This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk10: type 2 diabetes. And so that's what we're testing in a study. It's one that we're very excited about. And we've already started to see, you know, weekly injectables being used, you know, earlier than just the injection space as more people understand that, you know, a weekly injection through an oral injector is a good experience. And actually some consumers prefer orals, but some actually consume you know, prefer a weekly injection with an oral injector like Montreal and Trulicity has.
spk15: Thanks, Mike. Well, thanks for your question. Next caller, please.
spk21: The next caller is Evan Siegerman with BMO Capital Markets. Please go ahead.
spk19: Kyle, thank you so much for taking the question. So as part of the FDA acceptance of your accelerated approval filing for Denanamab, 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 three? Thank you.
spk15: Thanks, Evan.
spk13: We'll go to Dan for those. Yeah, thanks for the two Alzheimer's questions. The first one is on the accelerated approval application for Denenumab and whether that's an opportunity to gain more insight about acceptability of IADRS, which is our primary endpoint in the phase three 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 Denetimab, which we saw in the Phase 2 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, you know, clearly it's relevant in terms of the confirmatory study, Trailblazer 2. The second question that you raised was with respect to remteranatug, the N3PG4 molecule. This is a next-generation anti-plaque or plaque-removing antibody designed to attack the same pyroglutamate residue that the Nanomab goes after. We've seen robust ability of this molecule to clear plaques in patients. Remember that a liability or potential liability of Denimab is anti-drug antibodies, and so we've also noted that this molecule doesn't have that issue. So given the potent, robust clearance of plaques combined with lack of ADAs, we think this is amenable to alternative dosage forms that could be more convenient to patients. So we'll be looking at that.
spk15: Thanks, Dan. Evan, thanks for your questions. Next caller, please.
spk21: The next caller is Robin Konaskis with Truist Securities. Please go ahead.
spk25: Robin?
spk15: OK. Perhaps we could move to the next caller.
spk21: The next caller is Colin Bristow with UBS. Please go ahead.
spk22: Hey, good morning. Thanks for taking the questions. And Kevin, thanks for the great work. On business development, we had two deals announced today. Can you just give us your updated thoughts on BD, areas of interest, deal size, and then just what's the feedback you're getting from potential targets on their willingness to transact given the market backdrop? And then secondly, just on DananaMap, 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. Thanks.
spk15: Thank you. I'll invite Anat to weigh in on the BD question and then Ann for the Dynanamab question.
spk24: Thanks. So on the business development side 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 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. You know, valuations, while it has changed in the last six months or so, it has not historically been the rate-limiting factor in terms of pursuing business development opportunities, 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're looking 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.
spk26: Thanks for that. Anne? Thanks for the question on Denanamab. So it's our belief that the data package for Denanamab, which includes obviously both Trailblazer ALS and ALS2, should be sufficient to meet what CMS has described as that high level of evidence in the NCD. So the Trailblazer Alls study obviously was the first disease-modifying Alzheimer's trial to successfully meet its primary endpoint. And if Trailblazer Alls 2 also delivers that direct evidence of clinical benefit, 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 will continue to do so moving forward. And they've shown an openness to continue to meet. Obviously, they noted in the NCD the promise of Denanumab, and they've shown a great deal of interest in understanding the Trailblazer 2 Phase 3 program. And so I think we'll have more clarity on the timing of reconsideration once we're able to share that data with them in mid-23. 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 by next year and we discuss next steps with them.
spk15: Thanks, Anne. Colin, thanks for your questions. We've exhausted the queue. Dave, for the close.
spk17: 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. If you have questions, we have not addressed today on the call. Have a great day.
spk21: Thank you. And ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. And for using AT&T teleconference service, you may now disconnect.
spk27: We're sorry. Your conference is ending now. Please hang up. Thank you. Thank you. Thank you.
spk21: And ladies and gentlemen, thank you for standing by. Welcome to the Lilly Q2 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session, and instructions will be given at that time. Should you require assistance during the call, please press star then zero, and an operator will assist you offline. And as a reminder, your conference is being recorded. I would now like to turn the conference over to your host, Kevin Hearn, Vice President of Investor Relations. Please go ahead.
spk15: 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 AT&T's side. So thanks for your patience. I'm Kevin Hearn, 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 Skobronski, Chief Scientific and Medical Officer, Anne White, President of Lilly Neuroscience, Goya Yufa, President of Lilly International, Jake Van Narden, CEO of Loxo at Lilly, Mike Mason, President of Lilly Diabetes, and Patrick Johnson, President of Lilly Immunology and Lilly USA. We're also joined by Mike Sprengnether, Kenzu Ueha, and Lauren Zerke 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.
spk17: Thanks a lot, Kevin. In Q2, we achieved a number of impactful pipeline milestones, including approval and launch of Monjaro in the U.S., the FDA submission and acceptance of Dononimab, as well as Pertabrutinib, and positive top-line results for Librakizumab and EU and Japan submissions for Mirakizumab. 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 Monjaro 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 2 diabetes. We remain focused on gaining broad, open access for Manjaro 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 Fresenio, Jardia, and Centralicity was offset by lower prices, as well as for Olympia'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 Olympia, the sale of Cialis rights in China and COVID-19 antibodies revenue grew 6% compared to Q2, 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 developments since our Q1 earnings call for all five, including the U.S. approval and launch of Monjaro and type 2 diabetes and a positive CHMP opinion in the European Union. FDA acceptance and priority review designation for Dononimab in early symptomatic Alzheimer's disease. FDA acceptance and priority review designation for Prudiprutinib in mantle cell lymphoma for patients previously treated with a BTK inhibitor. Submissions for amirakizumab and ulcerative colitis in the EU and in Japan. Positive top-line 52-week data for leberkizumab in moderate to severe atopic dermatitis. And we also announced U.S., EU, and Japan regulatory approval for Illumiant and 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 and 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 Bebtolivumab for approximately $275 million, in an ongoing effort to provide COVID-19 treatment options for patients. Doses of beptolivumab 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 US government, we intend to begin making beptolivumab 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 to sales 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.
spk24: Thanks, Dave.
spk23: Slide six, summary. Recorded. Please rerecord your message. At the tone, please record your message. When you have finished recording, simply hang up or press the pound key for further options.
spk17: Just continue or not, and we'll see what's happening.
spk24: 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, resulting in $170 million of one-time revenue impact. And this quarter, we also saw the full impact of the loss of exclusivity for Limta in Europe and Japan and have started to see the impact of multiple generic entrants in the U.S.
spk23: When excluding revenue from Limta... To review or rerecord your message, press 1. To mark your message urgent, press 2. To mark your message private, press 3. To send your message as is, press the pound key.
spk24: Hopefully everyone on the call can hear us.
spk23: Your message has been sent. To send a message to another subscriber, enter the area code and phone number of that subscriber or press the star key to enter your own mailbox. Nothing has been selected. To send a message to another subscriber, enter the area code and phone number of that subscriber or press the star key to enter your own mailbox.
spk24: I'll continue and hopefully everyone can hear us.
spk23: Nothing has been selected. To send a message to another subscriber, enter the area code and phone number of that subscriber or press the star key to enter your own mailbox.
spk24: When excluding revenue from a LIMTA, the sales of Cialis Rites in China in Q2 of last year and COVID antibodies. Okay, hopefully you heard. I will repeat my last sentence. So when excluding revenue from Olympta, the sales of CialisRite in China in Q2 of last year and COVID antibody, 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 IP R&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 46 cents 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 VPS. 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 impact 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 non-deductible development milestones. 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 IP R&D and development milestone charges, which had 46 cents negative impact in Q2 of this year compared to 4 cents 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 Olympta, 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, Versenio, and Jorians. We experienced a net price decline of 8% for Q2, driven by lower realized prices for Humalog, Olympta, and Forteo due to higher rebated segments making slightly larger portion of the business, higher contracted rates, and the list price reduction for insulin lice per injection this year. Lower realized prices for TALTs 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 Alinta, which lost exclusivity in June of 2021, revenue grew 12% in constant currency, driven primarily by volume growth for Trulicity, Jardians, Pulse, and Versenio. 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 Olympta, which both faced generic entry beginning in 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 Versenio, Tyvet, Trulicity, and Tulse. 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 Tyvet, 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., E.U., 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 nine, 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 Versenio driven by the edge of an indication including recent acceleration and new-to-brand share of markets. 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 2 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 Manjaro, which could offer a step change in innovation for the treatment of type 2 diabetes and other metabolic indications as option in this class of medicine. Given the excitement and significant interest with the FDA approval of Manjaro for type 2 diabetes, I'd 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 Monjaro for patients with type 2 diabetes. The financial results you see from Monjaro today reflect significant utilization of samples were accepted and copay 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 Monjaro'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 for Monjaro, including the most recent IQ via data showing over 20% share of market for new-to-brand prescriptions in the type 2 diabetes injectable incretin class. We are also pleased to see that total LILI new-to-brand share in the type 2 diabetes injectable incartin class has grown nearly 12 percentage points since the launch of Monjara. Given the heavy utilization of copay cards as we build out access for Monjara, 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 Monjara, which is at the high end of our contemplated scenarios. We do not anticipate supply constraints for the U.S. launch of Monjara, 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 our global manufacturing capacity to support Monjara 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, Beptilovimab, 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 Olympta US Fat and Expiry. In addition, Q3 of 2021 revenue benefited from Illumian COVID-19 sales that will provide roughly 2.5 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 investment for selected key growth products in the second half of the year. Our guidance now includes 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 percent, 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 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 percent. Based on these changes, we have lowered our reported EPS guidance by 34 cents to now be in the range of $6.96 to $7.11 per share, and lowered our non-GAAP EPS guidance by 25 cents to be in the range of $7.90 to $8.05. The $0.25 reduction, or non-GAF EPS range, is driven entirely by the impact of foreign exchange rates, as the impact of EPS of acquired IP R&D and development milestone charges and selected products are offset by impact of additional sales of Beptilolumab. Now I will turn the call over to Dan to highlight our progress in R&D.
spk13: 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 One, 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 1st, 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 Insight, we're proud that Illumient has now been approved as a first in disease systemic treatment for adults with severe alopecia areata in the US, 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 Leberkizumab Phase III monotherapy maintenance studies in patients with moderate to severe atopic dermatitis, which showed 80% of Leberkizumab 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 healthcare providers. Lilly's planning submission of labrakizumab to the FDA in 2022, followed by submissions to other regulatory agencies around the world. Almirall has rights to develop and commercialize labrakizumab for atopic dermatitis in Europe, and is planning for submission to the EMA in 2022. Shifting to mirakizumab, we presented results from the Phase III maintenance study, LUCIN-2, at the DDW meeting. This study showed that for patients who responded to treatment on mirakizumab in the 12-week induction period, 50% of patients who received mirakizumab maintenance therapy achieved clinical remission at one year, compared to one-fourth of patients randomized to placebo. In addition to the U.S. regulatory submission of mirakizumab 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 a BTLA agonist antibody in SLE and our new KB1.3 inhibitor shown in Phase I. Our IL-2 conjugate is now listed under its non-proprietary name, ResPag-Aldisleukin. Moving to diabetes. We're thrilled that Manjaro 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 2 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 terzapatine for treatment of weight management in participants with obesity or 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 prediabetes at the start of the study, over 95% returned to normal glucose levels. The efficacy, safety, and tolerability data in SIRMOUT1 exceeded our expectations. Based on our existing robust data set for triseptide, we've 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 SIRMOUT1 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 triseptide, and we've now initiated our phase three study evaluating triseptide 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 triseptide compared to standard of care when initiated early in the course of type 2 diabetes. Later this year, we'll begin Surmount 5, a head-to-head study comparing weight reduction for trisepatide versus semaglutide 2.4 milligrams. And finally, later this year, we expect to initiate Surmount MMO, our phase 3 morbidity and mortality and obesity study. Moving to our weekly basal insulin FC, also known as BIF, we've now initiated our second phase 3 trial, QUINT2, which is evaluating BIF compared to Degludec in adults with type 2 diabetes who are starting basal insulin for the first time. Our Phase II GGG tri-agonist is now listed under its non-proprietary 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're announcing today that the FDA has accepted the filing for pertabrutinib and mantle cell lymphoma for patients previously treated with a BTK inhibitor, with priority review designation under 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 one development. And finally, moving to neuroscience. We're also pleased to announce the FDA has accepted the filing for Zanumab 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 ALS II, by mid-2023, which, if positive, will form the basis of our application for traditional regulatory approval. You'll also notice we're now referring to N3PG4 by its non-proprietary name, Remternitug. We plan to initiate the Phase III program for Remternitug 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.
spk17: Thanks, Dan. Before we go to Q&A, let me briefly sum up the progress we've 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 Manjaro. Excluding the impact of acquired IP R&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 Monjaro in type 2 diabetes and Illumia in alopecia areata. We also saw progress on our next wave of potential growth catalysts with the FDA acceptance of Dononimab as well as Pertabrudinib. and positive top-line readout for leprakizumab and additional submissions for mirakizumab. 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'd like to comment as well. This is Kevin Hearn'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'd 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.
spk15: Thanks, Dave. Thanks for the kind words. I will definitely miss it. We'd 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.
spk21: Thank you. And ladies and gentlemen, if you wish to ask a question, please press 1 then 0 on your touchtone phone. You will hear an acknowledgement tone that you've been placed in the queue. And you may remove yourself from queue at any time by repeating the 1-0 command. And if you're using a speakerphone, please pick up your handset before pressing the number. Once again, if you have a question, please press 1 then 0 at this time. The first question will come from the line of Jeff Meacham from Bank of America. Please go ahead.
spk06: Hey, guys. Thanks so much for the question. I just have two quick ones. One on Manjaro. I know we're pretty early in adoption, but maybe just talk about the source of new starts, meaning, you know, are they GLP-naive or experienced? And then talk about the expected payer dynamics looking to 2023. And for Dan on Terzepatide, I know your regulatory discussions, you know, are ongoing in obesity, but Do you think you can also use the safety database from diabetes and other indications when you look to, you know, kind of NASH, sleep apnea, et cetera? Thank you.
spk15: Thanks, Jeff. We'll start off with Mike on Monjaro, and then Dan, if you want to comment on the regulatory for just appetite obesity. Mike?
spk10: Yeah, thanks, Jeff. Thanks for the question. What we've seen earlier, first of all, we're incredibly excited about the very robust launch we've had with Monjaro. We're also excited about the source of business that we're seeing. 72% of Monjaro's is coming from new patients into the entering class. We think that's very important for accelerating class growth, and we have seen class growth both at total prescriptions, new to brand, and NTS accelerate since Monjaro'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 earlier, we're actually seeing Lilly-Incretin share market growing, which is the sign of a robust, solid foundation that we're laying. And so MBRX have increased our Lilly share in the injectable market by 12%, and new treatment starts by 10%. 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.
spk13: Thanks, Mike. Dan? Yeah, thanks, Jeff, for the question. You're pointing out correctly that we intend to pursue a number of related indications for TERS appetite. 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 2 diabetes and obesity representing a large number of patients such as NASH. So where applicable, safety exposures from similar populations 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 and 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 Surbast program as well as Surmount.
spk15: Thanks, Dan. Jeff, thanks for your questions. Next caller, please.
spk21: The next caller is Chris Schott from J.P. Morgan. Please go ahead.
spk05: Great. Thanks so much for the questions. 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 a health care reform. I know you love answering these questions, but I guess since you've just been so involved in this process, we just appreciate your thoughts on the latest bill we're seeing and just kind of the impact you'd expect it to have on the industry and maybe really more specifically. Thank you.
spk15: Thanks, Chris. We'll go to Mike first and then on obesity and then Dave for health care reform.
spk10: Yeah, great question. You know, the Surmount One data was phenomenal data for patients and physicians who treat obesity. I think there's a combination of effects that will affect, you know, employers and the government to increase access for obesity agents. One is, you know, the data we produce. And I think, you know, obviously the first data we're producing is the weight loss as well as the factors like lipids and blood pressure and the the data we produce so far has been stellar. So I think the better data we produce in surmount one through surmount four is just gonna help us in the short term. Long term, we think, you know, 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 our highly, have a lot of overlap with obesity. 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 on obesity. So we're very bullish on the long-term prospects of the obesity market and trigepatides are all in it.
spk17: Thanks, Mike. Dave? Yeah, Chris, thanks for the question. You know, 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 what we're looking at passes, maybe that's your question, as you know, we've been for the Part D reforms. I think they're 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 basing patient cost sharing on net pricing, which we were 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 26 anyway. But in the midterm, there'll 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 stepwise development, like cancer, where we start 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 probably want better oral cancer drugs in the future and orphan disease drugs. So, you know, I think that's probably not being talked about enough, and I just wanted to emphasize that.
spk15: Thanks, Dave. Chris, thanks for your questions. Next caller, please.
spk21: The next caller is Seamus Fernandez from Guggenheim. Please go ahead.
spk09: Oh, great. Thanks for the question. So, just a couple of questions here. You know, 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, you know, I see triple G listed in two phase two clinical trials. But Mazetide, your oxymodulin product is, you know, listed. you know, just in sort of the phase one in diabetes. Wondering if you guys have officially made a decision to move forward with GGG or if Masutide is still potentially in the mix as kind of your next-gen asset in the obesity space. Thanks.
spk17: Thanks, Seamus. We'll go to Dave and then Dan. Yeah, thanks, Seamus. I mean, I guess 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 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, you know, we could accept that weight loss will provide broader benefits for the earlier question about when, you know, 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'll have attenuated life cycle in the government business, and that will have to be factored in, but, you know, 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 and 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, you know, this bill raises $300 billion for the federal government off the back of the industry, probably cost the industry, you know, at least half a 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, you know, when we were leading pharma at Lilly, you know, 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.
spk15: Thanks, Dave. Dan?
spk13: Yeah, thanks, Seamus, for the question on our glucagon-containing molecules. We previously said that we have two in clinical development, masdotide, which is our oxyntamodulin, that's glucagon plus GLP-1, and retrotrutide, which is our triple G, which is glucagon, GLP-1, and GIP-1. You're right that the GGG molecule is ahead in development. That's in Phase 2, and the auxinomodulin is still in Phase 1. 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 SIRM-MT1. 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 3. Just like when we were doing Phase II interseptide, 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 one or both of these molecules going to Phase III, it means we saw that kind of a big step change.
spk15: Thanks, Dan. Seamus, thanks for your questions. Next caller, please.
spk21: The next caller is Louise Chin with Kantor. Please go ahead.
spk20: Hi. Thanks for taking my questions. So my first question for you was on the obesity product. Do you see any potential read-throughs from Novo's select study to Zepatide? And have you given any color on how you want to structure your studies on an outcome basis for obesity? 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 Denonimab, especially in front of some of these phase three trials we'll read out at the end of the year. Thank you.
spk15: Thanks, Louise. We'll go to Dan for the question on the SELECT trial and then Ann for the question on Alzheimer's.
spk13: Hi, Louise. Thanks for that question. Of course, we always root 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 announcing that they passed the interim analysis but didn't stop the trial for efficacy is fine. I think there's really pretty significant differences here between terzapatide 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 probability of 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 the 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.
spk26: Thanks, Dan. Ann? Yes, Luis, thanks for the question on Alzheimer's. So the fact is, bottom line, we remain convinced about the mid- and long-term opportunity for Denanumab in the Alzheimer's portfolio. Our focus right now is obviously on the rapid availability of Denanumab for the appropriate patients through the accelerated approval pathway and then reconsideration with Phase III data. We remain optimistic that with, particularly with traditional FDA approval, FDA, or sorry, CMS would not continue to limit coverage for unlabeled treatments. Now, obviously, you mentioned competitor readouts. 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 and CD with accelerated approval. But what that does do, the accelerated approval, is really enable us to engage quickly with CMS following 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 accelerated pathway, is use 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.
spk15: Thanks, Anne. Louise, thanks for your questions. Next caller, please.
spk21: The next caller is Terrance Flynn from Morgan Stanley. Please go ahead.
spk03: Hi. Thanks so much for taking the questions. Two for me. I guess, Mike, you talked about, you know, aiming for long-term success with Monjaro 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, you know, your ability to supply the market here, obviously launch, you said at the high end of your expectations. Anat, I think you touched on this a little bit during your comments in terms of, you know, confidence in U.S. supply. But how are you thinking about the broader supply dynamics globally? And then remind us, you know, your flexibility to increase supply if needed over time. Thank you.
spk15: Thanks, Terris. We'll go to Mike for both questions on Manjaro, both access and price, and then just global supply outlook.
spk10: Okay. Thanks, Terris, for those questions. You know, 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, you know, we don't, you know, give specifics in our net price negotiations. you know, publicly. But, you know, we're pleased with the progress. We're staying disciplined, you know, trying to accelerate access for 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 Monjaro, as Anat said, you know, we were planning for success, and so we had a lot of different launch scenarios, and we had launch scenarios that considered this level of uptake. As Anat shared, we don't anticipate any supply constraints for the U.S. launch of Monjaro. 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 biac and green at Fort Monroe, and those will 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.
spk15: Thanks, Mike. Terrence, thanks for your questions. Next caller, please.
spk21: Next caller is Tim Anderson with Wolf Research. Please go ahead.
spk11: 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 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 see on trial design, specifically primary endpoint, and perhaps most importantly, the timing of having results. Thank you.
spk15: 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 no low-fructose appetite.
spk13: Yeah, thanks for that 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 and 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 assumption. So that is yet to be disclosed. Thanks, Dan. Mike?
spk10: Yeah, on the head-to-head versus SEMA 2.4 milligram, there's been no head-to-head trials comparing terzapatide to SEMA 2.4, so we believed it was a good opportunity to do that to demonstrate terzapatide'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 true hepatitis versus SEMR 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 timeline at a later date as we get closer to posting it on clinicaltrials.gov.
spk15: Thanks, Mike. Tim, thanks for your questions. Next caller, please.
spk21: The next caller is Steve Scala from Cohen. Please go ahead.
spk04: Thank you. A couple questions. First, Lily 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. Thank you.
spk15: 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?
spk18: Yep. Steve, thanks for the question. You know, first, what we've seen is an accelerated demand for Trulicity in many of our international markets, and there's probably three sources of 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. It's quite dynamic, and we're ramping up as much as we can to meet this amplified demand 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.
spk13: Thanks, Ilya. Dan? Yeah, thanks, Steve. I understand where your question's going and probably don't 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 a 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, you know, 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 pre-specified. 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 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'll 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 continues kind of decision.
spk15: Thank you, Stan. Steve, thanks for your questions. Next caller, please.
spk21: Next caller is Umar Rafat from Evercore. Please go ahead.
spk17: Over.
spk21: Looks like his line dropped. We'll move to Andrew Baum from Citigroup. Please go ahead.
spk08: Thank you. A couple of questions. First from Munchausen. you uniquely have labeling requiring second forms of contraception during titration, which Rogovi doesn't have. The recent Supreme Court overturning of Roe versus Wade puts increased emphasis on the confidence in family 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? and the obesity indication rolled through, it does seem from the FDA review that there's a real pharmacologic concern rather than the force of the data here. And then second, on the positive side, in relation to the pertinent filing, assuming you get approval from Mantle Cell, I'm assuming that you would therefore get inclusion in the NCCN guidelines for Bruin for CLL. So could you talk to how you think the expedited approval through Mantle Cell may accelerate your penetration of the CLL market while you're waiting for the phase three trial program to mature.
spk15: Many thanks. Thanks, Andrew. We'll go to Mike for the first question on Monjaro labeling and the social climate, and then we'll go to Jake for the question on protobrutinib.
spk10: Thanks, Andrew. I appreciate the question. Let me just even set everyone. Our label on Monjaro advises women using oral contraception to switch to or add to a non-oral contraception methods for four weeks during initiation of the product and then during the dose titration for each dose. So healthcare professionals are aware of this. Given the profound benefits of Mongero, this hasn't impacted at all HCP and consumer interest in Mongero. If you look at the data in the marketplace, we have data with IQVIA through July 22nd, which is just five weeks of full promotion, and Monjaro's already reached 20% new brand share of market. So we haven't seen this as an issue at all. As the future works for and evaluating the issue, we have nothing new to report to investors at this time, but this has not been an issue that has impacted Montero's uptake at all.
spk16: Thanks, Mike. Jake? Yeah, thanks for the question. So just as a matter of policy, we submit company-sponsored guideline requests 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. 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.
spk15: Thanks, Jake. Andrew, thanks for your questions. Next caller, please.
spk21: The next caller is David Reisinger from SVB Securities. Please go ahead.
spk28: Yes, thank you very much. So my questions relate to Munjaro, please. First, could you clarify the share gain percentages? So I believe the comment was that Lilly's combined trulicity and Munjaro share gained by 12 percentage points So wanted to just understand, you know, what was the starting point and where is the figure today? And then there was also a comment about new to treatment starts, excuse me, 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 positive? planning to gate its ex-US Moonjaro launches due to the manufacturing supply constraints that you're currently up against. Thanks very much.
spk15: Thanks, David. We'll go to Mike for the questions around share gain and then Ilya for the questions around OUS launch.
spk10: Okay, David. 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 3rd. We had our launch meeting the week after ADA, so the week of June 14th. So we have been promoting kind of full on since then. And so when you compare where we're at today, we have IQVIA data through July 22nd, so five weeks of promotion. So we're comparing our IQVIA MBRX volume or new-to-brand volume and share at July 22nd versus June 13th in the injectable AnchorTran market. And so what we've seen since then is that Mongero's MBRX share has reached 20.5. We saw Truelicity's MBRX has declined by only 8.4 share points. And so that produces a net gain in the Lilly injectable incretin 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.
spk18: Thanks, Blake.
spk25: Ilya?
spk18: Yeah, David, thanks for the question on the launch of Manjaro outside of the U.S. and our thoughts around that. You know, one of the key aspects of how we take a look at launching outside of the U.S. is 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 Mount Jaro and looking forward to launching Mount Jaro outside of the U.S. and leveraging our commercial expertise and strength in diabetes across our markets outside of the U.S.
spk17: Thanks, Celia. David, thanks for your calls. David, just to clarify, though, because the way you framed your question, you said we're up against supply constraints. In the case of Manjaro, as we said today on the prepared text, we don't anticipate supply constraints in the U.S. Of course, before introducing a product in a new market, we will want to make sure we can fully initiate new patients and supply. And based on our competitors' actions, it's hard to predict, you know, a year from now what we'll need in a given market. It's not that we don't have supply. It's more the demand picture is unstable. 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.
spk19: Thanks, Dave.
spk17: Thank you.
spk15: Next caller, please.
spk21: The next caller is Chris Shabotny from Goldman Sachs. Please go ahead.
spk07: Thank you very much. Two questions. The first one, 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 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? Thank you.
spk15: Thanks, Chris. We'll go to Mike for the question on Manjaro and then Jake for the question on Verzenio.
spk10: Yeah, that's a good question. I think we're getting what we expected. We thought we would see, you know, more new patients into the class. That's who we talk about with healthcare professionals, and that's what we're getting. We're not surprised by that. You know, pretty typical what we'd expect with the new GLP launch. Now, what you would expect when you have a new product like Mongero, especially with endocrinologists, that, you know, they don't always see naive patients. They have a good bolus of patients. who are already on GLPs. And so when we talk to them about Montero, they're excited about the opportunity to actually switch some of their patients who are not performing or not at goal at the current GLP. And so I think early on, you'll see a higher percent coming from switches versus naive. And so today we have 72% that is naive. If you look at... 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 Montero's performance since Montero's launched.
spk16: Thanks, Mike. Jake? Yeah, thanks for the question. 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 Monarchy 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 is something we hoped would see happen, we think we're seeing some share gains in the metastatic setting as well, particularly among physicians who've historically used other CDK4-6 inhibitors are gaining experience with Versenio 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 monarchy 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. But it is an 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 monarchy. And, you know, we're awaiting that analysis of overall survival, as we've talked about in the past. So, yeah, we're pleased with how it's going. We see plenty of opportunity ahead to continue the momentum.
spk15: Thanks, Jake. Chris, thanks for your questions. Next caller, please.
spk21: Next caller is Carter Gold from Barclays. Please go ahead.
spk14: 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 Manjaro numbers and 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 US versus maybe other markets where those out-of-pocket costs don't exist. Thank you.
spk15: Thanks, Carter. We'll go to Mike for the first question, Manjaro, and then Dave for the follow-up on drug pricing reform and the impact.
spk10: 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, reiterating 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.
spk17: Thanks, Mike. Dave? Yeah. 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 pay for into Part D. Today, the way the donut hole math works, if you go back a couple 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 Versenio 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 oral oncology in Europe than the U.S., for instance, but I think also you'll see more initiation because physicians and their families screen themselves out of even qualifying patients. 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.
spk15: Thanks, Dave. Carter, thanks for your questions. Next caller, please.
spk21: The next caller is Carrie Holford from Beringberg. Please go ahead.
spk01: Thank you. Two questions, please. Firstly, on price, you've clearly cited lower reliance 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 GRP-1 market. Any particular step up on true listening rebates since the Manjaro launch? What are your expectations here going forward? This is a trend. It's higher rebates, negative channel mix, noted by your competitor on their results call yesterday. So interested to get any of your perspectives here. And then a quick question for Anat. When do you anticipate having greater clarity on the possible repeal of the 2017 tax act? Thank you.
spk15: Great. Thanks, Kerry. We'll go to Mike for the question on anchored and market price trends, and then Anat for the question on tax reform. Mike?
spk10: Yeah, 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 of being disciplined and why you don't want to accelerate those discussions too rapidly, and that's a factor into it. So I think, you know, Nanette, I don't expect any step changes in GLP pricing as a result of Montero launching, but that is part of the national pressure and tension in contract negotiations.
spk24: Thanks, Mike. Anat? So on taxes, what we're seeing is we're seeing broad bipartisan support for repealing 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 a text . Thanks for that.
spk15: Carrie, thanks for your questions. Next caller, please.
spk21: The next caller is Mohit Bansal from Wells Fargo. Please go ahead.
spk02: Great. Thank you very much for taking my question. Maybe one question on the select early study, the pre-diabetic study. So maybe a question for you, Dan. What you really need to show along the trial and what you need to show in terms of delta versus control to prove that it is beneficial in pre-diabetic patients? And wouldn't oral GLP be a better drug for those patients? Thank you.
spk15: Thanks, Mo. So, Dan, the question on SURPASS early, the prediabetes study, and then whether oral GLP would be better there.
spk13: Yeah, that's an early diabetes study, but I think you're, you know, 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, you know, 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 or even prevent diabetes before any drug is able to get that indication. I think this class of medications, particularly terzapatide, has great promise in that area. We highlighted the data from Sermont-1. that showed the vast majority, more than 95% of people, were pre-diabetic 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.
spk10: Yeah, maybe 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 Terzepatide on, you know, very early in the course of treatment. And so this will study putting, you know, starting patients who are naive or very early in their treatment versus standard of care. We think, you know, weight loss with the benefits of a GLP and GAP and the improvement in beta cell function and insulin sensitivity could have a profound impact of disrupting type 2 diabetes. And so that's what we're testing in a study. It's one that we're very excited about. And we've already started to see, you know, weekly injectables being used, you know, earlier than just the injection space. As more people understand that, you know, a weekly injection through an auto-injector is a good experience. And actually some Some consumers prefer orals, but some actually consume, you know, prefer a weekly injection with an oral injector like Montaro and Trulicity has.
spk15: Thanks, Mike. Well, thanks for your question. Next caller, please.
spk21: The next caller is Evan Siegerman with BMO Capital Markets. Please go ahead.
spk19: Hi, all. Thank you so much for taking the question. So as part of the FDA acceptance of your accelerated approval filing for Denanamab, 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 three? Thank you.
spk15: Thanks, Evan.
spk13: We'll go to Dan for those. Yeah, thanks for the two Alzheimer's questions. The first one is on the accelerated approval application for Denenumab and whether that's an opportunity to gain more insight about acceptability of IADRS, which is our primary endpoint in the phase three 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 Denetimab, which we saw in the Phase 2 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, you know, clearly it's relevant in terms of the confirmatory study, Trailblazer 2. The second question that you raised was with respect to remteranatug, the N3PG4 molecule. This is a next-generation anti-plaque or plaque-removing antibody designed to attack the same pyroglutamate residue that dinanamab goes after. We've seen robust ability of this molecule to clear plaques in patients. Remember that a liability or potential liability of Denimab is anti-drug antibodies, and so we've also noted that this molecule doesn't have that issue. So given the potent, robust clearance of plaques combined with lack of ADAs, we think this is amenable to alternative dosage forms that could be more convenient to patients. So we'll be looking at that.
spk15: Thanks, Dan. Evan, thanks for your questions. Next caller, please.
spk21: The next caller is Robin Kronowskis with Truist Securities. Please go ahead.
spk25: Robin?
spk15: OK. Perhaps we could move to the next caller.
spk21: The next caller is Colin Bristow with UBS. Please go ahead.
spk22: Hey, good morning. Thanks for taking the questions. And Kevin, thanks for all the great work. On business development, we had two deals announced today. Can you just give us your updated thoughts on BD, areas of interest, deal size, and then just what's the feedback you're getting from potential targets on their willingness to transact given the market backdrop? And then secondly, just on DananaMap, what's your latest thinking or have you had any interactions with CMS with regards to how A single successful phase three trial would be viewed in the context of reimbursement. Thanks.
spk15: Thank you. I'll invite Anat to weigh in on the BD question and then Ann for the Denana question.
spk24: Thanks. So on the business development side 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 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. You know, valuations, while it has changed in the last six months or so, it 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're looking 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.
spk26: Thanks for that. Anne? Thanks for the question on Denanamab. So it's our belief that the data package for Denanamab, which includes obviously both Trailblazer ALLs and ALLs II, should be sufficient to meet what CMS has described as that high level of evidence in the NCD. So the Trailblazer Alls study obviously was the first disease-modifying Alzheimer's trial to successfully meet its primary endpoint. And if Trailblazer Alls 2 also delivers that direct evidence of clinical benefit, 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 will continue to do so moving forward. And they've shown an openness to continue to meet. Obviously, they noted in the NCD the promise of Denanumab, and they've shown a great deal of interest in understanding the Trailblazer 2 Phase 3 program. And so I think we'll have more clarity on the timing of reconsideration if we're able to share that data with them in mid-23. 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 by the middle of next year and we discuss next steps with them.
spk15: Thanks, Anne. Colin, thanks for your questions. We've exhausted the queue. Dave, for the close.
spk17: 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. If you have questions, we have not addressed today on the call. Have a great day.
spk21: Thank you. And ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. And for using AT&T teleconference service, you may now disconnect.
Disclaimer