Q2 2023 Eli Lilly And Co Earnings Call
Thanks for holding we appreciate your time and patience. Please stay on the line and we'll be back in just a moment.
[music].
Ladies and gentlemen, thank you for standing by and welcome to the Lilly Q2 2023 earnings call.
At this time all participants are in a listen only mode.
Later, we will be conducting a question and answer session and instructions will be given at that time.
Should you request assistance during the call. Please press Star then zero and an operator will assist you offline.
I would now like to turn the conference over to your host Joe Fletcher Senior Vice President of Investor Relations. Please go ahead.
Good morning, Thank you for joining us for Eli Lilly <unk> Company's Q2, 2023 earnings call I Am Joe Fletcher Senior Vice President of Investor Relations and joining me on today's call are Dave Ricks, Lilly's, Chairman and CEO and not Ashkenazi Chief Financial Officer, Dr. Dan <unk>, Chief scientific and medical officer and wide press.
Didn't have Lilly neuroscience <unk> President of Lilly International Jacob <unk> President 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 Mccabe of Irons makes bring another 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 <unk>.
Securities 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 we transition to our prepared remarks. Please note that our commentary will focus on non-GAAP financial measures now I'll turn over the call to Dave Thanks, Joe.
In the second quarter Lilly's momentum continued we advanced our R&D pipeline progressed are ambitious manufacturing agenda and delivered strong financial results. Our business saw an acceleration of revenue growth driven by manganaro presenting and guardians.
As base period headwinds from COVID-19, antibody revenue and Alimta as loss of exclusivity recede, we do expect strong growth to continue in the quarters ahead.
Those he has made substantial progress in advancing our pipeline of innovative medicines in recent years.
But the past few months have been particularly noteworthy.
In early May we shared the topline results of the phase III Trailblazer, almost two trial, which showed donut I mab treatment slowed clinical decline in Alzheimer's by 35%.
While differences in enrollment criteria and study design make cross trial comparisons difficult.
This represents the greatest percentage cognitive slowing in a primary endpoint of any disease modifying alzheimers disease treatment reported to date.
And the only phase II to phase III replication to date.
Three weeks ago at the Alzheimer's Association International Conference in Amsterdam, and simultaneously published in Jama, we shared the detailed results, including new analysis, which demonstrate the potential of even greater cognitive slowing in patients in the earlier stages of Alzheimer's disease.
At the Ada scientific sessions in June we shared positive phase two data on two next generation diabetes, and obesity product candidates <unk> and <unk> side.
In less than two weeks ago, we shared top line results from this surmount three answer about four phase III trials, which showed participants on <unk> following intensive lifestyle intervention or with continued <unk> treatment achieved up to 26.6% mean weight loss.
Dan will share more perspectives and his R&D update on these and other exciting areas of pipeline progress.
Moving to our results you can see on slide four the continued progress made on our strategic deliverables. So far this year.
Excluding revenue from vaccine me and from the sales of COVID-19 antibodies in 2022, Q2 revenue grew 22% on 23% volume growth.
<unk> growth in Q2 was driven by Mongiardo, which leads our new products category.
That category also includes J <unk> and now <unk>, which saw its first sales in Japan in Q2 and launched in Germany in July .
In the second quarter of this year, new products and growth products categories. Combined combined contributed approximately 26 percentage points of volume growth.
These products, coupled with potential upcoming launches solidify really strong growth profile through this decade.
We've had several important pipeline updates since our Q1, earning call earnings call Premier Kisan map approval in the EU and Resubmission of our U S application with regulatory action expected by the end of this year.
Regulatory submissions in the U S for <unk> appetite for chronic weight management.
Regulatory submission of Denosumab for traditional approval to the FDA and EMA. Following the positive phase three results from the Trailblazer All's, two trial and positive phase III topline readouts for some out three and four in the third and fourth global studies evaluating <unk> in chronic weight management.
The second quarter also was.
Was productive for business development.
<unk> commented in the past on our active exploration and pursuit of external innovation and are pleased to have announced agreements to acquire two clinical stage companies in the second quarter.
<unk> therapeutics and for Santos buyout. These.
These companies operate in different therapeutic areas and each is a fit with Lilly strategy.
We also closed the sale of global rights to <unk> and the financial impact of this transaction is reflected in our Q2 results.
After quarter end, we closed the sale of rights to our Olanzapine portfolio, which will be reflected in our Q3 financial results.
Both of these transactions are now incorporated into our updated 2023 financial guidance.
We continued to progress the most ambitious manufacturing expansion agenda in the 147 history of our company.
We're happy to share that commercial production to support our anchor Gen portfolio has begun at our research Triangle Park site in North Carolina.
Beyond the capacity expansion that will come as we ramp production at this site. We're also pursuing other near term paths to.
And access to our anchor tends to patients around the world.
We will provide more detail on these efforts.
And finally, we distributed over $1 billion.
And dividends this quarter.
On slide five Youll see a list of key events since our Q1 earnings call, including several important regulatory clinical and other updates we're sharing today.
So without further Ado I'll turn this over to or not to share our Q2 results.
Thanks, Dave Slide six summarizes <unk> financial performance in the second quarter of 2023.
Focus my comments today are non-GAAP performance.
In Q2 revenue increased 28% versus Q2 of 2022.
Excluding revenue from <unk> and from COVID-19 antibodies in the base period revenue increased 22% or 23% on a constant currency basis.
This acceleration in our revenue growth was achieved despite lingering headwinds from the limited loss of exclusivity in the United States, which occurred in the first half of last year and the effects of which should normalize going forward.
Gross margin as a percent of revenue was flat in Q2 at 79, 8%.
Gross margin in the quarter benefited from product mix, including onetime revenue from the sales of <unk>, which was offset by increases in manufacturing expenses related to labor costs and our investments in capacity expansion.
Total operating expenses increased 14% this quarter.
Marketing selling and administrative expenses increased 18% driven by higher marketing and selling expenses associated with recent and upcoming new product launches and additional indications.
R&D expenses increased 32% driven by higher development expenses for late stage assets and additional investments in early stage research.
This quarter, we recognized acquired IP R&D charges of $97 million or nine tenths of EPS.
In Q2, 2022 acquired IP R&D charges totaled $440 million or <unk> 46 cents of EPS.
Operating income increased 69% in Q2, driven by higher revenue, including revenue associated with the sales of rights for vaccine me and lower IP R&D charges, partially offset by higher R&D and SG&A expenses.
Operating income as a percent of revenue was 27% for the quarter and reflected a negative impact of approximately 115 basis points attributable to acquired IP R&D charges.
Our Q2 effective tax rate was 16, 1%. This represents an increase of 190 basis points compared to the same period in 2022, driven by the impact of the new Puerto Rico tax regime, and the sales of rights for a vaccine.
At the bottom line, we delivered earnings per share of $2 and 11% in Q2, 69% increase versus Q2 of 2022 inclusive of 43 of EPS associated with the sales of rights for vaccine.
On slide eight we quantify the effect of price rate and volume on revenue growth.
This this quarter U S revenue increased 41%.
When excluding revenue from Covid, 19, antibodies and vaccines <unk> U S revenue grew 30% driven by robust growth from <unk> and <unk>.
Price in the U S increased 2% for the quarter driven by months axis and savings cards dynamics.
Excluding lunch Arrow net price in the U S decreased by low single digits consistent with prior trends.
As I mentioned in our Q1 earnings call, we expect the <unk> access and saving cards dynamics do you have an even greater effect on reported U S price changes in the second half of this year.
Europe continued its growth trajectory with revenue in Q2 up 6% in constant currency, driven primarily by volume growth for <unk> charity instant.
Volume in Europe increased 12% in the second quarter.
For Japan, Q2 revenue increased 7% in constant currency as we continued to see robust growth in our newer medicine led by <unk> and to a lesser extent <unk> ILUVIEN and <unk>, the last of which launched in Japan in April .
Moving to China revenue increased 20% in constant currency with volume growth only minimally offset by price declines.
Volume growth in Q2 was driven by private and Virginia, We're pleased to see our China business returned to growth.
Revenue in the rest of the world increased 19% in constant currency as volume growth of 20% was driven by Manzano present and jargon.
Slide nine shows the contribution to worldwide volume growth by product category as.
As you May recall on our Q1 earnings call, we simplified the categorization of our products with a focus on two categories.
New products and growth products.
As you can see the new and growth categories combined contributed 26 percentage points of volume growth for the quarter.
That's for all others category was driven by the sale of <unk>.
The lack of revenue from COVID-19 antibodies compared to the base period was a milder headwind to growth in Q2 compared to Q1, and we will continue to be a modest impact to prior year comparisons.
Slide 10 provides additional perspective across our product categories.
I'll speak more about <unk> shortly but first let me highlight the continued outstanding performance of <unk>, which fell worldwide sales growth of 57% in Q2 as <unk> grew 82% while U S volume grew 47%.
Joining us also continued its strong performance with worldwide sales growth of 45% for the quarter.
There have been two notable regulatory approval for Jordan in the last two months.
June the FDA approved <unk> for the treatment of type two diabetes and children 10 years and older.
<unk>, the first and only <unk> inhibitor approved for this patient population.
And in late July <unk> was approved in the EU for the treatment of adults with chronic kidney disease.
After almost a decade on the market <unk> continues to demonstrate its importance to patients across a number of cardio renal metabolic conditions.
Sure, Let's say performance has held up well in a growing and dynamic market.
In Q2, we sell worldwide Felicity revenue declined by 5% as modest volume growth was more than offset by price erosion.
In international markets <unk> volume continues to be affected by measures, we have taken to minimize potential disruption to existing patients, including communications to health care professionals not to initiate patient centricity.
We remain confident that <unk> will continue to be an important option for HCP and patient in years to come.
Moving to slide 11, I will share some perspective on <unk> performance.
We continue to be pleased with the strong momentum of lunch or is more type two diabetes patients benefit from the medicine.
<unk> revenue in the U S grew to $960 million for the quarter.
In Q2, we continued to make progress in expanding access to <unk> and excess reached 73% on July one for patients with type two diabetes across commercial and part D.
We estimate that the percentage of paid scripts from Lynch are in Q2 was approximately 67% up from approximately 55% in Q1.
As a reminder, we define paid script as those prescriptions outside of the $25 non covered copay card, but inclusive of the $25 covered copay card.
Since the $25 non covered copay card program, which expired in June <unk>, we would expect the proportion of paid script next quarter to be 100% under this definition.
Looking forward to the rest of the year, we expect continued growth in new to brand prescription as well as ongoing improvement in access.
Lastly, regarding the demand and supply outlook for importing we're pleased that commercial production has started at our RTP site in North Carolina.
Even as we ramp up capacity RTP, we believe supply will likely remain tight in the coming months and quarters due to significant demand.
Given the expected global demand for <unk> as we mentioned on previous earnings call. We are moving forward with different presentations to bring through is that the type two more patients faster.
To this end we initiated by equivalent study in early April for a multi dose quick pen device.
In many O U S markets, we expect to launch towards appetite first involve form later this year and transition to a multi dose pen is approved and available in these markets.
<unk> in 2024.
The launch of the vol, and click pet presentations for choose appetite will leverage existing manufacturing assets and capacity.
We're excited about the opportunity to expand the number of people. We can help in the short term and long term with these additional options.
On slide 12, we provide an update on capital allocation in the first six months of 2023, we invested $5 7 billion and our future growth through a combination of R&D expenditures capital investments and business development our place in.
In addition, we returned nearly $2 8 billion to shareholders in dividend and share repurchases.
Slide three presents our updated 2023 financial guidance.
Given the strong performance in our underlying business as well as revenue from the sales of rights, Rebecca Simi and Olanzapine, we are increasing our 2023 revenue guidance by $2 2 billion.
To a range of 33 334 to $33 9 billion.
Approximately $1 billion of half of this increase is driven by business development activity, including the sales of rights for the Olanzapine portfolio in vaccine me, while the remainder reflects strong underlying business performance.
Our updated FX assumptions based on recent spot rates are lifted and represents a de minimis impact to the updated guidance.
Our guidance for gross margin as a percent of revenue has increased to approximately 80% driven by the sales of rights for vaccine and our Olanzapine portfolio.
We're also increasing the range of operating expense guidance for the year.
Marketing selling and administrative costs are now expected to be in the range of seven two to seven 4 billion.
With the increase driven by additional investments in recent launches and preparation for launches a new medicine and line extensions expected later this year.
The range for research and development expenses has been increased to eight 9% to $9 $1 billion, reflecting positive dynamics across our portfolio, including success in advancing our early stage assets.
Positive enrollment trends in our late stage studies.
Broadening of the clinical program for our next generation Incretin.
And expected incremental expenses from business development activities.
We have incorporated IP R&D charges that have been incurred through Q2, 2023, which totaled $202 million.
Other income and expense and tax rate guidance has also been updated.
<unk> is now expected to be between zero and $100 million in income up from prior guidance of $100 million to $200 million and expense.
We've also increased our estimate estimated effective tax rate to be in the range of 14% to 15% upfront approximately 13%.
Reflecting the impact of the sales of rights for Olanzapine portfolio and vaccine.
Based on these changes we have raised our full year reported EPS guidance to now be in the range of $9 27 to $9 40 per share and raised our non-GAAP EPS guidance to be in the range of $9 70.
$9 90.
Now I will turn the call over to Dan to highlight our progress in R&D.
Thanks.
Been a productive and busy few months for Lilly R&D since our last earnings call. We've had a few major readouts across our therapeutic areas and we've announced several business development transactions let.
Let me start with the data that we shared in June at the American Diabetes Association.
We presented over 40 abstracts across our portfolio and shared data during two Ada sponsored symposia.
The first was for the phase III results from the surmount two study tours appetite in adults with obesity or overweight in type two diabetes, which was simultaneously published in the new England Journal of Medicine.
And the second symposium was for the results from two phase II trials have read a true tied our Gi P. GOP glucagon tri agonist in adults with obesity and overweight as well as in people with type two diabetes.
<unk> results in obesity and type two diabetes were simultaneous simultaneously published in New England Journal Medicine in lancet respectively.
We also shared in oral presentation on our phase II trial results for <unk>, our once daily non peptide oral G. L. P. One in adults with obesity or overweight. These.
These results were simultaneously published in New England Journal.
We also presented results from a phase two trial for <unk> in patients with type two diabetes and these were published in lancet.
Clearly, we're proud of all of this data in diabetes and obesity portfolio.
Since we discussed the topline data for surmount tutors appetite trial during our last earnings call I'll focus my update today on the phase II data shared or for <unk> and <unk>, starting with old forklift, Brian on slide 14.
The <unk> <unk> presentation highlighted safety and efficacy data across six dose arms in our phase II study in obesity.
With an overall mean body weight at baseline of 109 kilograms or for good Brian demonstrated an average of up to 14, 7% body weight reduction at 36 weeks.
At the second highest dose tested in this study 75% of participants reached a weight reduction goal of 10% or more.
We also shared data showing a dose dependent decrease in systolic blood pressure and an overall improvement in lipid levels.
The most common adverse events were Gi related and generally occurred earlier in the trial during the titration phase and were mostly mild to moderate.
While we have not yet shared the dosing details for our phase III studies. These phase II results have informed our approach on dose escalation.
We also presented data at Ada from a similar phase II study of forklift, Brian in people with type two diabetes. The results of which are highlighted on slide 15.
Ofer <unk> demonstrated a mean reduction in hemoglobin, a one C. At 26 weeks of up to two 1% and over 90% of participants on the highest III doses achieved a onesie levels less than 7%.
We initiated phase III trials for <unk> in both obesity and type two diabetes in the second quarter and we look forward to those results in 2025.
For <unk> the full results of two phase II trials were presented during an 80, a sponsored symposium, which discussed the efficacy and safety in adults with obesity and overweight with at least one weight related comorbidities as well as in people with type two diabetes.
There is also a segment of the symposium focused on liver fat and Nash related biomarker data in patients with non alcoholic fatty liver disease, which showed relative liver fat reduction of over 80% at 24 weeks for the two highest doses.
Slide 16 highlights key results from the obesity phase II trial in which <unk> met the primary endpoint at 24 weeks, demonstrating mean weight reduction up to 17, 5%.
The safety profile of <unk> was similar to other <unk> based therapies.
And the secondary endpoint of weight reduction at 48 weeks participants treated with the highest dose of <unk> demonstrated a mean weight reduction up to 24, 2% or almost 58 pounds on average.
If confirmed in Registrational trials, we believe that magnitude of mean weight reduction would represent a new high watermark for weight loss from a pharmacologic agent at this time point.
It is also worth noting that the phase II ready to tide trial, and obesity was well balanced between genders with females, representing just under half of all participants in the trial.
This was intentional and is atypical for <unk> clinical trials, and obesity, which often have a higher proportion of female participants the subgroup that typically experiences greater weight loss than males.
Indeed in the regulatory type phase II obesity trial, the mean change in body weight for female participants at the highest dose was 28, 5%.
Given these encouraging results we moved rapidly to initiate the trial phase III program, which will evaluate the safety and efficacy of <unk> for chronic weight management obstructive sleep apnea in knee osteoarthritis and people with overweight and obesity. These four phase III trials will each run between 68% and 80 weeks.
The trajectory of weight loss seen in the phase II study reinforces our belief that <unk> can potentially represent a further improvement in additional option for patients seeking pharmacologic treatment for obesity and its complications.
While <unk> phase II results in obesity garnered much attention at Ada the phase II results in patients with type two diabetes are also very encouraging with participants receiving <unk> tied to achieving a hemoglobin a <unk> reduction of up to 2% on average in addition to meaningful level.
Of weight loss.
He used to share that we plan to advance <unk> into phase III for type two diabetes.
Moving to <unk> appetite on slide 17, we were delighted to announce in late July at Surmount, three and surmount four trials of tours appetite in obesity met all primary and key secondary objectives.
Key secondary objectives for both these studies participants achieved similar mean weight reduction 26, 6%, it's around three and 26.0% and surmount for.
While these two trials were not required for our chronic weight management submission to the FDA.
They provide important additional information regarding the world tours appetite plays in maintaining or adding to the weight loss achieved with either intensive lifestyle intervention or pharmacotherapy in adults living with obesity are overweight.
Surmount three evaluated <unk> appetite following an intensive lifestyle modification program and demonstrated that even in people who have a weight loss response to lifestyle intervention.
There is appetite provides significant additional weight loss.
Surmount for was a randomized withdrawal study in which all participants receive trues appetite for 36 week lead in period at which point half the participants were switched to placebo and the other half continued treatment with <unk> appetite.
This study demonstrated that those participants who continued on <unk> experienced continued weight loss.
While those who switched to placebo started to regain weight.
These data reinforce our understanding that obesity is a complex chronic disease for which multiple treatment approaches, including lifestyle modification and effective medications are needed.
We believe there is appetite is well positioned to be one such treatment option.
Accordingly, we submitted an application for tours appetite for chronic weight management to the FDA during Q2.
The FDA granted this application priority review designation.
And we anticipate FDA action by year end.
Slide 18 shows select pipeline opportunities as of August 4th and Slide 19 shows potential key events for the year.
I've covered the major updates in diabetes, including the advancement of <unk> into phase III since our learning last earnings call.
Turning then to our neuroscience portfolio three weeks ago with the AIC meeting in Amsterdam, and simultaneously published in Jama, We were excited to share the detailed results from the Trailblazer <unk> two study highlighting.
Highlighting <unk> robust efficacy profile across a number of new analyses that reinforce our belief in the medicines ability to meaningfully slow the progression of Alzheimer's disease, especially in patients earlier in disease progression.
We cover the results in some detail during our AIC investor call. So I wont cover that again, except to note that we submitted to <unk> to the FDA and to the EMA for approval and we look forward to FDA action before the end of this year.
Shifting to oncology.
Launch progress continues with J, <unk> and mantle cell lymphoma, and we were pleased to have the detailed chronic lymphocytic leukemia results from the brewing Phase one two trial published in New England Journal in early July .
Following discussion with the FDA, we've now submitted an application for accelerated approval for <unk> in CLI patients previously treated with both a covalent PTK inhibitor in <unk> based on the results from the brewing Phase one two study.
We expect FDA action by year end.
Also during the quarter, we completed the regulatory submission in Japan for <unk> for patients with Mcl.
We continue to study <unk> in multiple phase III trials and look forward to the results from the brewing 321 trial in CLO, which we now expect to see before the end of this year and it has been added to our key events slide.
In other oncology developments at <unk> in June we presented new data from the <unk> monarch E trial in high risk early breast cancer.
For the first time, we showed data demonstrating the efficacy of the medicine in this setting is not compromised when patients undergo dose reductions.
We believe that the ability to manage presenting side effects, while preserving efficacy could be very important to ensuring that patients complete their two years of therapy.
This is an emerging part of presenting us differentiation in this class.
We're also very excited about last week's announcement regarding the randomized trial of <unk> in treatment naive ret fusion positive lung cancer as.
As we communicated in the press release. This randomized trial was declared successful on its primary endpoint of progression free survival. The first time any targeted therapy in lung cancer has ever shown superiority to a PD one plus chemotherapy regimen.
While we remain disappointed by the low levels of genomic profiling done at the time of lung cancer diagnosis. We're hopeful that these data will continue to advance the practice of genomic driven medicine.
We look forward to sharing the full results of the study at an upcoming medical meeting.
And our earlier stage oncology portfolio. The combination experiment of our <unk> inhibitor with <unk> continues to mature nicely.
And we're now working to initiate phase III trials in first line <unk> mutated lung cancer in the next six to nine months.
More broadly we're excited to see the overall progress of our oncology portfolio.
In addition to last week's <unk> announcements, we expect another seven randomized trial Readouts and four to six new first in human trials across small molecules and biologics in oncology over the next 12 months.
With the acquisition of <unk> oncology four years ago, we capitalize the change in the strategy and direction of oncology at Lilly.
And we're seeing the fruits of these efforts.
Finally in immunology, we have several updates related to mirror Chisholm at digestive disease week in May we presented new analyses from the phase III loosens, one and lucid two studies demonstrating that remission of key symptoms of ulcerative colitis, including bowel urgency was associated with significant improvement in quality of life assessment in adults with <unk>.
C.
In Q2, we launched <unk> map marketed as <unk> in Japan, as a treatment for adults with moderately to severe active UC.
Late May we received approval for <unk> in the EU and have subsequently launched <unk> in Germany and plan additional launches in the EU later this year.
In the U S. We've resubmitted our application to the FDA, we now expect regulatory action by the end of this year.
For <unk>, our IL 13, monoclonal antibody under regulatory review for atopic dermatitis, we presented a new secondary analysis at the revolutionizing atopic dermatitis conference in May.
This post hoc analysis demonstrated improvement or clearance of face or hand dermatitis in adult and adolescent patients treated with <unk>.
These are parts of the body that are highly visible and for which dermatitis can be particularly burdensome and stigmatizing.
We expect regulatory action for <unk> in both the U S and EU later this year.
Together with the Amaral, our development and commercialization partner in Europe , we look forward to potentially bringing this important medicine to patients who suffer from this chronic disease.
Looking earlier in our immunology pipeline. We are pleased in may to have the detailed results from our phase Iia study of <unk> in rheumatoid arthritis published in the New England Journal.
These data were first presented as a late breaking abstract at the American College of Rheumatology annual meeting in late 2022 and represent the first clinical evidence that is stimulating an endogenous PD one inhibitory pathway could be an effective approach to treat <unk> disease.
As you can see Q2 was another productive quarter for Lilly R&D with important progress in each of our therapeutic areas now.
Now I'll turn the call back to Dave for closing remarks. Thank you Dan before we go to Q&A, Let me briefly sum up our progress in the second quarter. This quarter saw an acceleration of revenue growth.
Our recently launched product portfolio gathers momentum.
Excluding COVID-19 antibodies and vaccines revenue, we grew 22% driven by <unk> and <unk>.
The quarter also saw a continuation of investment in our future growth.
And our manufacturing expansion in late stage medicines in early phase capabilities and in business development.
Notwithstanding these long term investments we continue to expect our revenue will grow more rapidly than our expense base in the coming years and see significant opportunity for margin expansion.
We also achieved meaningful advances in our near term pipeline with positive phase positive topline results detailed data disclosures and submission of <unk> for traditional approval to the FDA and EMA and completion of the <unk> appetite submission in chronic weight management alongside positive topline results from two more.
<unk> III trials for this amount program.
We also shared data from four mid stage clinical trials for FERC lupron or attach are tied and initiated a phase II trials for both assets.
Lastly, we announced several targeted business development moves intended to bolster our early and midstage portfolio and our R&D capabilities.
And we returned over $1 billion to shareholders via the dividend.
Now I'll turn the call 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. We will respond to one question per caller. So ask that you limit to one question per caller is we will end the call at 10 15, a M. If you have more than one question you can reenter the queue and we'll get to your question if time allows.
Paul Please provide the instructions for the Q&A session and then we're ready for the first caller.
Thank you at this time, we will be conducting a question and answer session.
If you have any questions. Please press star one on your phone at this time.
We ask that participants limit themselves to one question on today's call. If you do have a follow up question. Please rejoin the queue by pressing star one at anytime.
We also ask that while posing your question. Please pickup your handset after listening on speaker phone to provide optimal sound quality.
Please hold while we poll for questions.
The first question today is coming from Louise Chen from Cantor.
Please your line is live.
Hi, Thank you for taking my question just wanted to ask you about the Novo select study that came out this morning, what kind of read through do you see for the industry and do you think it will help improve reimbursement for obesity overweight tax. Thank you.
Thanks, Luis will go to Mike for that question on the recent select news.
Thanks Luis.
<unk>, probably would get a question on the select trial and thanks for starting off the call with that.
The select trial read out as we expected.
I think the results are great for the anti obesity medication class.
It should really support access for any payers, who are on the fence and whether they should add anti obesity medications are not.
I think importantly, it should turn the conversation on the benefits of weight loss or weight from ascetics and.
And more toward the health benefits of people living with obesity.
When you look overall there are three 236, the BC related health complications.
A few obesity increases the risk of type two diabetes by 243% coronary heart disease by 69% hypertension by 113% Dyslipidemia by 74%.
Overall cost of the BCP and complications of Comorbidities are massive.
<unk> $370 billion and direct medical costs over a trillion dollars and indirect annual costs in the U S.
People living with obesity or overweight drive two seven greater health care costs and normal weight individuals.
The global health stakeholders really needs to be moved beyond the debate and really move to action on the IOM class with tours hepatitis potential provide over 20% weight loss. It should provide great value for payers, we have a comprehensive real world evidence plan and clinical plan to demonstrate appetite value.
Including our MMO outcomes trial.
Based on the select trial results, we can't wait to see the results of three hepatitis MMO study, we do believe that additional weight loss will matter.
This is a fantastic day for people living with obesity now do I think most payers will.
<unk>, a oems overnight because the select trial I don't think so I think as I said earlier, those who were on the fence. This will push them over but I think it is an important milestone in our long term goal to get broad access for anti obesity medications.
Thank you Mike.
Paul next question.
Thank you. The next question is coming from Geoff Meacham from Bank of America, Jeff Your line is live.
Hey, guys. Thanks for the question I know that we're a year into the Majora launched I wanted to get a view of persistent rates.
The question is are you seeing drug holidays after weight loss troughs and I wasn't sure if there were.
Differences between diabetes and obesity indications at this point just with regard to the duration of use thank you.
Thanks, Jeff ill go back to Mike for that question on persistence rates Maduro.
Okay, Jeff. Thanks for your question of buy now we only market Mandara for type two diabetes. So the only end market real world persistency rates that we have.
Four mandara within the type two diabetes patients what.
What we do know is that people living with type two diabetes have had good experiences with <unk>.
In the first launch the first phase of launch before we've made savings card and experience supply.
The outages.
Diabetes patients, whose tumor Gerald did have better persistency than <unk>, which is important because <unk>. Historically has had the best compliance in the diabetes market. So we're confident in the in.
And the experiences that people, who use von <unk> type two diabetes have.
We're excited to see what that will be for people living with chronic weight management, when and if we get approved.
By the FDA.
Thanks, Mike Paul next question.
Thank you. The next question is coming from Tim Anderson from Wolfe Research Tim Your line is live.
Thank you.
So just going back to select.
A commonly held view is that positive results benefits every company in the category and that's our view as well but of course novo will be able to make the claim.
For quite some time that they are the only drug to have a proven cardiovascular benefit.
So could that actually give them a big commercial advantage in the marketplace on things like payer coverage that would actually be to Louise detriment. Thank you.
Thanks, Tim go back to Mike for that question a follow up on select.
No. It's a good question I don't think that would be the case, what we've seen is payers opt into the class not a particular drug. So I don't think that will give them differential impact.
Within payer access I think commercially typically health care professionals when they see results like this.
It helps to class more than any one individual product.
Thanks, Mike Paul next question.
The next question is coming from Kerry Holford from Bahrenburg carry your line is live.
Oh, hi, there thanks for taking my question.
Our guidance on Opex.
Any operating costs higher and at least in Nokia anticipated in Q2.
You are now guiding to spend more on SG&A.
Yeah.
I'm just interested to know more about what has changed between this cold yet to come.
To raise that opex.
Premium okay.
Can you elaborate on the key drivers of that.
<unk>.
Thanks, Gary for the question and yes, we will go to a not for that commentary on the Opex guide and additional context. Thanks.
Thanks, Gary for the question. So we have raised your right both SG&A guidance as well as R&D.
The SG&A increases are primarily as a result of continued investment in the upcoming launches we have yet this year.
We're seeing the opportunities we're excited to invest efficiently behind these opportunities and make them a reality for patients and for Lilly.
The R&D side, then provided a robust outline of the progress we've seen in our pipeline and there are really I would say three to four key drivers of that increase one is additional new studies that we've announced primarily in phase III and you've seen the broadening of the investments, we're making in our <unk> portfolio initiating multiple phase.
His III studies for both <unk>, and Richard true tide and announcing new studies.
Coupled with continued advancements we're seeing great success in our early stage pipeline.
We're investing behind that we're also seeing continued success in our enrollment rates for for currently for <unk>.
Phase III program. So that's continued to enroll well and then the three business development transactions. The inbounds that we've announced are now going to be incorporated in our second half R&D run rates. So all of these combined are the drivers of the increase this year. So they represent really a tremendous opportunity for continuing to invest.
<unk> and a very successful pipeline.
Thank you Paul next question.
Thank you. The next question is coming from Chris Schott from J P. Morgan Chris Your line is live.
Great. Thanks, so much for the question.
Just walk through expectations for Manganaro volumes and Asps as we move through <unk> and <unk> just given the change in the patient assistance program on June 30th as well as the North Carolina facility coming online I guess, specifically I was wondering did you.
<unk> scripts were now seeing largely reflect the change to the patient assistant program and then should we expect volumes from North Carolina to be a meaningful contributor to capacity this year or is that more 2024. Thank you.
It was close to multiple questions there, Chris, but let me hand over to Mike to provide expectations on <unk> volume.
And gross to net dynamics as we move into the second half given the RTP News and then also given the changes to the co pay program at the end of June Mike.
Chris Thanks for those questions.
Yes, we did make the change in the 'twenty.
$25 savings program did expire at the end of June 30, So anything that you see in <unk> is post that change.
And Youll see that volume of those individuals who were using an uncovered plan no longer in our trends.
We were very happy with what we saw with <unk> in the quarter as they grew nearly 60% in the quarter as we go forward.
Our manufacturing team is working on bringing on new capacity at North Carolina, and then a few more areas.
And as that production comes on and ramps up.
We'll see some benefit from.
That supply ultimately that will help build inventories up and help eliminate any spot outage that we see in the short term because we are seeing.
Unprecedented demand, we do still expect to see tight supply and some spot outages on manganaro.
Through the end of the year, but I think ultimately.
Is that that manufacturing capacity ramps up.
We will be out of the spot outages that we see in the next couple of months and quarters I think we'll still see tightening.
Thanks, Mike Paul next question.
Thank you. The next question is coming from Terence Flynn from Morgan Stanley <unk>. Your line is live.
Great. Thanks, so much for taking the question I was just wondering if you could provide any perspective on how you're thinking about the potential for a single brand for <unk> or a split brand ahead of the potential FDA action on the obesity indication. Thank you.
Thanks, Terence Michael hand that over to you for commentary on single brand versus multiple brands for <unk> appetite.
Yes. Thanks for the question, we're evaluating all alternatives and we will announce our decision at approval.
Thanks, Mike.
Next question Paul.
The next question is coming from Colin Bristow from UBS Colin Your line is live.
Hey, good morning, and congrats on the quarter.
I hope that sort of positive commentary regarding the commercial supply coming online in RTP.
As we think about 'twenty call how likely is it.
What are you seeing in terms of supply potentially capping the sales potential in 'twenty full and is the decision to move forward with the halls of multi dose pen in any way related to delays at the RCP side. Thank you.
Thanks, Colin I'm going to hand, not to talk a little bit about the RTP commercial supply and.
Supply dynamics in the near term Colin So let me first start with the end of your question on just to clarify RTP. So RTP is now live and producing for commercial purposes and its online in line with our expectations. So there are no delays, it's progressing as we had expected I'm incredibly proud of the work.
The manufacturing team has done to get us to this point.
As Mike alluded there'll be a gradual increase in available capacity coming out of that site. We've mentioned in the past. It's a large site with multiple lines that will come online gradually and provide more.
More product into the marketplace.
We think about 2024 I suggest we step back and look comprehensively at our manufacturing agenda and capacity plans. So RTP is one side. It's obviously of height interest just because of the proximal nature and Thats. The first one that's launch out of the <unk> and the number of sites. We are we have under construction in parallel.
We have been working on continuing to work to expand capacity in existing sites.
Working with partners and Cmos to supplement capacity you know our strategy is first and foremost to have.
Internal build but then we supplement externally as needed, but we're also progressing with our rapidly with our site in north the second site in North Carolina and Concord.
You'll recall, we've announced last year and that could potentially.
Go live in terms of production in the second half of 2024 again gradually so we will see some.
Relief of supply at the end of the towards the end of next year and then continuing to grow from there and as you know. This is these are not the only two nodes of capacity. We're also adding outside of <unk> and four <unk> API capacity in Ireland as well as two large sites and in Indiana. So we're expanding capacity broadly to support both the increase in portfolio.
But then the broader Lilly portfolio and managing a broad set of networks outside of Lilly So complex.
Manufacturing set of nodes that we're working towards we will comment on specifics around 2020 forward. When we provide guidance in terms of what you should expect in revenue.
But this is how you should think about the gradual increase in supply with both RTP.
Internal capacity elsewhere as well as CMO. The additional presentation is meant to provide options for patients and as we said, we'll start launching outside of the U S. With these presentations will which should provide additional capacity as well and as I stated earlier.
The deep manufacturing facilities in line already exist within Lilly for for example, the vial production we have those facilities, we don't need to construct new ones. So that provides us with the option to start with these.
As early as the end of this year and then going into next year.
Thank you Paul next question.
Thank you. The next question is coming from Steve Scala from Cowen Steve Your line is live.
Thanks, so much how should we think about the mace reduction powering and surmount MMO now that we have the select results surmount MMO likely won't be as robust given the population studied but would really consider a win something half of select.
20% mace reduction or would that be viewed as disappointing. Thank you.
Thanks, Steve I'll hand over to Dan for that.
Thanks, Steve for your provocative question here actually of course, we expect <unk> appetite to.
So a very important benefit I think on their most study there are several important differences as you're alluding to.
For the most part though they run in the opposite direction, as you're suggesting which would indicate a potential for an even larger effect size for surmount them out. The most important difference is the drug itself I remember that there is appetite is G. L. P. G IP co agonist and <unk> has some very significant benefits on.
Weight loss and metabolic health overall.
Seen that in a number of different trials and confirm that with some interesting experiments on <unk> monotherapy as well so given the properties of this drug given the level of weight loss, we have seen in previous trials given the important effects on blood pressure on lipid profiles and on other biomarkers that indicate lower car.
To your vascular risk.
Should be very confident in our large effect size coming out of the MMO study.
There are some differences in the population study includes both the primary and secondary.
Cardiovascular risk population.
We also have a different primary endpoint although of course, we have the three point base as a secondary endpoint our primary includes.
Two other events related to cardiovascular risk.
Other than that I would say that many of the patient characteristics or are going to be quite similar. Our study is obviously a much earlier and as an event driven study it's going to take some time to read out I think you were also asking about.
What would be considered a victory here and I think we'll just sort of wait and see the data in.
Understand it as it comes but no reason to expect anything less than what we're seeing today.
Thanks, Dan and thanks, Steve for the question Paul next one.
Next question is coming from Nomura robots.
<unk> Evercore.
<unk> life.
Hi, guys. Thanks for taking my question I wanted to zoom in on awful blip, Ron and specifically on the case of liver enzymes above five acts in a case above tenex as.
As well as the treatment emerging compatibility disorders, I know the slides mentioned safety with similar to other Incrementals and my question is is your opinion on liver safety driven by the fact that these liver enzymes self resolved or is it some preclinical data like the GSS attic formation et cetera.
Thanks, Thanks, Newmar for the question I'll hand over to Dan for that question on offer clip Ron liver dynamics, yes. Thanks for the question of course, there has been more attention on liver safety far for clip Ron following the.
Competitor announcements from Pfizer on one of their two oral <unk>. So we don't see any read through from that.
But of course.
We've looked very carefully at liver safety.
Maybe just starting at a high level. If you look at the supplementary data from the journal publication or you can see in obese population that.
In terms of group averages there is actually an improvement on on liver enzymes.
With treatment of forklift, Brian Thats not surprising.
We know that this disease obesity is characterized in many patients by excess liver fat, which can cause inflammation and liver abnormalities in when you reverse that youll see an improvement in liver function of course when people come off the drug that they could get fat in their liver again in liver enzymes could go up.
What we saw in this trial, we're a couple of patients scattered across arms, including placebo.
With excursions in liver enzymes as you point out.
I think there was one patient with a bit of a higher excursion in liver enzymes on for <unk>.
That.
Who returned to normal levels, while maintaining on therapy.
That's generally not a pattern that we see in drugs that cause liver injury.
But surely.
In phase III, we will keep an eye open for all possible safety consequences I think ive frequently caution investors on all of our molecules that phase III is really the place where you can get surprised by any new safety findings. So we'll be watching liver safety closely but not with any particularly heightened.
Versus other adverse events that will also be watching carefully this is a new molecule.
This is the first time that we're exposing large large numbers of patients here at for many years.
Many many months I should say and.
We'll be monitoring safety carefully.
Thanks, Dan All next question.
Thank you. The next question is coming from David Risinger from Leerink Partners. David Your line is live.
Yes, thanks very much.
So my question is for Dan. Please how are you thinking about whether future orthogonal mechanism weight loss drugs can deliver the cardiovascular outcomes of <unk> <unk>.
Even if they match weight loss on a pound for pound basis. Thank you.
Dan Yes, thanks, David its a very good question of course.
Particularly today.
We think we understand how the biomarkers from Incretin therapy.
Translate into cardiovascular benefits some of those biomarkers should.
Should be translatable to other mechanism, but depending on how orthogonal those other mechanisms are there could still be some uncertainty.
One I think important to understanding though is that obesity itself.
Including I think particularly where the fad is deposited in the body. So for example, visceral fat, particularly.
Is.
It's to adverse health outcomes, including adverse cardiovascular outcomes and therefore reversing that.
Should provide.
Cardiovascular benefits across mechanisms, but obviously when we get to very I'm talking on mechanisms. Each each one will need its own data to demonstrate that.
Recently, our focus has been on on mechanisms that could stack on top of increment therapy to give additional benefits in which case there could be.
Good read through from the <unk>.
Hi, Charles.
Thanks, David.
Thanks, Dan next question Paul.
Thank you. The next question is coming from Chris <unk> from Goldman Sachs. Chris Your line is live.
Great. Thank you very much truly city and <unk> can you talk a little bit about the dynamics there.
In particular are you seeing switching.
Just trying to get a sense for how you're seeing the supply and then the revenue dynamic.
Thanks, Chris I'll hand over to Mike to talk about <unk>, and any switching dynamics or observations we have Mike.
Yes, no. Good question, obviously, something we've taken a look at it since the launch really haven't seen any trend breaks.
What we've seen and how much of of Felicity.
<unk> converted over to Anja.
<unk>, we see about 13% to 14% of patients.
Coming on to Manganaro come on from <unk>, So really no changes from what we've seen at launch overall.
Goal is.
To grow the entire.
Building <unk> franchise, and we did that well in Q2 by growing revenue by over 58%. So we're pleased where we're at with the with our Italy and Cogent pipeline our portfolio and are excited to grow further in quarters to come.
Thanks, Mike Paul next question.
The next question is coming from Mohit Bansal from Wells Fargo.
Your line is live.
Great. Thank you for taking my question and congrats I have a comment on a question comment from my associate that leading you used to have two caused spun from window in lymphoma everything guys.
No.
My question is.
The question is basically.
How should we think about the long term supply now that the success of CV trial would likely spud more demand I know in the past you've talked about double of the illicit D. Eventually, but how should we think about the eventual supply all for wound genre until you see combined.
Thanks, Mohit will take your comment under advisement, It's a fair point to your question on long term supply I'll, maybe hand back to not to talk a little bit more about manufacturing dynamics and plans.
So mohit I would.
Echo a few of the things I said earlier.
I outlined the expansion, we are going to be seen in our manufacturing footprint across our portfolio. So it's not just to support the increase in portfolio.
Certainly with the RTP site in North Carolina in Concorde or both for to support our increasing portfolio. There are both large site. We did not provide the specific quantities, but we said that once RTP comes online.
The end of the year, we expect to double capacity from where we were last year. So just use that kind of as a reference point.
<unk> as you know both utilize the same auto injector. So they operate they run on the same platform and these lines are interchangeable, which allows us to manage production plans across our sites based on where we want or need to produce a product or market demand et cetera.
So we're going to be expanding our internal footprint too to support the increase in portfolio as well as continuing to leverage external partners to supplement that capacity.
Thanks, a lot.
Paul next question. Thank.
Thank you. The next question is coming from <unk> <unk> from BMO.
Hi, guys.
Hi, guys. Thank you so much for taking the question I'm going to ask one on demand and map shake it up a little bit so when submitting for dynamic full approval are there any nuances that you need to discuss with the agency. Following the Cri earlier this year or does the FDA have everything that they need based on the data that we saw last month. Thank you so much.
Thank you so much for the question on Banana Mab and just to refresh everyone's memory. We had submitted accelerated approval submission, which was designated as a priority review we did receive a serial CRA. All just based really on wanting more exposure. So it's a pretty simple request.
Our resubmission with travelers are all to the phase III study would certainly fulfilled and your expectations on the CRM and so that's good news I think going through the accelerated approval. The FDA had the chance to review all of the aspects of the submission preclinical manufacturing and others. So I would say we feel pretty confident at this point about the quality of our submission.
And they've accepted that there were viewing it for traditional approval. So as we've said we expect action by the end of the year.
Thank you Anne Paul next question.
The next question is coming from Robin Karnofsky from true of Securities Robin Your line is live.
Hi, Thank you I guess I have a big picture question. So your payer discussions right now ahead of approval for weight loss carbon zero.
Those payers that are not willing to cover not understand.
What do they need to see and do you expect the cadence of supply versus access.
In five years, he has a sense of what that looks like and what they really need to see.
Thanks, Robyn I'll hand over to Mike It sounds like the question is more around kind of payer discussions longer term and for those that are more maybe reticent, what what might eventually move some of these payers Mike do you want to comment.
Yes, I think Theres a couple of dynamics that will play out I mean first of all.
We need to build a long term.
Clinical and real world evidence to support payers decisions and we're doing that.
We are spending literally billions of dollars and clinical evidence to show.
Got.
Towards appetite in our.
Our pipeline can offer patients who have the BZ and payors with regards to medical cost savings.
We're confident in our modeling that payers will see medical costs offset with with <unk> appetite and so I think that'll be an important piece of it.
I think the other dynamic as you know a lot of times, we focus on.
On the clinical story.
But there is something beyond the economic analysis that I think will play a role.
If you if you go and really discuss.
With people, who live with obesity.
Improving their health as a top personal goal.
When we look at the data 82% of people limit of each of the experience physical functioning.
Reductions, while 77% experience reduce mental and emotional well being.
Patient choosing appetite showed significant improvements in physical mental and emotional well being and this from one trial.
And it's clear from the patent tests.
Testimonies that we had in our <unk> clinical trials that <unk> can meaningfully improve the lives of people with obesity.
The massive entrants that we see in obesity medications is really driven by the fundamental desire for people limits in BC to improve their health.
People living with the BCD should have allowed and powerful voice in this debate.
That's going to be a big component of payer decision, whether that be an employer or be state or federal government and so I think what you're going to see us over time.
C data like select data data like MMO or other clinical trials.
Continuing to build the case on economic side for these while youre going to see the voice of people living with <unk>, who really want a better life more hope for the future we will be demanding access for these agents and I think both overtime, we will continue to build access across.
<unk> the U S as well as globally.
Thank you Mike Paul next question.
The next question is coming from Andrew Baum from Citi. Andrew Your line is live.
Thank you no majority non to nanometer question coming up.
We estimate there's about $2 billion it depicts and in the U S from adults with atopic dermatitis.
When you are thinking about the launch of <unk> map, given the relatively little clinical differentiation and therefore, the need to place this space at <unk>.
Just comment on how you're thinking about the launch I'm assuming.
Or does it take to semi similar to majority will stick to.
The obvious thing would be to launch a very very large <unk> program in order to secure former access tapping into that high deductible patient population just interested in your thoughts there. Please.
Thanks, Andrew for diversifying the question said I'll hand over to Patrick <unk> President of Lilly immunology to weigh in on liver because of map and how we're thinking about.
Positioning Patrick.
Well. Thank you very much for the question on Olympic asked him up.
Based upon the data we have seen.
It's not the head to head I put extremely encouraged by the maintenance data, having more of an 80% of patients achieving skin clearance at week 16, and maintaining it at week 52.
We believe that the reputation to launch your thoughts now in biologics that actually has less frequent dosing than to pick them. So that's a big differentiator and.
And targeting the most random and cytokine for atopic dermatitis is being <unk> with a slow operates in high potency put them on access perspective.
We see that atopic dermatitis market.
Market currently significantly and we know that patients are looking forward to auctions yeah.
We are believing about pbms are willing to enter into discussions to enable rapid access of an empty case them up and of course here. We can capitalize on the strong footprint, we haven't thought mythology, and the portfolio. We got in cabin immunology and our strategy will entirely focused on value and differentiation and we are all of them.
<unk> seen and what it brings to the market based on atopic dermatitis.
Thank you Patrick next question Paul.
Thank you. The next question is coming from Carter Gould from Barclays Carter Your line is live.
Great. Good morning, Thanks for taking the questions I appreciate all the color on the manufacturing side at the same time not a lot of those sites you talked about.
And your plans to start the year. So I guess my question is as we think about Derisking of orphan micron the move to phase III has that in any way changed your sort of expected build out for your longer term manufacturing needs and really on the peptide side of the increments side. Thank you.
Thanks Carter Great question.
Dave wants to maybe jump in on this one yeah sure I'll jump in I mean, just as we think about this over the long term first of all versus where we started the year. There is one change we're talking about today, which are these new presentation that will be launching beginning even this year and into next year. It's important for people to know that the constraint. We experienced now is in the printer auto injectors.
So the green move outside of that using our.
Multi dose pen that's currently developed for insulin and where Redeveloped thing for just update or certainly the vial, which is.
Quite accessible in high volume systems available, we'll be able to make more than we had planned previously just to be clear that's on top of sort of an on schedule expansion at RTP and the other North Carolina site as well as other internal nodes of capacity. So I think thats good news for Monteiro.
That all said for the prior questions here will that be enough to meet demand I'm not so sure. So while the volume is moving up into the right. We we need more in dos like today's news will only expand the opportunity so.
Youre right to point out that other molecules.
Or forego upon in particular could play a big role in meeting global demand for obesity treatment and all the related complications because it's a completely different.
Technology and that its using oral solid and.
And theres quite a bit of capacity around the globe for that program funds are complicated molecule to make it's got many steps, but it puts us in a using a different set of assets.
Processes than the current ones we're using.
So that's an important program, particularly for global access and availability over the long term.
Just to remember as well.
Two years ago, we were probably treating 10 million people globally within Croutons and the <unk> is estimating there'll be 1 billion people with obesity and related conditions by 2050 I believe so.
A long way away from getting all the way to that we need things like <unk> to work for us to meet the needs of all the patients in the world.
Thanks, Dave.
Paul next question.
The next question is coming from Trung Nguyen from Credit Suisse. Your line is live.
Thanks for squeezing me in guys just one on Isle right. So one of the components that's being implemented in part is the part D redesign that starts impacting in 'twenty four and then there's going to be some more meaningful changes in 2005.
I'll now calculations, we think it should benefit products under $25000 a year like <unk> one for Nick.
Negative for drugs priced above $25000 a year.
So given the mix of products you have in your portfolio at various different price points direction.
How do you see that impacting earnings in the next few years.
Okay.
Thanks, Ron.
On a handgun not for that comment for that response in the IRI and potential impacts.
So if we I think you were referring to the part D redesign associated with removing the coverage gap.
But also mentioned that negotiation.
Wouldn't necessarily look at what the dollar amount is but rather youre right theyre going to be varying degrees of impact on product.
Based on how quickly they move through the catastrophic phase. So just to give an example from Lilly if youre thinking about an oncology product where patients get to the catastrophic phase very quickly.
Probably an additional cost assist with that with that for us moving from the previous 70% coverage gap to the 10% participation in the initial phase and then 20% in the catastrophic phase.
For other indications that might be the opposite so there is a mix there, but then important to think about the fact that given that patients are now going to have a limit of out of pocket when they get to the pharmacy counter hopefully that should improve adherence and compliance to medications, which should drive obviously better health outcomes for these patients, but also as we're thinking about.
Medication adherence, so theres going to be some pushes and pulls.
Of that part of the IRI.
The more significant ones that I that I would refer to as the so called negotiation that we have as part of that.
That's going to come later in 2026, and 2028 with the first cohort of products to be announced this year I think that could have quite a meaningful impact on the drugs that are going to be negotiating terms of.
The price discounts that.
The government is going to.
Arrive it as part of that process.
Thanks, a lot.
I think we're through the main queue, but I know a few people have reentered and would it be true to our word we only got about a minute left so maybe just one last question Paul.
In the Q and then we'll wrap up.
Certainly the last question is a follow up from Kerry Holford from Bahrenburg Karen Your line is live.
Thanks.
Probably yes.
Just checking to see whether you can tell.
That is one propulsion and used truck sales now represent.
Ross Campbell.
Paul Thank you.
We've now seen the choline that plenty of data at SK.
<unk>, how you're thinking about competition coming into that space.
Thanks, Carrie all right I'm going to hand over to Jake for that last question on <unk> and the proportion of sales in early breast versus metastatic and maybe some commentary on Natalie Jake.
Yes, thanks for the question.
So I'll answer a bit.
A portion of it sounds really on new patient starts and <unk> sort of a lagging indicator of course that takes into account different durations of therapy, but what we're seeing on the on the <unk> side is about call. It between 30% and 45% of prescriptions are in early breast cancer versus metastatic and obviously that number bounces around sort of week to week.
Month to month.
So that's more or less in line with what we expected.
Hum.
That's what's happening there on the on the competitive dynamics in the adjuvant setting and now that we've seen the Natalie data from <unk> and <unk>, which by the way were not really surprising to us I think when you take a step back and this is sort of both our opinion as well as what we've heard from thought leaders, we just really don't see.
What the <unk> three year regimen is giving to patients to justify the additional year of therapy relative to the two year regimen that we've offered patients with for us anyhow.
Obviously cross trial comparison, notwithstanding if anything do you see a marginally larger effect size with the two year presenting your regimen in high risk patients. Obviously, the Natalie studies started studied a larger population the node negative patients are at lower risk and frankly, not part of our indication. We've been study those patients I think.
To the extent that.
Alex I want to use because golly, there that's not really our business maybe it could be beneficial for those patients I can't really say.
I think the other thing and Dan mentioned this in the prepared remarks.
There's been a lot of talk in the past of course about the differences in the Tolerability of these two agents and I think one of the things that perhaps was somewhat surprising in the data we saw at <unk> with the high rate of discontinuation for toxicity of <unk>.
Actually with many patients still on therapy. So that number of course will go up with more follow up. So I think these two drugs, while they have different tolerability profiles in terms of what the side effects are they actually have somewhat similar overall tolerance profiles and importantly, the <unk> tolerability can actually be managed.
Those reductions without sacrificing efficacy, it's not clear that the same is true for scholarly given the nature of those adverse events. So we continue to feel really good about what presented can offer to patients in its competitive profile in the marketplace.
And that's been validated in talks with prescribing physicians. So we continue to feel good and and we just got to make sure that all the patients who can benefit from the medicine.
No that it's out there for them. Thanks for the question.
Thanks Jay.
Great well, we appreciate your participation in todays earnings call and your interest in the company. It's been a very productive first half of the year for Lilly and we look forward to continuing our momentum into the second half.
Again for dialing in and as always please follow up with the IR team. If you have questions. We have not addressed on today's call have a great day.
Thank you ladies and gentlemen, this does conclude our conference for today at this conference will be made available for replay beginning at one P. M. Today running through August 21 at Midnight you may access the replay system at anytime by dialing 803 three to 6854.
The access code two 1095 two.
International Dialers can call at 97 three of 5280005 again those numbers are 833 to 68549.
90, 735280005 with the access code 213 hundred 95 two.
You for your participation you may now disconnect your lines.
Yes.
[music].
[music].
[music].