Eli Lilly and Company Q2 2022 Earnings Report

Eli Lilly and Company EPS Results

• Actual EPS: $1.25
• Consensus EPS: $1.80
• Beat/Miss: Missed by -$0.55
• One Year Ago EPS: $1.87

Eli Lilly and Company Revenue Results

• Actual Revenue: $6.49 billion
• Expected Revenue: $6.85 billion
• Beat/Miss: Missed by -$360.58 million
• YoY Revenue Growth: -3.70%

Eli Lilly and Company Announcement Details

• Quarter: Q2 2022
• Date: 8/4/2022
• Time: Before Market Opens

Eli Lilly and Company (NYSE:LLY) is a US-based multinational pharmaceutical company. It is the 12th largest pharmaceutical company by revenue and has offices in 16 countries. Its medicines are sold in at least 125 countries including its 8 blockbuster drugs. The company is a member of the S&P 500 and S&P 100 indices, it brought in roughly $5.5 billion in revenue for 2021 and employs more than 35,000 people across its network of research and production facilities.

Eli Lilly and Company was founded in 1876 by Colonel Eli Lilly. The colonel, a veteran of the Civil War, had recently dissolved an unsatisfactory partnership and set on his own to produce and develop medicinal chemicals. Colonel Lilly remained as president until his death in 1898. His charge to his family, company and coworkers was to “take what you find here and make it better and better”. The company is well-known for many drugs, including the first mass-marketing of quinine to treat malaria.

The company brought in $4,470 in its first year and saw that figure grow 10X over the next 3. Among the many innovations during this time period is the addition of gelation coatings for pills which helped set the company up for rapid expansion. The company was incorporated in 1881 as Eli Lilly and Company issuing stock to family and friends. The 1900s brought about more change for the company, change in the form of expansion which included international markets.

Advancements during the war years included increases in efficiency due to increased automation and the development of precision technologies. Among the technologies was pill manufacturing which included injecting medicines directly into a gelation capsule. This method allowed for more exact dosing, setting the standard for modern production. The company produced capsules for itself and sold excess capacity to competitors. Other major advancements include fruit flavorings in medicine, straight-line manufacturing and a method of blueprinting manufacturing tickets to prevent errors.

The modern period saw the company grow and discover new, world-class pharmaceuticals. Today, the company is engaged in the discovery, development and marketing of human pharmaceuticals. It offers a wide range of treatments, including Prozac but is perhaps most noteworthy for its work with insulin. The company is the first to mass produce insulin and has made numerous advances in treating diabetes in the time since. While other drugs are more widely known, its diabetic drugs Basaglar, Jardience, Trulicity, Humalog and Humulin are its top-sellers and contribute the bulk of revenue and cash flow.

Along with Diabetic research, the company also focuses on Alzheimer's, Oncology, Immunology, Obesity and Pain care. At the end of 2022, the company pipeline had 23 compounds in Phase 3 clinical trials and 1 in review. There were another 18 in Phase 2 trials and more than 2 dozen in Phase 1 trials. The average cost to discover a new drug was running at $2.6 billion with a 10-year discovery-to-patient timeline.

Eli Lilly and Company Q2 2022 Earnings Call Transcript

Presentation

[Operator]

And ladies and gentlemen, thank you for standing by. Welcome to the Lilly Q2 2022 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to your host, Kevin Hern, Vice President of Investor Relations. Please go ahead.

[Kevin Hern, Vice President of Investor Relations at Eli Lilly and Company]

Thank you. Good morning, everyone, and thank you for joining us for Eli Lilly and Company's Q2 2022 Earnings Call. Apologies for the hour delay. We had some technical issues on the AT&T side. So thanks for your patience. I'm Kevin Hern, Vice President of Investor Relations. Joining me on today's call are Dave Ricks, Lilly's Chair and CEO; Anat Ashkenazi, Chief Financial Officer; Dr. Dan Skovronsky, Chief Scientific and Medical Officer; Anne White, President of Lilly Neuroscience; Ilya Yuffa, President of Lilly International; Jake Van Naarden, CEO of Loxo at Lilly; Mike Mason, President of Lilly Diabetes; and Patrik Jonsson, President of Lilly Immunology and Lilly USA.

We're also joined by Mike Sprengnether, Kento Ueha and Lauren Zierke of the Investor Relations team; as well as Joe Fletcher, who will be taking over leadership of the IR team this month. During this conference call, we anticipate making projections and forward-looking statements based on our current expectations. Our actual results could differ materially due to several factors, including those listed on slide three. Additional information concerning factors that could cause actual results to differ materially is contained in our latest Form 10-K and subsequent Forms 10-Q and 8-K filed with the Securities and Exchange Commission. The information we provide about our products and pipeline is for the benefit of the investment community.

It is not intended to be promotional and is not sufficient for prescribing decisions. As we transition to our prepared remarks, please note that our commentary will focus on non-GAAP financial measures. Now I'll turn the call over to Dave.

[David A. Ricks, Chair and Chief Executive Officer at Eli Lilly and Company]

Thanks a lot, Kevin. In Q2, we achieved a number of impactful pipeline milestones, including approval and launch of Mounjaro in the U.S., the FDA submission and acceptance of donanemab as well as pirtobrutinib and positive top line results for lebrikizumab and EU and Japan submissions for mirikizumab. This pipeline progress underscores the breadth and depth of our exciting long-term outlook. Perhaps the headline story for Lilly this second quarter was the launch of Mounjaro in the U.S., where initial uptake has been strong. We're hearing a great deal of enthusiasm from the field, and we're excited about the potential for this new medicine to provide A1C and weight loss benefits to adults living with type two diabetes.

We remain focused on gaining broad open access for Mounjaro and expect the full impact of this medicine for patients and our business to be realized over time as that access is achieved. Turning to Q2 financial results and progress on our strategic deliverables, we saw relatively flat top line performance in constant currency as strong volume-driven growth for key products, like Verzenio, Jardiance and Trulicity, was offset by lower prices as well as for Alimta's patent expiry in key markets around the world and last year's sale of Cialis rights in China. Volume for this quarter grew a robust 10%. When excluding revenue from Alimta, the sale of Cialis rights in China and COVID-19 antibodies, revenue grew 6% compared to Q2 2021.

In Q2, our newer medicines contributed 18% to volume growth and now account for 67% of our core business revenue, which we believe, together with our robust pipeline, is the most important indicator of the strength and durability of our growth outlook. Our non-GAAP gross margin was 79.8% in Q2, an increase of approximately 50 basis points compared to the prior year. Our non-GAAP operating margin was 20.5%, which includes a negative impact of approximately 680 basis points attributed to acquired in-process R&D and development milestone charges. At our investment community meeting in December, we outlined five potential new medicines that could launch over the next two years, which could serve as catalysts to driving top-tier growth through the decade.

There have been important pipeline development since our Q1 earnings call for all 5, including the U.S. approval and launch of Mounjaro in type two diabetes and a positive CHMP opinion in the European Union; FDA acceptance and Priority Review designation for donanemab in early symptomatic Alzheimer's disease; FDA acceptance and Priority Review designation for pirtobrutinib in mantle cell lymphoma, for patients previously treated with a BTK inhibitor; submissions for mirikizumab in ulcerative colitis in the EU and in Japan; positive top line 52-week data for lebrikizumab in moderate to severe atopic dermatitis. And we also announced U.S., EU and Japan regulatory approval for Olumiant in alopecia areata.

Last month, we announced plans for a $2.1 billion investment in two new manufacturing sites here in Indiana to support increasing demand for existing products as well as demand for potential new medicines in our pipeline. This announcement followed Lilly's recent investments in new facilities in Massachusetts, North Carolina and Ireland and will further expand Lilly's manufacturing network for active ingredients and new therapeutic modalities, such as genetic medicines. These investments underscore our confidence in the growth of our portfolio in the company. Finally, we distributed nearly $900 million in dividends to our shareholders in Q2.

On slide five, you'll see a list of key events since our Q1 earnings call, including several important regulatory clinical and COVID-19 antibody updates. As previously announced in Q2, we entered into an agreement with the U.S. government to supply 150,000 doses of bebtelovimab for approximately $275 million in an ongoing effort to provide COVID-19 treatment options for patients. Doses of bebtelovimab valued at approximately $130 million were shipped in Q2, and the remainder of that order will ship in Q3. Today, we are announcing that in collaboration with the U.S. government, we intend to begin making bebtelovimab available for purchase by states, hospitals and certain other providers through a sole distributor agreement.

This will happen later this month, which is prior to the anticipated depletion of the U.S. government's currently available supply. As we move from large ad hoc federal government purchases, the sale and distribution of COVID-19 antibodies to a broader set of purchasers, we will now integrate estimated sales into our forward guidance. As we have said previously, we don't see COVID-19 antibodies as a major long-term driver of growth for the company. Nevertheless, we will continue to do our part where we can to help fight the COVID-19 pandemic with the last monoclonal antibody treatment standing that neutralizes against the Omicron variant. And now, I'll turn the call over to Anat for a more detailed review of our Q2 results.

[Anat Ashkenazi, Senior Vice President and Chief Financial Officer at Eli Lilly and Company]

Thanks, Dave. Slide six summarizes... [Technical Issues]

[David A. Ricks, Chair and Chief Executive Officer at Eli Lilly and Company]

Just continue, Anat, and we'll see what's happening.

[Anat Ashkenazi, Senior Vice President and Chief Financial Officer at Eli Lilly and Company]

Slide six summarizes financial performance in the second quarter of 2022. I'll focus my comments on non-GAAP performance. We had a few notable items impacting the year-over-year financial comparison. Foreign exchange rates had roughly 300 basis point impact on revenue this quarter as we saw Q2 revenue decline 4% or 1% on a constant currency basis. In Q2 of 2021, we sold our rights to Cialis in China, resulted in $170 million of onetime revenue impact. And this quarter, we also saw the full impact of the loss of exclusivity for Alimta in Europe and Japan and have started to see the impact of multiple generic entrants in the U.S. When excluding revenue... [Technical Issues] Hopefully, everyone on the call can hear us. [Technical Issues]

[David A. Ricks, Chair and Chief Executive Officer at Eli Lilly and Company]

Go ahead.

[Anat Ashkenazi, Senior Vice President and Chief Financial Officer at Eli Lilly and Company]

Okay. [Technical Issues] I'll continue and hopefully everyone can hear us. [Technical Issues] When excluding revenue from Alimta, the sales of Cialis rights in China in Q2 of last year and COVID antibodies... [Technical Issues] Okay. Hopefully, you heard. I will repeat my last sentence. So when excluding revenue from Alimta, the sales of Cialis rights in China in Q2 of last year and COVID antibodies, total revenue grew 6%, highlighting the solid momentum for our core business in the second quarter. We expect that this growth rate will accelerate in the second half of the year. Moving on to gross margin as a percent of revenue, increased 50 basis points to 79.8% in Q2 of 2022.

This increase in gross margin was primarily driven by product mix and the favorable effect of foreign exchange rates on international inventory sold, partially offset by lower realized prices. Increase in logistics and manufacturing costs due to inflation had a modest negative impact on gross margin in Q2. Total operating expenses increased 14% this quarter which, as discussed on our Q1 earnings call, are now inclusive of acquired in-process R&D and development milestone charges following guidance from the SEC. Acquired IPR&D and development milestone charges represented nearly 1,200 basis points of the Q2 OpEx growth.

Marketing, selling and administrative expenses decreased 4% driven mostly by the favorable impact of foreign exchange rates. R&D expenses increased 8% driven by higher development expenses for late-stage assets, partially offset by lower development expenses for COVID-19 antibodies. This quarter, we recognized acquired IPR&D and development milestone charges of $440 million or $0.46 of EPS primarily related to a charge associated with the buyout of substantially all future obligations that were contingent upon the development, regulatory and commercial success of our mutant-selective PI3K alpha inhibitor.

In Q2 2021, acquired IPR&D and development milestone charges were $43 million or $0.04 of EPS. Operating income decreased 32% in Q2 primarily due to higher acquired IPR&D and development milestone charges. Operating income as a percent of revenue was 20.5%, which includes the negative impact of approximately 680 basis points attributed to these charges. Other income and expense was expense of approximately $13 million this quarter compared with income of $5 million in Q2 of 2021. Our Q2 effective tax rate was 14.2%, a decrease of 10 basis points compared to the same period in 2021. This decrease was driven by favorable tax impacts related to the implementation of a provision of the 2017 Tax Act related to the capitalization of R&D expenses, offset by the tax impact of nondeductible development milestone.

At the bottom line, earnings per share declined 32% this quarter, to $1.25 per share. The most significant driver of the year-over-year decline was the impact of acquired IPR&D and development milestone charges, which had $0.46 negative impact in Q2 of this year compared to $0.04 in Q2 of last year. On Slide 8, we quantify the effect of price, rate and volume on revenue growth. This quarter, U.S. revenue grew 6%. Excluding revenue from Alimta, which declined significantly due to broad generic entry in May and COVID-19 antibodies, revenue grew 11% in the U.S. This volume-driven growth was led by Trulicity, Verzenio and Jardiance.

We experienced a net price decline of 8% for Q2 driven by lower realized prices for Humalog, Alimta and Forteo due to higher rebated segments making slightly larger portion of the business, higher contracted rates and the list price reduction for Insulin Lispro injection this year. Lower realized prices for Taltz were also a driver due to the impact of changes to estimates for rebates and discounts, largely driven by favorable adjustment in the base period and to a lesser extent, continued pull-through of existing access. For the first half of 2022, net price decline in the U.S. was 4%, and we continue to expect mid-single-digit net price decline for the full year.

Moving to Europe. Revenue in Q2 grew 1% in constant currency. Excluding revenue from Alimta, which lost exclusivity in June of 2021, revenue grew 12% in constant currency driven primarily by volume growth for Trulicity, Jardiance, Taltz and Verzenio. For Japan, Q2 revenue decreased 22% in constant currency as our business there continues to be negatively affected by significant declines in off-patent products, primarily Cymbalta and Alimta, which both faced generic entry beginning June 2021. Key growth products represented 69% of total revenue in Japan and grew 11% in Q2 on a constant currency basis. We continue to expect a return to growth in Japan beginning in 2023.

In China, revenue declined 32% in constant currency driven by the impact of the NRDL formulary access, resulting in lower realized prices, partially offset by increased volume for certain newer products, including Verzenio, Tyvyt, Trulicity and Taltz. We also experienced a price decline for Humalog due to the impact of volume-based procurement. We expect improved access to continue to drive future volume growth, more than offsetting the price decline over time. With the latest COVID-19 outbreaks in China and to subsequent protective measures intended to control the spread of the virus, we have seen lower volume than we otherwise would have expected in Q2, particularly for infused products. For Tyvyt, we are also seeing the impact of increased competitive pressures.

Revenue in the rest of the world increased 3% in constant currency primarily driven by increased sales of key growth products. For the full year, we continue to expect mid-single-digit net price decline in each of the U.S., EU and Japan and a double-digit price decline in China, resulting in a worldwide net price decline in the high single digits. As shown on Slide 9, our key growth products continue to drive robust worldwide volume growth. These products drove 18 percentage point of volume growth this quarter and continue to underpin our overall performance and outlook. Slide 10 further highlights the contribution of our key growth products.

This quarter, these brands grew 20% or nearly 24% in constant currency, generating $4.3 billion in sales and making up 67% of our core business revenue. We continue to see further growth opportunities for these products. For example, we're extremely pleased to see the strong trajectory of Verzenio driven by the edge of an indication, including recent acceleration in new-to-brand share of market. In the injectable incretin market, we see significant opportunity for further class growth as these medicines currently make up only 25% of total prescription in the U.S. branded diabetes market and have the prospect of expanding the market through the earlier usage for glucose control and weight loss in the treatment of type two diabetes.

Trulicity is experiencing accelerated demand in many international markets due to market growth and the limited availability of competitor GLP in select markets. We are working to meet this increased demand, while also implementing actions in select countries to manage growth and minimize patient impact. This outlook for Trulicity is included in our guidance. Lilly is thrilled to have both Trulicity, which has the longest length of therapy of any GLP-1, and Mounjaro, which could offer a step-change in innovation for the treatment of type two diabetes and other metabolic indications as options in this class of medicine. Given the excitement and significant interest with the FDA approval of Mounjaro for type two diabetes, I would like to briefly provide an update on what we're seeing and hearing in terms of early launch.

After U.S. approval in mid-May, our full-scale launch began in mid-June. Our commercial team is prepared, energized and observing a high level of engagement across channels as we roll out a patient-centric approach to launching Mounjaro for patients with type two diabetes. The financial results you see from Mounjaro today reflect significant utilization of samples, where accepted, and co-pay assistance program to get patients off to a strong start. Peer negotiations are progressing as expected, and we're taking a disciplined approach to establish Mounjaro's access and are focused on delivering the same broad open access which we achieved for Trulicity.

As we remain focused on strong execution, we're encouraged by the prescription trends from Mounjaro, including the most recent IQVIA data, showing over 20% share of market for new-to-brand prescriptions in the type two diabetes injectable incretin class. We are also pleased to see that total Lilly new-to-brand share in the type two diabetes injectable incretin class has grown nearly 12 percentage points since the launch of Mounjaro. Given the heavy utilization of co-pay cards as we build out access for Mounjaro, prescription trends will likely provide a more accurate measure of launch uptake than net sales over the next few quarters.

We are pleased with the initial uptake of Mounjaro, which is at the high end of our contemplated scenarios. We do not anticipate supply constraint for the U.S. launch of Mounjaro, and we will monitor U.S. uptake to determine the appropriate timing for OUS launches. As a reminder, over the last several years, we have made significant investments to grow global manufacturing capacity to support Mounjaro volume, including our new RTP site in North Carolina, which will come online in 2023. On Slide 12, we provide an update on capital allocation. For the first half of the year, we invested $4.5 billion to drive our future growth through a combination of R&D expenditures, business development outlays and capital investments.

In addition, we returned approximately $1.8 billion to shareholders in dividends and repurchased $1.5 billion in stock. Our capital allocation priorities remain consistent as we continue to fund our key marketed products and expected new launches, invest in our pipeline, pursue opportunities for external innovation to augment our future growth prospects and return excess capital to shareholders. Slide 13 is our updated 2022 financial guidance. Our full year revenue outlook is unchanged. It now includes an additional $400 million of headwind from foreign exchange rates, since our previous guidance update, for a total impact of roughly $700 million of FX headwind for the full year compared with our original guidance.

This incremental headwind is offset by additional forecasted revenue from our COVID-19 antibody, bebtelovimab, which includes $275 million from the U.S. government agreement announced in June of this year as well as estimated revenue from the inception of non-U.S. government distribution that Dave mentioned earlier. As we look ahead, Q3 will mark the first full quarter impact of Alimta U.S. [Indecipherable]. In addition, Q3 of 2021 revenue benefited from Olumiant COVID-19 sales that will provide roughly two and a half percentage points of headwind to our top line growth in the quarter. Our outlook for gross margin, SG&A and research and development remains unchanged.

While the range is unchanged, SG&A does include additional commercial investments for selected key growth products in the second half of the year. Our guidance now include acquired IPR&D and development milestone charges of approximately $610 million, reflecting total charges in the first half of the year. We have had no material acquired IPR&D or development milestone charges at this point in Q3, and this guidance does not include any impact from potential or pending business development transactions in the second half of the year. GAAP and non-GAAP operating margin decreased 100 basis points to approximately 27% and 29%, respectively, primarily due to the negative impact attributable to foreign exchange rates and acquired IPR&D and development milestone charges to date.

Our non-GAAP range for other income and expense remains unchanged. On a reported basis, other income and expense is now expected to be expense in the range of $500 million to $600 million, reflecting the impact of net losses on investments in equity securities during the second quarter. Our tax rate and EPS in the first half of the year still includes the favorable impact of the provision in the 2017 Tax Act that requires capitalization of research and development expenses for tax purposes. Our financial guidance for the full year assumes this provision will be deferred or repealed by Congress, effective for 2022. If this provision is not deferred or repealed effective this year, then we would expect a reported and non-GAAP tax rate to be approximately 10% to 11%.

Based on these changes, we have lowered our reported EPS guidance by $0.34, to now be in the range of $6.96 to $7.11 per share and lowered our non-GAAP EPS guidance by $0.25, to be in the range of $7.90 to $8.05. The $0.25 reduction in our non-GAAP EPS range is driven entirely by the impact of foreign exchange rates as the impact of EPS of acquired IPR&D and development milestone charges for selected -- and selected products are offset by the impact of additional sales of bebtelovimab. Now I will turn the call over to Dan to highlight our progress in R&D.

[Daniel M. Skovronsky, Senior Vice President and Chief Scientific and Medical Officer at Eli Lilly and Company]

Thanks, Anat. Looking across Lilly R&D, I continue to be quite encouraged by the potential we have, to turn cutting-edge science into life-changing medicines for patients. This potential is becoming a reality in the late-stage portfolio, where I'll focus my remarks today. But also, it's becoming more and more evident in our earlier-stage projects, and I look forward to providing updates on some of these assets in future quarters. Given updates we provided at ADA in June, including detailed results from SURMOUNT-1, I'll focus today's R&D update on the late-stage progress since our last earnings call more generally. Slide 14 shows select pipeline opportunities as of August 1, and slide 15 shows potential key events for the year.

I'll cover both of these slides by therapeutic area. Starting with immunology. Along with our partner, Incyte, we're proud that Olumiant has now been approved as a first-in-disease systemic treatment for adults with severe alopecia areata in the U.S., EU and Japan. Alopecia areata is a significant unmet medical need, and we're delighted about what this medicine could mean for people living with this disease. We also announced top line data from the lebrikizumab Phase III monotherapy maintenance studies in patients with moderate to severe atopic dermatitis, which showed 80% of lebrikizumab responders maintained improvements in skin clearance and disease severity at 52 weeks.

Data supported both once every two-week and once every four-week maintenance dosing, with consistent and durable responses. We believe the potential for a once every four-week maintenance dosing regimen could be an important point of differentiation for patients and health care providers. Lilly is planning submission of lebrikizumab to the FDA in 2022, followed by submissions to other regulatory agencies around the world. Almirall has rights to develop and commercialize lebrikizumab for atopic dermatitis in Europe and is planning for submission to the EMA in 2022. Shifting to mirikizumab. We presented results from the Phase III maintenance study, LUCENT-2, at the DDW meeting.

This study showed that for patients who responded to treatment on mirikizumab in the 12-week induction period, 50% of patients who received mirikizumab maintenance therapy achieved clinical remission at one year compared to 1/4 of patients randomized to placebo. In addition to the U.S. regulatory submission of mirikizumab for ulcerative colitis that we announced earlier this year, we have now submitted in the EU and Japan. Also noted here in immunology is a Phase II start for our BTLA agonist antibody in SLE and our new KV1.3 inhibitor shown in Phase I. Our IL-2 conjugate is now listed under its nonproprietary name, Rezpegaldesleukin. Moving to diabetes.

We're thrilled that Mounjaro is now approved in the U.S. as the first and only GIP and GLP-1 receptor agonist for the treatment of adults with type two diabetes. We're pleased to have received a positive CHMP opinion in the European Union, and we're hopeful for full approval by the EMA later this quarter. We presented the exciting detailed results from SURMOUNT-1, evaluating tirzepatide for treatment of weight management and participants with obesity or are overweight at ADA, with simultaneous publication in the New England Journal of Medicine. New data included an exploratory analysis that showed roughly 40% of patients achieved at least 25% weight reduction on the 15-milligram dose compared to less than 1% of patients on placebo.

Additionally, we saw meaningful reductions in blood pressure and lipids as well as reduction in fat mass that was nearly three times greater than that in lean mass. Encouraging data also showed that for those patients who had pre-diabetes at the start of the study, over 95% returned to normal glucose levels. The efficacy, safety and tolerability data in SURMOUNT-1 exceeded our expectations. Based on our existing robust data set for tirzepatide, we have now engaged with the FDA and we'll have a meeting soon to evaluate whether there's a potential path forward to registration for chronic weight management based on SURMOUNT-1, combined with data from the SURPASS program.

We'll continue to communicate to investors as there are material updates. We continue to expand our clinical program for tirzepatide, and we have now initiated our Phase III study evaluating tirzepatide for treatment of obstructive sleep apnea. We also have begun a new trial called SURPASS-EARLY, which evaluates the long-term safety and efficacy of tirzepatide compared to standard of care when initiated early in the course of type two diabetes. Later this year, we'll begin SURMOUNT-5 a head-to-head study comparing weight reduction for tirzepatide versus semaglutide 2.4 milligrams. And finally, later this year, we expect to initiate SURMOUNT-MMO, our Phase III morbidity and mortality in obesity study.

Moving to our weekly basal insulin Fc, also known as BIF. We have now initiated our second Phase III trial, QWINT-2, which is evaluating BIF compared to degludec in adults with type two diabetes who are starting basal insulin for the first time. Our Phase II GGG tri-agonist is now listed under its nonproprietary name, Retatrutide. Also, in this area, two assets have now entered Phase I clinical development, our Dual Amylin Calcitonin Receptor Agonist or DACRA and our PNPLA3 sIRNA. In oncology, we are announcing today that the FDA has accepted the filing for pirtobrutinib in mantle cell lymphoma for patients previously treated with a BTK inhibitor, with Priority Review designation under an accelerated approval pathway.

Improved treatment options are needed for this challenging disease, and we're encouraged that this potential new medicine could be available to patients in early 2023. In early-phase oncology, we've moved our mutant-selective PI3-kinase alpha inhibitor into Phase I development. And finally, moving to neuroscience. We're also pleased to announce the FDA has accepted the filing for donanemab for the treatment of early symptomatic Alzheimer's disease and is granted Priority Review designation under an accelerated approval pathway. We continue to look forward to the top line results of the Phase III confirmatory study,

TRAILBLAZER-ALZ 2, by mid-2023, which, if positive, will form the basis of our application for traditional regulatory approval. You also noticed we're now referring to N3pG4 by its nonproprietary name, Remternetug. We plan to initiate the Phase III program for Remternetug in the coming weeks. As you can see, Q2 was another productive quarter for pipeline advancement at Lilly. Now I'll turn the call back to Dave for closing remarks.

[David A. Ricks, Chair and Chief Executive Officer at Eli Lilly and Company]

Thanks, Dan. Before we go to Q&A, let me briefly sum up the progress we have made in the second quarter. We're encouraged by the performance of our key growth products, which now represent 67% of our core business. We expect to see this grow over time as we work to launch more innovative medicines, like Mounjaro. Excluding the impact of acquired IPR&D and development milestone charges, we expect to see operating margin expansion from both revenue growth and driving further efficiencies in our business. We saw significant progress in our pipeline this quarter with the approvals of Mounjaro in type two diabetes and Olumiant in alopecia areata.

We also saw progress on our next wave of potential growth catalysts, with the FDA acceptance of donanemab as well as pirtobrutinib and positive top line readout for lebrikizumab and additional submissions for mirikizumab. Finally, we returned $900 million to shareholders via the dividend and share repurchases. Looking to the future, we are confident in our long-term growth prospects as we are focused on developing groundbreaking therapies in areas of significant unmet need as well as driving exceptional execution for our recently launched medicines so they reach patients who need them. Before we close, I would like to comment as well.

This is Kevin Hern's last call as head of our IR team. And before I turn the call over to him to moderate the Q&A session, I would just like to thank him on behalf of our shareholders, our Board and of course, our executive team and employees. He's done an outstanding job for the last four and a half years, strengthening our relationships with The Street as well as being an ambassador to both convey the company's messages to shareholders, but also inform management about shareholder perspectives. We wish him the best in his new assignment, transitioning to a leadership role in our U.S. commercial group. Now I'll turn the call over to Kevin for his last Q&A session.

[Kevin Hern, Vice President of Investor Relations at Eli Lilly and Company]

Thanks, Dave. Thanks for the kind words. I will definitely miss this. We would like to take questions from as many callers as possible, so please limit your questions to two per caller. Lois, if you can provide the instructions for the Q&A session, and then we're ready for the first caller.

Questions and Answers

[Operator]

[Operator Instructions] The first question will come from the line of Geoff Meacham from Bank of America. Please go ahead.

[Geoff Meacham, Analyst at Bank of America]

Hey, guys. Thanks so much for the question. I just have two quick ones, one on Mounjaro. I know it's pretty early in adoption, but maybe just talk about the source of new starts, meaning are they GLP-naive or experience. And then talk about the expected payer dynamics looking to 2023. And for Dan, on tirzepatide, I know your regulatory discussions are ongoing in obesity, but do you think you can also use the safety database from diabetes and other indications when you look to kind of NASH, sleep apnea, et cetera?

[Kevin Hern, Vice President of Investor Relations at Eli Lilly and Company]

Thanks, Geoff. We'll start off with Mike on Mounjaro. And then, Dan, if you want to comment on the regulatory for tirzepatide in obesity. Mike?

[Michael B. Mason, Senior Vice President and President, Lilly Diabetes at Eli Lilly and Company]

Yes. Thanks, Geoff. Thanks for the question. What we've seen are -- first of all, we're incredibly excited about the very robust launch we've had with Mounjaro. We're also excited about the source of business that we're seeing. 72% of Mounjaro is coming from new patients into the incretin class. We think that's very important, important for accelerating class growth, and we have seen class growth both at total prescriptions, new-to-brand and NTS accelerate since Mounjaro's launch.

Of the 28% of the volume that's coming from switches, only 30% of that is from Trulicity and 70% is from other GLPs. And so, as a result, as Anat indicated in -- earlier, we're actually seeing Lilly incretin share market growing, which is the sign that we -- of a robust solid foundation that we're laying. And so the NBRx have increased our share by -- Lilly's share in the injectable market by 12% and new-to-treatment starts by 10%.

So we're very happy we're growing the class and the market share at the same time. Your second question around payer dynamics, it's going as expected for us. We're trying to stay very disciplined. I think our focus is to set ourselves up for long-term success, not short-term success. And that's what we're doing. So it's going as expected. So far, we have both commercial and Part D access on Express Scripts, Cigna and Humana formularies.

[Kevin Hern, Vice President of Investor Relations at Eli Lilly and Company]

Thanks, Mike. Dan?

[Daniel M. Skovronsky, Senior Vice President and Chief Scientific and Medical Officer at Eli Lilly and Company]

Yes. Thanks, Geoff, for the question. You're pointing out that correctly, that we intend to pursue a number of related indications for tirzepatide. Some of them have overlapping patient populations. Most of the indications we pursue have a base of patients that either have obesity as a preexisting and sometimes causative condition, such as obstructive sleep apnea or heart failure in people with obesity.

Other indications might be a mix of type two diabetes and obesity, representing a large number patients, such as NASH. So where applicable safety exposures from similar propositions can be used to support submissions, of course, some of those programs are staggered in time, and so by the time we get efficacy data in those indications, we'll also have quite likely the rest of the SURMOUNT program.

But where we are today is quite a large and robust safety database from the entire SURPASS program as well as SURMOUNT.

[Operator]

The next caller is Chris Schott from JPMorgan. Please go ahead.

[Chris Schott, Analyst at JPMorgan Chase & Co.]

Great, thanks so much for the question. Just two for me. I guess just on the obesity opportunity. I guess based on the feedback you've been getting on that SURMOUNT data, I guess, is there any change in terms of how you anticipate payers will approach obesity? I guess the heart of the question is do you anticipate we're going to really need to see some of the CV morbidity/mortality data before we can think about broad coverage for obesity medications?

Or are you seeing payers potentially more interested in covering these type of products given some of the profile that kind of emerged from that study? My second question was one for Dave, I guess, on just health care reform. I know you love answering these questions. But I guess, as you guys have just been so involved in this process, I would just appreciate your thoughts on the latest bill we're seeing and just kind of the impact you would expect it to have on the industry and maybe really more specifically.

[Kevin Hern, Vice President of Investor Relations at Eli Lilly and Company]

Thanks, Chris. We'll go to Mike first and then -- on obesity, and then Dave for health care reform.

[Michael B. Mason, Senior Vice President and President, Lilly Diabetes at Eli Lilly and Company]

Yes, great question. The SURMOUNT-1 data was phenomenal data for patients and physicians who treat obesity. We -- I think there's a combination of effects that will affect employers and the government to increase access for obesity agents. One is the data we produce. And I think, obviously, the first data we're producing is the weight loss as well as the factors like lipids and blood pressure.

And the data we produced so far has been stellar. So I think the better data we produce in SURMOUNT-1 through SURMOUNT-4 is just going to help us in the short term. Long-term, we think there's a lot of comorbid conditions associated with obesity, like CV and heart failure and sleep apnea, and the better data that we support there will open up those indications, where -- or highly -- they have a lot of overlap with obesity.

And so we're excited about those trials and seeing those data as those trials complete. And then lastly, the more we can drive consumer interest in this, that puts pressure on employers and the government to be able to gain access for this. And so I think we've got strong plans on all three fronts, and we're excited about the first data disclosure we've had on obesity.

So we're very bullish on the long-term prospects of the obesity market and trizepatide thrown in it.

[Kevin Hern, Vice President of Investor Relations at Eli Lilly and Company]

Thanks, Mike. Dave?

[David A. Ricks, Chair and Chief Executive Officer at Eli Lilly and Company]

Yes, Chris, thanks for the question. I think everybody probably on the call has a good grasp of what's in this package. Difficult to speculate on probabilities, but certainly, a lot higher than a month ago, that something crosses the line. There may be some adjustments to this as they go through that parliamentary process and whatever changes might occur still to come in the Senate and the House.

But if -- when we're looking at passes, maybe that's your question. As you know, we've been for the Part D reforms. I think they are good incremental changes, particularly capping annual out-of-pocket and getting rid of the donut hole concept. Unfortunately, they don't improve the concept of pacing patient cost sharing on net pricing, which we're hoping it would. But by itself, we would support that.

The CPI adjustment is not really an issue. As probably everyone on this call knows, there's already lots of CPI capping that goes on in the commercial marketplace. And with CPI being where it is now as well, I think list prices in the drug business are not nearly as fast as the rest of the economy. But the negotiation piece is a problem. And I think, in the short term, speaking for our company, but probably the industry, it doesn't do much.

They don't really start until 2026 anyway. But in the midterm, there will be, of course, some products that will have attenuated life cycles. And I think that will cause some headwinds for the industry, and we'll see if any Lilly products get caught up in that. But probably to me, the most damaging thing about it is it sends a signal to investors and capital allocators like us that small molecules, and particularly small molecules in diseases that require step-wise development like cancer, where we start in stage -- in later stages and work our way to adjuvant or even in some orphan conditions, really aren't wanted and are worth a lot less.

So we'll focus our resources on other areas of innovation. We've got plenty of those and so will the rest of the sector. And I think that's really a miss for the patients that probably want better oral cancer drugs in the future and orphan disease drugs. So I think that's probably not being talked about enough, and I just wanted to emphasize that.

[Operator]

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

[Seamus Fernandez, Analyst at Guggenheim]

Thanks for the question. So just a couple of questions here. Dave, I was just hoping to get a little bit more color on the comment that you made there with regard to orals. How do you see that impacting your efforts to bring forward oral diabetes drugs? And is it more a benefit to complex oral therapies that aren't small molecule per se, but perhaps are more peptide-oriented?

I know you guys are working on some efforts along those lines. So just interested to know if the legislation would imply that as well. From a small molecule perspective, we see a number of oral GLP-1s seeking to come to market at some point in time. And then separately, just on Dan, on the glucagon mechanism, I see GGG listed in two Phase II clinical trials, but Mazdutide, your oxyntomodulin product, is listed just in sort of the Phase I in diabetes.

Wondering if you guys have officially made this decision to move forward with GGG or if Mazdutide is still potentially in the mix as kind of your next-gen asset in the obesity space.

[Kevin Hern, Vice President of Investor Relations at Eli Lilly and Company]

Thanks, Seamus. We'll go to Dave and then Dan.

[David A. Ricks, Chair and Chief Executive Officer at Eli Lilly and Company]

Yes. Thanks, Seamus. I mean I guess, to put a finer point on it, each project will have to be evaluated one by one. But I think you will probably see, 10 years down the line, fewer small molecule oral products developed in the industry than would have been otherwise the case if this bill passes. Again, that to me is the miss. And I think it -- there's still probably quite a bit of advantage in oral small molecules in sort of large primary care indications, especially if, in the case of like GLP, we could accept that weight loss will provide broader benefits for the earlier question about when sort of the belief system tips over and people just accept that chronic weight management is good for health, like reduced blood pressure is good for cardiovascular risk.

And I think those products will be evaluated one by one, and big opportunities, I think, will advance and do well. They will have attenuated life cycle in the government business, and that will have to be factored in, but we'll look at that. What I was referring to is more, I think, in narrower revenue opportunities. It just gets a lot harder. And when, by kind of construct, your new indications can't be compressed forward because of the way we develop drugs in some of these diseases, that's a problem.

And I don't think that was well-thought through, and there will be a long-term implication to that. One other thing I probably should say is this bill raises $300 billion for the federal government off the back of the industry, probably cost the industry at least $0.5 trillion, and only about $50 billion of that, like 10%, is going back to patient benefit support.

And I think that's another tenet when we were leading pharma, Lilly, was to make sure whatever came out of the industry went back to patients. That's not happening here, and that needs to be discussed as well.

[Kevin Hern, Vice President of Investor Relations at Eli Lilly and Company]

Thanks, Dave. Dan?

[Daniel M. Skovronsky, Senior Vice President and Chief Scientific and Medical Officer at Eli Lilly and Company]

Yes. Thanks, Seamus, for the question on glucagon-containing molecules. So we previously said that we have two in clinical development, Mazdutide, which is our oxyntomodulin, that's glucagon plus GLP-1, and Retatrutide, which is our GGG, which is glucagon GLP-1 and GIP1. You're right that the GGG molecule is ahead in development, that's in Phase II, and the oxyntomodulin is still in Phase I.

I think they're both viable as next-generation weight loss products. But to be clear here, it's a very high bar. We're looking for a major step-change above the really remarkable results we saw in SURMOUNT-1. I think they both have that potential, but we're going to need to see more data to know which -- if either goes forward to Phase III. Just like when we were doing Phase II in tirzepatide, which was just a few years ago, we noted that it had to have a step-change to go forward to Phase III.

If you hear us talking about when -- our growth of these molecules going to Phase III, it means we saw that kind of a big step-change.

[Seamus Fernandez, Analyst at Guggenheim]

Thanks, Dan.

[Operator]

The next caller is Louise Chen with Cantor. Please go ahead.

[Louise Chen, Analyst at Cantor Fitzgerald]

Hi, thanks for taking my question. So my first question for you was on the obesity product. Do you see any potential read-throughs from Novo's SELECT study to tirzepatide? And have you given any color on how you want to structure your studies on an outcomes basis for VC? And then secondly, it's been quiet on the Alzheimer's front, but just curious if you have any updated thoughts on the market opportunity for donanemab, especially in front of some of these Phase III trials that will read out at the end of the year.

[Kevin Hern, Vice President of Investor Relations at Eli Lilly and Company]

Thanks, Louise. We'll go to Dan for the question on the SELECT trial and then Anne for the question on Alzheimer's.

[Daniel M. Skovronsky, Senior Vice President and Chief Scientific and Medical Officer at Eli Lilly and Company]

Hi, Louise. Thanks for that question. Of course, we always reach for our competitors' success on clinical trials. We want great data so that we can have great drugs to help patients. I think the Novo [Indecipherable] they have passed the interim analysis, but didn't stop the trial for efficacy is fine. I think there's really pretty significant differences here between tirzepatide and semaglutide that we just have to remember, a different mechanism, a different degree of efficacy on various outcomes, different trial designs, different populations to some extent.

So we don't change our design of our SURMOUNT-MMO study. We don't change our thinking about probably success. As Mike said earlier, we're highly confident in this mechanism based on all of the data that we've seen, of course, starting with a quite dramatic weight loss, which should be a benefit on morbidity and mortality from obesity. But also, all of the cardiovascular indicators that we reported out in that Phase III study, including a very significant drop in blood pressure, that should have a benefit.

A drop in LDL, an increase in HDL, a drop in triglycerides, all of that should contribute to cardiovascular outcomes. So we remain excited and confident about our own study going forward.

[Kevin Hern, Vice President of Investor Relations at Eli Lilly and Company]

Thanks, Dan. Anne?

[Anne E. White, Senior Vice President and President, Lilly Neuroscience at Eli Lilly and Company]

Yes. Louise, thanks for the question on Alzheimer's. So the fact is, bottom line, so we remain convinced about the mid- and long-term opportunity for donanemab and the Alzheimer's portfolio. Our focus right now is obviously on the rapid availability of donanemab for the appropriate patients through the accelerated approval pathway and then reconsideration with Phase III data.

And we remain optimistic that with -- particularly with traditional FDA approval, FDA -- or sorry, CMS, would not continue to limit coverage for on-label treatments. Now obviously, you mentioned competitor readout. So as we've noted on prior calls, there's a chance that we'll see mixed results in some of these readouts due to the differences in the medicines and their trial designs.

And as you know well, we have some unique design features in TB2 and a medicine that demonstrates rapid and deep plaque clearance. So we won't be discouraged if others miss their primary endpoints. And so we'll be following that closely, obviously. But in the near term, of course, we have to acknowledge that patient access will be very limited under the current CMS NCD with accelerated approval.

But what that does do with the accelerated approval is really enable us to engage quickly with CMS following the -- that Phase III data and hopefully drive reconsideration at that point. And it also allows us to accelerate the traditional approval through a supplemental BLA. So what we'll do in the near term, following a potential approval and the accelerated pathway is used at that time to build out the diagnostic ecosystem, to help physicians with the referral process and infusion systems, and so there's quite a bit to do, I think, to get ready for that Phase III data.

[Kevin Hern, Vice President of Investor Relations at Eli Lilly and Company]

Thanks, Anne. Louise, thanks for your question. Next caller please.

[Operator]

The next caller is Terence Flynn from Morgan Stanley. Please go ahead.

[Terence Flynn, Analyst at Morgan Stanley]

Hi, thanks so much for taking the questions. Two for me. I guess, Mike, you talked about aiming for long-term success with Mounjaro from a reimbursement perspective. So can you just maybe define that for us, put a finer point on it? Should we assume that means you're aiming for a net price above Trulicity ultimately over time?

And then as we think about your ability to supply the market here, obviously, launch, you said, at the high end of your expectations, and I think you touched on this a little bit during your comments in terms of confidence in U.S. supply, but how are you thinking about the broader supply dynamics globally? And then remind us your flexibility to increase supply, if needed, over time.

[Kevin Hern, Vice President of Investor Relations at Eli Lilly and Company]

Thanks, Terence. We'll go to Mike for both questions on Mounjaro, both access and price and then just global supply outlook.

[Michael B. Mason, Senior Vice President and President, Lilly Diabetes at Eli Lilly and Company]

Okay. Thanks, Terence, for those questions. Long-term, I think our goals there, is obviously to optimize our net price, but also secure broad access, like we have for Trulicity. So those are our two goals. Obviously, we don't give specifics on our net price negotiations publicly. But we're pleased with the progress. We're staying disciplined, trying to accelerate access before any new product launch.

You got to be careful that you're not too aggressive. You get access too early, but you pay too much for it. So we're staying disciplined. We've got a great product with a great profile. Payers are seeing that. But it's a process, and we're going through that process right now. From a supply perspective on Mounjaro, as Anat said, we were planning for success.

And so we have a lot of different launch scenarios. And we have launch scenarios that consider this level of uptake. As Anat shared, we don't anticipate any supply constraints for the U.S. launch of Mounjaro. We -- our manufacturing team has been working around the clock for years to build manufacturing capacity throughout the supply chain. We have a number of sites who make this, and they're optimizing our initial capacity on a daily basis.

Also, we have made investments to expand our capacity over the next several years. We have a new parental plant at Research Triangle Park in North Carolina, that's coming online in 2023, and another one behind that in Concord, North Carolina. Also, we're building two manufacturing facilities to make back an agreement for Mounjaro, and those will go -- come on at a later time.

So obviously, we're planning for success, and our manufacturing team is working around the clock to get as much supply as possible.

[Kevin Hern, Vice President of Investor Relations at Eli Lilly and Company]

Thanks, Mike. Terrence, thanks for your question. Next caller please.

[Operator]

Next caller is Tim Anderson with Wolfe Research. Please go ahead.

[Tim Anderson, Analyst at Wolfe Research]

Thank you. On the outcomes trial for obesity, presumably that's a cardiovascular outcomes trial with MACE as a primary endpoint and if so, what level of benefit? Or will it be powered to show Novo's is designed to show 17%? And then on the head-to-head versus Novo's product in obesity, anything you can say on trial design, specifically primary endpoint, and perhaps, most importantly, the timing of having results?

[Kevin Hern, Vice President of Investor Relations at Eli Lilly and Company]

Thanks, Tim. We'll go to Dan for the first question on SURMOUNT-MMO and then Mike for the second question on the head-to-head trial with Novo for tirzepatide.

[Daniel M. Skovronsky, Senior Vice President and Chief Scientific and Medical Officer at Eli Lilly and Company]

Yes. Thanks for the question, Tim. You're raising an interesting point. I think implicit in your question is the observation that there's a lot of health benefits that come from losing weight. Obesity is a risk factor for a number of things, not just the things that are traditionally measured in cardiovascular outcome studies or MACE studies. So probably also noting, we've called this morbidity/mortality outcomes, MMO, in obesity rather than CVOT.

But beyond that, I think we've intentionally not gotten into details on the primary endpoint or the powering assumptions. So that is yet to be disclosed.

[Kevin Hern, Vice President of Investor Relations at Eli Lilly and Company]

Thanks, Dan. Mike?

[Michael B. Mason, Senior Vice President and President, Lilly Diabetes at Eli Lilly and Company]

Yes. On the head-to-head versus sema 2.4-milligram, there's been no head-to-head trials comparing tirzepatide to sema 2.4. So we believed it was a good opportunity to do that to demonstrate tirzepatide's significant weight loss benefits and totality, the benefits it has for patients. Head-to-head studies are the gold standards. Every time we talk to health care professionals, they really value and get a lot out of head-to-head studies.

It just really informs their treatment. So we think it's the right thing to do, and we're pleased to do that. It's going to be a head-to-head study, where we're comparing tirzepatide versus sema 2.4 in people that have obesity and overweight with the weight-related comorbidity. Other than that, we'll provide more on the design and the time line at a later date as we get closer to posting it on clinicaltrials.gov.

[Kevin Hern, Vice President of Investor Relations at Eli Lilly and Company]

Thanks, Mike. Tim, thanks for your question. Next caller please.

[Operator]

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

[Steve Scala, Analyst at Cowen]

Thank you. A couple of questions. First, Lilly mentioned in the prepared remarks a limited availability of competitor GLP-1s in select geographies. Can you be more specific on which geographies and the magnitude of the issue? And then a question for Dan. You must have been on the receiving end of many calls from DSMBs with interim updates on trials, for example, the trial of Trulicity in cardiovascular outcomes, REWIND.

The question is what is the depth of the information exchange between DSMBs and sponsors at that time? For instance, if a study is continuing past an interim look, is the conversation only three words, study is continuing? Or is it more extensive? Or does it depend? And if it depends, what does it depend on? It would seem to me, at least, counterproductive for a DSMB not to provide some guidance just from the vantage point of further development of the molecule. So that's my question.

[Kevin Hern, Vice President of Investor Relations at Eli Lilly and Company]

Thanks, Steve. We're going to go to Ilya for the question on the supply and demand that we're seeing for Trulicity outside the U.S., and then we'll go to Dan for the second question. Ilya?

[Ilya Yuffa, Senior Vice President and President, Lilly International at Eli Lilly and Company]

Yes. Steve, thanks for the question. First, what we've seen is an accelerated demand for Trulicity in many of our international markets. And it's probably three sources, that, one, great commercial success. We've been really successful in our diabetes portfolio, in driving the growth and utilization of Trulicity. At the same time, we've seen accelerated market growth.

And we have seen, in some select markets, the amplified demand for Trulicity because semaglutide is not available in full extent in a number of markets, in terms of where we've seen volatility and where that is occurring, and so we're evaluating. The local situation is quite dynamic, and we're ramping up as much as we can to meet this amplified demand.

But at the same time, in some of these markets, we're going to have to look at managing some of the growth and making sure we limit any kind of patient impact.

[Kevin Hern, Vice President of Investor Relations at Eli Lilly and Company]

Thanks, Ilya. Dan?

[Daniel M. Skovronsky, Senior Vice President and Chief Scientific and Medical Officer at Eli Lilly and Company]

Yes. Thanks, Steve. I understand where your question is going, and I probably don't need to weigh in specifically on what others might do or see, but I'll tell you how we run DSMBs and how we think about them generally across the industry. There's a couple of principles at play here. First, of course, is independence. This is not something run by the sponsor, and I think that's an important consideration for patient safety.

We don't see the data they see, and we're not privy to the discussions as a rule. The second is that we do set, for DSMBs, rules in advance by which they should make decisions. Those could be very simple rules, in some cases, like to hit statistical significance with a certain alpha on the primary endpoint, or they could be more complex rules, looking for consistency across secondaries or subpopulations or a higher bar of efficacy on the primary so that you're sure that you have a compelling effect that varies from study to study and sponsor to sponsor,

I'm sure. The third thing is that the recommendations that DSMBs give back to sponsors are often prespecified. So we'll tell the DSMB, if it meets these criteria, this is what you tell us. And if it doesn't, this is what you tell us. And they usually are, a matter of fact, without color that could compromise the integrity or cause unintentional unblinding of an ongoing study.

So I hope that's helpful in understanding how DSMBs work. I think at many companies, if there is a surprising recommendation for a DSMB, such as to stop a study, there will often be a process where the sponsor, or one or two representatives of the sponsor, are unblinded so they can confirm the DSMB conclusion before taking action. But that wouldn't be typical for a simple study, a continuous kind of decision.

[Kevin Hern, Vice President of Investor Relations at Eli Lilly and Company]

Steve, thanks for your question. Next caller please.

[Operator]

Next caller is Umer Raffat from Evercore. Please go ahead.

[Kevin Hern, Vice President of Investor Relations at Eli Lilly and Company]

Umer? Umer?

[Operator]

Looks like his line dropped. We'll move to Andrew Baum from Citigroup. Please go ahead.

[Andrew Baum, Analyst at Smith Barney Citigroup]

Thank you. A couple of questions. First one, on Mounjaro, you uniquely have labeling requiring a second form of contraception during titration, which [Indecipherable] doesn't have. The recent Supreme Court overturning Roe v. Wade put increased emphasis on the confidence in terms of risk of pregnancy given the consequences. How are you thinking about this, whether it's potentially an Achilles heel for the product, whether through additional pharmacology studies, that could be overturned as the [Indecipherable] indication rolled through?

It does seem, from the FDA review, that there's a real pharmacologic concern rather [Indecipherable] data here? And then second, on the positive side. In relation to the pirtobrutinib filing, assuming you get approval for mantle cell, I'm assuming that you would therefore get inclusion in the MCN -- NCCN guidelines [Indecipherable] for CLL.

So could you talk to how you think the expedited approval through mantle cell may accelerate your penetration of the CLL market whilst you're waiting for the Phase III trial program to mature?

[Kevin Hern, Vice President of Investor Relations at Eli Lilly and Company]

Thanks, Andrew. We'll go to Mike for the first question on Mounjaro labeling and the social climate, and then we'll go to Jake for the question on pirtobrutinib.

[Michael B. Mason, Senior Vice President and President, Lilly Diabetes at Eli Lilly and Company]

Thanks, Andrew. I appreciate the question. Let me just -- you just said everyone. Our label, Mounjaro, advises women using oral contraception to switch to or add to a nonoral, contraception methods for four weeks during initiation of the product and then during the dose titration for each dose. Given the -- so health care professionals are aware of this. Given the profound benefits of Mounjaro, this hasn't impacted at all HCP and consumer interest in Mounjaro.

If you look at the data in the marketplace, we have data with IQVIA through July 22, which is just five weeks of full promotion. And we've -- and Mounjaro has already reached 20% new brand share of market. So we haven't seen this as an issue at all. As to the future, we're still evaluating the issue. I have nothing new to report to investors at this time. But this has not been an issue that has impacted Mounjaro's uptake at all.

[Kevin Hern, Vice President of Investor Relations at Eli Lilly and Company]

Thanks, Mike. Jake?

[Jacob Van Naarden, Senior Vice President and CEO of Loxo at Eli Lilly and Company]

Yes, thanks for the question. So just as a matter of policy, we submit company sponsored guideline requests on -- like consistent with labeling indications that we actually intend to receive or expect to receive. So we'll do that in this setting as well, in the context of BTK-pretreated relapsed/refractory mantle cell lymphoma. What that -- from there, the NCCN and other guideline process is completely independent and has no involvement from us whatsoever.

To the extent that they choose to do something beyond our labeled indication is really completely out of our hands and hard for me to speculate on. And of course, we'll be promoting the product only on the labeled indication that we receive.

[Kevin Hern, Vice President of Investor Relations at Eli Lilly and Company]

Thanks, Jake. Andrew, thanks for your question. Next caller please.

[Operator]

The next caller is David Risinger from SVB Securities. Please go ahead.

[David Risinger, Analyst at SVB Securities]

Yes, thank you very much. So my questions relate to Mounjaro, please. First, could you clarify the share gain percentages? So I believe the comment was that Lilly's combined Trulicity and Mounjaro share gained by 12 percentage points. So I wanted to just understand what was the starting point and where is the figure today? And then there was also a comment about new-to-treatment starts gaining by 10%.

So if you could provide the x to y on that. And then based upon your current view of the very strong U.S. uptake of the product, to what degree is Lilly planning to gate its ex U.S. Mounjaro launches due to the manufacturing supply constraints that you're currently up against?

[Kevin Hern, Vice President of Investor Relations at Eli Lilly and Company]

Thanks, David. We'll go to Mike for the questions around share gain and then Ilya for the questions around OUS launch.

[Michael B. Mason, Senior Vice President and President, Lilly Diabetes at Eli Lilly and Company]

Okay. Dave, hey, thanks. I'll give you more context of the percentages that we had earlier on in the call. So what we're looking at is IQVIA data, the beginning of that, by our analysis, is June 3. We had our launch meeting the week after ADA, so the week of June 14. So we have been promoting kind of full-on since then. And so when you compare where we're at today, this is -- we have IQVIA data through July 22, so five weeks of promotion.

So we're comparing the -- our NBRx volume, our new-to-brand volume, and share at July 22 versus June 13 in the injectable incretin market. And so what we've seen since then is that Mounjaro's NBRx share has reached 20.5. We saw Trulicity's NBRx has declined by only 8.4 share points. And so that produces a net gain in the Lilly injectable incretin and NBRx share of 12.2%.

And then with NTS, same time period, same market, we have a 10% overall Lilly injectable incretin NBRx share gain.

[Kevin Hern, Vice President of Investor Relations at Eli Lilly and Company]

Thanks, Mike. Ilya?

[Ilya Yuffa, Senior Vice President and President, Lilly International at Eli Lilly and Company]

Yes, David, thanks for your question on the launch of Mounjaro outside of the U.S. and our thoughts around that. One of the key aspects of how we take a look at launching outside the U.S., it's typical for most product launches across pretty much all therapeutic areas to have some lag to U.S. launches, either through -- because of regulatory approval and process, but also pricing and reimbursement.

And it can take up to a year to get reimbursement in a number of markets. So the volumes in that first year of launch are somewhat limited. We are encouraged by what we're seeing in the U.S. launch of Mounjaro and looking forward to launching Mounjaro outside of the U.S. and leveraging our commercial expertise and strength in diabetes across our markets outside the U.S.

[David A. Ricks, Chair and Chief Executive Officer at Eli Lilly and Company]

Let me just -- David, just to clarify though because of the way you framed your question. You said we're up against supply constraints. In the case of Mounjaro, as we said today in the prepared text, we don't anticipate supply constraints in the U.S. Of course, before introducing a product in a new market, we want to make sure we could fully initiate new patients and supply.

And based on our competitor's actions, it's hard to predict a year from now what we'll need in a given market. So it's not that we don't have supply. It's more the demand picture is unstable. We want to -- we're just cautioning that we want to know that before we initiated a launch sequence. But we've launched in the U.S., and we're committed to that supply. It's not that we have an issue, just to be clear.

[Kevin Hern, Vice President of Investor Relations at Eli Lilly and Company]

Next caller please.

[Operator]

The next caller is Chris Shibutani from Goldman Sachs. Please go ahead.

[Chris Shibutani, Analyst at The Goldman Sachs Group]

Thank you very much. Two questions. The first on Mounjaro, thank you for that information about the relative trend as far as where the source of patients were. Narrowing in on the question of what portion were actually switches from Trulicity, that was helpful. Back of the envelope, that sounded like about 10%. Is that about what you expected?

And where do you think that this will go? I'm asking, obviously, since we're relatively early stages of this launch. Second question would be about Verzenio, actually to bring up something that seems a little bit less focused upon, but performance has been strong and logically, it would seem to be in the adjuvant setting. But could you speak to what you believe is driving this and what the outlook is for those trends that have thus far been delivering the strong performance there?

[Kevin Hern, Vice President of Investor Relations at Eli Lilly and Company]

Thanks, Chris. We'll go to Mike for the question on Mounjaro, and then Jake for the question on Verzenio.

[Michael B. Mason, Senior Vice President and President, Lilly Diabetes at Eli Lilly and Company]

Yes, that's a good question. I think we're getting what we expected we thought we would see, more new patients into the class. That's who we talked about with health care professionals, and that's what we're getting. So we're not surprised by that. It's pretty typical of what we would expect with the new GLP launch. Now what you would expect when you have a new product like Mounjaro, especially with endocrinologists, that they don't always see naive patients.

They have a good bolus of patients who are already on GLPs. And so when they -- when we talk to them about Mounjaro, they're excited about the opportunity to actually switch some of the patients who are not performing, are not at goal at the current GLP. And so I think, early on, you'll see like a higher percent coming from switches versus naive. And so today, we have 72% that is naive.

If you look at Trulicity, that's in like 88%. So what I would expect is that, that percentage coming from naive will grow over time. But I think this is what we would expect at launch, and we're very pleased by both Trulicity and Mounjaro's performance since Mounjaro has launched.

[Kevin Hern, Vice President of Investor Relations at Eli Lilly and Company]

Thanks, Mike. Jake?

[Jacob Van Naarden, Senior Vice President and CEO of Loxo at Eli Lilly and Company]

Yes. Thanks for the question on Verzenio. We too are pleased with how this has gone so far this year. I think, to your question on why and where it goes from here, on the why, I think it largely comes down to the clinical data from the monarchE study itself. I think the data are demonstrable, and when physicians and patients see them, they quickly want to integrate the drug into their practice.

Now in addition to that, and this was something we hoped would see happen, we think we're seeing some share gains in the metastatic setting as well, particularly among physicians who historically used other CDK4/6 inhibitors are gaining experience with Verzenio by utilizing it in the adjuvant setting and then starting to use it in the metastatic setting, where perhaps they hadn't been before.

So that was part of what we hoped might happen. I think we're seeing that happen a little bit so far this year. That having been said, in terms of where we go from here, I'll just say two things. One, we continue to interact with physicians who are still not yet aware of the monarchE data. And so that's, of course, good and bad. It's bad because there are patients who are appropriate for the medicine that should be on it.

It's -- but it is opportunity to continue growing in the labeled indication that we have currently. And on that note, as we've talked about in the past, we're hopeful that we have the opportunity to expand the indication to the enrolled trial population for monarchE, and we're awaiting that analysis of overall survival, as we've talked about in the past. So yes, we're pleased with how it's going. We see plenty of opportunity ahead to continue the momentum.

[Kevin Hern, Vice President of Investor Relations at Eli Lilly and Company]

Thanks, Jake. Chris, thanks for your question. Next caller please.

[Operator]

Next caller is Carter Gould from Barclays. Please go ahead.

[Carter Gould, Analyst at Barclays]

Great, good morning. thanks for taking the question. I guess, first off, can you talk about how pronounced the cash pay component was of the early kind of Mounjaro number and then how you expect maybe that to evolve? And then, separately, maybe coming back to the drug pricing question but from a different angle, it would appear that Lilly could be one of the main beneficiaries from lower out-of-pocket costs on that side when you think about sort of improvement in compliance.

So can you maybe help frame that impact or maybe think about how compliance today differs in the U.S. versus maybe other markets where those out-of-pocket costs or not -- don't exist?

[Kevin Hern, Vice President of Investor Relations at Eli Lilly and Company]

Thanks, Carter. We'll go to Mike for the first question on Mounjaro and then Dave for the follow-up on the drug pricing reform and the impact.

[Michael B. Mason, Senior Vice President and President, Lilly Diabetes at Eli Lilly and Company]

Hey, Carter, thanks for the question. On the cash pay side, we expect the percent of cash pay to follow our percent access in the marketplace. What we've seen so far, again, I reiterate what I said earlier, that we have both Part D and commercial access for Humana, Express Scripts, on the National Preferred Formulary, and Cigna. If you add that up, that's a little over 20% of the national lives.

And so I think that's probably the best estimation of what you probably see with the cash pay.

[Kevin Hern, Vice President of Investor Relations at Eli Lilly and Company]

Thanks, Mike. Dave?

[David A. Ricks, Chair and Chief Executive Officer at Eli Lilly and Company]

Yes. Carter, I think you're pointing out something -- as I mentioned, we would be supportive as a freestanding measure of the Part D reforms that are in this reconciliation package for a bunch of reasons. One, it does, I think, more fairly distribute the burden of the industry to pay for into Part D. Today, the way the donut hole math works, if you go back a couple of years, we had a lot of earnings calls, we had to describe that, there's this really disproportionate contribution from the industry inside the donut hole.

So commonly used medications, like in diabetes and cardiovascular, have a pretty big hit on that. That gets smoothed out. So now, that -- drugs that hit the catastrophic pay more, and it's more of a balanced contribution, independent of drug type. That's a good thing for companies like Lilly that have more commonly used drugs. The other thing though you're pointing out, and I think this really would affect a product like Verzenio for us primarily, is patients who get thrown into the catastrophic have this uncapped 5% contribution today.

And we know that not only do patients discontinue, and you mentioned about compliance rates, which are better in neuro-oncology in Europe than U.S., for instance, but I think also, you'll see more initiation because physicians and their families screen themselves out of even qualifying for an appropriate medication for themselves because of financial burden and maybe go to chemotherapy instead of a more targeted therapy.

So that presents another way in which we can both improve health care in America, but also prospects for medicines that Lilly makes. So those are good things. As I said, on balance, we still don't like it because of the negotiation side, but those are positive elements.

[Kevin Hern, Vice President of Investor Relations at Eli Lilly and Company]

Thanks, Dave. Carter, thanks for your question. Next caller please.

[Operator]

The next caller is Kerry Holford from Berenberg. Please go ahead.

[Kerry Holford, Analyst at Berenberg Bank]

Thank you. Two questions, please. Firstly, on price, you have clearly cited lower realized prices for a number of drugs this quarter, particularly in the U.S. And I'm wondering if you can speak specifically to how that's evolving in the GLP-1 market? Any particular step-up on Trulicity rebates since the Mounjaro launch? What are your expectations there going forward? This is a trend.

There's higher rebates related to channel mix [Indecipherable] by your competitor [Indecipherable] yesterday. So interested again in your perspective here. And then a quick question for Anat. When do you anticipate having greater clarity on the possible repeal in the 2017 Tax Act?

[Kevin Hern, Vice President of Investor Relations at Eli Lilly and Company]

Great. Thanks, Kerry. We'll go to Mike for the question on incretin market price trends and then Anat for the question on the tax reform. Mike?

[Michael B. Mason, Senior Vice President and President, Lilly Diabetes at Eli Lilly and Company]

Yes. That's a good question. I think, naturally, payers will ask for additional rebates when a new product joins a formulary. So that's part of our discussion on being disciplined and why you don't want to accelerate those discussions too rapidly, and that's a factor into it. So I think net-net, I don't expect any step-changes in GLP pricing as a result of Mounjaro launching, but then is part of the natural pressure intention and contract negotiations.

[Kevin Hern, Vice President of Investor Relations at Eli Lilly and Company]

Thanks, Mike. Anat?

[Anat Ashkenazi, Senior Vice President and Chief Financial Officer at Eli Lilly and Company]

So on taxes, what we're seeing is we're seeing broad bipartisan support for appealing that change, of capitalizing R&D expenses, as was evident in the recent Senate letter. This could come. We believe it will come through by the end of this year, most likely, if I had to guess, I would say, towards the end of the year, potentially as part of [Indecipherable]

[Kevin Hern, Vice President of Investor Relations at Eli Lilly and Company]

Kerry, thanks for your question. Next caller please.

[Operator]

The next caller is Mohit Bansal from Wells Fargo. Please go ahead.

[Mohit Bansal, Analyst at Wells Fargo & Company]

Thank you very much for taking my question. Maybe one question on the SELECT early study, the prediabetic study. So maybe one for you, Dan. What you really need to show, is how long the trial, and what you need to show in terms of delta versus control, to be -- to prove that it is beneficial in prediabetic patients. And wouldn't oral GLP be a better drug for those patients?

[Kevin Hern, Vice President of Investor Relations at Eli Lilly and Company]

Thanks, Mohit. So Dan, the question on SURPASS-EARLY, the prediabetes study, and then whether oral GLP would be better there.

[Daniel M. Skovronsky, Senior Vice President and Chief Scientific and Medical Officer at Eli Lilly and Company]

Yes. That's an early diabetes study. But I think you're -- I don't believe we've disclosed the design of the endpoints yet. But I think with respect to diabetes prevention, that's certainly a very interesting area. And there are currently FDA guidance on what's required to show diabetes -- prevention of diabetes, to get that kind of claim. It's a very high bar.

And I suspect the field will come to an understanding about which drugs can actually decrease the risk of getting diabetes, to prevent diabetes, before any drug is able to get that indication. I think this class of medications, particularly tirzepatide, has great promise in that area. We highlighted the data from SURMOUNT-1, that showed the vast majority, more than 95% of people, who were prediabetic at the beginning of the study had normal glucose levels at the end of the study.

That's really promising. Longer-term data, including drug washout data, required to get to that kind of claim.

[Michael B. Mason, Senior Vice President and President, Lilly Diabetes at Eli Lilly and Company]

Yes. Maybe if I can add -- are you done?

[Kevin Hern, Vice President of Investor Relations at Eli Lilly and Company]

Mike? Yes.

[Michael B. Mason, Senior Vice President and President, Lilly Diabetes at Eli Lilly and Company]

Yes, I can add a few comments on that. This study is for people with diabetes, have been diagnosed with diabetes. And we want to test what the impact could be on their progression of diabetes if you put a product like tirzepatide on very early in the course of treatment. And so this will study putting -- starting patients who are naive, are very early in their treatment, versus standard of care.

We think weight loss with the benefits of a GLP and GIP and the improvement in beta cell function and insulin sensitivity could have a profound impact of disrupting type two diabetes. And so that's what we're testing in the study. It's one that we're very excited about. And we've already started to see weekly injectables being used earlier than just the injection space as more people understand that a weekly injection through an auto-injector is a good experience.

And actually, some consumers prefer orals, but some actually consume -- prefer a weekly injection with an auto-injector, like Mounjaro and Trulicity has.

[Kevin Hern, Vice President of Investor Relations at Eli Lilly and Company]

Thanks, Mike. Mohit, thanks for your question. Next caller please.

[Operator]

The next caller is Evan Seigerman with BMO Capital Markets. Please go ahead.

[Evan Seigerman, Analyst at BMO Capital Markets]

Hi, thank you so much for taking my question. So as part of the FDA acceptance of your accelerated approval filing for donanemab, have you gotten clarity from the agency if the iADRS scale is acceptable as an acceptable endpoint for full approval? And can you also talk about what you saw with the N3pG4 to move it into Phase III?

[Kevin Hern, Vice President of Investor Relations at Eli Lilly and Company]

Thanks, Evan. We'll go to Dan for those.

[Daniel M. Skovronsky, Senior Vice President and Chief Scientific and Medical Officer at Eli Lilly and Company]

Yes. Thanks for the two Alzheimer's questions. So first one is on the accelerated approval application for donanemab and whether that's an opportunity to gain more insight about acceptability of iADRS, which is our primary endpoint in the Phase III study. It may not be an opportunity actually because the accelerated approval is not contingent on an understanding of the cognitive or functional benefits of donanemab, which we saw in the Phase II trial.

Instead, the accelerated approval is just simply contingent on a demonstration of lowering amyloid levels. So I'm not sure. We'll get into a deep discussion of that, although clearly, it's relevant in terms of the confirmatory study, TRAILBLAZER-2. The second question that you raised was with respect to Remternetug, the N3pG4 molecule. This is a next-generation anti-plaque or plaque-removing antibody, designed to attack the same power glutamate residue that donanemab goes after.

We've seen robust ability of this molecule to clear plaques in patients. Remember that a liability or a potential liability of donanemab is antidrug antibodies, and so we've also noted that this molecule doesn't have that issue. So given the potent robust clearance of plaque, combined with lack of ADAs, we think this is amenable to alternative dosage forms that could be more conveyed to patients. So we'll be looking at that.

[Kevin Hern, Vice President of Investor Relations at Eli Lilly and Company]

Thanks, Dan. Evan, thanks for your question. Next caller please.

[Operator]

The next caller is Robyn Karnauskas with Truist Securities. Please go ahead.

[Kevin Hern, Vice President of Investor Relations at Eli Lilly and Company]

Robyn? Okay, perhaps we can move to the next caller?

[Operator]

The next caller is Colin Bristow with UBS. Please go ahead.

[Colin Bristow, Analyst at UBS Group]

Hey, good morning. Thanks for taking the question. And Kevin, thanks for all the great work. On business development, you have two deals announced today. Can you just give us your updated thoughts on the areas of interest, the deal size and then just what your -- what's the feedback you're getting from potential targets on their willingness to transact given the market backdrop? And then secondly, just on donanemab, what's your latest thinking?

Or have you had any interactions with CMS with regards to how a single successful Phase III trial would be viewed in the context of reimbursement?

[Kevin Hern, Vice President of Investor Relations at Eli Lilly and Company]

Thank you, and I'll invite Anat to weigh in on the BD question and then Anne for the donanemab question.

[Anat Ashkenazi, Senior Vice President and Chief Financial Officer at Eli Lilly and Company]

Thanks. So on the business development side and in terms of areas of interest and what we're seeing in the marketplace, given some recent changes in valuation, our areas of interest remain really unchanged from what we've had in the last several quarters, which is our core therapeutic areas, so looking at potential breakthrough innovations in those areas in different stages of preclinical and clinical development as well as in areas of new modalities, where we talked about expansions that we have in those areas.

We do look at, and what you've seen us do in the last 12, 18 months, is more earlier-stage opportunities, where we can bring things into our pipeline to supplement our existing portfolio and add value as well as innovation in our core areas. Valuations, while they have changed in the last six months or so, has not historically been the rate-limiting factor in terms of pursuing business development opportunities.

It's really finding those breakthrough opportunities where we make those investments. And you asked about kind of target engagement and whether or not those views have changed, we're looking at, whether we look at a partnership or acquisition, everyone wants to get to value. If the opportunity is there, then we tend to be able to get to a good spot.

[Kevin Hern, Vice President of Investor Relations at Eli Lilly and Company]

Thanks, Anat. Anne?

[Anne E. White, Senior Vice President and President, Lilly Neuroscience at Eli Lilly and Company]

Thanks for the question on donanemab. So it's our belief that the data package for donanemab, which includes, obviously, both TRAILBLAZZER-ALZ and ALZ 2, should be sufficient to meet what CMS has described as that high level of evidence in NCD. So the TRAILBLAZER-ALZ study, obviously, was the first disease-modifying Alzheimer's trial to successfully meet its primary endpoint.

And if TRAILBLAZZER-ALZ two also delivers that direct evidence of clinical benefits, as we expect it would, then we'll engage with CMS to discuss that path quickly and broadly expand access to the treatment. And we have been engaging with CMS throughout the process, and we'll continue to do so moving forward. And they've shown openness to continue to meet.

Obviously, they noted in the NCD the promise of donanemab, and they've shown a great deal of interest in understanding the TRAILBLAZER-2 Phase III program. And so I think we'll have more clarity on the timing of reconsideration, that we're able to share that data with them in mid-2023. They've stated publicly they're committed to rapid reconsideration.

But I think we'll have to update you on timing once they have that data in hand, middle of next year, and we discuss next steps with them.

[Kevin Hern, Vice President of Investor Relations at Eli Lilly and Company]

Thanks, Anne. Colin, thanks for your questions. We've exhausted the queue. Dave, for the close.

[David A. Ricks, Chair and Chief Executive Officer at Eli Lilly and Company]

Okay. Great. Thanks for joining us today. And I just want to apologize for all the technical challenges on the call. We'll get that cleaned up. We do appreciate you participating today and your interest in our company. And please follow up with our IR team, including Joe Fletcher, our new leader, and if you have questions we have not addressed today on the call. Have a great day.

[Operator]

[Operator Closing Remarks]

Participants

Corporate Executives

• Kevin Hern, Vice President of Investor Relations
• David A. Ricks, Chair and Chief Executive Officer
• Anat Ashkenazi, Senior Vice President and Chief Financial Officer
• Daniel M. Skovronsky, Senior Vice President and Chief Scientific and Medical Officer
• Michael B. Mason, Senior Vice President and President, Lilly Diabetes
• Anne E. White, Senior Vice President and President, Lilly Neuroscience
• Ilya Yuffa, Senior Vice President and President, Lilly International
• Jacob Van Naarden, Senior Vice President and CEO of Loxo

Analysts

• Geoff Meacham, Bank of America Co.
• Chris Schott, JPMorgan Chase & Co.
• Seamus Fernandez, Guggenheim
• Louise Chen, Cantor Fitzgerald
• Terence Flynn, Morgan Stanley
• Tim Anderson, Wolfe Research
• Steve Scala, Cowen Inc
• Andrew Baum, Smith Barney Citigroup
• David Risinger, SVB Securities
• Chris Shibutani, The Goldman Sachs Group, Inc.
• Carter Gould, Barclays PLC
• Kerry Holford, Berenberg Bank
• Mohit Bansal, Wells Fargo & Company
• Evan Seigerman, BMO Capital Markets
• Colin Bristow, UBS Group AG