Eli Lilly and Company

Thank you, ladies and gentlemen, for standing by. Welcome to the Q1 2019 earnings call. At this time, all participants are in the listen-only mode. Later, we will conduct a question-and-answer session. Instructions will be given at that time. Should you require assistance during the call, please press star then zero. As a reminder, this conference is being recorded. I would now like to turn the conference over to our VP of Investor Relations, Kevin Hearn. Please go ahead.

Thank you. Good morning. Thank you for joining us for Eli Lilly and Company's Q1 2019 earnings call. I'm Kevin Hearn, Vice President of Investor Relations. Joining me on today's call are Dave Ricks, Lilly's Chairman and CEO, Josh Smiley, our Chief Financial Officer, Dr. Dan Skowronski, President of Lilly Research Laboratories, Christy Shaw, President of Lilly Biomedicines, Anne White, President of Lilly Oncology, and Enrique Quintero, President of Lilly Diabetes and Lilly USA. We're also joined by Kim Macko and Mike Zafar 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 a number of factors, including those listed on Slide 3 and those outlined in our latest Forms 10-K and 10-Q 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, a reminder that our commentary will focus on non-GAAP financial measures, which exclude the financial contribution from Elanco during the first quarters of both 2018 and 2019. and present earnings per share as though the full disposition via the exchange offer was complete on January 1st, 2018. We believe this view provides insights into the drivers of our underlying business performance as a dedicated pharmaceutical company and provides for cleaner comparisons to future and prior periods. Now I'll turn the call over to Dave for a summary of our progress in Q1.

Thanks, Kevin. The company's focus in 2019 is to execute on a broad and exciting range of new products and indication launches to build and accelerate our pipeline and continue to improve the focus and competitiveness of our company. We are pleased with the progress on these objectives in Q1 2019. First quarter revenue grew 5% in constant currency despite a significant decline in U.S. CLS revenue due to the recent loss of exclusivity. We made significant investments in key commercial and late-stage pipeline products and delivered non-GAAP EPS of 2%, putting us on track to meet our full-year financial guidance. Our key growth products, which all launched since 2014, contributed meaningfully to our performance and account for 39% of our revenue. While still relatively early in their product life cycles, these products continue to drive growth, led by Trulicity, Tulse, Brisenio, and in collaboration with Beringer Ingelheim, Jardiance, and Basaglar. Total volume growth across the entire portfolio was 7%, and excluding Cialis was nearly 13%. U.S. diabetes contributed strong volume growth of nearly 17%. Oncology growth accelerated in the US, Japan, and China. And our international markets grew volume by 9% as global launches of key brands continue across our major geographies. Excluding the impact of FX on international inventories sold, Q1 non-GAAP operating income as a percent of revenue decreased by nearly 600 basis points versus Q1 2018, reflecting a decrease in gross margin and investment in recent launches and multiple late-stage pipeline opportunities. On the same basis, operating income as a percent of revenue in Q1 increased by nearly 80 basis points versus Q4 2018, reflecting progress toward our 2019 full-year margin goal of 28%. We exit Q1 on track with our plans for the full year. We have invested in our future growth while delivering strong volume growth across the business. Importantly, several pipeline assets achieved milestones this quarter, including the regulatory submission for the Trulicity Rewind study for a CV outcomes label in the U.S. and in Europe. The FDA granted priority review for Mgality for cluster headache in the U.S., the submission of ultra-rapid Lyspro for type 1 and type 2 diabetes in both Europe and Japan, the U.S. submission of our first connected device, a connected care pre-filled insulin pen, and we had several phase 3 data readouts. We also announced an updated timeline for expected regulatory action timing for nasal glucagon. We received notification The FDA has extended the review timeline by up to three months to analyze information requested late in that review cycle. We remain confident in Azabukigan's submission package and look forward to FDA action in the coming months. In terms of capital deployment, we continue to utilize our strong operating cash flow to access value-creating external innovation, which will enhance our future growth prospects. We completed the acquisition of Loxo Oncology, adding key pipeline assets and expanding our presence into precision medicine. We completed the full separation of Alanko Animal Health via an exchange offer, retiring 65 million Lilly shares worth approximately $8.2 billion. We entered into a global licensing and research collaboration with Immunext, focused on new medicines for autoimmune disease. We announced a global licensing and research collaboration with Avidity, focused on potential new medicines in immunology and select other indications. We announced an agreement to sell the rights in China for two legacy Lilly antibiotic medicines, as well as a manufacturing facility to Edding Farm, a Chinese-based specialty pharmaceutical company. And we returned an additional $3.5 billion to shareholders via a previously announced accelerated share repurchase program and $600 million in dividends, representing a 15% increase per share versus 2018. Moving on to slides five and six, you'll see more details on key events since our February earnings call, including our announcement to introduce Insulin Lice Pro, a low-priced version of Humalog in the U.S., Now I'll turn the call over to Josh to review our Q1 results and to provide an update on our post-Dolanco financial guidance.