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

Fantastic. Hi, everyone. Thank you so much for being with us here today, and I am thrilled to have with me Lucas Montarce, the CFO of Lilly; and Mike Czapar, I'm going to say the last name incorrectly, undoubtedly, the Head of IR for Lilly as well. For those of you who do not know me, my name is Courtney Breen. I am the U.S. large-cap pharma analyst here at Bernstein. And I feel very privileged to share the stage with these 2 here today. Hopefully, we're going to have a wonderful conversation getting to poke and prod at the Lilly business in a few different ways. As a reminder, for those of you who are here in the room, you're very welcome to add questions through the Pigeonhole app to make sure that we can kind of answer the types of things that you're most interested in today. But with that, I'll perhaps I hand over to Lucas for him to set the tone a little bit in this conversation, and then we'll dive into the Q&A after that.

Sure. Good morning, everybody, and thank you, Courtney, for having us today here. Maybe just a few highlights from my side. Of course, we are getting into the earnings season, so I'm going to talk more about the first half of the year, but very pleased with the progress that we continue to make across our strategic pillars. Of course, starting with the revenue growth, great progress that we are seeing 38% in the second quarter, 40% in the first half of the year, outpacing pretty much the entire industry on growth. And again, continue to drive significant progress on -- across our key products. Those products, by the way, already represent more than $10 billion in the second quarter, growing 80% -- so the runway of continuation of growth of those products will continue to drive the growth into the future. Of course, tirzepatide, both Mounjaro and Zepbound are leading the way. But again, very good progress across all the other key growth products as well, again, immunology, oncology and neuroscience. So great progress on the revenue side, all volume-driven and also U.S. and OUS. I got a lot of questions about the OUS business that I'm always very happy to respond. And we have the CFO for the Lilly International business here as well that can help us to address some questions on that matter as well. The second pillar, manufacturing, we did 2 announcements this week, and it's becoming almost like a norm. Don't get too used to that to have a lot of new sites every week, but also great progress. And I call it in 2 fronts. Very important is making medicine today. If you go back almost 15 months back, we were still dealing with a shortage of tirzepatide and navigating through that process to get out of the shortage list and to start to launch the product in OUS markets. I can call it that, that's behind us, and we continue to ramp up production. We meet our goal of 1.6x in the first half of the year. We put another mark for the second part of the year of 1.8. I will give the disclaimer that I'm planning not to provide that number into the future into 2026 because it's becoming irrelevant. We are shipping product every day in all the countries that we launched the product, and we continue to launch into new countries as well. So very pleased with the progress that we are making in manufacturing, making medicine today. But also they are very busy on their nice shift, how I call it, that they are working also as well on building new facilities to ramp up production for the future as well. Many sites around the globe. This is, by the way, a journey that we started in 2020. I always get the question, are we doing this for tariff reasons. No. The answer is we started this even when tariff was not a hot topic. And we have even some of those sites already up and running, 2 in North Carolina, RTP and Concord. They are producing medicine as we speak. So we continue to ramp up production and continue to advance our agenda in manufacturing. The last part is the most important one that is the R&D one and continue to make significant progress across all stages and phases that we have in development and across all the therapeutic areas as well. In cardiometabolic health, we have a breadth of a portfolio of opportunities behind it. Again, very pleased with the data readouts of orforglipron and more coming every single quarter. Also in oncology, every single quarter, we have new data readouts and new products that will come into the market and starting with imlunestrant, our oral SERD that potentially will come into the market next year. And we continue to make progress as well in immunology and neuroscience. As you know, again, we have as well donanemab for preclinical and TB3 that could potentially read out into the future and bring new opportunities for patients suffering on Alzheimer's. So great progress across the board. Sorry, it's a long answer -- a long intro, but I'm very pleased with the products that we are making and how we continue to advance again our strategy into the future.

Fantastic. Thank you so much for that context. And I think you mentioned there was a lot in that upfront, and there's a lot going on for stop kind of outside Lilly, inside Lilly, there's policy pressures, there's manufacturing kind of requests, there's pricing, there's go-to-market, there's changes potentially to advertising, compounding kind of direct-to-consumer platforms. And then you're expanding, you're growing, you're making new business and new investment decisions on a consistent basis, both within the metabolic opportunity and beyond. Given all of the scenarios that are out there and the fundamentals of Lilly, what are the primary principles that you are applying to the investment decisions that you're making today? How do you make the right decision today for the next 3 years, but also the next 10 years, but also the next decade for Lilly.

Yes. That's a great question, and maybe there is not a perfect answer, but how we think through this on the investment side and how we prioritize is very much a very thorough process that we do bottom-up across all the business units. But then we review it at executive level on how we make, again, trade-offs and decisions to continue to invest. They are short-term decisions and long-term decisions, long-term decisions like the one that I mentioned in manufacturing. And for those ones, we look at what we call long-term plans or strategic plans that we look, again, our demand projections over the next 15, 20 years, and then make those decisions for the future. Similar, maybe not so long term, but also midterm is in R&D, how we continue to make decisions at advancing our pipeline and then making trade-offs in the pipeline as well. And last but not least, that is the more short term and more variable is on what we call SG&A, that is the commercial front that also we make decisions based on, again, opportunities that we see and continue to drive the uptake and the demand of our products. Worth to note that, again, in that area, all the investment that we are doing is more on the variable side, right? So we are very disciplined at this time going also all the variables that we are seeing, but also our strong belief that we need to remain disciplined, in particular, to remain agile as an organization. And if you look at our trends over the last few years, though, we have been growing in revenue significantly and growing the company, our headcount footprint remain outside of manufacturing relatively flat. And that's based on the discipline that we have put in place to, again, leverage AI, leverage automation and having a strong discipline from finance across the entire organization, not to start basically building a lot of organizations or footprint that we may then regret into the future as well.

Absolutely. That trade-off between discipline, taking the most of the opportunity, balancing risk and reward might be a hard continuum to kind of navigate.

Yes. Indeed.

I did want to dive into some of those manufacturing pieces. You mentioned 2 announcements for API plants in the last couple -- or last week even. Can you tell us a little bit more about this decision? I mean, traditionally, API is manufactured in some lower-cost countries around the world or sourced from lower-cost countries. As we think about more API being manufactured in the U.S., does that translate to a more expensive on a per unit basis? What supports the business case to make this investment in the U.S. and establish API here?

Yes. Very pleased with both announcements. If you haven't seen the news, we announced one API site in Virginia that will be focused on monoclonal antibodies and ADC, antibody drug conjugates. And then I think yesterday or the day before, we announced another one in Houston, Texas that will be focused on API for a small molecule or a small molecule, right? So very pleased with both. As I said, we look at the next 20 years and what are the projections on demand to base the decisions that we make. These lines are also fungible in terms of, again, different lines of production within those areas, right? So don't think about that is, again, one site for one asset, but actually, there is a lot of fungibility and also ability to scale up those sites as well over time if needed. So that gives us a lot of flexibility as well into the future. Some of the decisions on comparing on the cost, I think a few thoughts from my side. There are always push and pulls when you think about, again, the manufacturing investments that you have. And again, it's not just the line of what is the API cost, but you look at from the tax perspective, your flexibility and resiliency to supply the product around the globe as well, the tariffs as well associated with that. There is a component of decisions. Tariffs is not the main one, but there is a component of decisions that we take into consideration for the decision to make this long-term investment and then the decision on where the site will be located. One thing that maybe more broadly is important for us, and again, we learned a lot in the last 3 years going back to the supply situation is there is not a single trade-off that we will continue to do to actually make sure that we can supply the market, right? So -- and having that resiliency and flexibility is an important lever in my eyes that is also considered as part of the cost definition when we decide about this. What I mean by that is, for example, in the past, if you go back maybe 10 years ago, we were pretty much having a footprint that it was operating at full capacity, and we were actually having single source for every single product. Nowadays, we are focusing on creating more capacity and then having for the major products dual sourcing. You will say for that from the financial hub perspective, you will say it's not the most cost efficient. But actually having that flexibility and resiliency is way much more important for our P&L than the actual cost associated with that.

Absolutely. I would assume that, that also comes down to the fact that the API is such a low proportion of your -- when you think about the business.

Yes, you're right. Absolutely right.

What I did want to also spend some time on, and we'll probably have a few questions around this is orforglipron.

Okay.

And maybe starting from the manufacturing piece because this is what we were just talking about. You have spoken in the past about building inventory for this product in preparation for the launch. I think the last -- by last counts that I'm aware of, $850 million valued at COGS. Now we're getting kind of closer to the launch. You had to make a lot of manufacturing decisions at risk to establish this base, establish those manufacturing sites and build this inventory to this degree at this point in time. Now you know what you know. We've had 4 data cards turn over in Phase IIIs for orfo. Would you have been more aggressive, less aggressive, the same amount of aggressive in terms of that manufacturing risk that you took on?

Yes. Again, starting with the number, the $850 million is the one that is actually in our filing. It's not all orforglipron, but the vast majority is orforglipron. And I see all kind of numbers that people extrapolate to say how much that represents in revenue. It's funny to look at that, by the way. I'm glad that we are not going to go into those details to explain that. But yes, again, that's mainly what we are producing in advance for the launch of orforglipron. And it's going back to the learnings that we had in the last few years, how we prepare now for a global launch. And yes, taking risk, in particular, before the data readouts because we didn't have line of sight of the result of the data readouts. Now that having 4 of them 2 of them in actually obesity that we are planning to submit for approval here in the U.S., you derisk significantly actually that. So I'm pleased of the decision that we made. In terms of is it too much or too little what we have produced, I think we will see that in demand in the future. I'm very encouraged about all 4 data readouts. I look at them always together, in particular, thinking about diabetes and obesity. But I feel really good about the profile of orforglipron and having a small molecule daily oral that we can scale demand and with no food or water restriction that will serve and help us to continue to drive the demand, which is very important in my eyes when you think about, one, again, you have 150 million potential patients in the U.S., you have another 900 OUS. and we are serving only a few percentage points of that OUS and 5 percentage points in the U.S. Many of them actually not even thinking about using, again, incretins because they don't like injectables. So this will serve significantly those patients from my perspective. And then also patients that may have, again, different target weight reduction that they have a different BMI, and this will bring another option. And then we have more studies coming for orforglipron as well with different comorbidities, but also a very interesting study that we call ATTAIN-MAINTAIN that will actually start showcasing how you think about maintenance once you reach your target weight loss, how you maintain that and potentially switching as well to orforglipron. If you started with tirzepatide or sema, switching into orforglipron as well. So a lot to come. Again, there's going to be every single quarter, most data readouts that we will provide out there. I always tell investors, don't overreact to one single data point, 1 percentage point up or down, but look at this more holistically and think about the strategy that Lilly has in place that is to bring a full portfolio, including retatrutide that will have our first readout in Q4, bringing options for physicians and patients to decide what is best for them.

And to that point, I think at the EASD conference last week in Vienna, where some of the data was presented, there was a growing kind of conversation from physicians about right product for the right patient at the right time in their journey. And I want to be able to have that flexibility as a physician and meet the patient where they are. And so kind of bringing a portfolio makes a huge amount of sense. Maybe just to push a little bit on the orfo manufacturing piece as well. Where are we at scaling on the path for orfo as we think about kind of the ability you have to produce today? Is that the ability you will still have to produce in 2 or 5 years? Or is that going to -- we're going to see multiples on kind of the manufacturing potential for orfo? And how much will the gross margin launch evolve over the next kind of 5 years?

That's a question that I get all the time. On the first one, the ramp-up of production will continue to grow over time. That's very natural what we do. By the way, on the $850 million that you quoted, don’t be surprised that the number when we have the earnings call in the third quarter will continue to grow. That will be very natural. I'm super pleased that by the time that we launch orforglipron, that number will not be there. So I'm not going to get more questions because it will become more part of the total inventory. So we will not have a lot of line of sight of how much inventory we have for orforglipron. But we will continue to grow and ramp up more production, including bringing new sites, including this API site in Houston as well. Thinking about the preparation for the launch, of course, again, the team are working very hard and fast to finalize all the paperwork to submit for obesity later this year. And then the teams are preparing commercially to launch the product at the global level as well. The beauty is that we have a large footprint, as you know, globally. So this don't assume that this will require to ramp up more significant commercial footprint, but we do have what is needed to commercialize this product as well from the commercial point of view. In terms of the gross margin question, while we don't talk about product level gross margin, just -- to give a few perspective on this, think about this as a small molecule oral. They have some complexity on production, but also has a royalty associated because this is a product that we acquired from Chugai. So that's a component that will be factored as part of the gross margin. Maybe more broadly on the gross margin, what I've been sharing more publicly about this is just to give some perspective on gross margin. Q2, I think we reached what I call more the high end of the ceiling and 85% record high number in gross margin. I call it that the ceiling. Expect to see that, again, gross margin going into the low 80s. Some of the reasons on -- that I mentioned already as new lines and new manufacturing sites coming online as well and new products as well, price again, erosion. So there is a component of those drivers that will drive gross margin to those low 80s. It's still low 80s, by the way, is top tier in the industry. So I think that is very competitive. And think about what I mentioned about building more resiliency and flexibility globally, that is also maybe the major driver that is impacting that line.

Absolutely. Absolutely. And maybe to now poke on the other angle of the offer launch that everyone wants to know about when is it coming. And this question often comes is kind of -- it sounds like you're keen to get to market as quickly as possible. There's a variety of different potential paths, kind of traditional review, priority review, commissioners review voucher. When might we know or when might you know what the path is that is happening? Will we not know until the PDUFA date is announced? Or will something kind of become clearer so we can put a stake in the sand of when this might come?

What I can share now is, of course, our intent is to bring the product to the market as soon as possible. And we are exploring all options. You mentioned the commissioner voucher. We do have a priority review voucher as well. So we are trying to bring the product as soon as possible. That's why the team is working so hard and so fast to try to file this as soon as possible. That's the first step that we can take action, and it's in our control to make that happen. We will continue to work on preparing us to be ready also to launch the product in the market. And we talk about a few of them. We talk about from the manufacturing perspective. I mentioned commercially, we are going to be ready to go regardless of any of the scenarios to go as soon as possible. And then I wouldn't undermine as well, again, from the R&D perspective as well, again, all the data readouts that are coming will continue to strengthen the profile of the product in my eyes and the breadth with new studies, with new potential comorbidities that will be associated to maintain study. So we are all cylinders putting again, all the efforts to have a global commercial launch. When we talk about a global commercial launch, it doesn't mean that we launch all the countries all at once. By the way, it's just the regulatory process that you have, but expect those, again, different to tirzepatide that there was a long period between the launches because of the supply situation, those will be significantly shorter, right? Again, once we have regulatory approval in all the countries, we are going to go as fast as possible.

Fantastic. And no gating of volume into those countries?

No gating on volume. We are not gating the volume, by the way, in the tirzepatide side on the countries that we launch. If there are -- if you hear 1 country or 2, you can blame [Fadi], by the way, that is seated over there. But sometimes, believe it or not, still, we are surprised with the initial demand that we see in the marketplace. After more than 40 launches, I'm giving the finance organization a hard time because we cannot be surprised again that we launch, we bring the product into the market. And after 2, 3 weeks, we run short. That's on us. But it's not a challenge for manufacturing. It's more a challenge for us to have a good demand forecast and not sandbag on what we expect to see in the marketplace.

There'll be a lot of country managers thinking that...

[indiscernible] happy with me, by the way.

So the final angle on offer that I do want to push on is pricing. And kind of pricing seems to be critical for the position that those products will take in market. And this comes down to the fact that when we speak to physicians or when we speak to patients today, organically in those conversations, price and affordability around these products seem to be one of the first things that get mentioned, which is quite rare in the U.S. for a physician to raise price early in a conversation usually for pharmaceutical products. We've heard Lilly say in the past, we plan to price to value. And we've heard Lilly also say we are willing to be flexible on price for volume. What are you doing right now to evaluate how you might price this product at launch? And what are the steps you're taking to get comfortable with the decision that you're making because it's a very big decision.

It is a big decision, and we are looking at that very carefully. The beauty is that it's not a completely new area for us, right? Again, we have been in the market, not only in the U.S., but in many of other markets. And so it's not just theoretical market research, but actually, we have real cases on the marketplace around many, many markets. So we are gathering all those insights to be factored on our decision on how we position from the pricing perspective of orforglipron. You mentioned, again, price to value, that is our strategy, right? It has been our strategy and will continue to be our strategy. Without getting into any of the details, maybe a few thoughts that I think is worth to provide more color on this regard is, there is always, again, a little bit of that tension between price and volume. I would say that, of course, having an out-of-pocket product will have more sensitivity to the price level that we set up. But I would use, for example, the LillyDirect Zepbound vial as a good a proxy in my eyes, not for orforglipron, but a good proxy on how we think about pricing altogether, right? And when you look at, again, the [$499] that we have, again, depending on the presentation and the journey or loyalty program for patients to -- while they are titrating app, they maintain that price. That's a good way to think about it. The feedback that we are getting and seeing also the demand ramping up is very positive. And when we test or some of the competitors tested different pricing at even lower leverage didn't seem that was ticking significantly and shifting a lot of new demand. So I feel good about the pricing level that we have in LillyDirect. That is a good proxy in my eyes how we think about the price sensitivity. There is always that tension between price and volume, and it's our role to price it to value and try to maximize the value for the company, but also to reach as many patients as possible.

Absolutely. It's a very critical decision ahead for you guys. I do want to go a bit longer term now as well, kind of we spend a lot of time on orfo. And I know you get beaten up about orfo and what's going to happen and there's lots of things you can't say to us yet. But as we go longer term, kind of Lilly is arguably the first pharma company in kind of modern history where you have a very long vantage point on cash generation before a really big patent cliff might be coming, and kind of therefore, have a lot more time to prepare for the inevitable EPS troughs that come with patent cliffs for blockbusters. It seems kind of sitting here in 2025 that there could be a path for you to make great decisions, get good science to turnover where you're able to grow continuously through the 2040s. How are you thinking about spending today in R&D and the risk/reward profile of those bets and the time horizon of those bets to ensure that you are kind of delivering for today, delivering for the next decade and the decades beyond that?

Yes. That's an important question. And first of all, again, going back to your comment about the EPS trough and even revenue trough as well that happens again, during those cycles. I think the formula is, of course, to continue to innovate and drive innovation in the marketplace. And I'm really pleased that we've already proven the first trough that we are going to continue to grow through that one. When you think about Trulicity, 3 years ago, Trulicity was our largest product. Again, 2022, I think Trulicity was like $7 billion in revenue, and it was our largest product. That product will go off patent starting in 2027 and will go through IRA as well, and we are not talking about that. So we have proven through innovation, through tirzepatide, orforglipron, all the other launches as well that we will continue to grow through that period as well. That's the success formula in my eyes. How we're driving that is a continuation of that agenda. Of course, again, you need to continue to ramp up that agenda, and it's on 2 fronts. The first one in terms of the luxury of time, first, we are not just resting on that. We are taking action as we speak now and going with a sense of urgency as well because, again, if you think about it in 2, 3 years, maybe it's already too late as well. So we are taking that with a sense of urgency. And for example, we continue to drive the BD agenda. We signed more than 30 deals, all small ones, but that's intentionally because we have the time. We don't need to overpay it. We don't need to actually pay for revenue and the strategy is working well for us, right? Again, as part of our core therapeutic areas, we can take more risk because we have good understanding of the science, and we have proven even with the deal that we had for the asset that we are going to launch with orforglipron that we can do that successfully. Now there is more risk. It's not that we will turn all the [indiscernible] that we will have all of orforglipron. But even with that risk, it pays off. Again, when you put it all together, the NPV is very positive. And we will continue to drive that agenda into the future because we have that time. So that's one of the actions that we will continue to do, maybe at more scale as well. The other one is on -- Dave has been talking about this on the R&D side across all the therapeutic areas, always following the science, but to continue to expand what we call adjacencies even within our core therapeutic areas or even extending our therapeutic areas. I will start with diabetes, obesity, 3 years ago, we used to call the therapeutic areas only diabetes, then we call it diabetes and obesity. Now we call it cardiometabolic health because we added cardiovascular as well. So we are continuing to extend. We have 2 assets moving into Phase III with lepodisiran and muvalaplin getting into the cardiovascular space. And we are building a portfolio of products in cardiovascular as well. So that's expanding as well our therapeutic areas. You have in oncology moving into hematology, moving into new cancer areas that we didn't have in the past. Again, as part of, again, assets that will have data readouts in the future, we have in bladder cancer, in ovarian cancer as well. So we are expanding into areas that we didn't have in the past as well. And we are doing that in immunology with areas like GI as well that we signed again as well deals in the last 12 months and in neuroscience, including, for example, the new acquisition of SiteOne with an asset on the pain portfolio as well. So we are expanding and driving that innovation to continue to go -- to your question, to continue to drive that growth even beyond 2030 and getting into 2040s as well.

Fantastic. You mentioned kind of the risks are higher in some ways because of the types of earlier decisions that you're making. In some ways, the risks are also higher for some of the scientific areas you're going after. I think pain and neurodegeneration are 2 examples where kind of historically, drugs have gone to die, kind of it's been kind of a place where there's been a symmetry kind of assets that just haven't made it, but they're incredibly important and potentially very, very large TAMs. And so how do you think about the risk reward of those areas and contrast them with kind of your oncology, your immunology, your kind of next build-out on the innovation in cardiometabolic...

Yes. That's a very important question. Since I have a friend here, we'll call that friend, Mike, maybe he can start with this one.

Yes. I think absolutely, you want to have a good balance of risk reward. So take on an opportunity that has a large opportunity that is worth the high-risk [indiscernible] or something that is maybe takes time and capital, but there's strong scientific rationale. Lucas hit on a couple, but we have a few of those in our portfolio that we're investigating whether it's the Lp(a). It's a lot of scientific rationale there, but it takes a lot of time and investment in oncology, imlunestrant, we're looking at in earlier lines of cancer. That's again, it takes time and investment, but there's a lot of rationale for why that might be successful there. The other space that is kind of a blend of the TAs we're in as well as the kind of modalities we're in is looking at incretins outside of cardiometabolic health. And so there's been a lot of real-world evidence as well as some preclinical models that show that using incretins in substance use disorders, psychiatry, inflammation, there's a lot of promise for potential use of those medicines. And we're in a luxury spot where we have a very large portfolio of incretins that kind of 3 agents that are very new to the market and then double digits that are in Phase I or Phase II. And so we've announced a couple of efforts there, but that's another space where high risk, a lot of rationale and something that fits a profile that Lilly can take on.

Maybe just one comment to that to that, in particular, in areas that you call it hard science like Alzheimer's and so on. I think the value of building the expertise in those therapeutic areas. And over time, that is still risky, don't get me wrong, but reduce the risk because you start building, again, the understanding of the area, understanding of the modalities. And then that is always in my eyes how we think through to, again, increase our probability of success as well, right? That's very intentional, right? Having the right scientists that they have the expertise in those areas always help to understand those still risky, but limit that risk or mitigate part of the risk.

Absolutely. I do want to make sure we squeeze in a question here on kind of the overall margin top to bottom for Lilly as well, particularly given your role. I think you've said in the past, and you said just now, for example, the kind of peak on gross margin that we might be seeing. Certainly, when we get out to near the end of this decade, if you look at the average sell-side model, you see operating margin north of 50% because it's really hard to figure out how to spend Lilly's money that's coming through from revenue all the way down to the bottom. Good problem to have. But I think you continually try and guide the fact that, that 50% or more is not sustainable. Can you talk about kind of is -- should we be expecting that R&D is going to start outpacing the rate of revenue growth? Or where else are we going to see this spend occurring in a way that perhaps the Street is not yet appreciating?

Yes. Well, I gave some perspective on gross margin already that, again, we are -- actually will not expand beyond where we are, in fact, potentially go slightly down as well. The area that we have been very open that we will continue to expand margin is in SG&A on the commercial footprint. It's not meaning that it's not growing, but we will not be growing at the pace of revenue and the growth on that line will be variable spend. It is to continue to drive the uptake of the new launches and again, work on the commercial side, but less so on the fixed cost. So expect to see more margin expansion on that front. In R&D, it's the area that, of course, we will continue to follow the science. And I always -- again, you understand this really well. We don't -- again, there is not a correlation at the same time of the revenue growth with the R&D growth. For the finance people, it's always a challenge, but again, it doesn't work that way. 4 years ago, Lilly was getting a lot of questions why R&D was growing much faster than the revenue side. Well, you see now why. And those days could potentially come back as well. It doesn't mean that the revenue will not continue to grow, but they are not going in sync those lines, right? And again, I will continue to see if we grow the R&D line, trust us on the discipline to continue to drive it. Again, our speed again to market and our success rate continue to be in my eyes. The KPIs that you should be looking at and not the dollar value because if the speed to market and the success rate on our R&D pipeline plays out well, that translates later into revenue growth. That math always works. So I would think about it that way. On the op margin, we call it performance margin because, as you know, we need to remove the IP R&D line just for disclaimer. The way that I think about it is can we see periods that could reach into that 50% range and so on? It is likely because of that disconnection between the growth of one line and the other one. That being said, it doesn't -- I think about, again, the op margin more over a period of time. And I will stand behind again my thoughts that, again, you want us to continue to drive sustainable growth into the future, and we think about that line as a way to basically force to drive that sustainable growth, talking about 20 30 and 40. You want us to continue to reinvest into that to drive that growth into the future. So that's the reason why that you don't see over time that potentially getting over 50%.

Absolutely. And one final thought that I'll ask from you is this conference is focused a lot on leading and disrupting.

Okay.

In many ways, you're a leader in the incretins space and in lots of different ways. And you kind of need to be looking around the corner for what disruption might be coming or saying, can I disrupt this myself? And so what disruptive forces are you most focused on mitigating or owning in your own way?

Yes. I love the question, by the way, because I strongly believe about not only in execution, but also in disruption. And -- but I think about disruption more so and how that creates opportunities as well. Sometimes it's a challenge, but again, we look around on finding ways to make that as an opportunity as well. One disruption that I've been super impressed and pleased, and I give a lot of credit to Dave is LillyDirect. That was created 2 years ago, and it was created in a way to disrupt the market and improve the patient experience. And you look at the progress on that LillyDirect line is, we continue to receive really positive feedback. The business continue to grow. And as I said, it's a way to serve the patients and remove the frictions of the system as well. So it's a disruption that we created that created an opportunity in my eyes. The other one is what we call Catalyze360 that is this platform that is a disruption as well in the system that we give a space for biotechs to engage with Lilly in many different fronts in a facility that we provide also all the resources, including by the way, now the recent agreement that we provide also AI tools related to that and our library as well of information in R&D. So it's a great space to engage and understand even science that is coming from outside. It's another disruption in the system to turn it around and finding an opportunity. And then maybe the last, of course, again, disruption in the marketplace. We all have that also, but it's always in a way that we think about how that disruption we can find an opportunity as well, right? Again, there are a lot of dynamics nowadays, in particular, one disruption that is this kind of more separation around the globe, but also we are taking action, as you know, with the global footprint that we have to ensure that we build the resiliency to still be able to supply the products to all the patients around the globe. So those are kind of front and center for me. I think it's great examples of how you turn that disruption into an opportunity.

Absolutely. Thank you so much for your time today, Lucas and Mike, I really appreciate it.

Thank you for having us.