Ladies and gentlemen, thank you for standing by, and welcome to the Lilly Q1 2021 Earnings Conference Call. [Operator Instructions]. I would now like to turn the conference over to our host, Mr. Kevin Hern. Please go ahead.

Good morning. Thank you for joining us for Eli Lilly and Company's Q1 2021 Earnings Call. I'm Kevin Hern, Vice President of Investor Relations. Joining me on today's call are Dave Ricks, Lilly's Chairman and CEO; Anat Ashkenazi, Chief Financial Officer; Dan Skovronsky, Chief Scientific Officer; Anne White, President of Lilly Oncology; Ilya Yuffa, President of Lilly Bio-Medicines; Mike Mason, President of Lilly Diabetes. And we'd also like to welcome Jake Van Naarden, CEO of Loxo Oncology at Lilly, who will be joining us today and moving forward to answer your questions about discovery and early-stage oncology efforts he's leading. Now I'll turn the call over to Dave -- sorry, we're also joined by Sara Smith and Lauren Zierke 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 3. 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 results from the first quarter of 2021.

Okay. Thanks, Kevin. Lilly entered 2021 focused on expanding our reach to over 45 million patients by scaling our key growth brands around the world, continuing the advancement of our pipeline following a very successful 2020 and increasing productivity in the SG&A line while investing in research for sustainable long-term growth. We are pleased with the progress we've made on these objectives in our first quarter while also delivering hundreds of thousands of doses of our COVID-19 antibodies to patients to help the continued fight against COVID-19. As we unpack this quarter's results, we will attempt to give you a clear picture of the underlying trends in our core business. We recognize this quarter was noisy, catching the increased consumer stock in from the Q1 2020 in our quarterly compare and increased COVID-19 therapy R&D spend in 2021. These items, coupled with the FX rate movement and a number of changes to U.S. government purchase agreements for COVID-19 antibodies throughout the quarter, make for a longer earnings call and press release. And we realize, for those keeping score on sell-side model accuracy, perhaps some disappointment. Nonetheless, underneath all of that is a strong and growing core business for Lilly and a significant number of positive, even compelling pipeline readouts in the quarter to support long-term growth across all of our core therapy areas. And we continue to expect top line growth and margin expansion to accelerate throughout this year. This quarter, revenue grew 16% compared to Q1 2020 or 13% in constant currency. This performance was driven entirely by volume, which grew 17 percentage points. As previously highlighted in Q1 2020, we had roughly a $250 million COVID-19-related inventory build that is impacting the year-over-year comparison. When excluding COVID-19 antibody revenue and the Q1 2020 stocking benefit, our core business…

Thanks, Dave. Slide 7 summarizes our non-GAAP financial performance in the first quarter. As Dave mentioned, revenue increased 16% this quarter compared to Q1 of 2020 or 7% when excluding the COVID-19 antibody revenue and the Q1 2020 COVID-related stocking benefit, representing a good momentum for our core business. Last year, with the health and safety of our employees, patients and providers in mind, we shifted from in-person interactions to primarily virtual interactions and began 2021 with few sales reps in the field in the U.S. We feel good about our capabilities to work with providers virtually and are encouraged as we exited Q1 2021 with the majority of U.S. reps back in the field. As we navigate the early stages of the recovery, we're focused on operational excellence in both virtual and in-person environment and are pleased with the volume and share growth in key brands despite continued pandemic-related headwinds for several classes. As we look at gross margin, gross margin as a percent of revenue declined 490 basis points to 75.4%. Excluding the impact of foreign exchange on international inventory sold, gross margin as a percent of revenue was 78%, a decrease of 260 basis points, primarily due to the unfavorable product mix driven largely by sales of COVID-19 antibodies and, to a lesser extent, by lower realized prices and revenue. Moving down the P&L. Operating expenses grew 11% compared to the same quarter last year. Marketing, selling and administrative expenses increased 2% while R&D expenses increased 21%, driven primarily by $220 million of investments in COVID-19 therapies. Net of the COVID-19 expenses, R&D increased 5%, driven by continued investments in our late-stage pipeline. Total operating expense growth was less than 3% compared to Q1 2020 when excluding the investments in COVID-19 therapies. Operating income increased 6% compared…

Thanks, Anat. 2021 is clearly off to a very positive start for R&D at Lilly with strong pipeline progress already and more potential catalysts on the way. Before I get into the broader portfolio update, I'll spend a few minutes highlighting results from tirzepatide's first 4 top line readouts from the Phase III SURPASS program, including the strong results from SURPASS-2, the head-to-head trial with semaglutide 1 milligram. This program is aptly named as we've seen tirzepatide surpass our expectations through these initial readouts, displaying significantly greater hemoglobin A1C reduction, weight loss and percent of patients reaching normal glucose levels than any GLP-1 on the market. On Slide 13, you can see impressive performance in the efficacy estimate analysis in glycemic control for tirzepatide with each dose demonstrating superiority in each trial across a range of patient populations, comparators and background medications. The clear highlight is the impressive A1C reduction of the 5-milligram dose across each of these 3 -- each of these different patient populations while the higher doses provide additional glucose control up to and surpassing 2.5% A1C reductions. Moving to Slide 14. You can see how tirzepatide performed across all 3 doses in terms of patients achieving HbA1c below 5.7%, the normal glycemic level seen in people without type 2 diabetes. We believe this is an exciting finding that may reset expectations for the impact diabetes medications could have for patients. Using the efficacy estimate analysis across SURPASS-1, 2 and 3, we see about half of the patients on the 15-milligram dose of tirzepatide achieve this remarkable level of Hba1c control. In SURPASS-5, which focused on patients on background insulin glargine, 62% of patients on 15-milligram tirzepatide achieved this level of A1C compared to only 3% of patients in the placebo group. Remember, this is a patient…

Thanks, Dan. Before we go to Q&A, let me briefly sum up the progress we've made to start the year. Amid several moving pieces in a challenging health care environment, we are excited by the momentum we are seeing. Our business grew 16% in the first quarter with the core business growing 7%, adjusted for COVID-19 antibody revenue and last year's COVID-19-related inventory stocking benefit. Our top line growth continues to be strong, driven strongly by volume across our key growth products, which account for more than half of our core business. Net of the significant impact from foreign exchange on international inventories sold, our operating margin was in line with our expectations as we continue to expect operating margin expansion throughout the year and further expansion in years to come. We made significant progress developing new medicines with many more data readouts expected this year. Advances for tirzepatide, donanemab, pirtobrutinib, Verzenio, mirikizumab, Retevmo and Olumiant, serve as a reminder of the breadth and depth of opportunities we have to sustain robust long-term growth. We returned nearly $800 million to shareholders, being increased dividend, reflecting confidence in the ongoing strength of our business. I want to say thank you to my Lilly teammates, whose commitment to excellence and dedication to our purpose of bringing innovative new medicines to patients is inspiring and drove these accomplishments amidst ongoing pandemic headwinds. While our people, health care providers and patients continue to face near-term challenges associated with COVID-19, our long-term outlook is as bright as ever. This concludes our prepared remarks. And now I'll turn the call over to Kevin to moderate the Q&A session.

Thanks, Dave. [Operator Instructions]. Toni, can you please provide the instructions for the Q&A session? And then we're ready for the first caller.

[Operator Instructions]. Our first question comes from the line of Chris Schott with JPMorgan.

I've just got two on the pipeline. I guess, first, on Verzenio, did I hear that you mentioned FDA is looking for updated OS data as part of the review? So I was just wondering when you'll have that data. And does that push out approval timelines in any meaningful way that we need to think about? And then the second one I had was on tirzepatide. I guess, in light of the data you've seen from the SURPASS studies, does that -- has that changed how you think about what patient populations you'll focus on from a commercial standpoint or your go-to-market strategy? And I guess, as part of that, as we think about tirzepatide coming to market, do you expect substantial switches from Trulicity? Or is tirzepatide growth more about new patient starts and kind of expanding the market?

Thanks, Chris. We'll go to Anne for the Verzenio question and then Mike on tirzepatide.

Well, thanks, Chris, for the question on Verzenio. And so we will be delivering this data set to the FDA without delaying our standard review timing. We can't really comment on what the FDA will do with the data or the application, but these discussions are progressing as planned. Important to note, as the data matures, I think, as Dan said, given the strength of the DRFS hazard ratio, remember, it was a 0.687 haz ratio with a very strong p-value, we are highly confident that the OS will trend in favor of Verzenio. So really, what we believe we're discussing is when that will occur. So obviously, as I said, we can't comment on the discussion with FDA, but we do look forward to working with them on bringing this medicine to patients. And maybe just a comment to reference how immature this data is. At the time of the interim analysis that we published in JCO late last year, there were 39 deaths in the abema arm and 37 in the control arm. So that makes it really challenging to interpret this data when there's over 5,000 patients in the study. Thanks for the question.

Thanks, Anne. Mike?

Chris, thanks for your question. No, the tirzepatide results have not changed the way we want to position tirzepatide in the marketplace. Obviously very pleased with those results. We're also just really blessed to have both Trulicity and tirzepatide. Our goal will be to maximize our entire incretin portfolio. Trulicity has established a strong market position. And I think the best data to support that is just how we've been able to grow share of market in the face of Ozempic and Rybelsus. So it has a strong position in the marketplace and that will remain. But now as we think about tirzepatide, the dual incretin mechanism, that GIP component is really a game changer. Dan went through the results, but we just haven't seen the ability to return to someone living with type 2 diabetes, whether they're late or early, someone with type 2 diabetes progression, back to normal A1C. In fact, we were able to get 50% to 60% people back, it’s really incredible. Also weight loss at the highest dose, up to 14%. So when you just take a look at that and you take a look at the fact that 90% of people who live with type 2 diabetes are overweight or obese, they can really benefit from early treatment with type 2 diabetes. So the real question is why would you want to put them on something else early on? And why would you want to wait for them to have those benefits? So we see tirzepatide has the potential to really transform the market, driving earlier use of incretin, in particular tirzepatide's dual mechanism, and really expand the incretin market. So I think tirzepatide will clearly win some new patients that would have went on to Trulicity. You have some people who were maybe not performing well or not -- or needed more efficacy that will go on to tirzepatide. But clearly, our focus will be to profoundly change and disrupt the type 2 diabetes marketplace by driving earlier use of incretins with tirzepatide.

Our next question comes from the line of Geoff Meacham with Bank of America.

Also have two pipeline ones. Just want to get your perspective on mirikizumab, the decision to focus on just IBD. You have good head-to-head data in psoriasis. So is it more of a commercial focus? Or is it that you want to focus more on Taltz and psoriasis? And then in Alzheimer's, you'll have zagotenemab data in the second half of this year. How are you thinking about the opportunity to combine potentially with donanemab? I wasn't sure what steps need to happen prior to thinking about that type of trial? And maybe from a regulatory perspective, what do you think would be a gating factor?

Thanks, Geoff. We'll go to Ilya for the first question and then Dan for the question on Alzheimer's.

Great. Geoff, thank you for the question. On mirikizumab, really as we see the greatest opportunity for unmet need for patients and we've said all along, we believe that mirikizumab has the greatest opportunity in GI, in IBD, in ulcerative colitis and Crohn's disease. We were pleased with the LUCENT-1 results. And so we're looking forward to seeing the maintenance data at the early part of next year. In terms of psoriasis, as we take a look at the market and unmet need, we do continue to believe that Taltz is the gold standard and best in disease and believe that really is a market well served. And so the decision from a portfolio standpoint is to focus our efforts in places where we believe we can have the greatest unmet need. And GI is where we're focused for mirikizumab.

Thanks, Ilya. Dan?

Yes. Thanks, Geoff, for the question on zagotenemab, our anti-tau antibody. Before I come to combinations, maybe I'd just handicap this Phase II trial quickly. The pro here in favor of tau is clearly genetic validation and pathologic validation of the target. It's a great target for Alzheimer's disease. The cons here that we have to acknowledge is data from other companies' tau antibodies, which hasn't been particularly promising, and the difficulty in hitting the tau target in the brain. Now we have a differentiated antibody here that binds just aggregated tau, so perhaps there's reason to think we could get different results. We're certainly eagerly awaiting those data in the second half of the year. And you're exactly right, if we see efficacy, combination would be an important consideration here. For sure, the general theme of combining an anti-amyloid drug with an anti-tau drug is a good one, particularly when you have a drug like donanemab, where you can completely clear amyloid plaques with a limited duration of therapy and then perhaps at that moment, intervene with an anti-tau drug. I do think that's the future. It's something we're actively considering, pending, of course, data on the tau antibody.

Our next question comes from Vamil Divan with Mizuho Securities.

Maybe one on Taltz. Maybe just a little more clarity or color on the pricing dynamics there. You mentioned you're kind of expecting a return to net sales growth in the second quarter and then accelerating. I'm just trying to think about it as we think about the full year dynamics. I don't know if you'll give product-level guidance. But how do you think about sort of the kind of full year comparison for 2021 to 2020? I assume you're still expecting growth for the year as a whole, but if you could just sort of clarify. And is that contract with ESI, I'm not sure, is that a full year contract? Or does that go beyond 1 year? I'm just trying to get a sense of sort of pricing dynamics in 2022 and 2023 and if we should expect another step-down. And then one quick follow-up just on the comments around TRAILBLAZER-3. I don't know if you can maybe just share a little more in terms of the number of patients you're looking to enroll in that trial, just so we can kind of get a sense of how long the enrollment might actually take.

Thanks, Vamil. We'll go to Ilya for the question on Taltz and kind of the full year picture and then Dan on TRAILBLAZER-3.

Sure. So on Taltz, first, let me just say we're really pleased about the progress we're making on Taltz and the growth that we're seeing with the step-up in access upgrades, ESI and beyond. And so as we take a look, even though that we've had some price impact in Q1, there are some elements there where we have a number of patients that were on medical exception that are now in the rebated contract that we have with ESI. Of course, we're also seeing an increase in overall volumes with ESI. What's encouraging is that we're not only seeing improvements in overall volume based off of switches, we're also seeing significant improvement in our new therapy starts. And so we're, in dermatology, now the leading share in dermatology with over 19% share. And then in rheumatology, we're almost doubling our share from previous year. And so as we think about the year in terms of growth, we do believe we'll get to net sales growth in Q2, and we'll continue to accelerate that volume growth throughout the year. The contracting that we have for Taltz is -- goes beyond 1 year. And so we're encouraged about the volume growth of over 20% now, and we continue to see encouraging signs in the market.

Thanks, Ilya. Dan?

Yes. Thanks, Vamil, for the question on TRAILBLAZER-3 and our enrollment goals here. We probably don't get into too many details here, but we are, of course, expecting to -- this to be a large trial involving thousands of individuals, but yet we also set very ambitious enrollment goals. And while we don't have all the details planned out on how to achieve this, our goal is that we should be able to enroll this trial in about a year. That's pretty exciting to contemplate. And Alzheimer's prevention trial is something that makes great sense, given the science and the biology here and what we know about the onset of Alzheimer's disease and its relation to years of having amyloid plaque in the brain. But there have been 2 major drawbacks that have not made these trials really very practical. First is finding the patients. That has gone from impossible before our introduction of amyloid PET scan to possible but really hard with amyloid PET scans as we experienced firsthand in the A4 trial to now something that's eminently feasible with our advent of the plasma tau -- phospho-tau217 assay. That's a huge advance that just unlocks this trial. The second is if you think about this population, which is not experiencing symptoms, is a bit younger than an Alzheimer's population and introducing a therapy that is likely an infusion that they take for the rest of their lives, that's also a pretty significant hurdle. Again, we've, I think, abrogated that risk with donanemab in a limited treatment duration to give lasting plaque clearance, so excited about the TRAILBLAZER-3 trial.

Our next question comes from Seamus Fernandez with Guggenheim.

So just, first off, a question for Dave. Dave, as you think about some of the various proposals that are in Congress currently, could you just give us your thoughts on the tax proposal? And maybe Anat could give a little bit of the potential implications for Lilly. And then separately, there's obviously a lot of controversy swelling on drug pricing. Just wanted to get your sense of the proposals that are out there currently and if the industry is poised to or ready to step up with a more reasonable proposal. And then just the second question is on the JAK inhibitor space and Lilly's opportunity with lebrikizumab, particularly in atopic dermatitis. There's a bit of a compare and contrast. Only Lilly, I think, has both potential opportunities in this space. I think there's a lot of speculation that there is going to be a safety update from the FDA, if not a full safety panel. Hoping, Dan, that you could give us a little bit of your thoughts in that regard.

Thanks, Seamus, lots to unpack there. We'll start with Dave on some of the policy, maybe Anat on the tax piece of that. And then we'll go to Ilya on kind of what he sees from a JAK and lebrikizumab standpoint.

Yes, Seamus. Look, on tax, this is a live discussion, of course, because the president has introduced a number of ideas on corporate tax changes. I guess we join a growing chorus of large companies who oppose, that means to raise revenue, especially when the stated policy goal of the infrastructure plan is to build back the economy. Of course, private money and corporate actions make up the vast majority of the investment that could or would occur. And taxing that seems like a bad idea, maybe the opposite idea from the bill itself. Within the bill, maybe just a couple of general comments, and we can follow up if we need to. There's the nominal rate discussion, which, of course, when we say moving from 21% to 28% is moving toward the middle of the pack, is not true because, of course, in the U.S., we have state-level income tax. It would really put the U.S. at the highest developed economy in terms of corporate tax rate. Additionally, we're the only major economy that taxes overseas earnings of its domiciled companies and changing the so-called GILTI tax, foreign minimum tax, really is punitive to our home companies in multiple ways and is something that would have a disproportionate effect on pharmaceutical companies. And so both these actions don't make a lot of sense to us and we oppose. We would favor things like looking at funding the IRS, so they can collect taxes from all the people that don't pay, including businesses and other items that could be pay-fors, we certainly support infrastructure in many ways. On drug pricing, this has been pushed out a little bit. I wouldn't be surprised if we see HR 3 being debated soon, but as you may have read, apparently it won't be…

Thanks, Dave. Ilya?

Yes. Seamus, so thank you for the question. As you noted and what we said on the call is that we're quite excited about our progress in immunology as a whole. And if we think about the growth opportunities within immunology, atopic dermatitis is one catalyst for the company, both in what we believe in Olumiant's success but also lebrikizumab. In terms of the question around JAKs and FDA decision, I won't speculate on any decision the FDA may make. But it's safe to say that the delay across all JAKs in atopic dermatitis and other indications suggests that there's a broader review on JAK safety. We feel that Olumiant has a robust safety profile. And with dermatology being more safety conscious, we do believe that Olumiant has a very good prospect to compete in this space, especially after topical failure. And then lebrikizumab is one to watch out for, for the second half of the year. As we get more data, well, we feel like we can compete and differentiate versus Dupixent. And so long-term prospect and catalysts for growth are very good for having both mechanisms. And we also see catalyst for growth in alopecia areata, a very -- to be first in disease with Olumiant. And so we feel very good about our chances to not only compete but also to have significant growth and have meaningful outcomes for patients.

Our next question comes from the line of Louise Chen with Cantor.

So first question I had for you was on lebrikizumab. What do you think will differentiate your products from others that are already approved and those in development? And do you plan to pursue lebrikizumab for any other indications? And then second question is on LOXO-305 plus LOXO-338. What do you think your competitive advantages are here versus others that are trying to do the same thing?

Great. Thanks, Louise. We'll go to Ilya for the first question and Jake for the second.

Yes. Louise, thank you for the question about lebrikizumab. In terms of area differentiation, the focus for lebrikizumab is not only to look at the efficacy on skin but also one of the more impactful symptoms related to atopic dermatitis is itch. And so we believe we may have the opportunity to differentiate an itch, which also has impact on sleep. And we believe that lebrikizumab may have a better safety profile. So that's where we believe we can differentiate. And so we're excited to get the results for lebrikizumab at the back half of the year. In terms of new indications, I think it's early to take a look at any new indications. We're obviously evaluating opportunities to grow lebrikizumab. But our full focus right now is making sure we have success in atopic dermatitis.

Ilya, just to jump in on top of that, of course, there will be a dosing convenience and dosing certainty benefit with lebri as well.

Thanks. Jake?

Thanks for the question, Louise, about pirtobrutinib, LOXO-305 and LOXO-338, the BCL-2 inhibitor. I think as it relates to differentiation, I'd point out a few things. First off, obviously, as I think you and others know, pirtobrutinib itself is a differentiated BTK inhibitor that we believe affords certain advantages in combination. Obviously, we need to prove that clinically, but that's our hypothesis right now. So that sort of stands on its own. The LOXO-338 program, the BCL-2 inhibitor, we'll be putting into the clinic this year. And obviously, important that, that drug meets its human pharmacology goals so that we know that it itself is on track as a drug. Should that prove to be the case, which we expect it to, we will then look to combine these 2 agents. I think when you look out at others that are combining BTK and BCL-2, the latter largely being venetoclax, I think what you see is a very fragmented landscape of asset ownership across companies, and as a result of that, some -- oftentimes perverse incentives about how to combine those drugs and where. We think it's important that if you have a new and differentiated BTK inhibitor like we believe we do with pirtobrutinib, we thought it was strategically important to own our own BCL-2 inhibitor. And so we think we'll be really the only player in the field who owns both agents outright. So that, to us, is a key differentiating feature downstream. But it's still a bunch of hoops we have to jump through to enable that combination.

Next, we go to the line of Carter Gould with Barclays.

All right. I guess, first, for Dan or Mike, you guys posted details of the SUMMIT study of tirzepatide and HFpEF recently. And I think the design, size and time line were all surprising relative to expectations, so I guess getting to a readout much faster than some have had expected. Can you maybe just walk through some of those key design choices and the extent regulators have bought in, and also confirm that that single study would be sufficient for approval in that setting? And then also historically, Lilly has done a -- I think, done a better job of sort of franchise building in certain areas than some of its peers. Now with sort of mirikizumab derisking data, can you talk around how you're thinking about building around the GI portfolio?

Thanks, Carter. We'll go to Mike for the question on tirzepatide and Ilya for the question on miri.

Yes. Thanks for the question on the SUMMIT trial. We're bullish on the opportunity for tirzepatide in HFpEF. When you look at that, it's really a large unmet need with nearly 4 million people living with HFpEF heart failure, a leading cause of hospitalization in the U.S. When you look at it scientifically, you do see that there is a BC-related HFpEF phenotype that we believe that tirzepatide can play a large role in helping out. And so that's what really drove our investment in SUMMIT. And I think the team has done a nice job of coming up with a creative approach that will provide, I think, robust data for payers and clinicians to make that decision. So I think we're very confident in this -- in both our clinical trial design as well as the commercial opportunity.

Thanks, Mike. We'll go to Ilya for the next answer.

Sure. Yes, Carter, listen, as you noted, in terms of building franchises across immunology, we've built up our scale in dermatology and excited about increasing number of treatments there, the same with rheumatology in the hope for finding lupus as well. And then in GI, mirikizumab will be our first entrant into GI with ulcerative colitis and Crohn's disease. And then we do have a pretty robust pipeline in both Phase I and proof-of-concept studies, in particular, IL-2 conjugate that we're studying for ulcerative colitis as well. And we look forward to bringing out new treatments across all three of those areas in the coming years.

Our next question comes from Tim Anderson with Wolfe Research.

A couple of questions. On Verzenio and the CDK class more broadly. Can you talk about what you're seeing in the U.S. in terms of rebating for this oral oncology category? My understanding is that the level of rebates may be stepping up. And I'm not sure which company or companies are driving that. Maybe it's Pfizer driving that as they try to hang on to market share. But what's the outlook for gross-to-net price trends in this category? And then on Tyvyt, your PD-1 from Innovent, a Chinese company, you note that you'll file for approval in non-small cell lung in the U.S. this year. It's really hard for me to see how you gain any share with this product, given what would be a limited label and given payer and prescriber dynamics, where in things like Part B, you can't really compete on price. So what's realistic to expect with this product from a commercial perspective, not only U.S. but another Western markets like Europe?

Thanks, Tim. We'll go to Anne White for both of those.

Well, thanks, Tim, for the question on Verzenio. So I think, as you're mentioning, it's an incredibly competitive market with the CDK4/6s. And so we and others continue to do what we need to do to make sure that patients get access to the right medicines. So we have obviously a strong strategy there. I can't comment on the specifics, but we do see competition. And really, what we're seeing -- I think you're seeing in Verzenio, what we're seeing is an incredibly nice trend growing in Q1. As you saw, we had positive momentum with the U.S. strong share growth in March and we saw TRx of over 17% and NBRx of over 28%, so -- and this is despite, as you've noticed, a modest year-on-year TRx market decline. So I think what we're seeing is both from a payer strategy but also very much from a data strategy, we're seeing that Verzenio is growing its share nicely. And so I like how all of our different programs are coming together. And obviously, the data in AZURE breast cancer reinforce the growing awareness that these medicines are different. But what really has been the focus for our execution has been capitalizing on positive OS data and making sure that people are aware of that and we're seeing more trial, more adoption as we go through that. So very pleased how all of our strategies with Verzenio are coming together. On Tyvyt, yes, I mean, as you mentioned, it's a competitive space, obviously. And while I can't really comment on our commercial strategy prior to approval, you can be reassured that we're looking at ways to differentiate and really add value to this innovative class of medicines. So obviously, we know that there's certain commercial approaches we'll have to take to capture share as really a late entrant in the field, but we see opportunity here. And obviously, this deal made sense with the partnership that we've had with Innovent and we're committed to the U.S. submission this year. And so more to come as we look to launch the product and share that strategy and how we intend to make an opportunity here. But as you said, I wouldn't assess this as a large opportunity for Lilly, but an opportunistic one that we think makes sense, it makes sense for patients globally and driving value for them.

We'll move to the lightning round, so we can try to get everyone in. [Operator Instructions].

Next, we have Andrew Baum with Citi.

Yes, a question for Dan on Verzenio and the monarchE filing. As you outlined, the survival data is thankfully going to take a long time to mature. Is the answer that the FDA is looking for more about further maturation of progression-free survival or -- sorry, disease-free survival? Just given the historic precedence of the PENELOPE-B data with palbociclib, where you have separation that then coming together, isn't that really what the FDA wants, given if you're waiting for survival, you could be waiting for a very long time indeed?

Thanks, Andrew. Dan?

I'll just take it quickly. No, Andrew, it's -- the focus here is on the overall survival. On the distant relapse-free survival, as we commented, the curves are not coming together, they're actually separating more. It's improving as we get more events. So I'm not aware of any concerns around that.

Next, we go to the line of Steve Scala with Cowen.

I think it was stated that the number of CV events in SURPASS-4 has been reached, if I heard that correctly. If that's correct, then it looks like the study is going to achieve its endpoint earlier than expected. So my question is, is that either confidence-building or concerning? Are you worried COVID-19 cardiovascular effects may have impacted the accrual of events? And if tirzepatide trends worse than insulin glargine, can you still file?

Thanks, Steve. We'll go to Mike on that.

Yes. Thanks for the question. No, we have no concerns. We will -- we have reached the number we needed to complete the trial. We're getting patients back in. We'll have that data, should start to see top line in May, and we'll release that information in -- before the end of the quarter. We're very, very excited about tirzepatide and very confident in its CV profile. I'm looking forward to seeing the SURPASS-4 data.

Next, we go to the line of Terence Flynn with Goldman Sachs.

I was just wondering on monarchE, if there's any possibility of an NCCN listing before the FDA action? And then can you give us an update on the Retevmo launch dynamics this quarter?

Thanks, Terence. We'll go to Anne for the question on Verzenio and Retevmo.

Thanks for the question. So on monarchE and NCCN, I really can't comment for them. So obviously, we feel that this data is incredibly impactful. I think one of our thought leaders call it the most notable development in HER2-positive breast cancer in the last 2 decades, but we'll just have to wait and see what NCCN decides to do. And then on Retevmo, the launch is going well. So we had a virtual launch in May, we finished 2020 with $37 million in sales, and we see positive momentum in Q1. So we've had a great engagement with customers. Unaided brand awareness is strong. So we're quite pleased. And this is an incredibly important medicine, as you know, in some patients, over an 80% response rate, so great response from the customers. I'm very enthusiastic about what we're seeing so far.

Our next question comes from Ronny Gal with Bernstein.

So we are seeing you adopting cost-conscious strategies on both Taltz and on mirikizumab. And I was kind of wondering, if you're going to look forward 5 years, where do you see immunology pricing then goes in terms of dollars for you? It's right now in the low to mid-30s, the way we can see it. 5 years here from now, are we going be in the mid-20s, under 20, 30-plus? Where do you see the band of pricing looking like?

Thanks, Ronny. We'll go to Ilya for questions on immunology pricing trends.

Yes. Ronny, thanks for the question on immunology. In terms of our focus, it's -- let's not -- conscious is more related to looking at opportunities for growth. We have a long runway for Taltz. And so we do believe that Taltz is kind of at the foundation of our immunology strategy. We have numerous head-to-head studies in real world evidence to suggest that Taltz is a best-in-disease treatment. And as part of our growth strategy looking at mirikizumab in GI, we do believe that within the next 5 to 10 years, we can, across multiple mechanisms in those 3 specialized groups, dermatology, rheumatology and GI, have significant growth and become a top-tier immunology company. In terms of pricing, I think it's -- they're all very competitive fields. And so our goal is to have great evidence and create access opportunities for patients that need these treatments.

Next, we go to the line of Kerry Holford with Berenberg.

Just on the COVID antibodies, I wonder if you can just discuss the disconnect between your lower 2021 term guidance and the higher associated R&D spend. And with that context, do you have a budget cap in mind for your ongoing COVID investments?

Thanks, Kerry. We'll go to Anat for that.

Sure. Thanks, Kerry. Let me start with the budget. So we did increase our guidance for the COVID antibody investment from $300 million to $400 million to $400 million to $500 million. And the investments that we've announced this morning is really to address the growth in variants that we see globally and looking at additional antibodies that could address that. The lowering on the high end of the range, really it relates to the changes you've seen here in the U.S. government as well as what we see globally in terms of progression of the disease, but -- and this is one I know that is more challenging to forecast, given that there's not a lot of TRx data or data for you to look at, and we'll continue to update obviously with every quarter.

And maybe just to add as a mindset thing, we didn't get into this because we were thinking about margins or business profile, it was to be useful during the pandemic, which is still going on, obviously, raging in other parts of the world. One other driver for the top line is that increasingly, we'll be selling our products into lower-priced markets or giving it away because that's where the disease is. And when the pandemic period ends, I think we can then take a different look at this enduring business, but we're not there yet. So we're making the investments we need to, to be useful and selling the product where it's needed at the price structure we had previously announced, which is heavily discounted in low GDP markets.

Next, we go to the line of Umer Raffat with Evercore.

Dan, last we spoke in mid-March, it seems like you hadn't had a lot of regulatory discussions on donanemab, but it does feel like you've had them now. So I'm curious, the FDA feedback on the new endpoint, iADRS, as well as the Bayesian analysis. And also very briefly, on CD73, there's an interesting emerging signal in some of the other CD73s in pancreatic setting. I noticed you guys discontinued, would love to find out any additional color.

Thanks, Umer. Dan?

Yes, sure. So FDA feedback is -- has been continuing, I should say. We had some and it continues to come. I think our view here is unchanged. We previously said that the FDA has concerns around iADRS because it combines cognition and function. And there's always a risk that you could have a positive signal on iADRS driven by cognition with no benefit on function or function going the other way or vice versa. And that wouldn't be acceptable for approval of a new drug. So that's the risk there. On the CD73 Phase I termination, I don't have additional comments.

And last question comes from Gilbert with Truist Securities.

Dan, on tanezumab, is the outlook any more hopeful than the optics of the AdCom vote? And can you comment on where pain fits into your overall R&D priority list at this point?

Sure. Gregg, thanks for the question. Pain is still a really important unmet medical need. Clearly, the regulatory bar is high here in terms of safety. And we saw that from the Tanezumab Advisory Committee meeting, which was a pretty decisive outcome there and one that we were disappointed in.

Thanks, Dan. Gregg, thanks for your question. Back to Dave for the close.

Okay. Thanks, Kevin. We appreciate your participation in today's call and your interest in Eli Lilly and Company. 2021 has been -- has begun with good momentum in our underlying business. We remain focused on executing our innovation-based strategy to bring new medicines to patients and create value for all our stakeholders. As we continue to scale our diverse commercial portfolio, complemented by a pipeline of industry-leading opportunities, we believe Lilly continues to be a compelling investment. Thanks again for dialing in today. Please follow up with our IR team if you have any questions we have not addressed on today's call. Hope everyone has a great day.

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