Ladies and gentlemen, thank you for standing by. Welcome to the Eli Lilly and Company Q1, 2018 earnings call. At this time, all participants lines are in a listen-only mode. [Operator Instructions] As a reminder, today's conference call is being recorded. I would now like to turn the conference over to Dave Ricks. Please go ahead.

Good morning. Thank you for joining us for Eli Lilly and Company’s first quarter 2018 earnings call. I’m Dave Ricks, Lilly’s Chairman and CEO. Joining me on today’s call are Josh Smiley, our Chief Financial Officer; and Enrique Conterno, the President of Lilly Diabetes and Lilly USA; Dr. Sue Mahony, President of Lilly Oncology; Christi Shaw, President of Lilly Bio-Medicines; and Jeff Simmons, President of our Elanco Animal Health. We’re also joined by Kristina Wright, Jim Heaney, Kevin Hern and Phil Johnson of the Investor Relations team. We also joined for the first time by Dan Skovronsky, our incoming President of Lilly Research Laboratories. Dan is succeeding Dr. Jan Lundberg who retires at the end of May. Jan has been key to our success as we navigated the years YZ and return to growth for the series of successful products. We want to thank Jan for his all contributions to our company. During this conference call, we anticipate making projections and forward-looking statements based on our current expectations. Our actual results could differ materially due to a number of factors, including those listed on Slide 3 and those outlined in our latest Forms 10-K and 10-Q filed with the Securities and Exchange Commission. The information we provide about our products and pipeline is for the benefit of the investment community only. It is not intended to be promotional and it is not sufficient for prescribing decisions. 2018 is off to a good start. With first quarter revenue growth of 9%, which we leveraged into a 29% non-GAAP operating income growth and 37% non-GAAP EPS growth. New pharmaceutical products continue to be the drivers of our worldwide revenue growth. Led by Trulicity, Basaglar, Jardiance and Taltz, with growth in both US and international markets where launches continue to scale up. New…

Thanks Dave. Slide 6 summarizes our presentation of GAAP results and non-GAAP measures. While Slide 7 provides a summary of our GAAP results. I'll focus my comments on our non-GAAP adjusted measures to provide insights into the underlying trends in our business. So please refer to today's earnings press release for a detailed description of the year-on-year changes in our first-order GAAP results. Looking at the non-GAAP measures on slide 8, you'll see the revenue increase of 9% that Dave mentioned earlier. Gross margin as a percent of revenue decreased to 75.1%. This decrease was due to the effective foreign exchange rates on international inventory sold. Excluding this FX effect, gross margin as a percent of revenue actually increased roughly 70 basis points, driven by higher realized prices and manufacturing efficiencies, partially offset by product mix. Total operating expense decreased 5% with marketing, selling and administrative expense decreasing 4% and R&D expense decreasing 6%. Total operating expenses as a percent of revenue declined by 710 basis points compared to Q1, 2017. This significant improvement reflects our continued efforts to reduce our cost structure and increase our margins, accelerated by the restructuring actions we took late last year. Other income and expense with income of $67.5 million this quarter compared to income of $78.3 million in last year's quarter. Our tax rate was 15.9 %, a decrease of 530 basis points compared with the same quarter last year, driven primarily by the impact of US tax reform. At the bottom line, net income increased 35%, while earnings per share increased slightly faster at 37% due to a reduction in shares outstanding from shares repurchase. We achieved a significant earnings growth by delivering high single digits revenue growth, while significantly reducing our operating expenses, creating positive leverage again this quarter. Slide 9…

Thanks Joshua. Slide 15 shows select NME and NILEX as of April 20th movement since our last earnings call include the approval of baricitinib for the first line treatment of metastatic breast cancer in the US. A Phase 3 starts for Trulicity in 3 mg and 4.5 mg doses. A Phase 1 starts for the IL-23 CGRP biospecific antibody for immunology. While we have attrition of the Phase 2 base inhibitor molecule as monotherapy, the trial and combination with the N3pG antibody continues, and we look forward to seeing results in this novel trial design. We also discontinued our abemaciclib pancreatic cancer study. You'll see we've combined our NME and NILEX pipeline into one view. In terms of NILEX, we have a robust set of lifecycle opportunities for recently launched products, which we expect will continue to bolster the growth prospects for important brands like Trulicity, Taltz, Verzenio, Olumiant and Jardiance. These products are well positioned in some of the largest and fastest growing categories. In our dressing areas of high unmet medical need. Key NILEX opportunities include AxSpA for Taltz, atopic dermatitis for Olumiant, adjuvant breast cancer for Verzenio. The 3 mg and 4.5 mg dose study for Trulicity and heart failure for Jardiance, which is in collaboration with Boehringer Ingelheim. On Slide 16, we highlight expected key events for 2018. In addition to noting the US approval of Verzenio for first line metastatic breast cancer, we've indicated the data disclosure of the keynote 189 study at AACR which showed that Alimta, in combination with Keytruda plus platinum chemotherapy reduced the risk of death by half compared with chemotherapy alone as first-line treatment in metastatic, non-squamous, non small cell lung cancer patients. The overall survival benefit was robust regardless of PDL-1 expression status. We also announced last week that…

Thank you, Dave. We would like to take questions from as many callers as possible during the Q&A session. So we do ask that you limit your questions to two or to a single two-part question. Lia, you can provide the instructions for the Q&A session and then we're ready for the first caller.

[Operator Instructions] Our first question is from line of Greg Gilbert with Deutsche Bank. Please go ahead.

Thanks. Good morning, team. First, Dan, congrats to you in your new role. Dave, can you talk about the use of Bari outside the US in terms of mix of strengths and any post marketing safety data that you have to bolster your case with the FDA? And secondly on the subject of drug pricing in the US. What types of changes are you expecting the administration to put forth? You can be specific as you'd like but at least conceptually would love your opinion and how do you think Lilly is positioned relative to those potential changes? Thanks.

Great, thank you for the questions. We are actually going to have Christi Shah, President of Lilly Bio-Med to take your question on the use of the two different doses outside the US and any o-US data that may be helpful as we present our case to the FDA. And then Dave you'll have the question on drug pricing. Christi?

So outside the US over 40 countries you have both the 2 and 4 mg approved. And the majority of the use is in the 4 mg with remarkable efficacy, really patients getting their lives back and the safety continues to hold up that we see no new signals that are different than what we submitted to the FDA. And will continue I think yesterday's ADCOM showed for sure the unanimous vote on the efficacy of the 4 mg is important to patients in the US. So we want both the 2 and the 4 mg approved in the US for those patients.

Yes. Thanks, Greg. Obviously, big topic drug pricing. I mean it's hard to speculate exactly what the administration will say or do, but I think I can comment on what pharmas position has been and Lilly's as well, which is as it relates to a leading pain at the pharmacy counter and reducing the burden of list prices that consumers pay at the counter, we've been long been proponents of rebate pass-through, both in commercial plans and Part D. And I think the most important action that the administration could take would be to create either set of experiments or mandate a rebate pass-through for patients in the Part D program. This would I think immediately impact seniors cash flow and pocketbook, as well as I think helped to normalize the incentives on gross to net spread. So that I would be personally surprise if that wasn't part of the commentary, and that's something we've long stood for. So that would be I think a positive development from our perspective. The HHS Secretary has commented on Part B and the lack of market mechanism there. I would expect that to be a topic of discussion. And then we do see increased desire under this administration to approve waivers for Medicaid, giving states flexibility in a variety of forms to manage their own programs. And I would expect to see more of that. Finally, we worked closely with this administration on trade agenda to balance the incentives that foreign markets have to suppress drug pricing which are primarily exports from the US. We've had some early signs of success there with the Korea free trade agreement. We'll keep on that. I think long term, US needs to use is trading power to help equalize that sharing across sort of advertising the R&D expense that it takes to create the new innovations, which are becoming even more frequently from the industry. So we watch that carefully and continue advocate for pro innovation, pro patient choice, as well as policies that can make sure that this innovation, this industry can continue innovate and prosper for years to come. So all those topics are front of mind and will keep working out, Greg.

Very good. It's the line of John Boris with SunTrust. Please go ahead.

Thanks for taking the questions and congratulations on the robust results. Just back to Olumiant. Can you just quantify the number of patient years of therapy that you have on Olumiant, not just in the clinical package but how many or how much patient years or number of patient years of therapy that you have abroad especially since it's heavily skewed towards 4 mg? And then on Taltz, on the Novartis call, they clearly indicated that they also had a wholesaler de-stock and buyout. In addition to that was giving away a lot of free products. And then obviously copay accumulators are also a topic that is penalizing patients on deductibles. Can you provide some commentary on the miss on Taltz and the impact across your business of potentially copay accumulator going forward?

Great, John. Thank you for the questions. So Christi if you want to start with the Taltz question and then we'll figure out who's going to be best position here to give some of the numbers on the patient years exposures for Olumiant and the clinical trial program.

And can you give me the clarity on the Taltz question that was with term --

I think the Novartis indicated they gave away a lot of free product through initial sampling. How much did that impact IL-70 uptake in the quarter particular Taltz?

So for Taltz, we did have some inventory changes which were the biggest rationale for our decline from Q4 to Q1 in terms of dollars. But our demand was up in terms of Q4, Q4. And in fact our NBrx has grown 30% sequentially in the first quarter. So we're seeing actually real demand coming through. I can't really comment on the others, and how they count their inventories. The accumulator program I think our goal is to make sure that patients get access to every medicine that we provide and that their doctors think they need. So whether that a little bit of rebating, whether that's copay assistance et cetera that passed through that Dave talked about earlier. It's also important to ensure the patient's get access, but we haven't had issues to date.

And then John I don't think here in the room we have numbers on the patients that are in some of the overseas registries for follow-up. I think Dan you do have some information on the clinical trial program and the number of patients and patient years exposure.

Yes. Thanks, John. So in the safety data we presented to the Advisory Committee was based on more than 7, 800 patient years in our clinical trials. And that establishes the safety database for baricitinib from clinical trial experience. Your question referred also to the commercial experience outside the United States, where obviously they've been many, many more patients exposed to the drug. Although, we don't have exact numbers for patient years exposure. As you heard from Christi, despite that extensive exposure, we haven't seen any new safety signals. So while we agreed that VTE is a potential risk of this drug. We haven't seen that manifest in the clinical experience.

Very good. That is the line of Tim Anderson with Bernstein. Please go ahead.

Thank you. A couple of questions. Going back to Taltz. So in the class of IL-17 in general J&J is running the Phase 3 eclipse trial comparing their IL-23 to Novartis is IL-17. You have both of these mechanisms either on the market or in development. So I'm hoping you have some perspective on what you think is the better more effective mechanism in psoriasis. And if that J&J trial comes out in favor of Tremfya, doesn't that have a potential indirect impact on Taltz? And second question on your GIP/GLP one, I know you've said in the past we're supposed to see Phase 2 data this year. Can you say what the likely venue will be and maybe preview what you're hoping to see in that data?

Great, Tim. Thank you for the question. So Christi to you for the question on Taltz, IL-23 versus IL-17 and then Enrique over to you for your first question of the day on the GIP/GLP.

Sure. I mean, first of all, what I would say is thank goodness for patience we have so many more newer medications that are providing such higher efficacy. So IL-23, IL-17, they are going to be great for patients and it's going to spend the time to tap into that older market where the older TNS really lack efficacy relatively speaking. So the other thing is patients really churn through different modalities, each patient might need something different, they response to one and not the other, so we're really confident glad that we have both in our portfolio and we believe there will be specific patients for each. Specific to Taltz, as we look at the future the very short-term, not only is the psoriatic arthritis indication starting to kick off, these are dermatology really move in the first quarter and we think it's due to the psoriatic arthritis s indication really solidifying that efficacy there, but we also have our own head-to-head psoriatic arthritis readout later this year versus Humira, and then we have our ankylosing spondylitis data too that we have one of two studies that have completed. The second will be at the end of this year. So a lots happening with Taltz and we feel very good about our chances are winning the market place.

So, we've been an excited for quite a sometime about GIP/GLP clearly, the hurdle for this product is pretty high and we want to see their superior outcome when it comes to hemoglobin A1C and weight loss, this will be current GLP. We expect that we're going to be disclosing some of this data either later late this year or ADA next year. We have to see.

Next is a line of Geoff Meecham from Barclays. Please go ahead.

Hey, guys. Good morning and thanks a lot for the question. Just have a few more for Enrique and diabetes. So Trulicity growth has been great but how is the influential do you feel like rewind could be positive or negative relative to the current trajectory? And then Jardiance SLT-2 class is growing but we've haven't quite seen a tipping point for Jardiance just like guidelines, how do you think that could play out? And what do you think that could be and then I know it's been a lot of very questions already but if it's just a two mg dose that's approve maybe help us with the commercial positioning. Obviously weaker but I just want to give your context for that? Thanks.

Meecham, thank you for the question. And Enrique will go to you for the first two questions with Trulicity and Jardiance. And then the Christi over to you for a question on 2 mg dose for baricitinib commercial implication.

Yes. Maybe just to start with framing the Trulicity quarters because we have another strong quarter continued solid growth. We basically have seen that the increased promotion but the new launches is basically having some impact in market acceleration, but we see both -- we see a very good market growth and we see basically good share performance with Trulicity in a more competitive environment. So we very much like our position we have a strong access position as well and finally I'm calling something that sometimes it's under estimated but it's the patient experience that we basically receive from physicians, from patient themselves. We have an excellent real world efficacy and which is very simply delivered. So we're very excited about that. Clearly, we wind us and change any of that but it is extremely important because we believe the longer-term for us to be competitive in this class we will need cardiovascular outcomes. As it relates to the SGLT2s, clearly we have been seen some very good growth of Jardiance but we had a pretty important event in Q1 related to the exclusion from CBS. Jardiance still has very good access and what we basically have seen post the rebasing of the prescriptions of patients, many patients have been switch and we basically have seen resumed growth over the last few weeks. Clearly the SGLT2 class and Jardiance in particulars still a very small part of the overall prescriptions. We estimate that about 30% of patients with diabetes have established for the vascular disease. So the opportunity for us is of continued growth and we're working to accelerate Jardiance and being Jardiance catalyst for the growth of the class.

Thanks Geoff for the question. I think you saw yesterday the reinforcement by everyone with the 4 milligram dose is really needed for patients from an efficacy standpoint. So our goal is to actually have both doses available and we continue to study both the 2 and the 4 milligrams and other studies that are ongoing.

Next we go to line of Chris Schott with JP Morgan. Please go ahead.

Great, thanks very much for the questions. First one was just on the Humalog performance in the quarter and some of the rebates. So just two questions there, first, can you just quantify what the benefit was in the quarter? And second, can you just elaborate and what's happening with mix year and can we think about that is sustainable? My second question was on Taltz channel dynamics is under question just quantifying what we saw in terms of the work down of this quarter. And you've also get some very healthy volume trends but can you talk a little bit more about the underlying price dynamics in the IL-17? Are there other pressures we should be thinking about beyond just channel work down the quarter that could offsets of that volume growth? Thank you.

Chris. Thank you for the question. Just to understand the second question. You mentioned mix being sustainable, is that specific to Humalog or that more broadly focused across the portfolio products in the U.S.

I was actually specifically with the Humalog, but if there is a broader trend we'd love to hear that as well.

Okay. Very good, so if you love to the or Enrique if you talk about the Humalog in addition of the mix and then over to Christi for the Taltz channel dynamics. Joshua Smiley, if you are going to make any overall comments and repeat a one on or we generally seeing in the U.S. across our portfolio for mix. Enrique?

Very good. So when it comes to Humalog of course, strong quarter, we saw about a $50 million benefit in the quarter related to changes in the estimates of rebates and discounts. Part of that was Medicaid and part of that other payers mix changes. We basically see some of those benefits continuing throughout the year of course some of that is also growing as part of Q1. In essence, we are seeing lower Medicaid claims and basically other dynamics that are slightly favorable when it comes to payer mix, when it comes -- specifically to Humalog. Now, when we look broadly the portfolio, it is pretty clear that those Medicaid claims is something that we see across the portfolio but not all of our products are as exposed as of the incidents are.

Sure, so specifically the inventory change we saw was about $32 million quarter four and quarter one. And if we look at the price dynamics and volume growth, ours volume growth and as we look to the future, if patients really need the best medications out there, we haven't seen a strong need yet to significantly rebate. I know Novartis in its call said that on their but that's not the same case for us.

Yes. We have line of Andrew Baum with Citi. Please go ahead.

Hi. Couple of questions, please. Could you indicate your assessments have been impacted setting that [indiscernible] [Technical Difficulty] in 2019 given the new business, the third-party patients? Second, could you talk your expectations for Alimta post 189 data as well as the stalling of the 340B expansion which I assumed is health view? And then finally on business development and oncology generally, I know that my pay loss likely go to a competitor and also away that the deal flow we might have expected from to the in oncology not as yet transpired, but could you just update this on your commitment particularly to immuno biology and expectations and valuations you see for and potential acquisition for partnering candidate externally. Thank you.

Great. Andrew, thank you for the questions, we'll go to Enrique for the first question on the doughnut hole in 2019, and then Sue if would like to comment on expectations for Alimta moving forward as well as project perspective as you presented on oncology business development. And now the Dave or Josh you want to give a corporate perspective feel free to augment. Enrique?

So the increased coverage in during the doughnut hole for 2018, when we look at our overall portfolio is about $200 million, most of it being driven by diabetes

Yes, with regard to Alimta, clearly, we're very pleased with the Keynote-189 data and as I mentioned earlier, we have seen growth in this quarter on Alimta in the U.S. 8% growth overall and 3% that was price, 5% that was volume. We've also continue to see increase in each brand in combination. I think we don't give focus on individual products, and I think it's key to note that about 50% of our sale is come from first line and second line, about 40% is first line. With that we are as I said, seeing a stabilization in overall share market and an increase in each brand. We continue to see unexpected that increase as we saw some people waiting for the phase 3 trials data outcome before turning the combination of the Alimta, Keytruda and carbo. So we are really pleased with that. We think that it's concerns the benefit that we seen with Alimta, historically as a standard of care in the first line non-small cell lung cancer setting, and we continue to see that will be the case going forward. And with regard to a business development, we are continuing to be very interested in BD across all areas including IL, and we have told previously about offshore bank deal which is a bet that we have one of the best that we will be placing with regards to RNA based vaccines. We anticipate that we will be doing other deals both in the IL space and in other areas in oncology in the future. We're also bringing in new people into our team again. We motioned we’ve on-boarded two physicians recently, one from Duke and the other from the Memorial Sloan Kettering and you will see us continuing to bringing more external talent.

I would just say we're highly committed to use balance sheet to expand our portfolio with BD, we've talk about clinical stage assets and particular and oncology's the number one target. So, Jeff I wouldn't read through the relative lack of activity most recently as any signs that we're change our conviction. Of course, we need to look at each idea and make sure make sense for us to only make sure we like sciences and valuations are appropriate. But as we'll be discipline on those matters but strategically we understand, we need to be active externally and you can count us. If you need to look at all available choices that to our pipeline in particular in oncology.

Okay, thank you, Dave. And then back to question that John Boris had asked but we did not have a data for. Thank you to Olumiant team for providing that we now have 11,500 patients' years of exposure with baricitinib. And when you add in the post approval exposures. Lia, we can go to next caller please.

Thank you. It will be the line of Tony Butler with Guggenheim Securities. Please go ahead.

Thanks very much. Two questions if I may. One is, the pipeline related, one is galcanezumab and you do have some data at AN today. But I'm just curious with respect to the range of somewhat similar products that we'll come to market as a cluster, I assume later this year. What makes gout stand out? And can it do so without having a second agent in the bag is it less middle hand. And then second, back to the previous question asked on immuno biology. You have had relationship with an antibody base company I assume for biospecifics. And I'm just curious it seems to be an interesting area with CD1 through engagers in. Could you speak more to that because it's a way maybe to back end and to an area and which you didn't have to go through reset direct PD1? Thanks very much.

Okay, thank you for the questions, Tony. Christi we will go to you for the galcanezumab and how we intend to succeed in that market place. And over to Sue for the question on immuno biology biospecifics et cetera.

Sure, So, Tony thanks for the question. I think this is an area where migraine patient haven't had and an option for few decades, and here we are with the couple of agents coming out quickly together. So, first of all, I think the really good thing to really have a couple of companies activating these patients. So, the first piece is who is going to be better at the consumer driven area, the direct to consumer. And I think our chance is there are very good and we have a history of that. On the day specifically, we have 50%, 75% and 100% measurements endpoint and we are the only one is actually showing at 10% to 15% of the patient have the ability will be free of migraine totally. The other think we have is the galca is fast and durable. We see results as early as month one and we see the results continue through the 12 months that we've looked at. You were right, we do have the cluster data coming up and nothing has ever worked in this type of migraine and if we do it'll be a huge win for patients and obviously is then good for differentiating galcanezumab. So our second half launch, we're well prepared for to be competitive and we think we have some differentiation there.

Yes. Tony thanks for the question, biospecifics, yes, as we've looked at our I/O portfolio and what we want to do, we want to understand really what the next generation of IO agents are. And we've taken two bets. I mention one, and we'll be taking others by the way but two that we've taken at the moment, one is the RNA based vaccines that we think really could be potentially disruptive in the future. The other is the biospecifics and as you have mentioned we have ongoing collaborations and actually a number of biospecifics looking at different targets that should be coming into the clinic very soon. We're excited by those. Another asset that we've got in the clinic that we talked about before but not too much is the TIM-3 and we're pretty excited by our TIM-3 and think that we've got a best-in-class asset there. We've also got an IDO. We know that there's some data on IDO we have to see what happens there, but we believe that we've got one that again could be differentiated; so those are two assets we've got in clinic now and as you mentioned we're taking bets on the RNA based vaccines and the by specifics.

Thank you. That's the line of Vamil Divan with Credit Suisse. Please go ahead.

Great, thanks for taking my question. May be just following up on a couple there were topics that were discussed earlier again on baricitinib kind of coming out of yesterday's discussion just I know you have a phase-3 program in atopic dermatitis. Can you just talk about how you see sort of risk/reward and the attractiveness of a product like this in atopic dermatitis where I would think acceptance of safety concerns may be a little bit lower? And then the second question I have just following up on the question on the CGRPs, just curious if you could give your thoughts given we have Botox on the market and also some oral products that are generally used for preventative use, would you expect that the CGRP antibodies are going to use only patients upon through those products or do you think that there might be an opportunity to be used ahead of either. [Technical Difficulty]

Great, Vamil. Thank you for the question. So Christi we'll go to you for both the baric, atopic term question, as well as where you see CGRP potentially being used.

Sure. So baricitinib you know each disease they have its own benefit risk ratio so if you look at what we're studying our phase 2 data with Lupus. We have both the two and the four milligram. If you look at atopic derm, the data that we read out in phase two, the two milligram did work; it just took a little bit longer. So whether it’s two or four you know we know the patients will get better there. So each disease, they really have its own dosing and for rheumatoid arthritis we strongly believe the two and four milligrams needs to be available in the US as it is in over 40 countries. On the CGRP side, we expect patients to cycle through the generics and most of them already have there's like 4 to 5 million patients that are on preventatives and then there we believe there's a few million more that aren't on preventative and should be. So we have every expectation that there'll be a requirement for them to have used for example triptan before they; they go on to a CGRP, but we do expect it will compete well versus Botox. I mean getting 21 to 24 injections in your around your head for doesn't seem as good as having a monthly injection if I’m a patient. So I think we have an advantage there and they have the same hurdles from an access standpoint. So I believe that usage will come and we’re already talking to payers about how we make sure that access is available to the patients that need it.

And that's a line of Mark Goodman with UBS. Please go ahead.

Just to continue on with the CGRP conversation as well as Lasmiditan. Can you just talk about the safety profiles that you see and how you think these things are going to be all used? I mean presumably if everything makes it to the market, how the orals will be used? Your oral versus CGRP orals. Second question is Taltz, just can you explain the specialty pharmacy buying pattern issue and what was the impact on Taltz in the quarter and there were also some inventory patterns with respect to Forteo. Can you quantify that as well? Thanks.

Okay. So Dan if you wouldn't mind talking about some of the safety profiles for a CGRP monoclonal antibody as well as Lasmiditan. Christi, if you could then get the second part of that piece of the question that was how we see Lasmiditan being used relative to oral CGRPs potentially and then if you could go over again the Taltz specialty pharmacy buying patterns that we've seen in effect of this quarter’s revenues proposal.

Great, thanks. So with respect to the safety profile of galcanezumab, I think we've been really encouraged by what we've seen in our phase-3 trials on safety. And I think that's critically important for a preventative for migraine patients could be on for a very long time to be well tolerated by the patients and have a very clean safety profile. So that's an important differentiator for galcanezumab and for the class probably of anti-CGRP antibodies. When you get to the orals which are abortive, the safety profile could be a bit different and we've seen some evidence of that for the oral CGRPs and I think Christi you were going to comment on commercial differentiation.

Sure. I think that's one of the big advantages that we bring in the marketplace is a platform that we're building for pain. So we have the prevention and galcanezumab, the treatment in Lasmiditan and then we have Tanezumab coming. With the mechanism of action Lasmiditan is different than the oral CGRPs. And if we look at patients not everyone responds to the same agent. So we believe that they'll be used similarly for an acute phase and that not all patients will respond to one or the other. So obviously our goal would be to win in that marketplace and position ourselves well for that. But we're working on the package to submit later this year. And then on the Forteo question, I'm sorry the Taltz specialty pharmacy, I think I answered that. That was like a $33 million that was the inventory impact for Taltz but demand was positive quarter-to- quarter. And then on Forteo, the last question on Forteo was basically what we saw was inventory cam in at a different way. We saw the wholesaler buying patterns actually increased volume in Q4 of last year. Some of that has been de-stocking in Q1 but not all of it. We did have somewhat formally loss with Tim Lowe's, the new competitive entries but that was a really small impact to the overall performance for Forteo.

Okay. I am just going to add I guess there was another question about using for the CGRP antibodies in refractory patients. Just to point out that all of our phase-3 pivotal studies had patients who failed on at least two other modalities. So that's likely the indication I'm not sure if that has a big commercial bearing because those patients who have had - are chronic migrainers or episodic migrainers have tried many other things. So I think the pool of available patients for prevention will be there. The data in our program and I believe all the competitors is on to failures and despite that and the data we’re present today is incredibly strong, large extent of patients have at least 50% reduction in headache days per month.

And that is Dave Risinger with Morgan Stanley. Please go ahead.

Yes, thanks very much. So I have two questions. First just to follow up on the CGRPs. There was a Reuters article today that described how Express Scripts is asking for lower list prices on CGRPs. Could you just provide a comment on that and whether a manufacturer could trust PDMs to not extract significant rebates in the event that a manufacturer does list, the list price lower than expected and then second with respect to Trulicity rewind, the slide that you published this morning indicates an internal readout in 2018, but not an external readout and I just wanted to understand that a little bit better because clinicaltrials.gov indicates July completion of that trial. Thank you very much.

Great, thank you, Dave. Well, the article you're referencing was specific to CGRPs. Your question really more of a policy question. So Dave if you would mind taking the first part of Dave Risinger question then Enrique over to you for the Trulicity rewind, timing of internal readout and top-line press release relative to presentation to medical media.

Yes. Thanks, Dave. I did glance at that interview with Steve Miller this morning. I was really happy to see this Express Scripts is now for value-based pricing. Of course, we've been for this kind of construct for years because we believe in the performance of our products and I think in the case of migraine drugs and many other drugs. Diabetes, other autoimmune drugs even in oncology I think we're willing to enter into these discussions. The point about lower list prices is a little bit moods, I think the idea that the price varies in a value-based scheme based on actual product performance I think that's the key piece. So the value determination we will need to do it's difficult to comment specifically on launched products, would we trust the PDMs? Well, I think we worked closely with all the major payers in the US. I am happy to see the ESI is now changing their view and supportive of this kind of construct. We'd be happy to work with them on it.

So when it comes to a rewind, we do expect internal readout in the second half with the top-line press release likely in early Q4, and we will be targeting the full disclosure of the results at the next year's ADA meeting.

And Dave, just to be clear the city.gov date that you cite is the expectation for the last event. Obviously, with it being event-driven there is uncertainty around that. Even once we have the last event occur that would trigger then the analysis to be done. It does take a number of months to go ahead and get all that final visits and data into the system clean and validate the database, and then run our tables, figures and listings and report out. So Lia, if we can go to the next caller please.

Very good. It's line of line of Jami Rubin with Goldman Sachs. Please go ahead.

Thank you. May be for you David and Christi, I don't want to put words in your mouth but it sure sounds like you're not going to launch baricitinib unless you can get both two and four milligrams approved is that correct? And can you cite specific examples where the FDA goes against the panel recommendation? I know recently there was a Pacira that was approved even though the panel went against it but that was a non-opioid drug and in this case there is another jack on the market. So I'm just wondering if you can comment on your level of confidence that you can convince the FDA to vote against the FDA panel on the four milligram tablet. And if you can't would it is your decision not to launch Baricitinib for RA and to what extent would that affects your 5% top-line growth objective? Thanks very much.

Great, Christi. You want to go ahead and answer the question related to the launch two and four et cetera and maybe Josh if you want to comment on expectations versus 2020.

Sure. As I said before I think the promising thing we saw is that there was unanimous, unanimity in terms of the four milligram efficacy. And so the thing that you saw in the voting was based on a specific indication and as we continue to work with the FDA on our labeling and our path to the market that's where we can say we’re the highest unmet need. So that the patients who are suffering so much in the United States have access as they do in 40 other countries to improve their pain and improve their lives. So we will continue to talk to them about what is the path for both two and four milligrams and what is the indication that we can best serve the highest unmet need population. So I think one of the things you saw in the vote was the wording was very specific to the indication that was presented which was at after -- methotrexate, thank you. And then let's see the outcome. So I can't comment or recall any AdCom in terms of overruling but I think as I said it wouldn't be overruling the AdCom if we look at a different and carve out indication for four milligrams that benefits patients the most and make it 2 milligram available as well to lower risk patients.

Thanks, Jami. I think we've been clear about our growth expectations through 2020, which is a five% compound annual growth rate and the five% is a minimum and not dependent on any single product where we're confident in our growth prospects. I think if you look at where we are on Q1. We're ahead of our targets to get to a 5% growth in 2020. The strength of the new products that we have on the market today and the potential new launches in pain and other things that we've talked about already I think give us good confidence that we'll be there in 2020. We're still excited about the prospects of Olumiant particularly outside the US where we’ve already launched. I think by just looking at analyst models, the dollars associated with the US sales of Olumiant in 2020. I think in most of your models are pretty small anyway, but we're confident in strength to the portfolio that new products will continue to drive our growth and we're -- that 5% minimum is still valid.

Yes. It’s the line of Steve Scala with Cowen. Please go ahead.

Thank you. A couple questions. First on rewind. There's some concern about the less sick population being studied versus some of your competitors studies. Can you talk about how you design rewind to still achieve its endpoint despite its population possibly generating fewer events so maybe you can comment on how you arrived at the trial size, duration and also the statistical power? And then secondly, a couple questions on Elanco yesterday was announced that you hired a CFO for Elanco; is this newly created position and why was it done now? And can you comment on poultry trends? I think you've commented, no, can you comment on swine and cattle, you already commented on poultry. Thank You.

Christi, thank you for the question. So we'll go around the horn here. Enrique, if you'll take the first question on the design of rewind, Josh, Elanco CFO hiring that was announced yesterday and then Jeff you can give some more details on other parts of portfolio including swine that we didn't comment on in the prepared remarks. Enrique?

Well, Rewind is an event-driven trial. So we will basically have closer of this trial-one, we hit a certain number of events and the trial is appropriately powered for us to show basically a statistical difference if the product were to show it that is meaningful. So we are pretty confident. I do know that we got a lot of questions about the population that we have enrolled, whether the population is maybe less sick. We at this point in time I think we basically want to see the outcomes of the trial. We do have a lot of expertise when it comes to designing cardiovascular trials. And we're confident that we've designed this trial in the appropriate way. Dan, I don't know if you want to make any other comments.

No, that's correct. I would just add that we'll have one of the longer duration trials here in terms of the follow-up time on these patients, which gives us sort of more area under the curve time for the drug to work. And have its effect on cardiovascular outcomes. So although the lowering right mandates a larger longer trial, the increased duration actually we see as benefits to showing effect.

I think our first our strategic evaluation of Elanco is continuing as planned and we'll be in a position in our Q2 earnings call to announce our strategic direction. Our hiring of Chris Jensen as a CFO for Elanco adds to that analysis, he brings good external experience. And I think will position us well for any future direction that we announce and look to execute after our Q2 earnings call.

Yes, Steve. So first system industry perspective at a high level, beef continues to be stable and continue to grow. Dairy is a slower recovery expected probably as an industry later in 2019, and swine I think the eyes are a little bit on trade but again pretty stable overall. So we feel pretty good about the overall industry economics, no material impact on us. I think everyone's; as Josh said in his comments we're going to continue to watch trade. I don't think it's relative to a feed additive issue or anything like that. It would be much more just about the impact that trade barriers could have on the overall economics especially of the US industry. At this time, we don't see anything and definitely no impact on us. If you look at Elanco’s business, food animal will return to growth in the second half as we've stated. We see that led heavily by poultry and swine, less so by ruminants.

Next is the line of Umer Raffat with Evercore. Please go ahead.

Hi, thanks so much for taking my questions. I noticed phase three investigating a really high dose 4.5 milligrams in diabetes and I was just curious, a, what your thought processes but also your expectations on weight loss in that trial? And I would have thought that at such a high dose you might have included a semaglutide comparator as well. So just curious how you thought about that trial? And then in a quick follow up on animal health. Is Posilac and Optaflexx still a driver that's been weighing in just wanted to understand the market access pressures to livestocks? Thank you.

Umer. Thank you for the question. So Enrique on the recently initiated study for Trulicity using some higher doses and then Jeff back to you for some animal health dynamics with Posilac and Optaflexx.

So we are studying both 3 and 4.5 milligrams. We believe those doses can be well tolerated if appropriately titrated. And we basically have design this trial in a way that it can show actually a difference from a regulatory perspective vis-à-vis dula 1.5 when it comes to hemoglobin A1C. We are also expecting to see important difference when it comes to weight loss, but its okay that we made the A1C end point from risk benefit perspective in order to get this product approval.

Yes. So market access issues continue to be definitely and an area that we’re focused on and again we have taken some proactive actions as Josh mentioned with the strategic exiting as we are assessing our decision here with Posilac and exiting the business, but headwinds do continue for Posilac. I would note on our food animal business, first of all international grew as you will note in the backup slides that we saw close to 2% growth in o-US food animal. The net 10% though I would highlight came from one majority of that being Posilac and the declining in use. And again that’s driven by our exit and then some U.S. buying patterns relative to Q1 of 2017. On ractopamine, competition continues although we are continuing to see our business hold and remain stable in this area.

We go to its line of Jason Gerberry with Bank of America. Please go ahead. Q – Jason Gerberry : Hi, good morning, and thanks for taking my question. First question is on Verzenio. Feedback from Pfizer is that at least in the U.S. the metastatic market for the CDK0/4 agents is getting increasingly well penetrated and that maybe more of the near to medium term growth is shifting to x-US expansion, at least until label expansion occurs with more early use in breast cancer setting. So just kind of curious, if you agree with that assessment and as we look at Verzenio, the real growth opportunity in the U.S. is going to be contingent upon getting new patients start share versus your competitors. And then just the second question on CGRP front, how important you think early mover advantages in this category? One of the three kind of more advanced players in the market faces some uncertainty into it June PDUFA date, so just kind of curious how important you think early mover advantage would be in the category? Thanks.

Jason, thank you for the question. So Sue, we go to you for Verzenio question and then Christi over to you for the question on CGRP first mover advantage.

Yes. Thanks for the question on Verzenio. With regards to, well, first, we’re very pleased with the uptick I think as Josh mentioned we’ve got 15% huge brand share. And when we launched it we launched with the single agent activity and the combination with [Indescernible] and we should back at third of the market literally just the end of February we launch with the larger indication which is the rheumatoid just two third of the market and we’re now 16% on each brands, we feel good about that. And with regards to the actual market, we see plenty of opportunity actually for both growth in the market and also taking share with regards to growth about 50% of patients are treated with CDK4 and 6inhibitors, so again we see an opportunity there. One of the things that we’re trying to do is to ensure that physicians really understand patients that can benefit the most and we present a data on pace of the concerning clinical characteristics where with Verzenio, we were able to see that even in those patients we could see robust an efficacy similar to the overall patient population. And obviously with the data that we’ve got with the rheumatoid which is well the 28.2 month PFS is seen as robust as well, we see that as beneficial and we also see we got differentiated molecule with single-agent activity and continue dosing. So, our believe is that we can both compete within the market and that there is still continues to be opportunity to growth in the for the overall CDK market in the U.S. and of course o-US we have submitted to Europe and Japan and we hope to get approval later this year in both those geographies.

So on how important CGRP in early mover is, look at different classes, it depends on the differentiation strategy pieces, in general though three to four months is not a big deal, I mean by the time you get your label and get approved, then you’re talking about access, really its not a big difference. If you are looking at bigger delay and you have two agents in the marketplace and you are 12 to 18 months later that is a detriment for share.

Next is line of Alex Arfaei with BMO Capital Markets. Please go ahead.

Good morning. This is [Prakhar] for Alex Arfaei. I just had one question. Could you provide additional thoughts behind your decision to discontinue the base in a bit on its own? And yet advance the combination with the anti-PG antibody. And what was the milestone achieved to drive this efficiency. Thank you.

Great. Thank you for the question. Dan if you like to comment?

Yes, thanks for that question. So you're correct that we terminated the monotherapy for our phase 2 base inhibitor. That was based on a combination of external data readouts which of course you're familiar with, as well as our internal look at the data. A theory behind this compound initially was that given its higher brain penetration, this would have a favorable, more favorable safety profile. However, we also sought to demonstrate efficacy in Phase 2 and that was futility was what drove us towards stopping it. Now the rationale to continuing in and of course in monotherapy that continues to be on base status and phase 3 for monotherapy. As you commented we continue with the combination. Here I think we have a growing understanding that we need to clear the Abeta out of the brain with a plot clearly antibody that's get centered PG and also inhibited to production. So hitting from both end is rationale there for the combo.

Yes. It's the line of David Mirus with Wells Fargo. Please go ahead.

Good morning, a couple of questions. First going back on the administration's potential moves. When you mentioned the pass through pricing net of rebates. Can you address that assumes or does it assume that PVMs will willingly just make less money or how do you think mechanistically that will work without having an impact to PVMs. And then separately, if you can just provide us with, if you were to think of your top-10 or 20 products relative pricing average in the U.S. versus say developed Europe. What would you say the differential in net pricing would be? Is it as large as some people think or is it because of all the discounts that are much lower, thanks?

David. Thank you for the questions. Dave Ricks we'll have -- can you take both.

Sure. So just on the rebate through. As it relates to the Part D program. We've done modeling ourselves as well as pharma. And I know CMS has as well. Then it isn't free as you point out. But as Scott has been saying his podium speeches lately we somehow device a system where the fixed subsidized well. And I think there is something ethically wrong with that. I think there is going to census about that even among PVM apparently. So the idea will be that premiums would modestly grow across Part D program. We're talking $1 or $2 per member per month is probably all that's necessary. In exchange for passing through some portion not a 100%. But some portion of rebates to consumers in the Part D program in particular when they're exposed to the donut hole and beyond that their share of traffic side. So that's the basic idea. In that model, I think Part D plan providers will just be make a trade- off which is slightly higher premiums in exchange for maybe pass through. And of course that math requires some assumptions about how much rebates pass through. Our position is that it needs to be well more than half. Both to reduce the [Indescernible] of middle man and manufacturers to raise fewer prices, which I think is a positive objective here, as well as to meaningful out of pocket, savings at the point of sale. In correction plan, the dynamics are a little bit different, but here I think the ultimate decider will be the ultimate payers which are commercial payers like our company and other Fortune 500 companies. I think they are the market makers not the PVMs. And I think if they decide that employees would like to have rebate pass…

And that is the line of Steve Scala with Cowen. Please go ahead.

Thank you. A couple of questions. It was mentioned that you've seen lower Medicaid utilization but I am not clear on why you've seen that. So maybe you can amplify. And then secondly, the abemaciclib pancreatic Phase 2 study that was stopped, the trial was not to readout to late 2018 or early 2019. So was it stopped for futility at interim look for instance and does this failure in pancreatic decrease your interest in other new tumor types? Thank you.

Thank you for the question. And Enrique, if you would like to comment on the first question on the lower than expected Medicaid utilization. And then over to you Sue on the pancreatic cancer trial.

So we make our approvals for rebates and discounts before we actually receive the claims. In the case Medicaid, it tends to lack significantly more some of those clear -- receive of those claims significantly more than in commercial plans, another plans. So we basically have our estimate and what we basically have seen is that the claim that we have received have been lower than we had expected. So that's -- now there could be a number of reasons for that but at this point in time we are basically thinking as well okay as we look into the past what does this mean for us we are looking accruals for Q1 and for the rest of the year and the reason what we have a benefit coming from Medicare when we look at entire year.

Yes. Steve, now the pancreatic study was actually went to the final endpoint and we stopped the study. So I think you might be looking at cg.gov may have late timeline just as we are looking at future follow up with patients. And it does not by any mean reduce our confidence in moving forward in other indications with abemaciclib. This is pretty high bar. Pancreatic as you know is a tough gemo type and we are looking at clearly targeting tumor with the CDK pathway is important and also we do believe the combination is probably the way to go. We have a number of non breast indications that we are looking and you should see some trials starting later this year, as well as of course our lifecycle planning in breast cancer.

Great. Thank you. I think we've gotten through 17 different types of questions. And it sounds like there are no more folks in the queue. So I'll turn it over to David Ricks to close our session. And Lia after that you can provide the replay instructions.

Thanks, Phil. We appreciate all of your participation in today's earnings call. And your interest in Eli Lilly and Company. Our strong first quarter results represent continued progress on top line and bottom line growth prospects. And we've raised our guidance as a result. We have a broad portfolio of new products with many lifecycle opportunities driving top line growth. Hopefully for years to come. And we are executing on our significant margin expansion opportunities. Together with the strong pipeline, Lilly continues to be a compelling investment. Please follow up with our Investor Relations team if your questions we have not addressed on today's call. That concludes the call. Have a great day everyone.

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