Thanks for joining us. I'm Tim Anderson, the U.S. Pharma and Biotech Analyst at Bank of America. Happy to have Lilly here on this final day of the conference. We have Lucas Montarce, who's Executive Vice President and Chief Financial Officer at the company. The role he's held since September of 2024, he's been with the company a long time, since 2021, in both U.S. and international roles. We have Mike Czapar, who's Senior Vice President, Investor Relations. Been back in this role, been out of this role in the past, but you have been with Lilly for a long time as well, first joining in 2006. We have 30 minutes. We'll jump in, of course, with a little bit of a print discussion about policy matters, some questions that we've asked all of the companies that have presented. MFN, you know, this might have some basis in reality. To me, it feels like it's a threat. I think Trump wants to basically show the public he wants to take—he can take drug prices lower. Okay. To me, that's the end goal here. There's going to be a series of carrots and sticks, and MFN is a stick. What I can't figure out is what concession the drug industry could actually make to make Trump happy and to enable him to have a political win. Anyway, that's my views. What are your views of what's going on? Yeah. As many other companies have said, it is a very new topic with the executive order coming last Monday, and they have not provided many details on this matter. We will see this as we get more details and how this evolves, maybe again in the direction that you said. From the perspective on how we see this, first, again, we all want the same: how we make, again, the healthcare system more affordable, including the pharmaceuticals. That is the intention that we have been trying on many fronts, including the part redesign that we have been very supportive, the insulin cap as well in the past, that we did that adjustment on the insulin cap even before it was implemented. Many of these efforts, including, by the way, also the LillyDirect front that we have, basically products available directly for patients to get the product out of pocket as well. There are many of these fronts that we feel are parts of getting in that direction. In terms of the affordability and then this type of referencing to all U.S. pricing, we do not feel that actually the comparison versus all U.S. pricing is the right way to start. I think some of these actions do actually address some of these disconnections in the U.S. system, in particular when you think about the gross-to-net component. All the companies are talking about gross-to-net of 50% - 60%. That is not even close to anything all U.S. You do not have those intermediaries all U.S. That is, in my eyes, how we can start addressing that affordability objective that the administration has. We will continue to partner. I think the tone from the administration last Monday in terms of the pharmaceutical was positive. They are willing to engage on this matter through the PhRMA Association, and we will continue to partner with them. Maybe stepping back, being a topic that is very new, we have been again successful to navigate through similar situations in the past. I will see this in a way that we will continue to partner with the administration to find a common ground as well. Maybe I'm more optimistic on my perspective. To me, it does seem like there is a possible Goldilocks scenario, which is you squeeze out the middleman. I know the drug industry has talked about that. You just referenced it, or from earlier, you just referenced it. That would be a way possibly to get consumers lower prices because you would take some of what the middleman is taking and put it in the pocket of patients instead. Maybe that is not a concession from the industry. That is a win from the industry. Does that have a basis in reality? I think it does. Those concessions that you have are the PBMs or the intermediaries are supposed to be representing the government and the employers in this case. Our expectation is that all those wall of rebates are passed directly to the patients, right? That's how we feel that is a good way to start reducing the patient out of pocket and start improving affordability as well. We are supportive of those efforts. If there are other concessions that we have been doing already, like the one that I mentioned on Part D redesign, that is coming from the industry. We will continue to partner to find those ways to do those concessions as well on our side. Okay. One question we've been asking is, let's assume MFN does go through. We published a scenario a couple of days ago, and we made arbitrary price reduction assumption across government channels, so Medicare and Medicaid. Immediately heard back from clients, "Oh, what about commercial? You know, you're not assuming there's any spillover to commercial." That's the question. If there were reduced prices from MFN in channels like Medicare, would that have a spillover to the commercial side, in your opinion? When you think about it, we don't have clarity about the executive order yet, but thinking about studies on Medicare, on Medicaid, we have proven over time that the firewall that we have with commercial has very limited spillover. We still believe that is going to be the case even with this new executive order. Yeah. Okay. I have a tariff question, and it really, I think, is good CFO subject matter because it really is centered around manufacturing and moving that back to the U.S. Lilly's made a commitment, as have other companies. It is good. It is what Trump wants, but in a way, it is kind of a trifecta of bad things for drug companies because you have upfront CapEx. The second piece is, and correct me if I am wrong, likely increased future production costs because your input costs are higher in the U.S. You become a less tax-efficient organization because moving manufacturing to the U.S. links to transfer pricing. Let us just take that middle piece and increase production cost. On margin guidance, I think the companies talked about gross margins kind of being flattish over time. I don't think MFN was ever part of the thinking that this might actually happen and that you would move production to the U.S. Can you just talk about production costs and what that means to gross margins and how you view gross margins over time? Is it the best assumption that even with something like MFN, you could keep them fairly stable? Yeah. Or not MFN, but manufacturing back to the U.S. that you gross margins? Yeah. Let me go through the different parts of the question, starting with tariffs. Even during the earnings call, we have been open as of the tariffs that we have in place and we have visibility. There is limited impact to our guidance for the year, and we are observing that as part of the guide that we have. We have been putting a lot of actions in place to mitigate those. We have a global footprint. We can move sourcing of the products around the globe. To your question, we are investing since 2020, we are being investing heavily to expand our capacity and build more resiliency globally in the U.S., but also all U.S. as well. We did announce an expansion of our investment. We moved basically from $23 billion that we had in each early since 2020 to now $50 billion. We added another $27 billion for new manufacturing sites that we will be announcing in the future on top of the six that we are currently under construction. Quite a lot of investment. Our manufacturing organization is really busy at these times, and that brings resiliency both U.S. and all U.S. Now, going to the second part of your question about gross margin, that resiliency in general brings also a little bit of a burden or a headwind into the gross margin line. Why? Because, again, you're moving from one single source globally of products that you may be manufacturing from one place to have potentially two or three sites that will manufacture in that. That brings more flexibility, but also less efficiency from that point of view. We are planning to offset that, and we are offsetting that because we have new sites already operating, like the two in North Carolina. Through volume and efficiencies, we are offsetting that. The new lines that we are putting in place are operating at a high speed, high capacity, and will drive significant efficiencies compared to the past. We feel that we have a path to continue to offset that. The last part is, of course, again, in terms of the tax perspective. Certainly, there are tax differences, so we will need to continue to assess what are those differences that we see. We see with really good eyes, by the way, that is included in the reconciliation bill, basically to maintain some of those tax treatment in the U.S., like GILTI. We see that with positive eyes and will help to mitigate that effect. Yes, it's easy to expect that the tax rates could continue to grow over time. Yeah. Okay. Let's move away from those types of questions and just we'll go into obesity. I think, in my opinion, one of the maybe the biggest debate at the moment is the direction of pricing in this category. It's been going down. It often happens when volumes increase, prices go down. That's fairly common. I have a bunch of questions that are really kind of U.S. pricing questions. When I think about pricing over time, to me, there's three phases to it. The first phase is probably like 2025, 2026, where it's essentially a duopoly. It's Lilly and Novo and no other competitors yet. That, to me, says pricing should stay fairly stable. I would argue these are not expensive drugs for the value that they deliver. When I look at products like, I don't know, SKYRIZI as an example in the I&I space, priced it much higher. I think the benefits that these drugs offer is great. Why aren't prices, why can't they be held stable under this duopoly scenario, at least for the next two years? Yeah. When maybe starting with the pricing trends that we are seeing, the pricing trends that we are seeing are not different to any other therapeutic area. When we talk about our price guidance, we do not provide product-level detail, but we do provide guidance on the pricing at a portfolio level. That mid to high single digit that we communicated for this year is very much consistent with the price erosion that we have seen in the past, maybe putting aside a little bit of the nuance on the PRV calculation when you launch new products, is still very steady state. I do not feel that, again, that trend is changing all of a sudden, and I do not feel that that trend will continue to change. Our pricing strategy is a very disciplined one that I own, and we will continue to be very disciplined on that. Going back to the competition, again, there are going to be more plays in the future. I think it will take longer than one or two years to see that playing out. In the meantime, we will continue to manage our part with discipline in terms of the pricing strategy that we have in place. Happy to hear your view on our pricing for the product. We feel that it's very competitive as well, and we will continue to manage that in the future as well. Our view is to provide open access. You all may have heard about CVS on a smaller portion of the accounts, and our strategy has not changed to continue to provide open access. We will continue to manage pricing with discipline. Yeah, part of the discussion in this first phase, 2025, 2026, CVS comes up as a line of questioning. As best we can tell from doing our channel checks, the price give-up was quite negligible. This feels almost like a PR move on behalf of CVS and maybe Novo. What does your intel suggest on the price erosion for them to go one of one on formulary and kick you guys off? Yeah, it's hard to speculate about that. Again, over the next quarters, we will see more of those details coming either on one side or the other side. We will have more information to maybe put some additional thoughts into this speculation at this time. We feel that, again, as I said, a strategy for us is open access. The view from CVS on this deal, it was to go one- on- one. We feel that it's not the best thing for the physicians and patients, that is, to have a choice for them to decide what is the best drug. By the way, you may see that tracking on the data in IQVIA that three out of four new patients are starting with our drug. When you give that choice to the physicians, the physicians are making a decision that is our brand, that the one that they choose. Still, our strategy, I mentioned to you yesterday night, is putting the competition aside. The largest opportunity in this space is to continue to expand the market. When you think about in the U.S. that your level of penetration is 3% and there is 100 million potential patients in the U.S., there is a wide space that you can continue to grow significantly. It's not a matter of a few percentage points of us versus Novo, but a significant growth of opportunity. It's great to have another playing in the marketplace to continue to drive that patient mobilization as well. I will encourage, again, all of you to think about it from that perspective that there is a quite opportunity, wide opportunity to continue to grow. That is also on the U.S. side, even bigger, right? You are talking about 900 million patients globally. The percentage of penetration is even lower. We just launched, right? Again, I mentioned during the earnings call, 40 countries, but the vast majority of those countries has maybe two, three, four months in the market. There is a good opportunity to continue to drive significant growth and penetrate the class, including with the competitor as well. Can you quantify what losing CVS means either in terms of current scripts today that are for Zepbound or number of lives that will be lost by that decision? Yeah. We mentioned that it's basically less than half of the total lives. And in terms just to give you a data point, it's roughly a couple of hundred thousand patients that will be impacted. That's assuming completely unmitigated, meaning that, you know, that patients can go through an exception process. And we assume that many patients will do so. We're starting to receive a lot of calls from patients and employers complaining about this situation. By the way, many of them were before on the previous brand as well. So they were on WEGOVY. More than 20% were on WEGOVY and switching to our brand. It's hard to believe that those patients will need to be forced now to move back. And we don't see those products the same. Right? Again, the physicians are seeing that and also in the SURMOUNT-5 study, clearly showcasing the difference, almost 50% more weight reduction that you see with our brand versus WEGOVY, right? We do not see it the same way both clinically and also in terms of physician preference at this time. That is maybe the data point that I can give you maybe as a reference because you said, you know, a couple of 100,000 could be a lot. Just last month of March, if you look at the IQVIA data, we grew more than 200,000 TRx, right? Just in one month. Going back to my point about market growth, that is where we need to focus our attention, and that is where we are focusing our attention to continue to drive that growth. Yeah. Okay. I described pricing in three phases. Phase one, we just covered. Phase two, in my opinion, is 2027 when SEMA IRA pricing kicks in. We are going to get a decision on this price or an announcement by the government of that supposedly negotiated price by November 30th at the latest. How do you think this is going to play out? That is something that comes up a lot. We already know that the discounts on this category off of list are quite high, north of 50%, at least for big purchasers. Let's say that whatever the price is that gets negotiated, talk about how this is likely or not likely to spill over to Lilly once those prices get implemented in 2027. Yeah. First of all, we have always factored that in our models. It's worth to remind everybody that Medicare is a small portion of our business for the incretin class. In type 2 diabetes, as you know, Medicare is not covering for obesity. It's a small portion of the lives that are impacted or the price that is impacted there. The spillover, as I mentioned at the beginning, we feel that we can manage that through the firewall that we have with commercial as well. Think about it, more impact on the Medicare, but it's a small portion of the business. That we will continue to manage with discipline the commercial front. The last phase is 2028 onwards when we start to get a flood of new entrants coming into the category. They'll all be desperate to gain share. The only lever they'll likely be able to pull is the price lever. That will force some sort of minor concessions out of the incumbent. That's what history would say. How are you viewing price erosion from that period onward? Yeah. I would say the price erosion, we continue to see it in a continuation of what we have seen in the last few years. There are going to be different variables. This year, for example, you have a little bit more of Part D, less so on competition. In the future, will be more competition, and we will have other variables as well playing out there. By the way, all U.S. pricing as well by then usually is relatively flat in out-of-pocket, and it's relatively flat even for reimbursement as well. There are ups and downs in terms of the price erosion that you will see. A few things in addition, how to think about the competition as well. There is quite a lot of investment that the competition will need to do from the manufacturing perspective, from the commercialization perspective. We have already built a large footprint. Even that price flexibility that you mentioned that the competitors will have, they will need to also think about how they manage their gross margin, how they manage their levels. They will start with a small piece of share, right? It will be thinking about from the gross margin perspective, they will have less flexibility to adjust their prices significantly down to what the prices will be at that time. Okay. Let's shift to a different part of this discussion, which is the cash pay channel. Lilly and Novo now are doing something that really is kind of unprecedented in the space, which is patients basically buying product straight from the manufacturer, essentially. Your program is Lilly Direct. Is this cash pay channel just a short-term patch until access by employers and payers steps up substantially? Or do you think the cash pay channel is going to be a really meaningful chunk of the business going forward? Novo put out a figure. I think they said that they thought it could be as much as 50% of the total market that goes through a cash pay channel. That would seem to imply not a rosy view of what payer coverage is going to be if you could really get to 50% because that's still essentially $6,000 a day out of pocket, roughly. How are you guys viewing the cash pay channel and the direction of it and the intention of it near term and long term? Yeah. First of all, we created Lilly Direct before we tapped into this class with the obesity Zepbound product in there. The approach here is to, as I mentioned, have a way to remove the patient friction and have products in the market. We have Emgality, we have insulins in that segment as well, that patients that have no coverage will have access as well to the products, or if they have access, to have a platform that they can get the product delivered to their homes directly. Thinking about the incretin and what Novo stated, we are very happy about the progress that we see since we launched Zepbound. We started launching with 2.5 and 5 milligrams on that. We added a couple of months ago the 7.5 and 10 milligrams. You see the progression on number of TRx moving from basically a couple of thousand in the first months to more than 100,000 TRx. We are seeing a very nice progression of growth of that segment. As I said, there is quite a big opportunity to untap in that segment. We always think about the access as kind of the way to think about the size of the cash segment as well. We mentioned about employer opt-in being basically roughly in the high 50% at this time. There is quite a lot of space to continue to grow. Do not expect that to grow significantly, but it is gradually growth. We moved from high 40% last year to high 50% this year. We continue to see progress on employer opt-in, but there is still quite a lot of space there. I talk about Medicare not being covered for obesity. There is a space over there. The option for those patients that are not covered is to go to this cash solution. The size will depend a lot on our policy, on how much we can penetrate also with the access. If the access is there, I have a hard time to believe that a patient that will get the product for $25 will go to a cash for $350, right? I am happy still to hear your thoughts that it is a very convenient price. Still, from the cost perspective, everybody will seek basically that coverage. Yeah. Okay. Let's talk about the ex-U.S. opportunity with all of these products. That's another source of debate. The size in the U.S. of the opportunity versus what could unfold in the rest of the world. Q1, Mounjaro. In Mounjaro, you have the same brand. For the two. Yeah, f or whether it's obesity or diabetes internationally. Smash consensus estimates. Very handsome beat in Q1. It just really drives home that question about what is the size of the commercial operating. One of the questions I have is, in these international markets, what do you think are going to be the really big markets or really big regions? If you could wrap China into that discussion as part of it. Yeah. Big opportunity for U.S., and we are in very early days. As already mentioned, we launched in 40 countries as of the last quarter, but many of those markets have maybe two, three months that we launch in the marketplace. I talk about the size of the opportunity. You are talking about basically 900 million patients that could benefit from these drugs for U.S. And we are basically talking about one to two percentage points of penetration depending on the country. Quite a broad opportunity that we have ahead. We are very pleased with the uptake that we've seen in the first quarter. We launched in some of the markets that you just alluded. I was in two of those launches. We launched in China, India, and Mexico in the first quarter, big countries. They are off to a good start at this time. Thinking about the size and where it's a major opportunity, maybe nowadays, some of the countries you can see in the revenue, like the U.K., some of the Middle East countries, because they were in the first wave of launches, rightly so, they are driving more revenue. You always need to think about this class in terms of the volume of the size of the population, right? Thinking about the size of the opportunity as well, and then the incidence of overweight and obesity. Of course, countries like China, India, Mexico, in terms of volumes, are large countries that could drive significant growth as well. You need to combine that, of course, with the purchasing power to be able to afford these products that are out of pocket in most of these countries. Just a few data points. In the case of China, you are talking about roughly 180 million potential patients that could benefit. India is close to 140 million. And then Mexico and Brazil, you are talking about roughly 50 million patients as well. Quite a lot of untapped opportunities. We did not talk about type 2 diabetes. You mentioned the second indication as well. In many of these countries, both Trulicity and Ozempic are covered for type 2 diabetes. Like in every country of this, you have a process since you launched the product until the product is reimbursed. Expect to see also a significant growth taking place when those products get reimbursement in each one of these countries. Okay. Let's move to orforglipron, your oral GLP-1. We've seen the top line release, at least on the first phase three data, and lots more readouts ahead. My question is really, if we fast forward, I don't know, five to 10 years from now, is more orforglipron volume going to be sold in the U.S. or in the rest of the world? You want to start with this one? Sure. I mean, just to frame everybody. We had our first trial in diabetes that read out earlier this year, very good results consistent with our expectations. We have six more studies. Two in obesity will read out in Q3 and another four will read out across diabetes trials, leading ultimately towards a submission in obesity in Q4 and then type 2 diabetes in the first half of 2026. As we think about the development program there, we have two very approximate programs that are up and running. We started one in obstructive sleep apnea. We are looking at hypertension. Obviously a broad development pathway that we are pursuing across multiple indications, both in the U.S. and globally. U.S. versus ex-U.S., I think there is a big opportunity in both places. In the U.S., there's lots of different uses where it could be in people with lower BMI that are still obese. It could be in people in a maintenance setting. We're looking at a couple of different studies there. Ex-U.S. that obviously gives you a ton of scale. As Luke's mentioned, some of the markets we're just launching this year for Mounjaro. The ability to support launches right at regulatory approval, certainly with a huge amount of people ex-U.S., 900 million that we talked about earlier, there's a lot more people ex-U.S. that could potentially access the medicine. We've got an ambitious development plan, big plans for multiple geographies, and look forward to a lot more readouts to come this year. Yeah, maybe the last data point that I will give you in addition to what Mike said is in the U.S., you are talking basically roughly 20% - 25% of patients that prefer orals versus injectables. There is a more acceptance of injectables in the U.S. When you go to many of the all-U.S. markets, including Japan, for example, there is a complete opposite situation that the acceptance of injectable is way much lower, and there is a strong preference of oral treatment as well. That is another driver to take into consideration when we think about volumes, U.S. and all-U.S. I want to bring a background to that question. More volume ex-U.S. or U.S. over time? Volume, I would say all-U.S. Yeah, yeah. Given the size of the patient population and this preference, yes, certainly yes. Okay. How is this drug most likely in the U.S. to be used? Because you just said people are fine with injections. I know you guys are looking at maintenance therapy for orforglipron. Maybe stick yourself with a needle for a while, you get weighed down to a certain level and you go into ortho. Is that the most likely way to use the product? Yeah, that's one thinking. We are assessing, as you can imagine, this extensively. We have a lot of experience both in type 2 diabetes and now in obesity as well. There are a few thoughts. Again, you mentioned maintenance being one of them. By the way, we are running three studies for the three molecules, for tirzepatide, for orforglipron, and retatrutide for maintenance. That will inform more the practice in the future on how, again, physicians should be thinking about maintenance and the treatment as well. Still, even when you start treatment as well, you need to think about that BMI levels are very different, meaning you could see patients that could have really a BMI level that could start actually with an oral and get to the target BMI level that they want to achieve with a physician without a need to move to an injectable. To your point, you gave the example of saying, well, I have a higher BMI, maybe I start with terzepatide, and when I reach a certain level, I will move to a daily oral. There is the preference as well, right? Again, some people will prefer to use a daily oral, some others will prefer a weekly injectable as well. What we bring is more optionality. How that space will evolve, I think is still to be seen. Always talk about the market research when you do it. They're usually wrong, right? We take that into consideration, but they're usually wrong. Again, the practice is the one that then dictates more how the practice is being taken, both in terms of preference from physicians and patients. We're a minute over. I have one last question. It's one that I know you will only give a short answer to. Pricing benchmarks for orforglipron in the U.S. There's some folks out there that think you're going to come in at a really low price in the U.S. I personally think you won't. I think you'll probably price it plus or minus injectable, maybe some nominal discount. How should we think about pricing benchmarks for the oral just in the U.S.? How we think about pricing in general, and I think it will be applicable to orforglipron, is based on the label of the product. Once we have the full label of the product for both type 2 diabetes and obesity, that will drive how we position the pricing from the strategy perspective. That will be seen in the future once we have the product and all the label, but it's very consistent on the approach that we take on that. Great. Okay. Thanks so much. We're out of time. Lucas, thank you very much. And Mike, thank you. Thank you. You, Eli Lilly. Thank you.