Eli Lilly and Company

Ladies and gentlemen, thank you for standing by and welcome to the Lilly Q3 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, Joe Fletcher, Senior Vice President of Investor Relations. Please go ahead.

Thank you, Lois, and good morning. Thank you for joining us for Eli Lilly and Company's Q3 2022 earnings call. I'm Joe Fletcher, Senior Vice President of Investor Relations. And joining me on today's call are Dave Ricks, Lilly's Chair and CEO, Anat Ashkenazi, Chief Financial Officer, Dr. Dan Skowronski, Chief Scientific and Medical Officer, Anne White, President of Lilly Neuroscience, Ilya Yufe, President of Lilly International, Jake Van Narden, CEO of Loxo at Lilly, Mike Mason, President of Lilly Diabetes, and Patrick Janssen, President of Lilly Immunology and Lilly USA. We're also joined by Mike Springnether, Kenta Ueha, and Lauren Zerke of the Investor Relations Team. During this conference call, we anticipate making projections and forward-looking statements based on our current expectations. Our actual results could differ materially due to several factors, including those listed on Slide 3. 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. Well, thanks, Joe.

Over the last three months, we continued to successfully execute our strategy. On the commercial front, we drove strong volume-based growth of our recently launched medicines, including Manjaro, which has seen an impressive initial uptake. At the same time, we advanced our late phase pipeline, progressing towards potential launches of four new medicines by the end of next year, while also investing in our early stage pipeline and new modalities like gene therapy. To meet the growing demand for our products and prepare for future launches, we have also continued to invest in expansion of our manufacturing footprint. I'd highlight two areas of high unmet need where Lilly is progressing new medicines to improve patient outcomes, obesity and Alzheimer's disease. In obesity, we are pleased that the FDA has granted fast-track designation for terzipatide for adults with obesity, enabling us to potentially bring this promising medicine to patients even sooner. We're also initiating Surmount MMO, our phase three morbidity and mortality and obesity study, to evaluate improved outcomes for patients with obesity. In Alzheimer's disease, our Phase III Trailblazer ALS II study for Dononimab continues to progress towards a top-line readout in mid-2023. And we continue to work with the FDA to pursue an accelerated approval based on our Trailblazer ALS data. We also announced completion of our submission for Levrakizumab in atopic dermatitis in both the U.S. and the EU. With already completed submissions for Denonimab, Pertabrutinib, Murikizumab, we are excited by the potential to launch four new medicines between now and the end of 2023. We are experiencing an unprecedented rate of new product launches for Lilly, and undoubtedly one of the most impressive rates in our industry. Turning to our strategic deliverables on slide four, Q3 revenue grew 7% in constant currency. Worldwide volume grew a robust 14%. Key product growth grew 19% and now account for 70% of our core business revenue, a reflection of the youth and durability of our marketed product portfolio. We're encouraged to see the continued global adoption of products like Versenio, Tulse, Jardians, and our Inkerton medicines, including Monjaro and Trulicity. Our non-GAAP gross margin was 79% in Q3, which is in line with the same period last year. Our non-GAAP operating margin was 28.9%, which includes a negative impact of approximately 90 basis points attributed to acquired in-process R&D and development milestone charges. For pipeline milestones, we shared several important updates since our Q2 earnings call, including FDA fast-track designation for terzipatide for adults with obesity, with completion of a rolling submission expected by mid-2023, EU and Japan approval for Monjaro for the treatment of adults with type 2 diabetes, U.S. and EU submission of leperkizumab for moderate to severe atopic dermatitis, and FDA accelerated approval for Retevmo in RET fusion positive advanced or metastatic solid tumors regardless of tumor type and traditional approval in adults with locally advanced or metastatic RET fusion-positive non-small cell lung cancer. Dan will discuss this in more detail later, but we are excited to have announced the acquisition of ACUOS, which aims to accelerate efforts in gene therapies that promise to restore, improve, and preserve hearing for patients living with disabling hearing loss. This acquisition demonstrates our continued commitment to advancing genetic medicine at Lilly. And finally, we distributed nearly $900 million in dividends to our shareholders. On slide five, you'll see a list of key events since our Q2 earnings call, including several important personnel, COVID-19 antibody, and ESG updates. We announced the upcoming retirement of Steve Fry, our Executive Vice President of Human Resources and Diversity, following more than 35 years at our company. I'd like to thank Steve for playing a key role in advancing our diversity, equity, and inclusion agenda and leading our efforts to be the premier employer in our region and our sector. We also welcome Eric Dozier, who will succeed Steve. Eric has nearly 25 years of experience at Lilly and a strong track record of developing people and teams that deliver impressive business results. I'm confident he is the right leader to progress our people strategy, which is vital for Lilly to achieve our ambitious growth objectives ahead. In August, we began to make our COVID-19 antibody, bebtolivumab, available for purchase to states, hospitals, and certain other providers through a sole distributor. In Q3, we shipped an additional 600,000, or 60,000, I should say, doses of bebtolivumab to the U.S. government for approximately $110 million. These are to be used for the financially vulnerable patients through a product replacement program. At this time, we are not anticipating any further U.S. government orders for Bebta-Levimab. With regards to our ESG efforts, we published our inaugural Sustainability Bond Allocation and Impact Report, highlighting the allocation of approximately 128 million euros across a range of sustainability projects since the issuance of the sustainability bond in September of 21. For more information about this and the many other aspects of our ESG program, you can visit our Lilly ESG website. Now I'll turn the call over to Anat for a more detailed review of our Q3 results.