Eli Lilly and Company (LLY) Earnings Call Transcript & Summary

Good morning and close to good afternoon, but my name is Navin Jacob. I'm with UBS. Thank you for joining our UBS Global Healthcare Conference. I'm the senior analyst covering SMID-cap biotech and large-cap pharma here at UBS. I'm happy to have with us for our next session, Eli Lilly and Company. And from Lilly, we have CFO, Anat Ashkenazi. Anat, thank you for joining us today.

Great. Thanks. Good to be here, Navin. Good morning, everyone.

Fantastic. So we're going to have a fireside chat here with Q&A between you and me. But I do want to actually ask audience members to please feel free to participate, ask questions via the chat function down below. Those questions, I am happy to read out. They will be anonymous, so your -- you can remain shy. And -- but please do interact. It's always great to have audience members participating. Anat, we can't -- I've been asking every large company that we've been interviewing about the impact of the pandemic on demand for some products. We still saw some follow-through in Q1. How do you feel about all the key products? Are they back to pre-pandemic levels in the U.S.? And then how do things look ex U.S.?

Great. Thanks, Navin. It's a good question and obviously very kindly given where we are with this pandemic. So what we saw last year, probably the height of the impact on the health care system was around the April-May time frame. As system shutdown, physicians' offices were closed, patients were not getting treatment or not getting tests done, et cetera, we saw the most -- the majority of the impact then. And then physicians and health care systems started operating in a more virtual fashion, adding telehealth visits. We engaged with physicians in a remote fashion as our reps were out of the field. As we're looking at where we are this year, and I'll talk about the U.S. and then what's the dynamic that's occurring outside the U.S., in the U.S., we're seeing a good rollout of the vaccine. And the way to think about it in terms of impact to our business is the more -- the faster we go back to normality in terms of how health care system operates, the better base business functions. There is variability between classes. So as we think about, for example, the GLP class or SGLT2 class in diabetes, they're back to -- they're actually above the pre-COVID level in terms of patients going back and NBRxs. If anyone is tracking the trends in the market in the U.S., you see rapid acceleration in these markets in terms of growth rate. So for those classes and several others, the pandemic is, to some extent, behind us. There are classes, though, where we're seeing -- we're still seeing a significant lag for our portfolio. Migraine is one that I would highlight where we're still not back to pre-COVID level in terms of growth rate. It's improving. So with every week that goes by and as I look at the data, we see improvements in that segment, but it's still not back to where it was. The rollout of the vaccine is done -- is incredibly efficient here in the U.S., so I would expect that as you think about kind of first half, second half in the U.S., we should start to see acceleration in our base business here in the second half, and that's how we also set our guidance for the year. So very encouraging from that perspective. Outside the U.S., there's variability country by country, and I'm sure you see that. I'll think about some of our major markets. So China is back to almost completely normal in terms of reps are back in the field, physicians are seeing patients, et cetera. And you're seeing rapid growth in that business on the Lilly side. Japan, on the other hand, is in their third lockdown and has just -- they just now extended their lockdown. So it's even -- it's going to be more impactful and we're seeing that impact on health care system. And the market there is certainly not back to where it was pre-pandemic levels. We, at Lilly, also see the other dynamic associated with our specific portfolio in Japan, where we have lots of exclusivity for some of our, what we call, legacy products, small molecules now occurring in Japan. You recall those products lost their exclusivity in the U.S. in the 2014, '15 time frame, and there's kind of a lag in Japan. So we're seeing -- you're not seeing much growth from our portfolio in Japan because of that dynamic as well. In Europe, it's mixed. And I'm actually encouraged by what I'm seeing here in the -- what I've seen in the last several weeks. So the initial rollout of the vaccine in Europe has been slower, and we have had several countries in lockdown yet this year. And we've seen some impact there. But we're seeing here in the last several weeks that the vaccine is being rolled out faster. So I would predict that in Europe probably by mid- to late summer, we should see things go back to normal, and again, in line with our view that second half of this year will be a stronger year for our business globally.

Perfect. And then a question that we -- or a topic that is often discussed as it relates to Lilly is pricing. You've given guidance of low to mid-single-digit decline in the U.S. How are you tracking against that? Are you seeing more or less pressure there?

Yes. So I would say very consistent with the guidance we've provided. So we said double digits -- no, sorry, single-digit price erosion, low single-digit price erosion in the U.S. given the tailwind we have from 340B. And that's what we saw. In the first quarter, we had a minus 4% price erosion. So that's -- we're not seeing any additional pressure beyond what we had forecasted, very consistent with the guidance we provided for this year on pricing, both in the U.S. and globally, for our business.

You brought up 340B. That's a good segue to my next question, which is you've seen relief this year from 340B. The Biden administration recently asked several companies, including Lilly, a deadline was given of June 1 to restore those 340B discounts. What's the latest on that front? And how does this play out? And if for some reason, you did have to restore that, what would the impact be? Or rather said differently, how much of a benefit this year did you get from that relief?

Yes. So if we go back to 340B and the change we announced last year, it really was -- it was to go back to the intent of that statute and to ensure that those that are getting the discounts are offered to 340B entities are those 15 340B entities and not contract pharmacies. So we view our actions as completely in line with the legislation. And we saw benefit from this from a pricing perspective in Q4 of last year. We saw it in Q1 of this year. It's fairly consistent in terms of a dollar impact, and we said it's going to provide us with about 2 to 3 points tailwind here in the U.S. on pricing for the full year. And what we saw in Q1 is consistent with that. So that's what I would continue to expect for the year. I will say our expectation and guidance for that -- for the year, on the 2 to 3 points, did not assume we will have benefit for the full year. So we said there could be some change that will come later in the year that will impact that, so we were a tad more conservative and applied kind of a partial year, which is that 2 to 3 points but fairly consistent in terms of what we're seeing right now. The important thing that I would say is we also have -- we've seen no interruption to patient care, and we're still offering any entity that wants to get those discounts can apply for those. They just have to demonstrate that the benefit goes to the patient, flows through to the patient. And again, we've seen no interruption there. The notification we and some of our peers received from HRSA just last week, we did file a preliminary injunction with the court on that to prevent the government from any punitive actions not in line with the legal process that we're in. We -- the letter was an interpretation of the statute that said that the entities that are outside those 15 entities should be receiving the 340B discounts. We don't agree with that interpretation, and we believe that our actions are completely in line with the intent of this law. And again, we'll go through the legal process here. In terms of any financial implications at this point, there's nothing that we can communicate on anything that we are reserving for that because, again, we do believe that we have the right -- we've taken the right actions and have not seen any impact to patients. Should anything be ruled against us in a different fashion, it could be forward-looking. It can be backward looking. At that point, we'll have to reassess. And that's why I feel a little more comfortable that we've taken a partial impact for the year.

Got it. Perfect. And if we talk about an important franchise for Eli Lilly, your GLP-1 and soon-to-be GIP-1 franchise as well, Trulicity volumes have been very strong. You did talk about the low to single-digit price decline for the overall U.S. portfolio, but Trulicity has been facing some net pricing declines. Has the declines this year have been -- how has it been for Trulicity, specifically this year relative to your expectations? Again, is it in line, better or worse? And then I have a few follow-ups.

Yes. So Trulicity, as you've noted well, the volume is very strong, right? So in the U.S., we're nearing 49% share of market on total Rx, and the GLP class is growing rapidly. In a number of countries outside the U.S., it's even higher than that. So the franchise and the product is doing exceptionally well, which is just evidence of the good efficacy that this provides to patients but also the simple delivery and especially in diabetes, having an easy-to-use device, the auto-injector, which I'm sure we'll talk about later on, will be used for tirzepatide as well, once a week, easy. You click. You don't see the needle is providing patients with tremendous benefit. And as you look at adherence across the diabetes classes, Trulicity has the highest adherence among both the injectable and the oral, which is very impressive and the longest duration on treatment. On Trulicity pricing, it's very consistent with what we had projected. And again, the 340B, we didn't parse out the impact by class. But obviously, it's across our set of products, provides tailwind there as well. So a mid-single-digit price erosion is consistent with what you should expect there. And I would say any pricing pressure in the GLP market would be just what we traditionally see. Now this is one product where we already have very high access across really all the commercial books. So it's one where I would just expect just continued business negotiations there.

Consensus expectations are pretty high for Trulicity, tirzepatide by 2025. It's roughly $8.5 billion for the combined franchise, certainly achievable, not unachievable. But on the other hand, it does assume a fair amount of continued growth with GLP-1 class. As you've noted, it's been growing well. But in the past, you've given some metrics around new patient starts with GLP-1s versus insulins, which is where you're getting most of your growth from. How does that continued switching look? Are you confident in the continued switching from insulins to GLP-1s?

So if you look at the GLP market, it represents about 10% of all diabetes market or 20% of the branded market, so still tremendous opportunity for growth into additional spaces. And that's where I would see continued growth coming from for that class. For Trulicity specifically, you could see switches from other products. The fact that we have the higher dose now for Trulicity, the 3 and 4.5 also provides physicians with the opportunity to transition their patients to the higher doses as opposed to transition into a different product, should they need to be on a different product. So we have opportunity for class growth, which I expect is where you will see significant growth coming from as well as continued switches from other products. As you look at the tirzepatide opportunity and tirzepatide to Trulicity dynamic, once that comes through, again, tremendous opportunity for class expansion now with the GIP lift in there but as well as switch it into tirzepatide once that launches.

On tirzepatide, you recently shared cardiovascular outcomes data from the SURPASS-4 trial and analysis across all the SURPASS trials. It trended well with the hazard ratio lower than 1, but the -- we've been getting questions on the -- what the implications are for the upper limit of the confidence interval being above 1. What does that mean, if anything?

Yes. So the -- so this was the fifth SURPASS study that read for tirzepatide. So very impressive because the other 4, as you've seen, had just tremendous data, both in terms of significant A1C reduction, not just in terms of getting patients to below 7, but actually getting patients to normal glucose level, which is very impressive. We had 40%, depending on the dose, but significant percent of patients achieving lower -- normal glucose level. And then on weight reduction at 14%, very significant weight reduction. So the results of the SURPASS program are very impressive. This study, remember, that it wasn't a CV outcome study, and that's important. And as we look at the hazard ratio, we look both at SURPASS-5 individually and then we looked at -- sorry, SURPASS-4, and then we look at full data across the SURPASS studies. And the hazard ratio of 0.74 for SURPASS-4 or 0.81 at the pool data is very good and robust hazard ratio and very -- we're very pleased with that number. The confidence in our goal was broader than that, went up to 1.8 or 1.26, depend if you look at the pool or the individual data but still very much consistent with what we expected for this specific study. We do have a CV outcome study that's ongoing, and that's going to be reading out or completing in 2024. And that's where we will actually see the CV outcome impact.

Right. And that being a much larger trial, your tighter confidence interval which should offset what was seen in this much smaller trial.

Yes.

And so maybe on another important asset that folks have been very interested in for Lilly this year particularly, which is donanemab. I just want to confirm that there is no avenue for filing on just the TRAILBLAZER-ALZ trial. And then tied to that, the pending decision on aducanumab, does the outcome of that decision in any way affect the potential for filing?

Yes. So the history and for this division of the FDA is that it requires 2 well-controlled studies for an approval, and we believe that's still the case and should be the case because then you have more data and ability to see segment information across patients, less variability, et cetera. So we still believe that should be -- that is the base for approval. We've had conversations with the FDA. And at this point, our focus is on accelerating enrollment for the current study to make sure that completes rapidly and then ready for submission. You've highlighted correctly the aducanumab data that's -- or not data, the decision that's coming out here in less than 2 weeks. We're watching that very closely. And depending what comes out, we'll continue to have discussions with the FDA. We have ongoing discussions, but we believe that the path for approval is the 2 well-controlled studies. And that's the path forward, but we'll -- if anything changes in 2 weeks that we learn about, then we'll continue these conversations with the FDA.

Great. Thank you. [Operator Instructions] Anat, just on capital allocation, a few questions, if I may, there. Are you taking a different approach than your predecessor? Is that some -- an area where you see some different path forward for Lilly relative to the past few years? And then sort of tied to that, just on a dividend versus share repo, how do you decide between one versus the other? What do you see as more important near term? And do you set a target payout ratio for the next 5 years?

Yes. So the way I think about capital allocation is consistent with how we've looked at this the past several years. It would be -- the first priority would be to fund the business, whether it's the new launches or R&D investments. And in R&D, I would divide it into 2, and I'm happy to address that as well. One is our internal pipeline. The second is bring in external innovation and through business development more kind of add on in our core therapeutic areas. So that would be the first in terms of capital allocation. We then would look at repurchase and obviously dividend increase. On the dividend, we've increased the dividend 15%, as you've seen. As we look forward and I look at where we are in terms of potential for firm growth, I do see an opportunity for continued top line growth and margin expansion which translates to bottom line. And with that growth, I expect that we will continue to see potential for further dividend growth. Now it will not be 1:1 with our growth rates, but it will be directionally with our -- the firm growth and something that we can sustain over multiple years. So that's how I think about dividend payout. In terms of share repurchase, we paused our share repurchase program early last year at the beginning of the pandemic, not knowing impact on liquidity in the markets. We pulled back and we've decided to put a pause on that. This year, we started back up with our share repurchase here in the second quarter. We started the year with $1 billion on our share repurchase program remaining out of the $8 billion we had, and we went back to our Board to receive authorization for additional $5 billion of share repurchase. And what you should see in terms of the amount, it's very consistent with what we had in previous years for share repurchase. I will say that's an amount that will be a toggle between business development and share repurchase. So if we have multiple business development activities in a given year, more capital would be allocated to that, less more would be allocated to share repurchase. So that's how I think about the balance. It's not in terms of any specific ratio, but it's making sure that we fund the business but also fund the growth. We have tremendous growth opportunity ahead of us as an organization. We want to make sure we invest not just in all the products that we talk about, the late stage, but the set of cohort of products that will come behind it because we need -- as I'm looking at the business, from my seat, given that we're going to be a much larger organization, we need an R&D engine that delivers a larger output, more NMEs per year, higher value, and we need to make sure we invest in ensuring that sustained growth.

You mentioned BD as a way to bring in some assets and that external sort of R&D effort. Several companies in large pharma are looking to deals -- for deals to enhance their pipeline, many of which have a patent cliff where you don't, and so their needs are even greater than yours. Equity markets have been pretty favorable for the last few years to biotech companies, meaning they're not in a rush to take a payout per se. But are you -- how do you see your ability to execute deals in this environment? Is it more or less challenging than 2 years ago?

Yes. So as we look at business development, and you outlined this correctly is that we don't have a major patent cliff ahead of us, right? The only product that is -- well, we have gotten expiries around the world in different dates. Alimta is the next one in the U.S. But obviously, it's now a smaller product on a large base. So it's a small percent of our revenue that's exposed to patent expiry, and then we have a very long runway ahead of us. So as we think about business development opportunities, we first look in areas of our core therapeutic areas, not to go -- sorry, my computer was ringing. Looking at our core therapeutic areas where we have deep understanding of that space and can add value to molecules we're bringing in. We look mostly at earlier stage or smaller acquisitions. So you've seen us do $1 billion type of acquisition or even in the $100 million acquisitions or in-licensing partnerships. We will continue to do more of these. Obviously, we're operating in competitive spaces in terms of competing for good innovation. Every company wants good innovation. But where other companies may be looking more at revenue replacements where it's a product that's on the market and will be willing to pay more for that, we're not in a position where we're forced to replace revenue. We have that sustainability in our base, so it's a matter of really supplementing the pipeline to ensure we have the growth beyond that. We'll pay appropriately with what the innovation is and what it brings forward. Obviously, no CFO would like to overpay for an innovation. So we'll pay for what that innovation could bring to us. And we look at a few things, both -- one is just from a pure R&D perspective, the potential to have a best-in-class, first-in-class product. And obviously, that's not easy to discern when you're looking at something that may be a Phase I or even a preclinical opportunity, but that's how we look at that. And the second is any unique set of capabilities or platform we can bring in-house. And you think about the Loxo acquisition we did a couple of years ago, we got assets, good assets in innovating spaces, but we also brought in unique talent and expertise in drug development. And you look at their time line, their ability to actually drive something through the development cycle and into the approval process very rapidly is something that we're now leveraging and replicating within our -- across our business. So if we have that sweet spot where we have an innovative, first-in-class, best-in-class product, good capabilities, those are the things we want to bring in, but our focus is on product.

You mentioned Loxo. Hematology is a relatively new space for Lilly. And to that extent, I'm aware of only maybe one other asset in heme beyond LOXO-305. What are your aspirations in heme? Do you have the critical mass and research to have the expertise to continue to push there? Or will you be looking in that space to continue expanding either from an external perspective?

So we have the expertise with Loxo. And obviously, when we advance a product like that through the development phases, we make sure that we have our internal research and development organization to support such program in terms of clinical know-how, scientific know-how and understanding. So we feel good about that. We could expand. I mean it will be just part of our oncology franchise if we go into further -- either indications or additional products that we bring in-house.

And one more question on this capital allocation front. The stock has done exceedingly well at a near all-time high multiple. You could -- one could conceivably see if there was a time to use equity, why not do it when the stock is doing well and the multiple is high? Would you ever be -- would Lilly ever be open to a big deal and use equity? Or is that just off the table?

Yes. So let me talk about my philosophy and approach to large-scale M&A. I believe the value is not in these large-scale acquisitions. And when I say large scale, I don't mean like a Loxo-type acquisition but as you look at kind of merger of equals or truly large-scale acquisitions. So I believe that the value is where we can bring something into our development organization and bring the additional value that we have where we have expertise in, and it's not in acquiring such an organization. So regardless of our stock price and our position in the market, I just don't see value in those types of acquisitions. And then decisions on our business development, transactions and the structure. So there could be different structure, obviously, for how we sign and bring things in. And those will depend on the discussions and negotiations with the counterparty, not necessarily just our stock price. The driver would be the innovation we're bringing in and then the ideal structure for that specific transaction.

Perfect. And if we could go through a few P&L items, if I can. On gross margins, how should we be thinking about the gross margin evolution over the next 5 years? Near term, you have Trulicity mix shift versus insulins and then longer term Trulicity versus tirzepatide. Is all of that beneficial to gross margins? And just if you could walk us through the pushes and pulls and where the trajectory might go.

Sure. Yes. So this year, we had a specific impact associated with the COVID therapies. Putting that aside and just looking at our core business, we're at about 80% gross margin. I expect that would stay the case for the next 5 or so years, potentially even beyond that. I would say as I look at the pushes and pulls around gross margin, there are a few. One is the type of products that we have. So when you have a product that's a large molecule in a device, those are more expensive than a small molecule in a pill, just the pure production process. Products that are -- as you know, we do more business development and we bring more innovation in. Then there are typically royalties associated with these products, which sit in our gross margin line. So that's another impact to just the gross margin. And then as we have products that are adding -- coming into existing platforms, so think about anything in diabetes, right? We have robust manufacturing platforms existing across the diabetes portfolio. We have opportunities for additional productivity there. So these are kind of the pushes and pulls. We have productivity efforts across our manufacturing organization. Products that may have higher royalties may be just a little more expensive than small molecules. And obviously, there's the pricing dynamics. So these are the pushes and pulls. But I expect that our productivity efforts across the manufacturing organization, our ability to leverage platforms will offset some of these headwinds to get to about 80% gross margin for the portfolio.

Great. And then on some other line items. On SG&A, you have several launches going on, credit to the Lilly team to be in that enviable position. But given that, what -- how should we be thinking about SG&A growth? Should we be thinking of SG&A growing close to as fast as sales? Or is there enough leverage there that you can take advantage of, such that growth is more along the lines of, say, inflation at a couple of percentage points?

So the way I think about SG&A, it's -- that's the one line where we should get leverage from as the firm grows. So if you think about the operating margin estimates we provided of us getting to mid-30s to high 30s in terms of operating margins, it's going to come from that line for the most part. It's not going to come from the R&D line or maybe marginal. And the way we get there is twofold. One is we have -- we're launching products in existing areas. So think about tirzepatide in a diabetes portfolio. We already have a sales force in that area. We already have the established relationships. So there could be some growth. But for the most part, this is sitting on existing platform. Same thing with the LOXO-305 launch, it's in our existing oncology portfolio. And as you know, oncology from an SG&A perspective, it's very low to begin with. Donanemab is probably going to be -- it's the one area where -- obviously, we don't have commercial footprint, and that's one that we would have to build out as we get closer to a potential approval and launch. We've started thinking about this in a solanezumab base, so we have a little bit of an advantage in terms of understanding how this space works, and we'll start thinking about this now. We're not waiting. But as you think about SG&A ratios and how this would grow, this is an area where I would expect to see productivity more significant probably than any other place in the income statement, both in terms of large products provide a lot of leverage from an SG&A perspective. The second is the last 15 months or so of living through a global pandemic has taught us much in terms of how we interact with our customers and just the environment around us. And last year, our reps were out of the field, and we had engaged with physicians through virtual ways. And those are not maybe as productive sometimes as a face-to-face interaction, but they're much lower cost. So as we think about moving forward and we're adding product to our portfolio, we're going to continue to double down on that virtual engagement side and multichannel engagement with physicians and customers that would allow us to expand our reach without a meaningful increase to cost.

You alluded to the fact that R&D basically as a percent of revenues will be effectively the same going forward, is that just a function of the products you have? Or is that somewhat of a -- just a philosophy of Lilly that you want to maintain a certain level of R&D spend as a percentage of your revenue?

Yes. So we've hovered around 24%, 25% of revenue. It doesn't mean that it's going to be exactly 24% or 25% each year, but it's going to be a meaningful percent. And that is our strategy. Our strategy is one of innovation and investing in our pipeline. We do have business development opportunities that come in. But if they come in at an earlier stage, and you see the impact of those on our income statement, it's just not -- it's leveraging our capital but impacting our income statement as well. So the way to think about it is we're going to continue to drive, by the way, productivity in our R&D engine, and I'll talk about that in a minute. But our philosophy is that we're heavy investors in R&D. So it may move, for example, in a specific year. If we have a donanemab-like opportunity, we have strong conviction behind the product. You'll see us step in and invest, like we did on the Q1 earnings call, where we changed the guidance, primarily because of that additional $300 million we put behind donanemab. So this number could go up and down based on the specific opportunity and the flow of product through the R&D organization. Back to the productivity and my comment on the pandemic, we have learned some things on how do you do drug development in the virtual world. Because last year, you may recall, we had to pause some of our studies because investigator site may have closed or physicians were -- or patients were not comfortable going to a physician's office. And we had to find different ways to communicate and work with physicians and a different way to engage with patients. And we have, and we have done that. It is smaller scale compared to everything else today, but it's an area that we're planning on substantially increasing and expanding and looking at other ways where we can leverage less in-person interactions with even patients. They have -- still have to go to site and certain disease states, et cetera, but are there different ways to leverage tools that will allow us to drive further efficiencies in how we run drug development.

You mentioned one area that would be new, that you need investment, and it's Alzheimer's. Another I'm curious about is GI. Mirikizumab, you're developing for ulcerative colitis and Crohn's disease. Do you need to build out a GI force there? And what level of investment is required there?

Yes. So in immunology, we have quite strong presence with Taltz and what we will be looking at is how do we leverage that footprint to make sure we launch both mirikizumab as it comes through in both Crohn's and UC. And what we can talk about what the sales force would look like, we'll look at synergies across our brands.

Got it. Okay. And then your COVID antibody has been a nice tailwind this year. But speaking of tails, I mean, do you see a tail to this program beyond just this pandemic phase? Is there -- and what's the sort of ability to create a national strategic stockpile of COVID antibodies, whether it's here or the U.S. or ex U.S., kind of like a Tamiflu or vaccines? Is that feasible for the COVID antibodies, just given that there are variance and that does may affect efficacy? But just wanted to get your thoughts on the tail value of the COVID antibody program.

Yes. The reason we started the COVID antibody program last year was really for -- to drive benefits to the health care system and for patients' health. It was -- and/or an urgent need, and we stepped in with our partners and delivered a product to the market and just remarkable time lines. And obviously, we had help from regulators in terms of rapid reviews, et cetera. The -- we had $870 million of revenue last year, $810 million in Q1 of this year, and the full year estimate is $1 billion to $1.5 billion. I expect that the majority of those revenue will come in the first half, and that's where you should see it. And this is where -- as the vaccine rollout is done effectively globally, the less there will be a need for the antibody. So I should expect -- I would expect that to start coming down here in the second half of the year. We will be providing donations globally. India is one that we're looking at. Other countries, those will be at cost or free donations, so they wouldn't translate to any top line additional revenue. So I wouldn't see it as a growth driver for Lilly. That wasn't the intent behind it, and I don't see it as a long-term growth driver for the firm. Your question on the stockpile is an interesting one. The antibody's shelf life right now is 12 months. So that's obviously prohibitive in terms of creating a stockpile. We are working to extend that shelf life to more than that, potentially 18 months. But again, that's short for a stockpile type of Tamiflu-like stockpile of medicine.

Got it. The antibody, though, was -- or the entrants there did bring you into new market relative to your existing portfolio of infectious disease. Would you ever consider yourself digging further into that space as a new vertical for Lilly, particularly as it's -- there are some learnings from the immunology side of things, which you've been expanding in for the last few years?

No. I would say this was specific to this pandemic. We may want to make sure that we're pandemic-ready, should anything else occur, and ability to quickly ramp up efforts within R&D to deliver a product to the market if, again, there's another need at some point in the future. At this point, our core therapeutic areas, our 5 core therapeutic areas remain unchanged from that perspective. But evaluating what therapeutic areas we're in is something we do on a regular basis. I do firmly believe there is great benefit and staying consistent with therapeutic area you're in as opposed to going in and out and building -- really building the expertise, knowledge, know-how and relationship in that therapeutic area does create significant value. When you look at our diabetes results, right, I remember when I was the CFO for diabetes in 2014, it was a very different organization than where we are today. We've moved significantly and really built a powerhouse in the space, and we'll continue to do that in the spaces we're in. But we're always evaluating just as part of our long-term strategy, should we be looking at other therapeutic areas? They could be a diverse set, virology is not the one that we're today expanding into.

Sure. And a question from the audience: Do you believe the greater pharma industry gained any political goodwill for its work at COVID therapies and vaccines? And I'll just add to that, there has been some back and forth from Democrats, initially, some of the HR 3-related pricing reform thoughts were it -- part of the infrastructure building that was pulled out, but then there's some thought that it might come back on its own. First, maybe, I suppose talk about that political goodwill, whether some of that has been actually gained. And then separate from that, your latest thoughts on where pricing reform and any potential risk might lie.

Yes. I would hope that what the industry has done will -- created some goodwill. I'm not sure that's the case, though. And obviously, this industry has stepped up. What some of our peers have done with the vaccine is nothing short of remarkable in this time frame. But you see what's going on in Washington right now and the comments and some of the proposed changes. They imply that any goodwill that we may have incurred maybe was very limited. And the focus has shifted quickly elsewhere, which gets me to any pricing changes and pricing pressure, potential reform. This has been something that's been discussed for, I don't know, as long as I've been in the industry, I think. Any potential changes for pricing reform that probably the most significant one we've seen was the ACA. The proposals that are on the table right now are not ones that necessarily benefit patients. And that's where we're engaged in conversation and pharma is engaged in discussions on. Is there a solution we can proactively bring forward that would help directly lower out-of-patient costs? And we're willing to participate. We know this -- we'll have a part in that. But at least it's taken the pricing discussion to a direction where it truly helps patients not to pay for something else or money that's going to get lost in the system and never makes it to patients. That's where we're going to be proactive. Obviously, as time goes by, the probability of a drug reform, pricing reform potentially declines, but we will continue to advocate for something like that.

Maybe in the last minute here or 2, given that you're relatively new still to the seat, wondering as you've assessed the Lilly portfolio, particularly the pipeline, do you see any assets there from your financial overview that is of most interest to you? Feel free to give a completely different answer than Dave or anyone else with the Lilly management team.

It's something that I always look at. And having been here for 20 years, I've seen us grow through different phases in terms of what we have in clinical development. Obviously, we're all excited about the late-stage pipeline because it's near term, and it's more certain. It's easy to get excited about. But if you look back at what we have behind it, we have a robust Phase II pipeline. We have a robust increasing portfolio, right, across multiple opportunities there. And I think those will really deliver meaningful value to shareholders, to patients, to the company. But I'll tell you what I'm most excited about is the diversity we have in our portfolio because I've been here in years when we didn't have it, if you look at our pipeline 10, 15 years ago and maybe where some of our peers are, but we now have truly a diverse set of opportunities across our therapeutic areas and across all stages of development. And that's from my seat as the CFO, that's what I'd like to see because it provides us with this hedge. Because you know very well in drug development, things will fall out of the pipeline that we didn't expect, and things will do better than what we had expected. So it will go in both directions. And we don't want to be in a position where we rely on ones that will be make or break the company. We want to have that could potentially deliver the growth that we need moving forward. So that's truly what I'm excited about is the diversification in the portfolio and the fact that we have what I term internally as an LOE-free zone. It's a number of years ahead of us with very limited pipeline exposure to patent expiry. And even the products that are going to be losing patents here in 2027, it would be interesting to see how -- what happens there given that these are not small molecules. It's a different dynamic there.

Fantastic. And with that, we're exactly on time. I want to sincerely thank Anat Ashkenazi from Eli Lilly and Company for joining us today. Thank you so much, Anat.

Thank you.

Take care.