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

Okay. Let's kick off the afternoon session here. I hope everyone enjoyed the lunchtime discussion and has had a positive and productive morning so far. My name is Chris Shibutani. I'm a member of the research team. We are thrilled to be able to present Lilly at our conference here: Anat Ashkenazi, the CFO; and also really appreciative of the entire team that's out here, the stellar IR team, Joe Fletcher, Lauren Zierke; and James Gilroy is also here, for those of you lucky enough to get into conversations, talking about market access, which is obviously extremely topical.

So many inbound questions. Obviously, the center of gravity of our conversation is very clear. One of the things that I like to do personally, however, is that since this is a conversation as well between you and me is to make sure that we understand who you are. We spent a little bit of time on the road last month. You have this unmistakable kind of quiet poise about you that seems kind of lethal, and I'm just kind of interested to sort of see. If you could share with us a little bit about your background, about how you got into this role, your journey through Lilly and kind of like maybe share anything that kind of gets you triggered.

Yes, sure. Well, thanks, everyone, for joining today and having an interest in Eli Lilly. Anat Ashkenazi, the CFO. For those of you who don't know me, I've been in the CFO role for a little over about 2.5 years or so, but with Lilly for 22 years, and have had a diverse career with Lilly. Had the CFO roles for almost every part of -- almost for every part of our value chain, almost every business area across Lilly and actually started on the venture capital side within Lilly, and part to that was in financial service. So this is just kind of in a nutshell. What I've done prior to this role, I also had the role of the Chief Strategy Officer at Lilly for -- and the investors I talked to, they know that I love to talk about strategy and where the direction days that Lilly is heading and what our goals are and what we want to do over the coming years and achieve as an organization.

Yes. And I think that's incredibly valuable, and particularly given the sweet spot where the company is with just so many bountiful opportunities, decisions that have to be made, a lot of high-class problems, but nonetheless, big challenges that are very involved. And I think it's always very interesting, kind of akin to a GE model, where people sort of rotate through, people come through. Even the Investor Relations group has experienced operating roles in Europe, et cetera. So I think that kind of insight, when we think about the depth of experience, is really valuable. So let's get to it. Demand. Very clear kind of picture in terms of the kind of transformational opportunity that the GLPs have had in terms of thinking about diabetes. And of course, it goes back over a decade, and there's been a clear evolution. And we're at this very distinctive, kind of almost societally engaging, transformation, with the demand as such that you have to figure out how to tackle the task of meeting that demand. Manufacturing. Very much in your wheelhouse in terms of strategy, very much the role that you play in terms of deciding how to allocate capital, invest. The company is going through just incredible amounts of effort on that regard. Tell us about how your progress is for manufacturing, supply. What's going on?

So you're right, it's a strategic question, although people think about it across other industries as more operational in nature, right? You start a manufacturing site to produce a product that you're going to be selling, et cetera. For us, it's a strategy and operation, which means you have to think about these questions well ahead of the launch of a product. In fact, when we started our newest facility that's going to come online next year in North Carolina in Research Triangle Park, it was before we had the full data on tirzepatide, before we saw what the market demand was going to be. So in some -- to some extent, you're making a strategic bet, and you're taking some risks. These investments are not cheap necessarily. In LTP, we're going to be investing $1.7 billion in starting up that -- in completing that site. So we look at what would be the demand, what our projection is for demand over the next -- actually, we do a 10-year horizon, and then walk back from that and say, what capacity do we need to have in-house across the value chain from API through the fill finish of the product, depending what product that is. Our strategy had been to operate with our own manufacturing facilities across -- start to finish, and then supplement with CMOs, where needed, or for specific elements of the supply chain. So that's kind of the anchor of our strategy. The other piece of strategy that's important for us is we operate in networks. So what does that mean? We have an autoinjector network. And for those of you who had any -- a one-on-one conversations with me, I tend to carry these autoinjectors with me. So you've seen that our tirzepatide autoinjector is the exact same auto-injector as Trulicity, different color buttons so patients can recognize they have very different label. It's the same component of the Emgality autoinjector and the same component of the Taltz autoinjector, different sizes because of the API. So operating in these networks allows us to have more flexibility. So if we project a product revenue or demand, then it doesn't materialize, probably there's going to be something else that's going to come behind it. So the ability to have that portfolio allows us to better balance product and capacity. So in 2020, we broke ground on a large facility in North Carolina, parenteral facility, that will be supporting the tirzepatide commercialization. That facility is progressing well, and we should be launching out of that facility -- or not launching, selling out of that facility this year. So it's on track to what we said previously. But we knew that this was probably not going to be sufficient. It's a very large site with multiple lines. So we broke ground last year, mid last year, on a second site in North Carolina in Concord, a couple of hours' drive from the first site. Equally large site as well, another over $1 billion investment. But we knew that's not going to be sufficient. So we have 3 more sites we're starting. One is an API site in Ireland, which we just broke ground on. And I think you already know, we have a large presence in Ireland. And then 2 new sites in Indianapolis, not all of them for the incretin portfolio. But we looked at the broader portfolio that we have, and we felt that we needed that capacity to be available. So almost $4 billion of investment in just north of Indianapolis for additional manufacturing capacity. We reevaluate on a regular basis, what our needs are and what do we need to do to meet those needs and what do we do within our existing manufacturing footprint to expand capacity, to increase throughput, to increase the level of automation that increases the number of products to get out of the line on a daily basis. So we're progressing well. We're pleased with where we are. And hopefully, RTP will come online here soon.

So 2 things. To a certain extent, I think you and your competitor with the leading GLP, Novo, we're confronted with a situation where the magnitude of demand was beyond whatever planning actually happen. Because, for instance, we're approved for tirzepatide diabetes over in Europe, and you guys can be very explicit about making sure that you weigh the pros and cons of introducing a product, recognizing the importance of being able to meet that demand for patients, for clinicians, et cetera. And so there are some decisions that we're paying a little bit of a catch-up in terms of being able to supply the magnitude on that demand. If you have that opportunity to think back a couple of years earlier when you were doing the forecasting of that, what was the element of that sort of -- I don't want to say missed the mark because it didn't because this is kind of like an upside opportunity situation. But like where did things go beyond the forecast at that time? Because now, we're just leaning in with these 5 global facilities, et cetera, to put these petals to the ground, looks like.

Yes. A couple of things happened. One is when you predict forecast or demand for a product, you assume that -- you also look at competitors. And we predict or we forecast what the competitive products will do as well. And you look at total demand, global demand, what will we sell, what would the competitors sell, et cetera, so that we can back into what the capacity needs are. What we didn't forecast is that a competitor will be out of the market, which puts additional pressure, obviously, on our own demand. We saw it primarily outside the U.S., where we actually had to instruct physicians to not start new patients on Trulicity because of that huge demand we had for the product. So that's a new element. When we started the journey, before we even had the data for tirzepatide, you can -- you predict and you have algorithm that you try to figure out what the data will tell you. But it was very good data. It's great data for the type 2 diabetes indication that's proven in the marketplace. And it was great data for the obesity indication as well. I mean, we set a new bar for efficacy when it comes to obesity and certainly with type 2 diabetes as well, getting patients to normal A1c level. So good data is great. We always assume that when we start a Phase III, but seen a good balance of strong efficacy, very manageable safety profile helped us in the marketplace.

So I think a lot of these things tend to be a little bit less directly familiar to most people in the investment community, and we've talked kind of broad strokes about your efforts here. So I'm just going to try to peg you down to a little bit more in terms of specifics in relation to things that management has said in terms of how can we gauge where you are with this progress. And so one of the points that has been made in terms of thinking about being able to double incretins supply by the end of this year -- didn't even get the question out and you're already nodding, so things are good.

We said it. I said multiple times. And this was kind of if you think about what the anchor point is, that was around probably Q3 of last year when we said that. So doubling from that point, and there are a few -- several efforts. So we're -- first, I would say, kind of to the bottom line, we're heading towards that. So nothing that I would say that we're not. The way we're getting there is we're getting there through a new site that's going to come online as well as additional changes we've made with our own existing facilities to, as I said, introduce automation; increase throughput; and where we can, partner with external suppliers or CMOs to bolster that capacity as well. We're progressing towards that goal.

So I'm going to be reading your face as I ask you this question as well, assuming the potential approval of the obesity indication, 2024, how are you feeling about being able to supply that U.S. launch?

So let me just change one thing you just said. You said 2024. So obesity, as you recall on the Q1 call, we said with the data -- with the SURMOUNT-2 data that we shared, our plan was to move rapidly to complete the rolling submission we started for the obesity indication. Now I can share, we have completed our submission for obesity. And we have a PRV as well in place, priority review voucher. So with that, you count to 6 months. We're hopefully launching this year. So we're already thinking about that. And what does that mean? Now we've always planned, and we plan for multiple scenarios. We can't just plan for one. And what you will see us do in terms of launches is when we launch in a market, and we're confident in our ability to support the U.S. market for an obesity launch or we would not have used the PRV to ensure that we have an accelerated time line here, but every market after the U.S. will only launch if we have high level of confidence that we can supply that market for a long period of time. We do not want to be in a position where we launch into a market, and then we have to pull back. That's not good experience for patients. So whenever we see us launch in a market, you should feel confident we're going to be able to support that market. We did launch in Japan in April. Early days, but first, early days are good, and we're excited with what we're seeing there. And we're going to continue to launch in markets once we have the regulatory approval, we get the right pricing for the product and that we feel good about the supply situation.

Okay. Terrific. So we're very much on track to make the doughnuts, and doughnuts is probably absolutely the wrong metaphor for the indication. So moving on to the revenues. It's been kind of fascinating and difficult to sort of figure out what the net reported revenues because the inputs we have for a lot of the scripts as well as just recognition of the incredible demand there, calculating that, gross to net has been one of these sort of like AP calculus and then some exercises for most of the people. And I'm sure Lauren and Joe have had many headaches going through the reiteration of these discussions with folks. As we sit here, mid-June, the end of this June marks kind of like a defined end point based upon changes that you've made in your Patient Assistance Program, broadly speaking, in terms of people who have insurance, but perhaps not covered. Walk us through kind of like the core elements of what this change at the end of June is and what we should think about in terms of how that's going to impact this transitioning from end of June into the next forward phase.

So what you're referring to is when we launched tirzepatide late last year or less -- mid last year, we launched with a co-pay card within the Patient Assistance Program. It was $25, so it was a good program. We saw a huge surge of demand, the result of -- yes. And the terms and conditions on the card were such that, that card is set to expire at the end of June of this year for those patients with commercial insurance, but where their -- with product does not cover another of their insurance. What we have just recently announced is we're changing that program when we get to that point of June 30, that co-pay card amount is going to change. It's not $25, and it's given now patient benefit of $500, so what they're paying out of pocket approximately is $450. Again, those are for patients who are insured, but don't have coverage for Mounjaro. Those that have coverage will go through their insurance and we will still have Patient Assistance Program. So what's going to happen at the end of June? There's still a large both patients that came last year through that $25 card, and they were on that card, they're still on the cards. Some have insurance, or where their insurance started covering Mounjaro during that period, moved out of that card and into their insurance program, but there are still many patients who are on that $25 card. So at the end of that period, which is 2 weeks away, if a patient still does not have Mounjaro covered under their insurance, they will have really 2 choices. One is they stay on the new card, which means they're paying more out of pocket as opposed to $25, or they decide to not continue with the drug. And it's very similar to the change we saw late last year. We made a change to our co-pay card in November. We increased the amount of out-of-pocket, and we did show a slowdown in new prescriptions. We expected that. We saw -- we did see a higher monetization for the script, given the gross-to-net dynamics, [ but here, it starts ]. So it will depend on where access is at the beginning of July. To the extent -- and we haven't shared you since the Q1 call where access situation is, but to the extent access continues to improve, the last number we shared was around 60% ex of the U.S. To the extent it continues to improve, that means more patients can then transition to their insurance coverage and not drop out of the program. Some will elect to stay and some will not. So we'll see that dynamic occurring as well here in the second half.

Okay. So to the extent that all of us tend to watch prescription trends on a neurotic basis, weekly and whatnot, and as we navigate kind of this transition point at the end of June, what I'm hearing from you is that, to a certain extent, what happened at the previous time that we had an inflection here should rhyme somewhat with what you're going to happen in June. And we're also going to have a similar event of transitioning another 6 months from now at year-end as well, right?

So only to the extent that we don't gain a significant coverage. So if we gain significant coverage, then no, the dynamic will be slightly different. The second event you mentioned is recovered patients at the end of the year, where they're moving to, again, a slightly different card. But I think that's less of an event that you will see in terms of the script demand. But you're right, it's always for new products that launches with Patient Assistance Program. It is hard to make that direct correlation between script data and revenue, dollar revenue amount, because of that dynamic.

Right. Let's circle to the obesity opportunity, in particular, to think about on the forward and the coverage outlook there. So -- because for the most part, what we've been talking about, obviously, is the coverage for the diabetes indication. For obesity, what would the cadence of that look like? And we'll talk about, obviously, the commercial insurance side when that comes on. Do you expect -- again, we're always cross-trial comparison and looking for competitive comparisons, but what we saw Novo go through with Wegovy, to what extent does that represent some sort of a template for how you expect coverage to progress in obesity for tirzepatide?

It was encouraging to see the access they gain, which means that payers are seeing the value and the benefit of having this drug available for members. We have not started the actual negotiation for obesity, obviously, because we don't have the approval. We're engaged in conversation that we are allowed to engage in, in terms of strategy, medical information, et cetera. So hopefully, we'll start -- once we get the approval, we'll start gaining access. We'll do it very much like what we did with tirzepatide in the sense of having a disciplined approach to gaining access. This is a drug that brings differentiated value to patients, just look at the efficacy and the data there. And we believe when we bring value to patients, then we should be rewarded for that. So you'll see, again, we don't talk about what these numbers are. Obviously, it's prelaunch and it's timing-sensitive, but you'll see that same disciplined approach when we start contracting for tirzepatide in obesity as well. Now how will this evolve? Let's see. We'll work one step at a time, and we'll try to get as broad access as we can for patients with obesity.

Yes. The reiteration of the disciplined approach is very much within expectations in terms of vocabulary I was expecting you to use. You also make reference to the fact there's some unique aspects to this opportunity, particularly this product for obesity. Can you help us a little bit further with any specific considerations that are unique?

Well, it's a large market with many patients, and we know there is a significant demand out there. So we always balance when we price the drug, and you see the list price. What we don't see is the net price, which is critical because that's what patients will more experience, to some extent, closer to what patients will experience. And we always balance getting value for the medication. We'll bring it to the marketplace, the years of investments we've made in it, with being able to ensure that patients can actually access it. If the patients can't access it, that's an issue. So that's what we're going to try to balance in this marketplace. I'm sure you will ask the question about Medicare and [ Trilla ] and how are we going to ensure patients there will gain access to the obesity medications as well. And it will be great if Trilla were passed. It will be a huge benefit, obviously, to patients, but we don't have a CBO score yet for that. So we're waiting for that to come through. But even with that, I view this, it's a legislative change and those are never easy or fast. So this will take some time, I think, for us to see. And we're heading into an election year next year. So it might not be here in the very near future, but hopefully, this will come down the road. Today, government federal employees have coverage for anti-obesity medications. So hopefully, this will be open as well for patients on Medicare.

Right. I mean it's not a fast throw. It's bipartisan legislation that was proposed now a decade ago. So the journey continues to be on. And clearly, the other aspect that everyone in the investment community is paying attention to is the impact of the results from outcomes-related trials broadly across the space. Obviously, the next and the nearest that could read out over this summer is from Novo's SELECT trial -- cardiovascular outcome trial there. A lot of debate in terms of sort of what the outcome would be, what is the kind of magnitude of outcome that would both keep The Street happy, which tends to actually have a little bit of a distinct discussion over what we think the impact will be on insurance companies and coverage, folks who are kind of like firm grip on the pen and maybe perhaps reluctant to think about writing checks and paying for things. So what is the Lilly house view in terms of the impact of the readout of this first of these outcomes trials? And talk to us about how your own kind of program of outcomes studies are designed to meet your needs.

So I don't -- I know a lot of people ask me about the SELECT trial is, though, it's a critical binary event, and I don't see it that way. First, I look at these medications, just talk about tirzepatide. I don't -- we don't talk about competitors' medication, but look at tirzepatide, and we see the cardiometabolic indicators all heading in the right direction with the data. So it tells me there's probably going to -- it's probably going to be a positive study, but we'll see. Who knows? But I look at the totality of outcome that we're going to be providing with the obesity indication and the additional outcome studies that we're going to have read out next year. So you'll probably recall that we've started multiple additional studies with tirzepatide in obstructive sleep apnea, in heart failure, in kidney, et cetera, to show the impact beyond just the weight loss, which we know is very critical, and it's not a number on a scale, necessarily. It's truly health care and well-being for these patients. These studies are going to start reading out next year. And hopefully, we'll continue to build on that body of evidence we already have through the SURMOUNT and SURPASS program, demonstrating the benefit of this drug to patients. And we talked about coverage and access before. All these indications that I've just mentioned are already paid for and reimbursed, both in the U.S. and outside the U.S. And if you think about -- just let's take obstructive sleep apnea as an example, there are about 80 million patients in the U.S. with not an insignificant overlap with patients with obesity. Those patients, when they're treated, their insurance cover the treatment and pay for it. If we show that tirzepatide can provide additional benefit to these patients, again, when you think about from a peer perspective and you think about, "I'm already paying for these indications. Here is the medication that can help us there." I think this well could be even more pronounced outside the U.S., where you have a government kind of single-payer type system. And they truly have a holistic view of their population because they are paying for hospitalization, they're paying for absenteeism, they're paying for procedures, et cetera. So they have a whole system view, a patient view that bring in additional data will be helpful as well. But I don't think it's just a single study necessarily.

Sure. Yes. No, we tend to be anchoring and investing off what comes right beneath the nose next. So a couple of the classic questions, which I know, historically, you guys haven't answered too much. But 1 brand name or 2, if you can just blink once or blink twice.

So yes, obviously, I get this question, and we're very hopefully nearing approval on the launch, so you'll see that once we launch the product. I will say, in Lilly's history, we've had examples for both. So we had products, same molecule, 2 indications, 2 brands, same molecule, 2 indications, 2 different brands, the same. So we had Cialis with, for example, 1 product, Prozac for depression, PMDD had 2 brands. So there are -- you want to understand the customer, the patient population and what their needs are. If you -- if launching with a single brand, it allows us to build a very large brand, great brand recognition, efficiencies and marketing efforts. You can have, for example, 1 marketing campaign, some efficiencies in supply chain as well, 1 product. On the other hand, with 2 brands, there's benefit of being able to tailor the message to the very specific needs of that customer population. Even marketing campaigns, we'll target it as well. Payers, I know I get questions about payer dynamic, and would payer want 2 brands to better manage the class? They can manage it fast, I assume, today, but certainly will be a little easier. There are pros and cons to each of these choices.

Okay. So we will certainly...

Didn't blink one [indiscernible].

Okay. Fine. I'll tell people later what I saw. But -- so obviously, we have the American Diabetes Association meeting coming up, and so we'll look forward to the continued robust R&D development efforts here. But in nature of time and talking to you, let's make sure we cover a couple of more topics, transition over to Alzheimer's disease and donanemab. As we sit here, June 12, we just had, at the end of last week, folks at the FDA getting together and giving a very pronounced thumbs-up in terms of the opportunity there for lecanemab. Talk about what you see as potential read-across implications for donanemab's outlook from a regulatory standpoint.

Good day for patients to have that unanimous support, that's good, and recognizing the meaningful effects that a drug can have for Alzheimer's patients. So good for donanemab as well, obviously. Donanemab will -- as we said, we were going to be finalizing the submission hopefully soon and then potentially get approval by the end of this year or early next year and then progress forward. I think the -- what we need to address and solve still is the coverage for these drugs under the CMS rule for requiring a registry or coverage with evidence determination. Obviously, this will be -- this could slow down adoption for these drugs. We'll have to see what that means from a registry standpoint. But CMS, they'd say, with the high level of evidence, that they will reconsider that decision. That could come with the full approval for lecanemab or it could come with the full approval of donanemab or both. But hopefully, that will start. I mean, I think, we're already seeing the pushback from patients' advocacy groups wanting to see coverage for these medications. Certainly, when you have 2 drugs on -- fully approved by the FDA, hopefully, we'll see that as well.

And where would Lilly be in terms of -- help us understand the timing of the interaction. Have you had an engagement, either at the staff level, with CMS? Thinking about now that you have some data out, is that something that we would typically think more about as being once a full data is out, which is coming up next month, but help us understand what your level of interaction and what that dances like with CMS for you guys?

Yes. So while we can't comment on specifics, I will say that we have been engaged with CMS and provided data and addressed answers, as needed, has engaged with them to ensure that they have all the right information to make these decisions. We can obviously try to work to trigger a reconsideration upon our full approval, but we haven't said yet what we're going to be doing there. But certainly, we're providing all the information and having the conversations needed.

Okay. That seems fair. The IRA, just wondered, as we're going through all our different agencies and all of the treachery that they're trying to generate and create here, during the earnings call, you guys made the comment how you described your preference and rationale for potential third-party administration of IRA-negotiated pricing versus via a reduction in the wholesale acquisition cost. So particularly, based on any exchanges that your team may have had with the staff here, can you talk about what you see as the potential likelihood that this is actually reflected in some implementation type guidance coming this summer? Where are we with that? Some of the nuances.

Yes. So I would say, first, from a clarification standpoint, it's not initially a third party to administer the negotiation, but it's more to verify that when a script comes in, it's actually a script that's eligible for that level of discount, very much like what happened with the coverage gap. So that needs to -- we need to make sure that exists. And we thought a third party would be a good administrative of that process. But -- and you've mentioned where are we with the negotiation. Obviously, we'll see the next -- the first list of 10 products to be negotiated soon, and then we'll see where things are heading from there. I think the word negotiation is the keyword here, because I don't view it necessarily as a real negotiation. So the way I define negotiation, we do this outside the U.S. all the time, is we negotiate with the other party, whether it's the government or districts, et cetera. And if we can't get to the right terms, we may not launch in a country. This is not the case here. So the case here is that you're actually -- you enter a contract before the actual negotiation. So there's no option to pull back and decide we're not continuing to market. You have to arrive at a negotiated price. So the word negotiation is probably not necessarily the right word for this because it's not -- there's no way for the manufacturing to step back from this. If we do, the penalties are quite hefty. I mean, it's 19x sales, et cetera, on a daily basis. So it's not even a possible -- it's not a possible scenario. So that presents a challenge. We have to see again what the first one -- the first cohort looks like. Now we just saw our first lawsuit in this area. So we'll see how that progresses. And I understand the direction they're heading, and I agree with their kind of overall view of this. So it's a bit of a challenge. It's more of a price setting as opposed to a real negotiation to get to the right price.

And I think there was also another legal challenge. And I think the perception is that, actually, legal teams have been watching closely and kind of waiting and thinking about pacing their timing there. Is there anything in particular that Lilly is involved with? I know that Dave, for instance, was -- had his recent tenure as the Head of Pharma. Just curious to know about potentially Lilly's view and then also Lilly's view of participation in groups like pharma, which has seemed to have been somewhat weakened in terms of their potency, the shadow that they could possibly cast over Washington. So specific to Lilly and then thinking about joining forces with other groups, we don't...

So we're still part of pharma, and we still view it as -- it was very valuable. A couple of companies pulled out of pharma, not our view. Our view is that's important that we continue to have that organization and continue to advocate. I can't comment on whether or not we're going to be engaging on the loss, but I think our options are open there. And we'll make a decision where we're progressing there. On the IRA, what we're hearing is, for multiple groups, challenges. The bill was paced quick -- was passed quickly. And certainly, it's one where you look at the devils in the details, right? How do you actually execute this is really going to be critical, which is more to be seen. There was a period for comments. We provided comments into that process. We'll wait and see what...

Which we haven't been able to see, thus far, right?

Which what?

Which we haven't been able to see the full load of the comments that came in, thus far, which is interesting.

Yes, but we've provided comments into that process. Hopefully, the process will be more transparent. I know, right now, there's a gag order on the negotiation process, but hopefully, the process will be more of a real negotiation. And we'll take it from there to make sure it's -- we will do our part and, obviously, we'll comply with any rules.

Okay. Let's put on the CFO hat more obviously and talk about financial results and margin progression, particularly as we think over the coming years and whatnot. You guys hosted a terrific analyst meeting in December of 2021. And you kind of outlined, at that point, a framework for thinking about the P&L and thinking about what gross margins could be and kind of where the level of R&D spending has been. And I actually always think of you guys as being, particularly in the last decade, leaning into the notion of investing a sufficient sort of percentage of revenues into the R&D component. And you're enjoying the fruits of that labor clearly right now. So that framework that you provided: gross margins, 80%-ish; R&D, 25%; margin expansion, primarily coming from SG&A leverage. And clearly, you're going to be led up through this revenue trajectory with the opportunity that we're anticipating for the lead assets in obesity and Alzheimer's. So how well does that framework that you provided in December of '21 still apply?

Yes. So when we provided this 1.5 years ago, and our confidence in that midterm guidance probably only increased, has not decreased by any means. And the way we think about gross margin, around 80%, it's certainly not going to be precise. There could be quarters with 81% or 79% or 82%. And I would say that's kind of the pushes and pulls are. On the one hand, we're going to see pricing pressures, not just in the U.S. with IRA and continued pricing pressure, but also outside the U.S. So those will continue, coupled with our heavy investments in manufacturing. We're going to start to see that coming through the [ COPS ] line. On the other side, we're going to have the scale of large products coming through and continued productivity within our manufacturing organization. So that's going to yield approximately 80%, as we said, through the end of the decade. Then within the middle of the income statement, OpEx, where we expect to see leverage is in the SG&A line. In R&D, that number -- we expect to be a heavy investor in R&D as a percent of revenue. The specific number really moves with late-stage investments. When we launch a Phase III, typically about a year into it, you start peaking in terms of investments. So the more Phase IIIs we have, the more you see it. As the program ends at some point, that margin may look a little different. But that's not the line to see margin expansion coming from because that's our -- our strategy is investments in R&D, whether it's through our own internal R&D program or through business development and acquisition of primarily earlier-stage assets and molecules. But SG&A is where we should start see an expansion come from as we have larger products that are within the existing therapeutic areas we're in. Now having said that, we're launching into 2 new areas with our obesity and Alzheimer's disease. And I think everyone sitting in this room, if you're an investor, you want to make sure we do this the right way because these are great opportunities for patients and for the company. So we're going to invest appropriately to make sure they're very successful launches. But we're going to try to do that in a way that continuously allows -- that allows us to continuously improve margin over time. We said we're probably going to be at mid- to high 30s. It doesn't mean we can't go above it, but it's our strategy to invest that cash flow back into the business that's going to drive where we're going to be.

Okay. I think that makes sense. Anat Ashkenazi, thank you very much for joining us.

Thank you. Appreciate it.

Compelling opportunities. Appreciate your thoughtful responses. Thank you very much.

Thank you.