Eli Lilly and Company

Ladies and gentlemen, thank you for standing by. Welcome to the Lilly Q1 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will have an opportunity for questions and answers with instructions given at that time, as well as now. If you have a question, please press 1, then 0 on your touchtone phone. You'll hear an indication that you've been placed in queue, and you may remove yourself from the queue by repeating the 1, then 0 command. We ask you to wait approximately two minutes before you begin pressing those buttons. Please pick up your handset and make sure your phone is unmuted before you press any buttons. As a reminder, your conference call today is being recorded. I'll now turn the conference call over to your host, Vice President, Investor Relations, Kevin Hearn. Go ahead, please.

Good morning. Thank you for joining us for Eli Lilly and Company's Q1 2020 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, chief financial officer, Dr. Dan Skobronski, chief scientific officer, Ann White, president of Lilly Oncology, Patrick Johnson, president of Lilly Biomedicines, and Mike Mason, president of Lilly Diabetes. We're also joined by Sarah Smith and Mike Sapar of the investor relations team. In addition, I would like to welcome Anat Hakim, who recently joined Lilly as Senior Vice President and General Counsel. Anat joins Lilly with a wealth of experience in the healthcare industry and more broadly across the legal profession. Her prior experiences include General Counsel at WellCare Health Plans, Associate General Counsel at Abbott, as well as working for a number of years at Foley & Lardner and Latham & Watkins. 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 the extent and duration of the effects of the COVID-19 pandemic, as well as other factors listed on slide three and those outlined in our latest forms 10-K, 10-Q, and any 8-Ks 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 2019, and present earnings per share as though the full disposition via the exchange offer was complete on January 1, 2019. Now, I'll turn the call over to Dave for some opening comments.

Thanks, Kevin. Well, these are challenging times for all of us, as the COVID-19 pandemic has affected the way we live, the way we conduct business, and most importantly, the health and wellness of millions of people. Like all of you, we're hopeful that the decisions to implement social distancing will be effective to curb the spread of COVID-19. as our industry works urgently to enhance testing and speed therapies to market to treat and then prevent the virus. Today's call will have a different structure than normal. Before we discuss our Q1 results, we'll describe the impact of COVID-19 and the pandemic in general is having on our business and the actions we've taken to respond to the resulting global crisis. Our Q1 results were driven by very strong fundamentals, with additional benefit from increased inventory across the supply chain, including at the patient level. This is as a result of the COVID-19 pandemic. Despite that near-term benefit, the COVID-19 pandemic is likely to have a negative impact on our business in the future. We expect headwinds later in 2020 and potentially beyond, such as destocking as supply chains normalized from the recent demand surge, decreases in new prescriptions as a result of fewer patients visiting physicians' offices, potential changes in segment mix in the U.S. due to rising unemployment, and pricing pressures resulting from the fiscal on government-funded healthcare systems around the world. While we do not yet know the extent and duration of these impacts, Like everyone around the world, we're hopeful that the massive mobilization of scientific and technical resources occurring across this industry and in collaboration with government and academic labs will yield multiple effective therapies in the coming months and an effective vaccine in calendar 21. While it's difficult to predict the specifics of how the world manages through this pandemic, it seems clear our industry will play a leading role. In the midst of the outbreak and in its aftermath, it seems equally clear that investing in research and development to address and then conquer human disease has never been more important, and this is likely to remain true for some time. As we've navigated the crisis, we've acted with speed and agility, focusing on the needs of patients, our employees, and the communities we serve and operate in. I'll provide a summary of our response, then Dan will describe our ongoing efforts to develop a treatment for COVID-19, and Josh will walk through potential financial impact of our outlook going forward. Slide four summarizes our strategic approach and actions to date. As you can see, we focused on five areas, maintaining a safe supply of and access to our medicines, reducing the strain on the medical system, developing a treatment for the virus, keeping our employees safe, and supporting our communities. To ensure that 40 million-plus patients we serve have access to their medicines, early in the outbreak, we took a number of steps to maintain the supply of medicines around the world. To limit their exposure to the virus, we reduced personnel at our manufacturing sites to the bare minimum, required to operate our facilities in enhanced conditions, already robust precautionary measures for safety and cleanliness. The majority of our supply chain is multi-sourced, and for materials we supply from one source, we keep sufficient inventory on hand to avoid disruptions. Even with increased demand and customer stocking, we have sufficient inventory and production capacity for all our products. This includes all forms of insulin. And we don't currently anticipate any issues meeting patient needs through the remainder of the pandemic. Our manufacturing sites in the US, Europe, and China have remained operational through this crisis. We're proud of the extraordinary efforts of our manufacturing colleagues who've worked diligently to supply our medicines to patients around the world who depend on them. In addition to the numerous programs currently available through the Lilly Diabetes Solution Center, we announced the introduction of the Insulin Value Program. This allows patients with commercial insurance or without insurance to limit their monthly out-of-pocket expenses for insulin to $35 per prescription. Of note, the Solution Center has seen a significant increase in daily calls since this new benefit was announced. Patient affordability continues to be a top priority, and we remain committed to helping people access the medicines they need. We've also made a number of decisions which reduce the strain on the medical system. These include pausing new clinical starts and enrollment for most ongoing programs, suspending our in-person customer visits to physicians, repurposing our labs to conduct diagnostic testing here in Indiana for COVID-19, and creating a drive-through testing facility for healthcare workers and first responders in the Indianapolis area. We took these actions because they are the right thing to do during these challenging times and to do our part to combat the spread of COVID-19. Dan will give a more complete pipeline update later, but I would like to highlight that we do not expect significant changes to the timelines for our ongoing late-stage studies, except for the previously announced delays for the GI indications of our IL-23 antibody, mirakizumab. In terms of addressing the significant changes unmet need of treating COVID-19, we've acted upon several opportunities, which we hope will result in a treatment option. These include partnering with Abcelera to develop potential antibody therapies, which we expect will enter the clinic this summer. Participating in the National Institute of Allergy and Infectious Disease Adaptive COVID-19 Treatment Trial with our JAK inhibitor, Veracidinib. initiating a Phase II clinical trial with an antibody targeting angiopoietin 2 to explore its potential use in reducing the progression of acute respiratory distress syndrome related to COVID-19. The need for new medicines is urgent, and we've mobilized our development team at a record pace. Keeping our employees safe and healthy and our company running smoothly is, of course, also a top priority. We've implemented remote work practices, added health and wellness benefits, and provided additional compensation for those essential employees routinely coming to our site, such as those in manufacturing. We've also created opportunities for employees to volunteer during work hours to support our medical system, including helping staff our drive-through testing facility. To date, Lilly has tested nearly 30,000 people for COVID-19, which represents over a third of all tests conducted in the state of Indiana. while absorbing all associated expenses. We are building on this capacity by developing serological antibody tests that will be critical in the next phase of the pandemic. In addition, we've been supporting our local communities by funding or contributing to public health awareness campaigns, as well as providing assistance and deploying available resources to fight the pandemic. I would also note our appreciation for the high level of responsiveness and cooperation from the FDA and other government agencies in the U.S. and abroad as we partner together to fight COVID-19 and to minimize the negative impact to drug development timelines for our other innovative medicines. Across the biopharmaceutical industry, we're working around the clock, collectively driving forward to address the acute medical need created by the COVID-19 pandemic. And to further elaborate on that, I'll turn the call over now to Dan to provide more details on the ongoing efforts to treat COVID-19 and our regular pipeline update.