Eli Lilly and Company Q2 2021 Earnings Report

Eli Lilly and Company EPS Results

• Actual EPS: $1.87
• Consensus EPS: $1.89
• Beat/Miss: Missed by -$0.02
• One Year Ago EPS: $1.89

Eli Lilly and Company Revenue Results

• Actual Revenue: $6.74 billion
• Expected Revenue: $6.59 billion
• Beat/Miss: Beat by +$153.43 million
• YoY Revenue Growth: +22.60%

Eli Lilly and Company Announcement Details

• Quarter: Q2 2021
• Date: 8/2/2021
• Time: Before Market Opens
• Conference Call Date: Tuesday, August 3, 2021
• Conference Call Time: 5:53AM ET

Eli Lilly and Company (NYSE:LLY) (NYSE: LLY) is a global pharmaceutical company founded in 1876 and headquartered in Indianapolis, Indiana. The company researches, develops, manufactures and commercializes a broad range of medicines and therapies for patients worldwide. Eli Lilly maintains operations and commercial presence across North America, Europe, Asia and other regions, serving both developed and emerging markets. The company has been led in recent years by President and Chief Executive Officer David A. Ricks.

Lilly’s core activities center on discovery and development of small-molecule and biologic therapies across multiple therapeutic areas, including diabetes and metabolic disease, oncology, neuroscience, immunology and pain. Its commercial portfolio includes longstanding and well-known medicines as well as newer specialty products; examples of medicines associated with the company include Humalog (insulin), duloxetine (Cymbalta), fluoxetine (Prozac), the GLP-1/GIP receptor-directed agent tirzepatide (marketed for type 2 diabetes) and a range of oncology and migraine treatments such as Alimta, Verzenio and Emgality. The company combines internal discovery programs with external collaborations and licensing arrangements to broaden its pipeline and commercial reach.

Research and development is a central focus for Lilly, with substantial investment in clinical development, regulatory activities and manufacturing scale-up to move novel candidates from laboratory to clinic. The company operates multiple research centers and manufacturing facilities and emphasizes biopharma capabilities, including biologics and antibody-based therapies. Its pipeline spans early-stage discovery through late-stage clinical trials, targeting both established and emerging disease areas.

Strategically, Eli Lilly emphasizes innovation in chronic and complex diseases, expanding patient access to new treatments and pursuing global commercialization. The company’s operations combine proprietary R&D, manufacturing infrastructure and global commercial teams to deliver therapies to healthcare providers and patients, while also engaging in partnerships and licensing to accelerate development and distribution.

Eli Lilly and Company Q2 2021 Earnings Call Transcript

Key Takeaways

• Revenue grew 23% year-over-year in Q2 2021 (20% in constant currency), driven by 22 points of volume growth; core business rose 12% excluding COVID-19 antibody sales and China Cialis divestiture.
• Achieved key pipeline milestones such as FDA breakthrough designation for donanemab, positive Phase III SURPASS-4 data for tirzepatide, and the first successful HFpEF trial for Jardiance, with global filings planned by year-end.
• Updated 2021 guidance: raised core-business revenue outlook by $200 million but cut COVID-19 antibody revenue guidance by $400 million, while maintaining non-GAAP margin and EPS targets.
• Returned approximately $1.3 billion to shareholders in Q2 via dividends and buybacks, and authorized up to $5 billion in additional share repurchases on top of existing programs.
• FDA review of Olumiant for atopic dermatitis has been delayed due to broader JAK class safety evaluations, with no new action date yet announced.

Presentation

[Operator]

Ladies and gentlemen, thank you for standing by, and welcome to Lilly's Q2 earnings 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. As a reminder, today's conference is being recorded. I would now like to turn the conference over to your host, Vice President of Investor Relations, Kevin Hern. Please go ahead.

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

Good morning. Thank you for joining us for Eli Lilly and Company's Q2 2021 earnings call. I'm Kevin Hern, Vice President of Investor Relations, and joining me on today's call are Dave Ricks, Lilly's Chairman and CEO, Anat Ashkenazi, Chief Financial Officer, Dr. Dan Skovronsky, Chief Scientific and Medical Officer, Anne White, President of Lilly Oncology, Ilya Yuffa, President of Lilly Bio-Medicines, Mike Mason, President of Lilly Diabetes, and Jake Van Naarden, CEO of Loxo Oncology at Lilly. We're also joined by Lauren Zierke, Kento Ueha, and Sara Smith of the Investor Relations team. During this conference call, we anticipate making projections and forward-looking statements based on our current expectations. Our actual results could differ materially due to a number of factors, including those listed on slide three.

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

Additional information concerning factors that could cause actual results to differ materially is contained in our latest Forms 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, a reminder that our commentary will focus on non-GAAP financial measures. Now, I'll turn the call over to Dave for a summary of our second quarter results.

[Dave Ricks, Chairman and CEO at Eli Lilly and Company]

Thank you, Kevin. Q2 of last year was the peak of the pandemic's negative impact on our business, and one year later, I'm proud of the innovation and resilience displayed by my Lilly colleagues to deliver against our objectives in new ways, while also mobilizing to develop treatments to help combat COVID-19. Looking at Q2 2021, we were encouraged by the increasing worldwide vaccination rates as well as the underlying environment in most of our major markets. COVID-19-related stocking in Q1, followed by destocking in Q2 of last year, complicates quarterly performance comparisons. Therefore, looking at revenue growth in the first half of 2021 better reflects the underlying trends in our business. On today's call, we will provide year-over-year comparisons for both Q2 and the first half of the year. In the first half of 2021, we delivered 11% growth in our core business. This excludes COVID-19 antibody revenue.

[Dave Ricks, Chairman and CEO at Eli Lilly and Company]

This was buoyed by strong volume-driven growth across key brands and major geographies, including the U.S., Europe, and China. Turning specifically to Q2, revenue grew 23% compared to Q2 2020 or 20% in constant currency. This performance was driven entirely by volume growth of 22 percentage points. As previously highlighted in Q2 2020, we saw a reversal of the $250 million pandemic-related product stocking, which occurred in Q1 2020. When excluding COVID-19 antibody revenue, the Q2 2020 COVID-19-related destocking, and the sale of Cialis in China, our core business grew 12% for the quarter, up from 7% in Q1 on the same basis. We were pleased to see sequential top-line growth in the core business this quarter, signaling that healthcare systems' continued recovery from the pandemic and the strength of our underlying business.

[Dave Ricks, Chairman and CEO at Eli Lilly and Company]

Key growth products continue to drive our revenue growth and represent 54% of our core business this quarter. Our non-GAAP gross margin was 79.3% in Q2, or 79.7% excluding the impact of foreign exchange on international inventory sold. Excluding the FX impact, our gross margin increased by approximately 60 basis points compared to last year. Our non-GAAP operating margin was 29.4%, representing an improvement of nearly 140 basis points. We are pleased to see the operating margin expand year-over-year, and we expect continued expansion in the second half of this year. On the pipeline front, we achieved multiple milestones since our earnings call in April, including receiving breakthrough therapy designation for donanemab and announcing our plan to submit to the FDA under the accelerated approval pathway.

[Dave Ricks, Chairman and CEO at Eli Lilly and Company]

Announcing positive phase III results for tirzepatide's SURPASS-4 trial with planned global submissions of the SURPASS program for tirzepatide in type 2 diabetes by the end of 2021. Obtaining approval for Jardiance in partnership with Boehringer Ingelheim for HFpEF in Europe and announcing positive phase III results from the EMPEROR-Preserved trial for Jardiance in HFpEF, the first and only successful trial for this patient population. Initiating phase III trial results for pirtobrutinib in mantle cell lymphoma, tirzepatide in HFpEF, and Verzenio in HR+ HER2- early breast cancer and now prostate cancer. We also continue to augment our pipeline with business development deals and announce the acquisition of Protomer Technologies.

[Dave Ricks, Chairman and CEO at Eli Lilly and Company]

We welcome the Protomer team to Lilly and are excited to bring this technology to our diabetes pipeline as we believe glucose-sensing insulin may become the next generation for insulin treatment to improve the quality of life for people living with diabetes. Lastly, on financials, we returned approximately $1.3 billion to shareholders via the dividend and share repurchases in the quarter and authorized the repurchase of up to $5 billion in stock, in addition to the $500 million authorization remaining under our 2018 share repurchase program. Moving on to slides five and six, you'll see a list of key events since our Q1 earnings call, including a May webcast, which highlighted our updated environmental, social, and governance strategy and our sustainability efforts, as well as the launch of a new ESG website to serve as a comprehensive resource to provide increased transparency regarding the company's ESG goals and progress.

[Dave Ricks, Chairman and CEO at Eli Lilly and Company]

As part of our goal to become carbon neutral in our own operations at our manufacturing plant in Kinsale, we recently inaugurated a new solar field, which is now the largest in Ireland. We also announced donations of COVID-19 therapies at no cost to low-income and lower-middle-income countries heavily impacted by the pandemic, and are proud of the impact we are having around the world as we work to combat COVID-19. I'll turn the call over to Anat to review our Q2 results and to provide an update on our financial guidance for 2021.

[Anat Ashkenazi, CFO at Eli Lilly and Company]

Thanks, Dave. Slides seven and eight summarize financial performance in the second quarter and year-to-date. I'll focus my comments on non-GAAP performance. Revenue increased 23% this quarter compared to Q2 2020 or 12% excluding the items Dave mentioned earlier, representing strong momentum for our core business. Given the COVID-19-related stocking and de-stocking seen between Q1 and Q2 2020, our first-half performance of 11% revenue growth or 8% in constant currency, excluding COVID-19 antibody revenue, is a more accurate reflection of underlying performance, and the sequential quarter-over-quarter revenue growth better represents the trends in our core business. Sequential revenue growth from Q1 to Q2 for our core business, an increase in vaccination rates in many major markets, and the majority of our sales reps now being back in the field suggest our recovery from the pandemic was in line with our expectations for the quarter.

[Anat Ashkenazi, CFO at Eli Lilly and Company]

We're particularly pleased with the strong volume growth across key brands like Trulicity, Taltz, Verzenio, and Jardiance. Verzenio in the U.S. grew nearly 6 percentage points in share total prescription exiting June compared to the prior year, while Trulicity, Taltz, and Jardiance increased their leading market share in the same period, while class growth accelerated. These products, along with other key growth products, represented 54% of revenue in the core business this quarter. Gross margin as a % of revenue declined 30 basis points to 79.3% in Q2. The decrease in gross margin % was driven primarily by the unfavorable effect of foreign exchange rates on international inventory sold. Excluding this FX impact, gross margin as a % of revenue grew 60 points this quarter. Total operating expenses grew 18% this quarter compared to the same quarter last year.

[Anat Ashkenazi, CFO at Eli Lilly and Company]

Marketing, sales, and administrative expenses increased 16% as the base period in Q2 2020 included a meaningful reduction in direct-to-consumer marketing and customer-facing expenses as healthcare system closed. R&D expenses increased 20%, driven by investment in exciting late-stage pipeline opportunities, including pirtobrutinib, tirzepatide, donanemab, and lebrikizumab. In Q2, we also invested approximately $85 million in COVID therapies R&D, bringing our total COVID-19 R&D investment to approximately $300 million year-to-date. Net of COVID-19 R&D investment, operating expense growth was 18% compared to Q2 of 2020 and 10% for the first half of the year. Operating income increased 29% compared to Q2 of 2020, and operating income as a percent of revenue was 29.4% for the quarter, an increase of 140 basis points compared to the prior year. This increase was driven by revenue growth outpacing expense growth. We expect continued margin expansion in the second half of 2021.

[Anat Ashkenazi, CFO at Eli Lilly and Company]

Other income and expense was income of $5 million this quarter, compared to expense of $57 million in Q2 2020, driven by income from European patent settlements for Alimta. Our effective tax rate was 14.4%, an increase of 350 basis points compared with the same quarter last year. The effective tax rate for both periods were reduced by net discrete tax benefit, with the lower net discrete tax benefit reflected in the second quarter of 2021. At the bottom line, net income and earnings per share increased 29% in Q2 and 22% year-to-date, or 30% and 24%, respectively, in constant currency. On slide nine, we quantify the effect of price, rate, and volume on revenue growth across the world. We are encouraged by the growth seen across most of our major geographies. This quarter, U.S. revenue grew 18% compared to the second quarter of 2020.

[Anat Ashkenazi, CFO at Eli Lilly and Company]

Adjusting for COVID-19 antibody revenue and the Q2 2020 COVID-19-related de-stocking, the core business grew 8% in the U.S., up from 5% in Q1 on that same basis. These results were driven entirely by volume, led by Trulicity, Taltz, Verzenio, and Jardiance. Pricing was a 1% drag on U.S. revenue growth this quarter, with increased rebates to maintain excellent access and higher growth in lower net price segments, largely offset by lower utilization in the 340B segment, changes for estimates to rebates and discounts, and, to a lesser extent, modest list price increases. The year-to-date price decline of 3% in the U.S. is in line with our net price expectations for the full year.

[Anat Ashkenazi, CFO at Eli Lilly and Company]

Specific to Taltz in the U.S., performance for the quarter was in line with the expectation we described on the Q1 earnings call, and we were pleased to see a return to net sales growth this quarter as volume gains more than offset price declines. Taltz Q2 performance benefited from a favorable change to prior estimates for rebates and discounts and COVID-19-related inventory destocking last year. Excluding these items, Taltz still returned to double-digit growth in the second quarter. We believe the net price decline for Taltz in the first half of 2021 represents the underlying full price trend, and that continued volume growth will drive net sales acceleration in the second half of the year. While midterm price trends are currently stable, given increasing variability in period mix, we continue to expect quarterly variability in reported U.S. net price changes across our business.

[Anat Ashkenazi, CFO at Eli Lilly and Company]

Moving to Europe, revenue grew 27% in constant currency. Excluding COVID-19 antibody revenue and the negative impact of Q2 2020 COVID-19-related customer buying patterns, revenue grew 14% in constant currency, driven entirely by volume growth, primarily for Trulicity, Taltz, Olumiant, and Emgality. We continue to be pleased with the momentum of our business in Europe and expect continued growth in the second half of this year, excluding the expected impact from the loss of exclusivity for Olumiant. In Japan, revenue grew 2% in constant currency, driven primarily by the launches of Olumiant and Emgality. Revenue growth in Japan continues to be negatively impacted by the decreased demand for several products that have lost market exclusivity. Our key growth products grew 21% in Q2 in Japan and represented approximately 50% of the business there.

[Anat Ashkenazi, CFO at Eli Lilly and Company]

Recent surges of COVID-19 cases continue to negatively impact recovery in Japan, though we currently expect improved revenue growth in the second half of the year based on the uptick of newer products. In China, revenue grew 106% in constant currency, primarily driven by the divestiture of Cialis and the launches of Tyvyt and Trulicity. Excluding the impact of the Cialis transaction, our revenue in China grew 35% in constant currency. We are excited about the continued momentum in China as sales of new medicines have accelerated significantly in the past three quarters. Revenue in the rest of the world increased 5% in constant currency, driven primarily by our key growth products. At the bottom of the slide is the price rate volume effect on revenue for our June year-to-date results, which shows double-digit growth across all major geographies except Japan.

[Anat Ashkenazi, CFO at Eli Lilly and Company]

As shown on slide 10, our key growth products continue to drive strong worldwide volume growth. These products drove nearly 17 percentage points of growth this quarter and continue to drive our overall performance and outlook. Slide 11 highlights the contributions of our key growth products. In total, these brands generated over $3.5 billion in revenue this quarter and made up 54% of our core business revenue in Q2. We're encouraged by the strength of our key products in Q2, collectively up over 34% compared to the same period last year. Trulicity, Taltz, Verzenio, and Jardiance all continue to outgrow their respective classes. We are now tracking above the pre-COVID-19 new-to-brand prescription baseline in the U.S. across all our major therapeutic areas, with the exception of oncology and the CGRP antibody class, which we expect will continue to recover in the second half of the year.

[Anat Ashkenazi, CFO at Eli Lilly and Company]

On slide 12, we provide an update on capital allocation. In the 1st half of 2021, we invested $5 billion to drive our future growth through a combination of after-tax investments in R&D, business development, and capital investments. In addition, we returned over a billion and a half to shareholders in dividends and share repurchase. As we look ahead to the second half of the year, we will continue to fund the growth of our key products and recent launches, invest in our pipeline, and seek external innovation to augment our future prospects, as well as return capital to shareholders. Turning to our 2021 financial guidance on slide 13, we are updating our GAAP and non-GAAP guidance. While the COVID-19 pandemic is still impacting countries around the world, the pace of recovery from the pandemic was in line with our expectations in Q2.

[Anat Ashkenazi, CFO at Eli Lilly and Company]

New to brand scripts in most of the classes in which we compete, with are tracking is above the pre-COVID baseline in the U.S. Healthcare systems in most major markets, and are largely returning to normal as we enter the second half of 2021. We are increasing our full-year revenue outlook for the core business by $200 million to reflect the strong performance and favorable impact from foreign exchange. We are, however, lowering the top end of the range for COVID-19 antibody revenue by $400 million and confirming the bottom end of that range. Moving forward, we expect COVID-19 antibody revenues to be less of a factor, as demonstrated by Q2 revenue declining to $150 million from $810 million in Q1. Variants are growing, we recognize that situations across the globe can evolve quickly, and we plan to adapt as required.

[Anat Ashkenazi, CFO at Eli Lilly and Company]

The net impact of these changes is an updated revenue range of $26.8 billion-$27.4 billion. Our outlook for non-GAAP gross margin % remains unchanged at approximately 79%. On a reported basis, we've lowered guidance for gross margin % to approximately 75% to reflect the impact of COVID-19 antibodies excess inventory charge due to the combination of changes to current and forecasted demand from the U.S. and international governments, and near-term expiry of COVID-19 antibodies inventory. For research and development and SG&A, our guidance ranges remain unchanged. Investment in promising R&D opportunities and exciting potential launches could push us towards the top end of our guidance range for both R&D and SG&A. Our non-GAAP operating margin guidance is now expected to be approximately 30%, driven by lower COVID-19 antibody revenue. It remains approximately 31% excluding COVID-19 antibodies. Our GAAP operating margin is now expected to be approximately 24%.

[Anat Ashkenazi, CFO at Eli Lilly and Company]

We are increasing our non-GAAP range for OID to an expense of 0 to $100 million to reflect the Alimta patent settlements in Europe, I noted earlier, and our GAAP range is now income of $375 million-$475 million, which also reflects the impact of equity investment gains in the first half of the year. On a non-GAAP basis, our expected tax rate remains unchanged, and on a reported basis, we've lowered our expected tax rate to approximately 12%. Finally, the non-GAAP range for earnings per share remains unchanged at $7.80-$8, while GAAP EPS is expected to be in the range of $6.73-$6.93, primarily driven by the impact of the COVID-19 antibody inventory charge, the impact of equity investment gains, and the Alimta patent settlements in Europe.

[Anat Ashkenazi, CFO at Eli Lilly and Company]

We are confident in our ability to achieve our 2021 revenue goals for the core business while delivering mid-teens EPS growth. As we look at the underlying volume and share trends across our key growth products, we're confident in our full-year outlook for the core business. The pipeline successes in the first half of this year strengthen our conviction in our midterm and long-term outlook for continued top-tier revenue growth and operating margin expansion. Now I will turn the call over to Dan to provide an update on our pipeline.

[Dan Skovronsky, Chief Scientific and Medical Officer at Eli Lilly and Company]

Thanks, Anat. 2021 has clearly been a productive year for R&D at Lilly, with continued strong progress in our pipeline and more potential catalysts on the way. Before I get into the broader portfolio update, I'll spend a few minutes highlighting several updates for our late-stage pipeline. I'll start with donanemab. In Q2, the first amyloid-lowering agent for the treatment of Alzheimer's disease was approved under the FDA's accelerated approval pathway based on plaque-lowering, which we believe reflects a shift in policy and sets a new path for Alzheimer's drug approval in the U.S. Lilly has long been an advocate for using biomarkers for amyloid plaque and neurofibrillary tangles to identify patients for treatment and to monitor their response to therapy. We were pleased to see the FDA's conclusion that improvements in brain pathology are appropriate surrogates for clinical efficacy of Alzheimer's drugs.

[Dan Skovronsky, Chief Scientific and Medical Officer at Eli Lilly and Company]

Based on data we've seen to date, we believe donanemab clears plaque faster and deeper than previously seen with other therapies and achieves complete plaque clearance in a majority of patients in TRAILBLAZER-ALZ after only a limited duration of dosing. On the basis of the clinical evidence for donanemab, we were pleased to have received breakthrough therapy designation from the FDA. At the Alzheimer's Association International Conference last week, we shared additional important analyses from donanemab TRAILBLAZER-ALZ. Briefly, I'll highlight several findings. First, we shared detailed exploratory statistical analyses comparing a variety of methods beyond MMRM and DPM, as summarized on slide 14. We were pleased to see that these new analyses showed consistency of effects on primary and secondary outcomes across all statistical methods.

[Dan Skovronsky, Chief Scientific and Medical Officer at Eli Lilly and Company]

Notably, all of the new analyses conducted showed good separation of treatment from placebo, with statistical significance achieved for most endpoints at nearly all relevant time points measured. The robustness of the treatment efficacy across analytical methods increases our confidence in the potential clinical benefit of donanemab. While all statistical methods evaluated showed similar results, we note that the Bayesian Disease Progression Model, BDPM, closely reflected the raw observed data with the smallest standard error of any method. These results reinforce our hypothesis that DPM is a preferred analytical method for Alzheimer's trials. Additionally, we shared new data showing a relationship of amyloid plaque reduction and slowing of cognitive decline, as shown on slide 15. To our knowledge, this is the first time such results have been available.

[Dan Skovronsky, Chief Scientific and Medical Officer at Eli Lilly and Company]

When we initially reported the results of TRAILBLAZER-ALZ, we commented that at a group level, patients treated with donanemab showed both statistically better plaque reduction and statistically better slowing of cognitive decline at 18 months. Patient-level correlations between the degree of plaque reduction and the magnitude of slowing of cognitive decline were not significant. Now, using a more sophisticated PK/PET iADRS exploratory analysis that uses all of the available time course data, we showed a highly significant relationship between the degree of amyloid plaque reduction and slowing of cognitive decline, with p < 0.001. The Conrado model, shown here, was published in 2014 and is the result of efforts from the Coalition Against Major Diseases, CAMD, which collected placebo data from 15 randomized trials, including almost 4,500 participants. We introduced a treatment arm and incorporated percent amyloid plaque removal into this model to generate these results.

[Dan Skovronsky, Chief Scientific and Medical Officer at Eli Lilly and Company]

We believe this is important support for the use of amyloid plaque reduction as a surrogate for clinical efficacy. Notably, these data suggest that full clearance of amyloid plaque is required for the highest efficacy, as model results predict that patients achieving 100% clearance of amyloid plaque could have more than 40% slowing of disease progression. Moving to slide 16, we show an exploratory analysis looking at the effect of donanemab's plaque clearance on the development of tau pathology. Tau pathology is an exciting biomarker, since measures of Alzheimer's disease tau, unlike measures of amyloid plaque, have been correlated with clinical measures of cognitive and functional decline, as noted here. Importantly, we had previously shown that donanemab-treated patients had slower accumulation of regional brain tau pathology than placebo-treated patients.

[Dan Skovronsky, Chief Scientific and Medical Officer at Eli Lilly and Company]

This is an important finding because the amount of brain tau pathology is an excellent predictor of subsequent cognitive decline, a finding we observed with solanezumab in EXPEDITION3 and reproduced once again in TRAILBLAZER-ALZ. Now we've extended these results to show that the donanemab-treated patients who achieved complete clearance of amyloid plaque by six months had the most marked slowing of tau spread with nearly complete abrogation of progression in the frontal lobe. This reinforces our hypothesis that both deep and rapid amyloid plaque clearance are required for optimal drug efficacy. With this new data we presented last week, we have now linked degree of amyloid plaque reduction with degree of clinical benefit, as well as degree of amyloid plaque reduction with degree of benefit on brain tau pathology, which is itself linked to clinical benefit.

[Dan Skovronsky, Chief Scientific and Medical Officer at Eli Lilly and Company]

As displayed on slide 17, we have just recently obtained data with our plasma tau biomarker, phospho-tau217. These new data demonstrate that amyloid plaque clearance with donanemab also resulted in reversal of the typical increases of phosphorylated tau seen in the blood, with decreases from baseline of more than 24% and a change from the untreated arm with a p-value < 0.0001. This highly significant effect was seen as early as three months following initiation of treatment and could reflect a combination of less tau spread in the brain as well as less neuronal damage, which could account for tau leakage into the periphery. You can see on the right side of the slide that the effect on plasma tau is also correlated to degree of plaque reduction. With nearly every patient on treatment who achieved substantial plaque clearance showing flat or declining plasma phospho-tau.

[Dan Skovronsky, Chief Scientific and Medical Officer at Eli Lilly and Company]

We are delighted to see the potential utility of p-tau217 not just for diagnosing disease, but also for monitoring treatment efficacy. We believe this could be another important contribution to the Alzheimer's field. Finally, on slide 18, the significant relationship between plasma p-tau217 reduction and the slowing of cognitive decline is shown. This additional biomarker for efficacy links the donanemab mechanism of amyloid plaque clearance with positive effects on both clinical outcomes and tau pathology. These data suggest that patients who achieved a 30% decrease in p-tau217 from baseline showed more than 40% slowing of disease progression. The three main findings I just discussed. One, the consistency of clinical benefit across statistical methods. Two, the correlation of plaque-lowering to clinical benefit with patients who achieve the greatest plaque clearance, I mean the greatest opportunity for benefit.

[Dan Skovronsky, Chief Scientific and Medical Officer at Eli Lilly and Company]

Three, the correlation between achieving complete plaque clearance and beneficial effects on tau pathology seen in the brain and measured in the periphery, which themselves are predictors for clinical benefit, strongly support the efficacy of donanemab and give us confidence that the remarkable levels of amyloid plaque clearance achieved by donanemab could translate into a meaningful breakthrough for patients. Moving to slide 19. Accordingly, we've announced that we plan to submit to the FDA under the accelerated approval pathway before the end of this year based on data from completed studies supplemented by additional safety data from the ongoing TRAILBLAZER-ALZ 2 study. We remain focused on enrolling TRAILBLAZER-ALZ 2 with the aim to replicate the positive results of TRAILBLAZER-ALZ. Replication is important to overcome skepticism in the field.

[Dan Skovronsky, Chief Scientific and Medical Officer at Eli Lilly and Company]

We hope that TRAILBLAZER-ALZ 2 will generate important confirmatory data for patients, physicians, and payers, and help us understand how to make sure the right patient gets the right duration of therapy at the right stage of disease. We are pleased to announce today that we have closed screening for TRAILBLAZER-ALZ 2 with an adequate number of subjects now in the trial's screening process to fully enroll the study. Given that conducting and processing the imaging studies used during screening takes several weeks to complete, we expect that the final subject to complete screening procedures and receive their first dose of donanemab or placebo by the end of the third quarter, and the study will be completed 18 months later.

[Dan Skovronsky, Chief Scientific and Medical Officer at Eli Lilly and Company]

Given this progress in enrollment, we are confident that we will achieve the number and duration of drug exposures needed to appropriately characterize the safety profile of donanemab, allowing for regulatory submission by the end of this year. Discussions with the FDA are consistent with our prior statement supporting a submission before the end of 2021. I also want to provide a few comments on how we believe the national coverage determination opened for monoclonal antibody therapies targeting amyloid by the Centers for Medicare and Medicaid Services may impact Lilly and donanemab. We believe this NCD is a clear opportunity to focus treatment on the patients most likely to benefit from amyloid plaque-reducing therapies. This would align with our goals, which have long been to use advanced diagnostic tools to identify the right patients who can benefit the most from amyloid-reducing therapies.

[Dan Skovronsky, Chief Scientific and Medical Officer at Eli Lilly and Company]

We're particularly encouraged that our progress with the plasma p-tau217 assay could open up broader access to diagnostic tools. Still, despite the advances in diagnostics and the promise of donanemab, we acknowledge the current skepticism in the national discussion, and we hope that each drug will be evaluated by payers and prescribers based on its own data. This could be particularly important given the data I've shared today, which suggests that the degree of donanemab's amyloid plaque clearance relates to clinical benefit. In summary, we look forward to submitting donanemab to the FDA later this year, with the potential to bring a robust amyloid plaque-clearing agent with limited treatment duration to market for early symptomatic Alzheimer's patients in 2022, with potential replicated clinical efficacy results expected in 2023. Transitioning now to Verzenio.

[Dan Skovronsky, Chief Scientific and Medical Officer at Eli Lilly and Company]

On the last earnings call, we commented that the FDA had asked to see an overall survival trend in favor of Verzenio in the monarchE trial in adjuvant breast cancer. We also noted that the OS data set is quite immature in the overall population, which makes interpretation challenging. We have now provided the FDA with additional data from the monarchE study. We were encouraged to see continued strengthening of the primary endpoint of invasive disease-free survival, IDFS, as well as consistent benefit in the key secondary endpoint of distant recurrence-free survival, DRFS. Of note, with this continued follow-up, we can now confirm this benefit extends beyond the two-year Verzenio treatment period. We look forward to disclosing this new analysis at a medical meeting this fall. Our discussions with the FDA have focused on the pre-specified subpopulation of patients with high Ki-67 index, a marker of increased cell proliferation.

[Dan Skovronsky, Chief Scientific and Medical Officer at Eli Lilly and Company]

These patients have more aggressive disease and a higher risk of relapse, and thus are more mature for overall survival analysis. This group, which makes up approximately half of the monarchE population, is demonstrating an overall survival trend that favors the treatment arm, and based on FDA feedback, we expect an initial approval in adjuvant breast cancer in this population before the end of the year, in line with the current review cycle. Importantly, since the IDFS and DRFS hazard ratios favoring Verzenio are similar in patients with high and low Ki-67 index, we expect that the OS trend first seen in the Ki-67 high population will, in time, be replicated in the broader study population. We hope to expand the label to the entire enrolled population in the future once we see more overall survival events in the broader population.

[Dan Skovronsky, Chief Scientific and Medical Officer at Eli Lilly and Company]

To date, regulators outside the U.S. have not raised the same questions on overall survival. Moving to Olumiant, we shared in July that the FDA will not meet the PDUFA action date for the supplemental new drug application for atopic dermatitis. This delay is related to the FDA's ongoing assessment of JAK inhibitors. Patient safety is critical to Lilly, we continue to further evaluate baricitinib's safety profile with ongoing randomized and observational safety studies. We're confident that the efficacy and safety data for baricitinib support a favorable benefit-risk profile for the treatment of atopic dermatitis. We look forward to continuing to work with the FDA during the remainder of the review process. We do not have additional information on timing or a specific action date from the FDA. We see potential for regulatory action for atopic dermatitis in the U.S. later this year.

[Dan Skovronsky, Chief Scientific and Medical Officer at Eli Lilly and Company]

We're committed to bringing Olumiant to market in the U.S. to help meet the needs of people living with atopic dermatitis. Slide 20 shows select pipeline opportunities as of July 30th, and Slide 21 shows potential key events for the year. There have been several additional major developments since our last earnings call, and I'll cover these by therapeutic area. In May, we shared the positive results for tirzepatide in SURPASS-4 and announced that the SURPASS program met regulatory submission requirements for evaluating cardiovascular risk and confirmed our intention to submit a registration package for tirzepatide in type 2 diabetes to global regulatory authorities by the end of 2021. At ADA in June, tirzepatide was a large focus as we shared detailed data for the first four studies from the tirzepatide SURPASS program for the treatment of type 2 diabetes.

[Dan Skovronsky, Chief Scientific and Medical Officer at Eli Lilly and Company]

These results support our belief that tirzepatide may represent a substantial improvement in the treatment of patients with type 2 diabetes with early and unsurpassed improvements in A1c and body weight reduction across doses. We remain on track for global regulatory submissions before the end of this year. We are also excited about tirzepatide's opportunity across multiple indications, including cardiovascular outcomes, obesity, NASH, and heart failure. In Q2, we initiated SUMMIT, our planned phase III study for tirzepatide in heart failure. In July, we achieved an important milestone with Jardiance as the first and only medicine to achieve a primary endpoint for heart failure with preserved ejection fraction, or HFpEF. The EMPEROR-Preserved phase III trial met its primary endpoint and demonstrated significant risk reduction with Jardiance for the composite of cardiovascular death or hospitalization for heart failure in adults with HFpEF.

[Dan Skovronsky, Chief Scientific and Medical Officer at Eli Lilly and Company]

This is a significant breakthrough for patients, and we're proud of what we've achieved here in partnership with Boehringer Ingelheim. We look forward to presenting detailed results from this study at the European Society of Cardiology on August 27th, and we expect to submit this indication to regulators later this year. We also received approval in the EU for Jardiance HFrEF in June and expect regulatory action in the U.S. and Japan later this year for this indication.

[Dan Skovronsky, Chief Scientific and Medical Officer at Eli Lilly and Company]

Additionally, we've advanced our GGG triagonist into phase II for diabetes based on the promising data we shared at ADA, which supports the potential for differentiated efficacy from tirzepatide with respect to body weight while maintaining glycemic control. We also started two phase I studies for diabetes and cardiovascular disease. Lastly, we removed one of our oral GIP/GLP phase I molecules from our pipeline. In oncology, we also continue to make important progress.

[Dan Skovronsky, Chief Scientific and Medical Officer at Eli Lilly and Company]

Starting with Verzenio, we've initiated two phase III studies since our last update. As planned, we've initiated an adjuvant study for HR-positive HER2 breast cancer. We are announcing today that, as a result of a favorable blinded interim analysis for our phase II trial in metastatic castration-resistant prostate cancer, we've also initiated the phase III portion of this adaptive study. This action was based on a recommendation from the Independent Data Monitoring Committee, or IDMC. The IDMC reviewed interim efficacy and safety data and concluded that the results met the pre-specified expansion criteria based on radiographic progression-free survival and recommended advancing the study to the registrational phase III stage. While Lilly remains blinded to the study, we are obviously very pleased with this development and have already begun dosing patients in the phase III portion of this trial.

[Dan Skovronsky, Chief Scientific and Medical Officer at Eli Lilly and Company]

Given that the expansion to phase III includes the cohort of patients who were in the phase II study, these data remain blinded, and we will not be disclosing these at the medical meeting. On the development front in oncology, we also made progress with pirtobrutinib and our oral SERD. We've initiated the phase III study for pirtobrutinib in relapsed, refractory MCL monotherapy, executing on our commitment to a robust phase III program for this molecule. Regarding oral SERD, we announced our plans to begin a phase III study later in 2021 based on the phase I results we shared at ASCO in June that showed an efficacy and safety profile in line with our expectations. In addition, we've now achieved the first human dose for our next-generation KRAS G12C inhibitor. Lastly, in oncology, we announced that the FDA has accepted our submission of sintilimab for non-small cell lung cancer.

[Dan Skovronsky, Chief Scientific and Medical Officer at Eli Lilly and Company]

This submission is an encouraging start for our collaborative efforts with Innovent to make sintilimab available in countries beyond China. In neurodegeneration, in addition to the donanemab news I just shared, we anticipate a phase II readout for zagotenemab later this year, and note that our GBA1 gene therapy asset from Prevail started a phase II study in type 2 Gaucher disease. For immunology, we do not have additional significant updates in Q2, but we're looking forward to the phase III readouts of lebrikizumab in atopic dermatitis and baricitinib for lupus later this year. We also submitted baricitinib for alopecia areata in Japan.

[Dan Skovronsky, Chief Scientific and Medical Officer at Eli Lilly and Company]

Lastly, we're moving our COVID-19 antibody therapy, LY-CoV1404, now known as bebtelovimab, into phase II to address viral variants as part of our ongoing commitment to help combat COVID-19 if needed. To recap, Q2 was another positive quarter for R&D at Lilly. We're excited about a number of further readouts and important milestones coming later this year, reflecting continued advances on behalf of patients suffering from the disease. I'll turn the call back over to Dave for some closing remarks.

[Dave Ricks, Chairman and CEO at Eli Lilly and Company]

Thanks a lot, Dan. Appreciate that. Before we go to Q&A, let me sum up the progress we've made during this quarter. We've seen strength in our core business in the first half of this year and increased momentum in Q2. This is driven by strong volume-driven growth across key brands in most major geographies. We're pleased to see sequential top-line growth this quarter as well as year-over-year margin expansion. We made significant progress developing new medicines. Q2 was another positive quarter for our pipeline as we announced plans to submit tirzepatide in type 2 diabetes and donanemab in Alzheimer's disease later this year, as well as an approval for Jardiance in HFrEF and, as Dan outlined, positive results in HFpEF. We returned nearly $800 million to shareholders through dividends and completed $500 million in share repurchases, reflecting confidence in the ongoing strength of our business.

[Dave Ricks, Chairman and CEO at Eli Lilly and Company]

As we look forward to the rest of the year, we're quite confident in our long-term prospects. Before we move on to Q&A, I would also like to share that we will hold a live investor meeting this December to highlight our R&D pipeline and progress for investors. We will also provide our initial 2022 guidance at this meeting. Given the limited physical space available, this event will have an accompanying webcast. We're hopeful that we can host this event in person, but are watching the evolution of the pandemic closely and will adjust accordingly to a virtual event if needed. Our IR team will be in contact in the coming weeks to issue invitations and provide more logistical details on this meeting. Let me turn it over to Kevin to moderate our Q&A session.

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

Thanks, Dave. We'd like to take questions from as many callers as possible, so we ask that you limit your questions to two per caller. Lois, can you please provide the instructions for the Q&A session? We're ready for the first caller.

[Operator]

Thank you. Ladies and gentlemen, if you wish to ask a question, please press one then zero on your telephone keypad. You will hear an acknowledgment tone that you've been placed in the queue, and you may remove yourself from queue at any time by pressing one zero. If you're on a speakerphone, please pick up your handset before pressing the number. Our first question is from the line of Terence Flynn from Goldman Sachs. Please go ahead.

[Terence Flynn, Analyst at Goldman Sachs]

Hi. Thanks for taking the question. Maybe, Dan, I was just wondering if you could elaborate at all on your comments regarding your discussions with the FDA on donanemab. It sounds like they're consistent with your expectations, but any more color you can provide if they've actually signed off fully on your plans to file the BLA? How much additional safety data would they want to see from the ongoing TRAILBLAZER-2 study? Thank you.

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

Thanks, Terence. Dan?

[Dan Skovronsky, Chief Scientific and Medical Officer at Eli Lilly and Company]

Yeah. Sure, Terence. Thanks for that question on donanemab and FDA and safety. In June, when we got the breakthrough therapy designation and announced our expectations to file a BLA by the end of the year, that was based on our current understanding of the situation. Since then, things have progressed, and I would say I'm even more confident now than I was then that we should have an adequate package to support a complete submission by the end of this year. That includes, of course, our confidence that we have enough safety data to support a full evaluation of the benefit-risk of this drug. I think given the limited duration of dosing, that helps, as well as given the near completion now of enrollment in TRAILBLAZER-ALZ 2.

[Dan Skovronsky, Chief Scientific and Medical Officer at Eli Lilly and Company]

It's our intent then to use combined safety data from the completed phase I and phase II studies, as well as an early look at safety data from that ongoing phase III study to support the package. Of course, with any ongoing study, there's always risk. We don't know what that safety data is going to show. If it's consistent with safety data we've collected prior to the study, then I think we should also be confident that that would support a positive benefit-risk assessment and put us on track to launch next year, as we said.

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

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

[Operator]

The next question is from Ronny Gal from Bernstein. Please go ahead.

[Ronny Gal, Analyst at Bernstein]

Good morning. Thank you for taking my question. Two. The first one, I'll stay with donanemab. You have kind of suggested in your comments there that there will be a good chance to use some of the biomarkers that you are developing in the early commercial use of donanemab. Can you talk a little bit about what markets you expect to have proved by when, and how you see essentially the entire patient passage through the use of donanemab going forward, and how does it differ from other amyloid beta? Second, Basaglar seems to have a bit of a price drop this quarter. Can you discuss a little bit what you're seeing here, what you're expecting with the approval of the first interchangeable biosimilars, any impact there, and as we go forward, how should we think about that franchise?

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

Thanks, Ronny. We'll go to Dan for the questions on donanemab and then Mike Mason for the questions on Basaglar.

[Dan Skovronsky, Chief Scientific and Medical Officer at Eli Lilly and Company]

Yes. Thanks, Ronny, for the question on biomarkers and their commercial use. Of course, this has been an area of great progress and great investment by Lilly. We continue to put a lot of emphasis here. I think objectively, you wouldn't have had the progress that we're seeing now in Alzheimer's disease had it not been for the ability to select patients for treatment and follow their response to treatment with biomarkers. We don't see that as a research-only application. That should be available, those kinds of tools, to patients who are being clinically treated for Alzheimer's disease in the future. The status of the tools right now is both of the PET agents, the tau-PET imaging with Tauvid that we used, and the amyloid PET imaging with amyloid.

[Dan Skovronsky, Chief Scientific and Medical Officer at Eli Lilly and Company]

Those are both, of course, FDA-approved, and availability is somewhat limited right now, particularly for Tauvid, but could quickly be scaled with the launch of donanemab in the future. The third agent, which is probably the one that will be the most accessible to patients, is the phospho-tau217 assay. Just as we continue to work on that assay, we're more and more impressed with its performance, its ability to identify patients and, even as I showed today, track their progression. This could be an answer for patients in the near term. We'll work hard to make that available. The bar is often lower for in vitro diagnostics than in vivo diagnostics. I think there's good potential there. You asked about the patient flow once all these things are approved and available, and presumably that happens around the time of donanemab's launch, if not before.

[Dan Skovronsky, Chief Scientific and Medical Officer at Eli Lilly and Company]

I think it would make sense and fit with medical practice if screening starts with some sort of simple cognitive exams by a physician to assess a patient's eligibility as early Alzheimer's, then they would move on to probably a blood-based test like phospho-tau217. If that's positive, that could either be a basis for treatment, depending on if data support that, or that could triage patients to PET scans for further evaluation.

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

Thanks, Dan. Now to Mike for the questions around Basaglar Q2 performance and ostensibly interchangeability.

[Mike Mason, President of Lilly Diabetes at Eli Lilly and Company]

Yeah. Thanks for the question on Basaglar. The performance that you're seeing in the second quarter of 2021 has primarily been driven by pricing pressure and volume pressure in the Medicaid segment for Basaglar. Let me give you a little bit of color on how the Medicaid segment works. There's really two different types of states, those that have one single unified preferred drug list across managed Medicaid and fee-for-service, and then others that have two different kind of unique preferred drug lists across fee-for-service and a different one for managed Medicaid.

[Mike Mason, President of Lilly Diabetes at Eli Lilly and Company]

What we've seen with Basaglar is when states decide to transition from having two preferred drug lists to a unified preferred drug list, the economics for the state tends to favor the longstanding brands like Lantus. At that point, you see if we have one estate in a managed Medicaid, you'll see the transition back to Lantus. That's what you've seen driving our Q2 performance. Also, in the managed Medicaid space, we have seen some pricing pressure there from Semglee that has required us to put more rebates in order to preserve volume for that. Now let me turn to Well, first of all, before we turn into Semglee, know that the trends for Basaglar are fully baked into our guidance for the remaining part of 2021. Now, let me turn to Semglee.

[Mike Mason, President of Lilly Diabetes at Eli Lilly and Company]

First of all, understand that Semglee has gained interchangeability just with Lantus, not with Basaglar, so we don't anticipate any immediate impact on Basaglar. If you look at Semglee's performance to date, they've captured about 2% share of market on the TRx and about 1% of new treatment starts, and the vast majority of that has come from Medicare Part A, which is hospitals and the Medicaid segment. If you look at the price point for Semglee, it's currently at $99 per vial and about $150 per five-pack of pens. With the move to interchangeability, we really support any actions that help patients with diabetes have a more affordable out-of-pocket experience, which is why anyone, regardless of insurance status, is eligible to buy their monthly prescription of Lilly insulin for $35 or less through our Insulin Value Program.

[Mike Mason, President of Lilly Diabetes at Eli Lilly and Company]

The Insulin Value Program has helped lower the average out-of-pocket costs for a monthly prescription of Lilly insulin, which often requires or includes multiple vials or insulin pen packs to $28.05 in the face of raising health insurance deductibles. It's great that people living with diabetes have access to many options to lower their out-of-pocket costs. Thanks for the question.

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

Thanks, Mike. Thanks, Ronny, for your questions. Next caller, please.

[Operator]

Thank you. The next question is from Tim Anderson from Wolfe Research. Please go ahead.

[Tim Anderson, Managing Director and Analyst at Wolfe Research]

Thank you. A couple of questions. Just your general thoughts on subQ dosing with antibodies to plaque. Does that offer meaningful differentiation? At a high level, the benefits would seem quite obvious in being able to dose a drug at home. Some argue that it falls outside of a Medicare Part B framework, so maybe docs would be more inclined to stick with an infusion. I believe you originally did not pursue subQ because you were worried you wouldn't get enough drug across the blood-brain barrier. Roche has shown us that they can achieve that. Can we expect Lilly might also pursue a subQ, and would this require a formal phase III study looking at plaque reduction as a primary endpoint? Last quick question. Why wouldn't something like p-tau217 become a separate, meaningful revenue stream in its own right for Lilly?

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

Thanks, Tim. We'll go to Dan for all those questions.

[Dan Skovronsky, Chief Scientific and Medical Officer at Eli Lilly and Company]

Okay, thanks. It's a good question and line of questions here on subQ dosing for anti-amyloid therapies. Probably two factors that we have taken into account in addition to the ones you mentioned. First and most important is efficacy for patients. I think all of the data that we have so far suggests and support the notion that deep and rapid clearance is key here. If you're going to go to subQ dosing, it's important to make sure you do get enough drug in so that you can quickly get patients to clear. That's not going to always be possible with every drug. I think the second consideration with subQ dosing is the duration of therapy.

[Dan Skovronsky, Chief Scientific and Medical Officer at Eli Lilly and Company]

If it's a limited duration of therapy, the difference between IV and subQ, if it's once a month for six months, that's not a big difference between IV and subQ, whereas if it's for the rest of your life, maybe that is a bigger difference. With respect to our plans for subQ, I do think it's an important option to offer patients, notwithstanding the previous comments, even for a limited duration therapy, some patients may prefer it, assuming you can get the same kind of efficacy. I think with donanemab, that's unlikely to be possible, and we're not pursuing it given the doses we need and the formulation we have. We have a second-generation antibody here that we call N3pG, which I think is quite likely to be viable in a subcutaneous presentation, and that is our focus of development around N3pG.

[Dan Skovronsky, Chief Scientific and Medical Officer at Eli Lilly and Company]

My expectation around that is that it should be able to show comparable amyloid plaque-lowering with subcutaneous dosing as donanemab does with IV dosing. If so, given the similarities between the drugs, we would seek an accelerated approval pathway for that drug in the future as a sort of subcutaneous version of donanemab, although it is a new NME. Your second question was around the phospho-tau assay and whether that's a significant revenue stream. It's certainly conceivable, and we haven't sort of thought through all of our commercial plans around that. Really, for Lilly, and it may be significant for some companies, I think for Lilly, though, our focus is on removing barriers for treatment to patients. As we think about how we position diagnostics and therapeutics in the marketplace, our focus will be on really making sure the most patients possible can get treated appropriately.

[Dave Ricks, Chairman and CEO at Eli Lilly and Company]

Maybe just to comment, thanks, Dan, Tim, on the access and payment environment. I think our priority at Lilly is always going to be how to make it easier for patients to get to therapy, and then we solve for value on the back end. There are clearly benefits in a short-duration treatment, like Dan said, with donanemab in Part B. They're going to be watched closely by their physicians initially anyway. There are real and important side effects that require imaging analysis for this class of drugs, and so it's an intensively managed disease.

[Dave Ricks, Chairman and CEO at Eli Lilly and Company]

Through time, as we've seen with other classes, as comfort level will rise in primary care in particular, in using therapeutic antibodies to treat Alzheimer's, a more convenient form available at a local pharmacy, perhaps for self-injection or injection by a caregiver, would be preferred. Our plans line up with pursuing both those channels, although in the early days, probably the intensive nature of the treatment and specialist nature will favor the infusion. We're committed to both, and we're solving for patient convenience at the end of the day.

[Tim Anderson, Managing Director and Analyst at Wolfe Research]

Thank you.

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

Thanks, Dave and Dan. Tim, thanks for your questions. Next caller, please.

[Operator]

The next question is from Chris Schott from J.P. Morgan. Please go ahead.

[Chris Schott, Managing Director and Analyst at J.P. Morgan]

Great. Thanks very much for the questions. Just one on donanemab and then one on Verzenio. I guess my bigger question on donanemab is how you're thinking about the role of A-beta antibodies, maybe prior to definitive cognition data being available. I guess, do you see cognition data significantly expanding the market opportunity for these products? Do you anticipate we're going to see broad usage even in the event, let's just say, the additional cognitive readouts you see on donanemab were less definitive than what we saw in the phase II?

[Chris Schott, Managing Director and Analyst at J.P. Morgan]

I'm trying to see, do you think the whole market at this point is just going to move to plaque regression or reduction? Is cognition still very important, I think, in terms of the commercial opportunity? My second question was on the Verzenio update. Just a two-parter here. Just when do you think you'll have that incremental OS data for the other 50% of the population? How hard is it to identify these higher-risk patients as we think about maybe the initial commercial opportunity in adjuvant? Thanks so much.

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

Thanks, Chris. We'll go to Dan for donanemab and then Anne for the questions on Verzenio.

[Dan Skovronsky, Chief Scientific and Medical Officer at Eli Lilly and Company]

Yeah. Your question is, maybe I can break it into two parts. The first part is how important it is in the near term to have additional cognitive benefit data for amyloid plaque-lowering drugs? In the longer term, what happens if the confirmatory studies give a negative surprise? In the short term, I just want to clarify that we have compelling clinical efficacy data for donanemab. The only trial that's going to be successful is, a positive phase II study in its primary endpoint showing cognitive benefits for donanemab. That's different, unique, and exciting, published in "The New England Journal." That's exciting. I think that will be helpful even before we have the confirmatory data, being in that unique position. There will be some physicians, I'm sure, as there are today, who still say, "I don't want to use a drug until I have cognitive data." Fine.

[Dan Skovronsky, Chief Scientific and Medical Officer at Eli Lilly and Company]

For those physicians who are willing to make that link between the surrogate efficacy data and the phase II data on donanemab, if you believe that lowering amyloid plaque is a good thing to do, you're going to want the drug that lowers amyloid plaque the most, and I think that's an exciting aspect of donanemab as well. We come to the confirmatory studies. I think surely, everyone will have to acknowledge that if for multiple sponsors, multiple drugs are all clearly negative, that would be a bad thing, and we would retreat and say that this was a wrong way of thinking.

[Dan Skovronsky, Chief Scientific and Medical Officer at Eli Lilly and Company]

I think that scenario is extremely unlikely. I think the most likely scenario is probably a mixed picture. Some drugs will be better than others. Some trials will reach significance, others might not. You've heard me speak about the confidence in our trial, but we have to see the data. I think in that scenario, that will be good enough to reinforce the notion that amyloid is an important surrogate and reducing amyloid is a good idea.

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

Thanks, Dan. Anne, on Verzenio?

[Anne White, President of Lilly Oncology at Eli Lilly and Company]

Yeah, Chris, thanks for the question. As Dan shared, we are incredibly pleased with what we're seeing out of Verzenio on the monarchE data. As he shared, key endpoints such as IDFS have continued to strengthen with further follow-up. Now we have two years of median follow-up, very pleased with that. We would work with the FDA to expand our label to include these patients in the future. Obviously, this is event-driven; the timing of this will be determined by the event rate. Our next planned analysis is in the second half of 2022; this analysis will help us further inform the timing of that final analysis.

[Anne White, President of Lilly Oncology at Eli Lilly and Company]

As you commented, the overall survival data in the broader population is still immature. We still have less than 50% of the events needed to do that final OS analysis. With what we're seeing, and again, strong performance in both the high and low Ki-67, we remain confident to see this trend in OS favoring Verzenio to replicate. As far as Ki-67, good news here is that this is really a familiar concept to physicians.

[Anne White, President of Lilly Oncology at Eli Lilly and Company]

It is already accepted as a prognostic factor in breast cancer, and it's really easily performed through an IHC assay, so a very simple assay. These are broadly available in the pathology labs. The assay and the methodology that we used on monarchE are straightforward and proven to be accurate and highly reproducible. Our belief is that oncologists will move to quickly adopt this in practice. Really, this clarity in patients with the highest risk, I think, will help to accelerate uptake in this setting. We look forward to launching in this setting.

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

Thank you, Anne. Chris, thanks for your questions. Next caller, please.

[Operator]

The next caller is Umer Raffat from Evercore. Please go ahead.

[Umer Raffat, Senior Managing Director at Evercore]

Hi. Thanks so much for taking my questions. I surprisingly also want to talk about Alzheimer's today. Dan, I have three sub-parts. First, are you expecting to use interim data from your ongoing phase III as part of the regulatory filing or during the review? Secondly, once the plaque is cleared, and I think 60% of patients have clearance by 12 months, what rate of onset of new amyloid plaque do you expect subsequently? I'm just trying to understand your expectation on the finite duration of dosing versus Biogen's opinion on continued dosing.

[Umer Raffat, Senior Managing Director at Evercore]

Finally, I'm also trying to reconcile the slide you showed on the nonlinear model, the Conrado model, suggesting a relationship between plaque decrease and a slowing in clinical progression. Are you saying there's a relationship, or are you saying there's causality? You might recall the New England Journal paper on your phase II mentioned there was no association between plaque and clinical benefit at the patient level. Biogen's data suggested similar. Thank you very much.

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

Thanks, Umer. Dan?

[Dan Skovronsky, Chief Scientific and Medical Officer at Eli Lilly and Company]

Three great questions, Umer. Thanks. The first question you asked if we'd use interim data. I commented that we'll take a safety cut of data in the right way to support that submission. We don't plan to support that submission, nor do we see the need to support that submission with any looks at efficacy data. We have adequate efficacy data supporting the plaque-lowering, which would be the basis of submission and approval under accelerated approval. Your second question is, once plaque clears, how long does it take to come back? We have some data on that that was also presented at AAIC. I didn't highlight it this morning. What we found is that off therapy, there is very slow, negligible, really, regrowth of plaque.

[Dan Skovronsky, Chief Scientific and Medical Officer at Eli Lilly and Company]

I think if you sort of extrapolate it out, it might take 14 or 15 years or something like that to regrow amyloid plaque. The average age of patients in this trial is 75. Remember, we haven't fully halted the progression of the disease. That doesn't feel like near-term thinking on redosing will be necessary to keep them clear. We'll have the ability to follow patients for many years and confirm that. Finally, I think you've correctly summarized the situation, which is that in our initial analysis, we didn't see a correlation; now we are reporting that we do see a correlation. Why is that? Of course, correlation can't prove causation; it is just a correlation. Why do we see it now?

[Dan Skovronsky, Chief Scientific and Medical Officer at Eli Lilly and Company]

I think what we learned was quite interesting, that's that the amount of plaque you remove depends a lot on how much plaque you have to start with. If you only have 50 centiloids of plaque, there's only so much you can remove. If you have 100 centiloids of plaque at baseline, you can remove a lot more. That turns out to be a pretty important confound in these kinds of correlations.

[Dan Skovronsky, Chief Scientific and Medical Officer at Eli Lilly and Company]

The people who have the more severe disease, perhaps longer duration, lower cognitive performance, and older age might have more plaque at baseline. You can remove more, but they still might be the worst progressors than people who have lower plaque, and you remove less. I think our thinking initially, and maybe the field thinking, was a little bit backwards on this to look for a straight correlation between change and change without adjusting for all of those important baseline covariates.

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

Thanks, Dan. Umer, thanks for your questions. Next caller, please.

[Operator]

Our next question is from the line of Andrew Baum. One moment. Please go ahead.

[Analyst]

Thank you. Couple of questions, please. Just going back to interim analysis for TRAILBLAZER-ALZ 2, not so much as a use to support accelerated, but to accelerate the readout for the full standard regulatory review. You're using a Bayesian disease progression model. Given that you're getting such a rapid clearance of Alzheimer's, and that's linked to cognition in those patients who have that, do we have to assume that the follow-up is going to go out to the full 72 weeks, or is there a possibility of earlier unblinding driven by efficacy in those patients? Second, perhaps you could comment on the manufacturing capacity for donanemab as well as the regulatory outlook for your p-tau assay, assuming that you attain regulatory approval on the accelerated. Thank you.

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

Thanks, Andrew. Dan, we'll go to you for those questions.

[Dan Skovronsky, Chief Scientific and Medical Officer at Eli Lilly and Company]

Andrew, you've asked a follow-up question here, an important one on the potential, even in the face of an accelerated approval for plaque-lowering, whether we'd still be keen to get that cognitive data a bit earlier by pulling forward an interim on TRAILBLAZER-ALZ 2. We haven't ruled that out. We also don't have plans at this moment in time. I think we just need to see where we are and where the field is. Really, maintaining a pristine phase III trial would probably be a pretty high priority, particularly if accelerated approval gives the path for patients to have access to the medicine. It becomes less urgent to get that data faster. That's our current thinking. We've been working hard to make sure we have manufacturing capacity.

[Dan Skovronsky, Chief Scientific and Medical Officer at Eli Lilly and Company]

I feel good about where we are to support the launch and growth of donanemab and hopefully someday N3pG even to follow that. With respect to the commercialization of a p-tau diagnostic, there are different paths forward for an in vitro diagnostic, including a lab-developed test or LDT, which can be done in a centralized location, for example, under CLIA. That's a pretty fast path, and that's one of the options that we consider.

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

Thanks, Dan. Andrew, thanks for your questions. Next caller, please.

[Operator]

Thank you. That question comes from Louise Chen from Cantor. Please go ahead.

[Louise Chen, Analyst at Cantor]

Hi. Thanks for taking my questions. First question I had for you is, how do you think about a potential outcome for the National Coverage Determination of monoclonal antibodies to treat Alzheimer's disease? The second question is, how would you think about pricing donanemab if it is approved? Thank you.

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

Thanks, Louise. Dan?

[Dan Skovronsky, Chief Scientific and Medical Officer at Eli Lilly and Company]

Okay, thanks. Two sorts of commercially focused questions on donanemab. The first one on the national coverage decision determination, of course, that's important. I think it was widely said that when the first approval came, it was quite a broad indication, and then subsequently the FDA, working with the sponsor, focused the patient population. I think there could still be an opportunity for further focusing here, and that's one direction the experts at CMS may take.

[Dan Skovronsky, Chief Scientific and Medical Officer at Eli Lilly and Company]

In that case, it could require patients to have evidence of Alzheimer's pathology in the form of amyloid plaques or even tau pathology. As I said before, I think that matches our goals and what we think is right. It'll take some time for that to play out, probably over the next nine months or so, and surely we'll be part of some of those discussions and share our data and thinking in the right way. Then on pricing, I think, on I simply say it's too early to comment on that. We have some time yet.

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

Thanks, Dan. Thanks for your questions, Louise. Next caller, please.

[Operator]

The next caller is Geoff Meacham from Bank of America. Please go ahead.

[Geoff Meacham, Managing Director at Bank of America]

Morning, everyone. Thanks so much for the questions. Dan, you're popular today, so I just have a couple more for you. On donanemab, is there a hurdle that FDA has provided in terms of the number of patients for safety, either for the filing or during the review? As the data from TRAILBLAZER-ALZ matures, what is your estimate on what the duration of therapy benefit could ultimately be? Real quick on tirzepatide, just wanted to know as you guys complete the filing, at this point, what's the gating factor as you look at the different geographies and you prepare? Thank you.

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

Thanks, Geoff. We'll go to Dan for the donanemab questions and then Mike Mason on tirzepatide.

[Dan Skovronsky, Chief Scientific and Medical Officer at Eli Lilly and Company]

With respect to the safety hurdle for donanemab or for any drug, really, it's having adequate exposures and duration of exposures in a broad population to be able to fully assess the benefit risk of a given drug. That's not a number. That depends on the particulars of the drug, the population, of course, that you hope to treat, the duration of therapy, of course, but also the particulars around the safety data and the efficacy data that you collect. It would be nice and easy, I think, for sponsors in the FDA if there was a particular line in the sand that could be drawn. As I said, it needs to be tailored for each drug. Based on our current thinking and analysis and discussions, as I said, I think we'll be there comfortably at the end of this year.

[Dan Skovronsky, Chief Scientific and Medical Officer at Eli Lilly and Company]

Your second question was about, I think it was about the duration of benefit as the TRAILBLAZER-ALZ data mature. I commented on the duration of plaque-lowering, which appears to be sustained. I think, Geoff, you're getting at the duration of the cognitive benefit. We see a slowing of decline on average, which means that patients are still declining. You could ask, are the lines coming together or going apart? I think on some of the cuts of the initial data, there might have been a perception that the lines were not diverging at the later time points. I think as I showed the additional statistical methods, and even as we look at the raw data, we're pretty comfortable here that we have lines that diverge over time. Therefore, I would expect that benefit of slowing would continue over time, but too soon to have real data on that.

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

Thanks, Dan. Mike, on tirzepatide?

[Mike Mason, President of Lilly Diabetes at Eli Lilly and Company]

Yeah, thanks for the question. Our phase III SURPASS program for type 2 diabetes is done and completed. The only gating factor here is how quickly we can summarize the data and submit to the regulators, which we plan to do by the end of the year to major global regulators. Thanks.

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

Thanks, Mike. Geoff, thanks for your questions. Next caller, please.

[Operator]

Thank you. The next caller is Carter Gould from Barclays. Please go ahead.

[Carter Gould, Analyst at Barclays]

Great. Good morning. I guess I'll try to take another stab at the pricing question. I appreciate it's early, but it is sort of the elephant in the room. Just maybe if Dave and team could comment just on the appropriateness of the pricing benchmarks in the space already today in Alzheimer's as you think about it. Then obviously 3Q has tripped you up in the past around Trulicity dynamics. Just hoping if you could just offer a little bit more clarity there as you think about pricing headwinds into 3Q specifically. Thank you.

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

Thanks, Carter. We'll go to Dave for the question on pricing for donanemab and then Mike on Trulicity pricing dynamics.

[Dave Ricks, Chairman and CEO at Eli Lilly and Company]

Appreciate the question, we totally get the curiosity. There's, as you understand, probably a lot of limitations on what we would say at this stage. One of the reasons for the limitation is really the ultimate label we have, and the value we can demonstrate to customers is a key input at Lilly for pricing. We have, fortunately, the only study in the space that hit its pre-specified endpoint for disease reduction or disease progression reduction, and those are key. As we demonstrated at AAIC, we continue to cut that data. I think there was an earlier question about how we might differentiate in the NCD process. That's one of them, we have this completed study with exquisite biomarker profiles of the product and can continue to elucidate what donanemab does in the brains of Alzheimer's patients in ways that perhaps others could not.

[Dave Ricks, Chairman and CEO at Eli Lilly and Company]

Those are inputs as well. Finally, Lilly has been a leader in value-based concepts and partnerships to make sure that the appropriate patients can easily access, at low out-of-pocket costs, our medicines. We're applying that thinking to this problem in the U.S. as well as outside. Our goal isn't to just get an approval, but to make sure that all of the people, millions in the U.S. who could qualify for it, could access it on day one. Those are all inputs into that process, and without throwing out a number here, which wouldn't be appropriate till we get an approval, that's how we think about it. Hopefully, that gives you some color behind the scenes.

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

Thanks, Dave. Then to Mike on Trulicity for pricing dynamics, pricing trends.

[Mike Mason, President of Lilly Diabetes at Eli Lilly and Company]

Yeah. Thanks for the question. Really nothing new to report on Trulicity pricing. At the beginning of the year, we gave guidance that when you take a look at the impact of increased rates and market, second mix and offset by lower utilization 340B and modest list price increases that, for the year we would see a low single-digit price decline for Trulicity. That's what we're experiencing, so really nothing new to update at this point in the year.

[Anat Ashkenazi, CFO at Eli Lilly and Company]

Yeah, let me just add more general comment on pricing movement through the year. I know we've had numerous conversations on this. There does tend to be some volatility throughout the year. We do tend to see as patients flow through the healthcare system, a more pronounced impact from the coverage gap in the second and third quarter of the year. You see that dynamic throughout really every year. As Mike said. We built those assumptions into our full-year guidance in terms of pricing dynamics for the year. Obviously, as we have more color and insight, we'll provide that. Right now, as we look at the full-year estimate for U.S. pricing dynamic, it's consistent with what we previously discussed in terms of overall erosion. You saw 3% for the first half of the year, which is what you should expect for the full year.

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

Thanks, Anat. Carter, thanks for your questions. Next caller, please.

[Operator]

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

[Seamus Fernandez, Senior Managing Director and Analyst at Guggenheim]

Great. Thanks for the question. Really wanted to kind of focus in on abemaciclib and prostate cancer, and the update that was provided. I think in an abstract published at ASCO, some of the details were provided with regard to the sort of threshold for moving forward, as it relates to the hazard ratio, and a site that has a ratio of 0.64, 80% power. With a p-value of 0.1 to, I think, continue advancing into the next stage of CYCLONE 2. Just wanted to clarify if that information is consistent and a driving force for moving forward, that would seem like a robust piece of information to have as we head into that. As incremental to that, just wanted to get a sense of the magnitude of the opportunity that Lilly believes this would represent for Verzenio going forward.

[Seamus Fernandez, Senior Managing Director and Analyst at Guggenheim]

If there are, let's say, RB, so the retinoblastoma-related requirements for enrollment or any other biomarker requirements that could limit the size of the patient population. Just as a follow-up, in terms of the NCD determination, just wanted to clarify if the pricing of the initially priced product would have any impact on Lilly's ability to independently price its own product. If that's part of the reason why Lilly has argued for the products being treated independently as part of the NCD rather than as a class. Thanks.

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

Thanks, Seamus. We're going to toss it to Dan first to start on Verzenio, and then Anne will follow to round that out, and then we'll go back to Dan for the NCD question.

[Dan Skovronsky, Chief Scientific and Medical Officer at Eli Lilly and Company]

You're asking, Seamus, very smartly about the criteria to expand the study from a phase II study to a phase III study. I don't think we want to get into the very precise details on what that was. You're correct that it was a very robust threshold. We're excited to see that happen. We take phase III very seriously at Lilly. We don't want phase III failures. When we have studies like this one in any therapeutic area, we move from phase II to phase III without ever seeing the data. We set aggressive bars that the data really have to match to move forward to phase III. You can expect that's what we did here. Anne, for more details.

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

Thanks, Dan. Anne, for more detail, there and also the magnitude of the opportunity we see in prostate?

[Anne White, President of Lilly Oncology at Eli Lilly and Company]

Yeah, as Dan said, we were incredibly pleased with this outcome and the recommendation by the DMC, and we set a very aggressive threshold on this adaptive design, and we're impressed that it met that threshold. I think it just continues to be another example of how Verzenio differentiates from the competition. The phase III is open. It's already enrolling patients. We anticipate the results of the analysis in 2024. On the question of market size, CYCLONE 2 is a metastatic castrate-resistant prostate cancer trial that really targets patients who have not yet received a prior novel hormonal agent, so in earlier settings. Our initial research shows that the addressable market could be in the range of 25%-50% of metastatic CRPC. It's depending really a bit on how the market evolves with the use of NHAs in that earlier setting.

[Anne White, President of Lilly Oncology at Eli Lilly and Company]

In the U.S., for example, based on that, we currently estimate between 7,000 and 14,000 patients would match the inclusion criteria for CYCLONE 2. Exciting in this space is that along with being a high unmet need and a large patient population, there's also a long length of anticipated treatment duration. This could be a treatment duration of up to two years or longer. That's why we're particularly excited about this opportunity is what it delivers there. There is no RB or other biomarker requirements in the study.

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

Thanks, Anne. Dan, on NCD?

[Dan Skovronsky, Chief Scientific and Medical Officer at Eli Lilly and Company]

The last question was on NCD, and why did I say that we think each drug should be evaluated on its own merits? Is that an allusion to pricing or something like that? No. My primary focus here is on the patient and the outcomes that a drug could deliver, which even within the same class could be different. Our theory, and I just presented data today to support that theory, is that the amount of amyloid you remove and how quickly you do that is important for predicting outcomes. If that's the case, you can easily imagine different drugs, even with the same class, having different benefits for patients, and some of those benefits may be above a threshold for coverage, and others may not. That's conceivable. Not what I anticipate is the most likely scenario, but we want to be prepared for all scenarios here.

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

Thanks, Dan. Seamus, thanks for your questions. Next caller, please.

[Operator]

The next question is from Vamil Divan from Mizuho Securities. Please go ahead.

[Vamil Divan, Analyst at Mizuho Securities]

Great. Thanks for taking my questions, and thanks for all the updates on the pipelines. Maybe a couple sort of separate topics that have been covered more on the call so far. One, lebrikizumab, I feel like that one maybe gets underappreciated a little bit. We got phase III data coming up. Can you maybe just set the sort of expectations on what you're hoping to see? I know you have a dosing advantage potentially with that product, but obviously, Dupixent is a pretty formidable competitor there, so maybe you can sort of frame what you're hoping to see? Then, tirzepatide, just one quick follow-up. I know you mentioned you've started, I think you said the HFpEF study for that product. Are you looking at that for HFrEF as well? I don't remember you mentioning that. If not, I'm just curious why you wouldn't pursue that.

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

Thanks, Vamil. We'll go to Ilya for the question on lebrikizumab and then Mike for tirzepatide.

[Ilya Yuffa, President of Lilly Bio-Medicines at Eli Lilly and Company]

Great. Thank you for the question on lebrikizumab. We're excited for the second half of the year to see the data related to our induction phase for lebrikizumab across a number of trials. What we're hoping to see and expect to see is replicating some of the positive signals we saw in phase II, where we have strong efficacy in skin itch, and we believe have a very good safety profile. We anticipate that lebrikizumab will have a very competitive profile versus Dupixent in a growing and significant unmet need. We see lebrikizumab as an important asset for us as we think about not only atopic dermatitis, but also our overall presence and strength in dermatology and our growing immunology franchise.

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

Thanks, Ilya. Mike?

[Mike Mason, President of Lilly Diabetes at Eli Lilly and Company]

Okay. Thanks for the question. Yes. We have only announced a HFpEF study for tirzepatide; that's currently all we're planning on announcing at this point. I think we're very confident in the opportunity of tirzepatide in the HFpEF. When you look at patients who have HFpEF, there's a large segment that also are obese; obesity is a distinct phenotype within this patient population. I think we feel good about the results we've seen in our phase II studies, that give us, I think, confidence that we'll be successful in HFpEF. Right now, our efforts are focused on HFpEF. Thanks.

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

Thanks, Mike. Vamil, thanks for your questions. Next caller, please.

[Operator]

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

[Steve Scala, Analyst at Cowen]

Thank you. Two questions. First, on the Q1 earnings call, Lilly said in monarchE there had been 76 events, 39 on abemaciclib, 37 on control. Can you provide an update with numbers on a like-for-like basis? Secondly, on your oral SERD, did Lilly see potential for differentiation in the ASCO data? If so, what differentiation did it see, particularly as competitor data and news flow evolve? Lilly has previously said it would not pursue a me-too SERD I'm wondering what is different about yours. Thank you.

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

Thanks, Steve. We'll go to Anne for the first question on Verzenio, and then to Jake for the question on oral SERD differentiation.

[Anne White, President of Lilly Oncology at Eli Lilly and Company]

Well, thanks, Steve. As Dan shared, we're going to be presenting data from this recent analysis at a medical meeting later this year. We won't be able to share further details than that, obviously, due to the embargo. As you can tell, we are very pleased to see the data continue to strengthen in this latest analysis with more than two years of follow-up. As we stated previously, the overall survival data remains immature. At this point, what I can share is that we have less than half of the events needed, so less than 50% of the events needed for the pre-specified OS analysis. The data remains immature. Again, we were really pleased, even with that immaturity, to see that the patients with the highest risk already had this favorable trend. Thanks for the question, and I look forward to sharing more at a meeting later on.

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

Thanks, Anne. Jake?

[Jake Van Naarden, CEO of Loxo Oncology at Lilly at Eli Lilly and Company]

Sure. Happy to take a question on SERD. We're pleased with how the drug is performing clinically. It's doing everything that we expected it to do from a pharmacology, safety, and efficacy perspective. I think the data package that we presented at ASCO and that which we continue to see in the trial subsequent to ASCO, places the drug in a vacuum on par with the best agents in development from our peers. This is not a class of medicines that stands on its own, period. This is really a development program. I think, as it relates to me-tooism, what I would say is that we're not interested in pursuing a me-too development program. We stand by that statement.

[Jake Van Naarden, CEO of Loxo Oncology at Lilly at Eli Lilly and Company]

Frankly, our leadership position in breast cancer, in particular with emerging Verzenio data as we've been talking about today, I think puts us in a unique position as it relates to this class of medicines. That all having been said, I also think we are a bit more cautious about the long-term role of SERDs in this landscape, and we're looking forward to some randomized data for the first time from some of our competitors later this year that I think will shed some light on where these drugs ought to fit in the overall treatment paradigm.

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

Thanks, Jake. Steve, thanks for your questions. Next caller, please.

[Operator]

That comes from Matthew Harrison from Morgan Stanley. Please go ahead.

[Matthew Harrison, Managing Director at Morgan Stanley]

Great. Thanks for fitting me in. I guess two from me. First, just a follow-up with two parts on the Conrado model. One, do we know the regulators' view of this model? Secondly, maybe if you can just explain what we're seeing in a little bit more detail. It looks like you're seeing about a 40% regression in slowing at 100% clearance. I assume this is over 18 months. Would you expect that to continue to compound? I'm just wondering why only sort of 40% slowing when you've cleared all the plaque. Just a second follow-up on SERD. Any plans to look at that in combination with CDK4/6 or other combinations? Thanks.

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

Thanks, Matthew. We'll go to Dan for the questions on the Conrado model and then to Jake on SERD.

[Dan Skovronsky, Chief Scientific and Medical Officer at Eli Lilly and Company]

Yeah. Thanks, Matthew, for the question there. No, we don't have a regulator's view on the Conrado model, but we're encouraged that this model was built, as I said earlier, by data from the CAMD consortium, and it's been around for a while and used for various applications. What we're doing here, though, to be clear, is checking a patient's progression against what we predict their progression would be. Knowing all of their baseline factors, how much would they predicted to have progressed had they not been on the drug versus how much did they actually progress? That's essentially what you're seeing in the graph. You're right. Even with full plaque clearance, there's still some progression. There's only a 40% decrease. That's as big an effect as anyone has ever talked about in Alzheimer's disease.

[Dan Skovronsky, Chief Scientific and Medical Officer at Eli Lilly and Company]

Surely, over time, we're going to need additional therapeutics for Alzheimer's beyond just clearing the plaque, at least in this stage of disease. I think that's probably where tau therapeutics comes into play. That's how we think about it. I think earlier in the disease course, it could be quite different, perhaps. If you get it early enough, you could have 100% slowing of progression and, in essence, no Alzheimer's. That has yet to be proven.

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

Thanks, Dan. Going to Jake for the question on SERD.

[Jake Van Naarden, CEO of Loxo Oncology at Lilly at Eli Lilly and Company]

Yes, the question on SERD. Of course, we plan to explore combining our oral SERD with CDK4/6, in particular abemaciclib. We're doing that right now in the context of an expansion cohort of the phase I/II trial. The same trial for which we presented data at ASCO has expansion cohorts that contemplate rational combinations, including with abemaciclib.

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

Thanks, Jake. Matthew, thanks for your questions. We've exhausted the queue. We'll go to Dave for the close.

[Dave Ricks, Chairman and CEO at Eli Lilly and Company]

Thanks, Kevin, and thanks to Dan for answering all those questions. We appreciate your participation in today's call and your interest in the company, of course. We continue to see growth with our broad commercial portfolio, and we have strong momentum across our core business, supported by a breadth of brands and accelerating classes and robust growth across the U.S., Europe, and China. In addition, as you heard today, we believe we have a compelling pipeline with industry-leading opportunities, and we remain focused on bringing new medicines to patients and creating value for all our stakeholders. Thanks again for dialing in. Please follow up with the Investor Relations team if you have any questions we have not addressed today, and hope you have a great day. Thanks.

[Operator]

Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation and for using the AT&T Teleconference service.

Participants

Executives

• Anat Ashkenazi, CFO
• Anne White, President of Lilly Oncology
• Dan Skovronsky, Chief Scientific and Medical Officer
• Dave Ricks, Chairman and CEO
• Ilya Yuffa, President of Lilly Bio-Medicines
• Jake Van Naarden, CEO of Loxo Oncology at Lilly
• Kevin Hern, VP of Investor Relations
• Mike Mason, President of Lilly Diabetes

Analysts

• Carter Gould, Analyst at Barclays
• Chris Schott, Managing Director and Analyst at J.P. Morgan
• Geoff Meacham, Managing Director at Bank of America
• Louise Chen, Analyst at Cantor
• Matthew Harrison, Managing Director at Morgan Stanley
• Ronny Gal, Analyst at Bernstein
• Seamus Fernandez, Senior Managing Director and Analyst at Guggenheim
• Steve Scala, Analyst at Cowen
• Terence Flynn, Analyst at Goldman Sachs
• Tim Anderson, Managing Director and Analyst at Wolfe Research
• Umer Raffat, Senior Managing Director at Evercore
• Vamil Divan, Analyst at Mizuho Securities
• Analyst