speeding life changing medicines to patients.

We do this through investments in our current portfolio to drive new launches investment our manufacturing capacity and in our future innovation through R&D and business development.

And we returned capital to shareholders through dividend payments and share repurchases.

Slide 13 provides an updated 2023 financial guidance.

The only change we've made from the guidance we provide in December is to update our effective tax rate, which resulted in an updated EPS range.

During December guidance call, we shared that the effective tax rate for 2023 will be approximately 16% based on the assumed deferral or repeal of the tax provision requiring capitalization of R&D.

Since this provision was not defer to retail in 2022 and given the uncertainty around if and when such action will take place in 2023, we have updated our tax rate from 16% to approximately 13%.

This update to our effective tax rate results in new EPS range of $7 90 to.

The $8 <unk> on a GAAP basis.

$8 35.

$8 55.

On a non-GAAP basis.

Regarding FX rate there has been a general weakening of the dollar since we set our initial 2023 financial guidance last year. However.

However were not adjusting guidance for FX changes. This time as we are only one month into the year and FX markets can we can be quite volatile.

As I shared in December the most significant headwind in revenue growth in 2023 versus 2022 will be the impact of COVID-19 antibody sale.

This year over year comparisons will be most pronounced in Q1 2023, given that we had $1 billion $5 of COVID-19 antibody sales in Q1 2022.

To a lesser extent the loss of exclusivity of Alimta in the U S. In Q2, 2022 will also impact year over year growth in the first half of 2023.

Still the mid point of our 2023 revenue guidance range represents roughly 7% of growth or 50% growth for our core business, excluding COVID-19 antibody.

This year holds tremendous promise for us to help patients as we execute on the current wave of potential launches, while maintain our commitment to invest in and progressed feature innovation.

We expect this ongoing focus on disciplined execution and investment will help drive top tier revenue growth through at least 2030.

Now I will turn the call over to Dan to provide an update on our pipeline. Thanks. So not 2022 was a really productive year for Lilly R&D as we advanced our late stage assets <unk> appetite to nano map pretty brutal nib, <unk> Mab and Leverages, a mab to key regulatory submissions.

And we obtained the approval for <unk>, we launched <unk> for type two diabetes in mid 2022.

As Dave shared we received an approval last week for Peter Bruton, It, but now known as J perk up.

By the end of this year. We also have the potential to launch two new immunology assets with Mira <unk> map and Leverages a map.

And for <unk>, we're looking forward to a phase III readout mid year, which if positive will form the basis of our submission for traditional approval.

In 2022, we also gained clarity on the next wave of assets that have entered or will soon enter phase III registrational trials those are Serge.

<unk> cancer.

Our weekly insulin for diabetes terna.

Terna tug and Alzheimer's disease.

As shared in our December guidance call. We now have four glib, Ron and read a true tied in diabetes and obesity.

Given the updates we provided in mid December today, I'll, just briefly highlight progress since our last earnings call.

Slide 14 shows select pipeline opportunities as of January 30th in slides 15, and 16 show a recap of 2022 key events and potential key events for 2023.

Starting with diabetes and Cardiome anabolic disease in November we shared results from the <unk> phase III trial in collaboration with Boehringer Ingelheim, as the largest and broadest <unk> inhibitor trial in <unk> to date. The results showed a significant benefit of giants and reducing the relative risk of kidney disease progression or cardiovascular death.

By 28% compared with placebo in people with chronic kidney disease.

Overall safety data were consistent with previous findings confirming the well established safety profile of <unk> <unk>.

<unk> is a leading cause of death worldwide affecting over 850 million people globally and $37 million in the U S with.

We've submitted to the FDA and EMA for approval and expect to make submissions to other regulatory agencies in the coming months.

In January we started quint, one phase III study comparing fixed dose escalation of release weekly insulin to insulin <unk> and insulin naive type two diabetes patients.

With this initiation all five studies in the <unk> Phase III program are now underway.

Moving to earlier stage assets in our diabetes and CV pipeline in Q4, we advanced two assets into phase III that aim to lower LP little a well known risk factor for atherosclerotic cardiovascular disease.

The first is an oral <unk> inhibitor, a small molecule that disrupts the interaction between the April a protein and the LIFO protein particle.

And the second uses <unk> to disrupt the production of <unk> in the liver.

We shared proof of concept data on the SA RNA asset during our December 2021, R&D Investor meeting. This is our second ESI RNA asset to advance to phase III. Following our <unk> III <unk> RNA, which entered phase two earlier in 2022.

We also recently moved in SA RNA asset targeting apoc, III and cardiovascular disease into phase one.

Our genetic medicines portfolio is advancing and we remain optimistic about the prospect of improving cardiovascular outcomes with these molecules.

Lastly, we discontinued our phase one <unk> inhibitor.

In oncology, we are of course pleased with the recent approval of <unk> and we look forward to continuing the substantial ongoing development program for the molecule in the years ahead J.

<unk> is the second product approved from our 2019, Laakso oncology acquisition, which reshaped our oncology efforts at Lilly.

It <unk> at Lilly is growing NME portfolio now includes a number of emerging assets shown in our pipeline, including our <unk> three program, which recently dosed its first patient.

Also in Q4, we dosed the first patient in Amber for our second phase III trial for inland <unk>, our oral <unk> <unk>.

And before we will study <unk> in the adjuvant setting.

Lastly, turning to <unk> as noted in our guidance call at the San Antonio breast cancer Symposium in December we shared the latest 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 pause.

<unk> early breast cancer at high risk of recurrence.

We've now submitted an NDA to the U S FDA to potentially expand our adjuvant indication beyond the currently indicated cohort one CAD 67 greater than 20% population.

In immunology, we are looking forward to potential FDA approvals later this year for <unk>, but also of colitis, which we expect in the first half of the year and Leverages, a mab in atopic dermatitis, which we expect in the second half of the year.

Looking earlier in our immunology pipeline as mentioned in our guidance call. We presented exciting proof of concept results for our PD, one agonist antibody pair solar mab in rheumatoid arthritis at the ACR Conference in November and we have now initiated global dose ranging phase <unk> study.

Moving to neuroscience, we've advanced our into phase III, our <unk> seven inhibitor for chronic pain.

Newly acquired rights to this asset from Asahi cost say pharma in early 2021.

With regards to the nanometer as Dave mentioned, the sole deficiency cited by the FDA to our submission for accelerated approval was the number of patients with at least 12 months of drug exposure.

The phase III Trailblazer, ALS trial on which the accelerated approval application was based allowed patients to complete their course of treatment with <unk> when they reached a predefined level of amyloid plaque clearance.

Due to the speed of plaque reduction that we saw many patients were able to stop dosing as early as six months into treatment.

Starting in fewer patients receiving 12 months or more of genetic map dosing.

In summary, while 2022 was an outstanding year of pipeline progress. We're fully focused on the work we need to do in 2023 to make our next set of potential medicines a reality for patients we look forward to providing additional updates throughout the year.

Now I'll turn the call back to Dave Thanks.

Thanks, Dan before we move to Q&A, Let me summarize the progress we made during 2022.

In 2022, we submitted regulatory applications for important pipeline products like mirror, Kismet, perturbed nib and lever kismet.