John Lechleiter - Chairman, CEO and President Phil Johnson - Vice President, Investor Relations Derica Rice - EVP, Global Services and CFO Dave Ricks - SVP and President of Lilly Bio-Medicines Enrique Conterno - SVP and President of Lilly Diabetes Sue Mahony - SVP and President of Lilly Oncology Jan Lundberg - EVP of Science & Technology and President of Lilly Research Laboratories Jeff Simmons - SVP and President of Elanco Animal Health Chito Zulueta - SVP and President of Emerging Markets Business Ilissa Rassner - Director, Investor Relations Brad Robling - Director, Investor Relations.

David Risinger - Morgan Stanley Gregg Gilbert - Deutsche Bank Tim Anderson - Sanford C. Bernstein & Company, Inc.

Salim Syed - Evercore ISI Tony Butler - Guggenheim Securities John Boris - SunTrust Robinson Humphrey Steve Scala - Cowen and Company Seamus Fernandez - Leerink Partners Jay Olson - Goldman Sachs Wendy Lin - JPMorgan Ari Jahja - Credit Suisse.

Ladies and gentlemen, thank you for standing by and welcome to the Eli Lilly's and Company Q4 Earnings Call. [Operator Instructions] As a reminder, this call is being recorded. I would now like to turn the conference over to our host, Chairman, President and CEO, John Lechleiter. Please go ahead, sir..

Thank you, good morning, everyone. Thank you all for joining us to discuss Eli Lilly and Company's fourth quarter 2014 earnings. I'm John Lechleiter, Lilly's Chairman, President and CEO. Joining me on today's call are Derica Rice, our Chief Financial Officer; Dr. Jan Lundberg, our President of Lilly Research Laboratories; Dr.

Sue Mahony, President of Lilly Oncology; Enrique Conterno, President of Lilly Diabetes; Dave Ricks, President of Lilly Bio-Medicines; Chito Zulueta, President of Emerging Markets; Jeff Simmons, President of Elanco Animal Health; and Ilissa Rassner, Brad Robling and Phil Johnson of the Investor Relations team.

During this conference call, we anticipate making projections and forward-looking statements based on our current expectations. Our actual results could differ materially due to a number of factors, including those listed on Slide 3 and those outlined in our latest forms 10-K and 10-Q filed with the Securities and Exchange Commission.

The information we provide about our products and pipeline is for the benefit of the investment community. It is not intended to be promotional and is not sufficient for prescribing decisions. As usual, I'll begin by highlighting key events that have occurred since last quarter's call.

Following FDA approval in September, we launched Trulicity in the U.S. during the fourth quarter. We also received regulatory approval for Trulicity in Europe. We’re in the process of launching in the U.K. and Germany and anticipate launches in additional EU countries over the course of this year and next.

In diabetes, we also resubmitted Humalog U-200 KwikPen in the U.S. and along with Boehringer Ingelheim we received approval in Japan for both Jardiance and our insulin glargine product.

In oncology, Cyramza was approved by the European commission for the treatment of advanced gastric cancer and by the FDA for two new indications second line non-small cell lung cancer and advanced gastric cancer in combination with paclitaxel.

Enabled by a fast track designation, we also completed the rolling FDA submission for necitumumab in first-line squamous non-small cell lung cancer. And we submitted necitumumab to European regulators for the same indication.

On the clinical front along with Incyte, we announced that baricitinib met the primary end point of improved ACR20 response compared to placebo in the Phase 3 RA-BEACON study in patients with moderately-to-severely active rheumatoid arthritis who previously failed one or more TNF inhibitors.

The study included a high percentage of patients who would also receive prior treatment with one or several non anti TNF biologic agents. Along with AstraZeneca, we announced the initiation of the Phase 2/3 AMARANTH study of AZD3293, an oral BACE inhibitor being studied for Alzheimer's disease.

Earlier this month, we presented Phase 3 data ASCO-GI from the RAISE trial evaluating Cyramza in combination with chemotherapy in patients with metastatic colorectal cancer. In this trial, Ramucirumab prolonged both progression free and overall survival.

And we began the second Phase 3 trial abemaciclib in breast cancer as well as a Phase 3 trial in lung cancer. On the business development front, we announced a pair of immuno-oncology collaborations.

One with Bristol-Myers Squibb to study their PD-1 inhibitor, Opdivo with galunisertib, our TGF-beta kinase inhibitor, in a Phase 1/2 study in patients with glioblastoma, hepatocellular and non-small cell lung cancers.

The other was Merck to study their PD-1 inhibitor Keytruda at a Phase 2 study with Alimta in non-squamous, non-small cell lung cancer and in Phase 1/2 studies with Cyramza in gastric, bladder and non-small cell lung cancer, as well as with necitumumab in non-small cell long cancer.

We also announced a worldwide licensing collaboration with Adocia focused on developing an ultra-rapid insulin known as BioChaperone Lispro, for the treatment of type 1 and type 2 diabetes.

Lilly and Boehringer Ingelheim announced changes to our diabetes collaboration; the companies will continue co-promotion work in 17 countries, representing over 90% of the collaboration's anticipated market opportunity. While in the other countries, the companies will exclusively commercialize the molecules they brought to the collaboration.

And finally on January 1st, we completed the acquisition of Novartis Animal Health. In another news of note, we increased our quarterly dividend by 2% to $0.50 per share and we repurchased $300 million of stock in the fourth quarter of 2014 under our outstanding $5 billion share repurchase programs leaving $3.7 billion remaining.

I would also highlight that the total cash distribution to shareholders in 2014 was nearly $3 billion. Now, I'll turn the call over to Phil for a discussion of our financial performance in the quarter..

Thanks, John. And Tom with AT&T, if you could check, we should be the only line as open at this time, we're getting quite a bit of feedback if you could sure that other lines are close, we’ll appreciate it. Thank you.

First, I'll review our GAAP results and then I'll discuss a few non-GAAP measures to provide some additional insights into the underlying trends in our business. Keep in mind that our 2014 non-GAAP measures include the expense associated with amortization of intangibles.

As discussed on our January 7th call, our 2015 guidance however excludes this expense. When we report Q1 2015 actual results in April, we’ll provide you with 2014 by quarter, restated for removal of amortization of intangibles, and if we had acquired Novartis Animal Health on January 1, 2014.

As we report our results during 2015, this should provide a meaningful view of the trends in our business. On Slide 8, you can see the revenue in Q4 was $5.1 billion. This represents a decrease of 12% compared to Q4 2013 driven by reduction of over $500 million in U.S. Cymbalta and of nearly 200 million in U.S. Evista.

Recall that we lost Evista facility for Cymbalta in December 2013 and Evista in March 2014. Excluding Cymbalta and Evista in the U.S., the rest of our worldwide revenue was essentially flat as underlying performance growth was offset by the stronger U.S. dollar. Gross margin as a percent of revenue decreased 60 basis points, driven by the loss of U.S.

exclusivity for Cymbalta and Evista partially offset by the impact of foreign exchange rates on international inventory sold. This quarter foreign exchange rates on international inventory sold had a positive impact on our gross margin. However, in Q4 of 2013 there was a negative impact on our gross margin.

Excluding this FX effect from both 2013 and 2014, gross margin as a percent of revenue declined from 77.0% in Q4 2013 to 73.9% in Q4 2014. As in past quarters, we've included a supplementary slide providing our gross margin percent for the last 10 quarters with and without this FX effect. Non-GAAP measures are shown on Slide 9.

Total operating expense, defined as the sum of R&D and SG&A declined by 13% or nearly $450 million compared to Q4 of 2013. Marketing, selling and administrative expenses declined 8% while R&D declined 20%.

The reduction in marketing, selling and administrative expenses was due primarily to reduction in sales and marketing activities for Cymbalta, as well as ongoing cost containment efforts and to lesser extent foreign exchange. The reduction in R&D expense was driven by lower late stage clinical development costs.

Other income and expense was income of $45 million in Q4 2014, compared to income of $9 million in the fourth quarter of 2013. This increase was due to larger gains on investments. Our tax rate was 14%, a decrease of 6.5 percentage points compared to the same quarter last year.

This decrease includes recognition in the fourth quarter of 2014 of the full year U.S. R&D tax credit. At the bottom line, net income was flat while earnings per share increased 1% reflecting the benefit of share repurchases. Turning to full year results shown on Slide 10, revenue decreased 15%.

Now, to place this in perspective, this equates to year-on-year reduction in revenue of $3.5 billion. U.S., Cymbalta and Evista decline by a total of $4.1 billion while FX reduced revenue by over $350 million.

These reductions were partially offset by performance growth in the rest of our business of nearly $1 billion or over 5% primarily by insulins, our animal health business, Cialis, Alimta, Forteo, OUS Cymbalta, Trajenta and Cyramza.

Full year revenue totaled just over $19.6 billion or about 400 million less than the minimum we targeted starting back in 2009. Gross margin declined nearly four percentage points due to loss of U.S. exclusivity for Cymbalta and to a lesser extent Evista.

And to reductions and spend behind Cymbalta and Evista, lower late stage clinical development costs and significant ongoing productivity efforts total operating expenses decreased 11% or over $1.4 billion as R&D expenses declined nearly 800 million and SG&A expenses declined more than $600 million.

Finally looking at the bottom line, despite 400 million less topline revenue than we targeted, we nearly met our 3 million minimum net income goal posting non-GAAP net income of $2.988 billion and EPS of $2.78. While not shown here, when we issued our 10-K you’ll see that we also exceeded our goal of $4 billion in operating cash flow.

Our full year result reflects successful execution of our strategy for managing one of the industry's most challenging series of patent expirations. Driving growth in Japan, emerging markets and Elanco, and in brands not losing patent protection.

Replenishing and advancing our pipeline and reducing our cost structure and increasing productivity across our business, to fund the R&D necessary to fuel our future growth. Slide 11, provides a reconciliation between reported and non-GAAP EPS. Additional details about our reported earnings are available in today's earnings press release.

Let's take a look at the effective price rate and volume on revenue. On Slide 12, in the yellow box on the middle of the page, you can see the total revenue decline of 12% in Q4 2014 was driven by a negative volume impact of 9% and a negative foreign exchange impact of 4% partially offset by favorable price impact of 1%.

The negative foreign exchange impact is larger than we've seen in recent years and was driven by the strengthening of the US Dollar against many developed and emerging markets currencies. By geography, you will notice that U.S. revenue decreased 22% driven by volume. This was due to loss of exclusivity for Cymbalta and Evista.

Excluding Cymbalta and Evista, EUS pharma revenue increased 5%. I would note that this year, we extended our shipping to wholesalers until December 30, resulting in lower wholesale inventory build this year end. In Australia, Canada, and Europe, or ACE, you will see a negative 7% rate impact drove the overall 4% decline in revenue.

While on a constant currency or performance basis, ACE revenue increased 3%. In Japan, pharma revenue decreased 10% driven by the weaker Yen. On a performance basis, our Japanese pharma revenue increased 2%.

Growth this quarter was negatively affected by the timing of Cymbalta shipments to our marketing partner Shinogi, as well as by volatility we have seen in customer purchases over the course of 2014 due to increases in the consumption tax. Turning to emerging markets, we saw mid-single-digit performance growth driven by volume growth of 7%.

As a result of the significant negative effect of FX, our reported emerging markets revenue declined 3% versus last year. Elanco Animal Health delivered revenue growth of 9%. Excluding FX, Elanco grew 12%.

This performance growth was driven by OUS animal products, including the acquisition of Lohmann, as well as OUS companion animal products and US food animal products. This was partially offset by a continued decline in the US companion animal product sales, principally Comfortis.

Moving to Slide 13, you will see the effect of changes in foreign exchange rates on our 2014 results. For the four year 2014, FX had a modest negative effect at both the top and bottom line. For the quarter however, we saw a larger effect, and one that differed at the top and bottom lines.

As I mentioned earlier, FX was a topline headwind, reducing revenue in US Dollars by four percentage points. In terms of cost of good sold, FX provided a substantial benefit which led FX providing a modest tailwind benefit for operating income and EPS.

Excluding FX, you can see that our non-GAAP EPS in fourth quarter declined 4% while including FX, EPS grew 1%. Now let me turn the call over to Derica..

Thanks Phil. Slide 14 shows our pipeline as of January 23. Changes since our last earnings call are highlighted, with green arrow showing progression and red arrow showing attrition. You will see that necitumumab has moved into the regulatory review column, following submissions in the U.S. and Europe.

And as John mentioned, Phase 2 testing began for AZD3293, the base inhibitor for Alzheimer's disease that we are developing with AstraZeneca. And in Phase 1, we initiate human testing of a small molecule base inhibitor for Alzheimer's disease. We also began Phase 1 testing of two biologics, one for diabetic complications and one for hypoglycemia.

And we terminated development of a Phase 1 biologic for anemia. Next, let me provide a recap of how key event played out in 2014. I'll remind you of our key events for 2015 and quickly review our 2015 financial guidance. Slide 15 is the slide we provided you in January of last year to track our progress against these milestones.

As you can see from the preponderance of green check marks, we made significant advances in our pipeline in 2014. These advances included major progress on eight new molecular entities.

Approval and launch of three new products, Cyramza, Jardiance and Trulicity, approval of our insulin glargine product, submission of necitumumab, and positive Phase 3 trial readouts for Basal insulin peglispro for diabetes, Ixekizumab for psoriasis, and baricitinib for rheumatoid arthritis.

2014 was a very productive year for advancement of our pipeline and we expect 2015 to provide more of the same. On Slide 16 list keep events to watch for in 2015. And we will update this list on each of our quarterly calls to help you monitor our progress.

Since I've discussed this with a detail on our January 7th call, I will not go through each item again today. However, it’s clear from this list of key event that 2015 will be another important year for execution of our innovation based strategy and we are excited for what we believe the year may bring.

We know it's unreasonable to expect all of these potential events to be positive. However, we believe it’s very possible that a significant majority will break our way and solidify our near to medium term growth prospects. Turning to our 2015 guidance, we have updated the guidance we provided on January 7th to reflect current FX rates.

That is the only item prompting these changes. Now before I step through this specific line item changes, I would like to provide some high level thought on the impact to us both this year and moving forward. On our call in early January, we provided a full P&L impact of FX to our 2015 results.

Now this included a topline revenue headwind of about 2.5% or $500 million and a bottom line EPS headwind of about $0.03. At the current FX rate, the revenue headwind for 2015 will be more like 6% to 7% and the EPS headwind would be about $0.07 per share, not the $0.03 we shared earlier this month.

Now as we discussed before, the FX effect on international inventory sold that flows through cost of sales provides a short term offset to the underlying operational impact of FX.

The $0.07 EPS headwind I mentioned is in fact comprise of an unfavorable operational FX effect of about $0.57 largely offset by favorable FX effect on international inventory sold of about $0.50. Should FX rate remain stable, this cost of sales benefit would go away as we sell the existing inventory will likely be nil in 2016.

So we do experience the same, the exact same operational FX effect throughout our P&L as some of our peers and other U.S. multi nationals. Difference in some however, the FX effect on cost of sales means that the full effect of FX does not show up immediately in on our P&L. We will see part of it this year and the remainder next year.

Now turning to the individual line items, you can see on Slide 17, the FX has caused us to reduce revenue by $800 million, increase our gross margin percent by 1.5 percentage points, reduce marketing, selling and administrative expenses by about $200 million and reduce research and development expenses by $100 million.

As I mentioned earlier, if current FX rates hold for the full year, EPS would be reduced by about $0.04 per share from our prior assumptions and we have adjusted our outlook accordingly. However, as our outlook still falls within our existing GAAP and non-GAAP EPS ranges, these ranges and guidance remain unchanged.

Hopefully, this additional color is helpful as you think about how FX may affect our result. Also keep in mind that our 2015 GAAP guidance does not include the $200 million payment that we will make to Pfizer if the FDA removes tanezumab from partial clinical hold, and we move forward with the Phase 3 development.

And it is based on our current estimate for how we'll account for the Novartis Animal Health acquisition and which could change based upon revise estimates and final accounting treatment. And as I mentioned earlier, 2015 guidance for non-GAAP measures excludes amortization of intangibles, as well as the other items listed on Slide 24.

In summary, we enter 2015 having successfully navigated through the most significant period of patent expiration in our history. Over the past five years, we delivered on our financial commitment, we advanced our pipeline and what we build what we believe is a sustainable R&D engine.

Again in 2014, we made excellent progress implementing our innovation based strategy. Not only did we advance our pipeline but we also significantly reduced costs and increased productivity. Throughout the balance of this decade, we aim to drive revenue growth and expand margins.

Bolstered by the recent acquisition of Novartis Animal Health, we have a solid base business and we intend to build on that base with a first wave of new product launches in diabetes, oncology and immunology followed by second wave of potential launches in cardiovascular disease, Alzheimer's disease, pain and oncology.

And as John mentioned on our 2015 guidance call, going forward you will see us sharpen our focus on areas where we are best positioned to compete and win. And continue to look for ways to increase productivity and do the work of pharmaceutical R&D better.

We enter this post-patent period in a position of strength and we are very optimistic about the opportunity before us to improve patient's lives and create value for shareholders. Now this concludes our prepared remarks. Now I will turn the call over to Phil to moderate the Q&A session..

Thanks Derica. Given the 90 minutes we allot for the overall call, and the relatively brief prepared remarks, we do have quite a bit of time for Q&A but it would be great and appreciated if you limit your questions to two or three. If you have additional ones feel free to rejoin the queue later.

Tom if you could provide the instructions for the Q&A caller please..

[Operator Instructions] Our first question is from the line of David Risinger with Morgan Stanley. Please go ahead..

Yes. Thanks very much. So, I have three questions. First, with respect to the sola extension study data readout ahead, could you just please characterize that? And discuss your level of enthusiasm for that data? Second, with respect to tanezumab, you were expecting to restart Phase 3 this year.

Should we expect a readout in 2016 or 2017 from that? And then finally, Derica, it would be great if you could just explain once again -- and I know you have before -- but why your FX tends to lag peers? And just in terms of the accounting, whether there is an international cost of goods accounting difference? That would be helpful in just putting it in perspective.

Thank you..

Great Dave. Thank you for the questions. We'll have Dave Ricks, President of Lilly Bio-Medicines handle the first two on solanezumab and tanezumab and Derica obviously be FX question.

Dave?.

Hi, Dave. Thanks for the question. On the solanezumab extension just a remainder we have a 24-month period where we are measuring patient's who all rolled off expedition one and two into drug treatment at their choice of course.

In that data we do expect to come out in the near future because it's not published or announced I can't really elaborate on what's inside that but again we are looking for evidence of a disease modifying effect in that patients who were started on sola coming off placebo. Don't catch up to those that had sola all along.

And so with that sort of guidance of what we are looking for, we wait for the data to be published in the future. On tanezumab we are hoping to have the class and tanezumab remove from clinical trial hold this year and initiate Phase 3 studies as Derica mentioned.

We have not posted those studies or their design yet, so it would be premature to comment on when they'd be completing read out but I would guide you to say it's probably beyond 16 Dave..

And David, as regards to the FX effect on international inventory sold, recall that our inventory turns in Lilly is about 12 months.

And so if you take back as we build the inventory during the period where the dollar was at a weaker level, or the euro and the yen was at a higher level, those inventories went on our balance sheet as we sell those inventories into the marketplace.

Those inventories get revalued at current exchange rate and that benefit or that differential flows through P&L at that point in time. So in the case scenario we're looking at today, where the dollars has been strengthening, it comes to us as a benefit.

You've seen in prior periods when the rate was going the other way when foreign currencies were strengthening against the US dollars and you were seeing a negative effect or an unfavorable effect flowing through our P&L through cost of goods sold..

Thanks Derica. Tom, next caller please..

Our next question is from the line of Greg Gilbert with Deutsche Bank. Please go ahead..

Thanks. Good morning. First, on Trulicity, you have been very bullish on the opportunity in the past, given the ideal mix of attributes. So I was hoping you could give us some early metrics on launch success, beyond the simple IMS-type of data we all see.

And then secondly, for John, what are senior management team's and your most important corporate objectives in 2015? Aside from the typical meeting or exceeding of the financial metrics you have provided? Thanks..

Thanks Greg. Enrique, for the first question please..

On Trulicity, we have to keep in mind that in mid-November we launched this product in the U.S. to specialist, specialist roughly represent about 30% of the market opportunity. We are in the process of launching as we speak in primary care right now, and as I have shared in the past, for us it is critical that we basically expand the GLP 1 market.

We believe that Trulicity can be an important catalyst for the overall growth of the GLP 1 class. So we basically have to wait for that. In terms of metric that we actually look at specific to our near, medium and long term objectives are looking at the breadth of prescribing when we look at Trulicity.

So we want to make sure that there is a strong breadth of prescribing in particular among primarily care customers..

Greg, hi, this is John. Thanks for your question. I think I would say three things in terms of what we’ve thought the senior management team has talked about around the table. Number one is to launch well - we’ve launched three products last year Cyramza, Jardiance and Trulicity.

We have within 12 month window an opportunity to launch others potential our insulin glargine product, necitumumab. We have other filings in the work. So this is – we're exercising that launch muscle now and I think that's something we’re acutely focused on.

Secondly to renew our pipeline, we've paid particular attention to putting the company in the position where we do not have to go through the boom and bust cycle, that's characterize the last 10 years.

We're very focused on our Phase 1 molecule enteries on progression from Phase 2 to Phase 3 and ensuring that those molecules are high quality and substantially derisk by the time we get to Phase 3. And finally I would say improving productivity. We work and operate a very competitive world.

We're in growing but very competitive classes and I think learning to operate across our business and ways that respond to the increased demands of our customer and the competitive pressures is something that's on our desk everyday and we're driving with the new conviction..

Great. Thank you. Tom, next caller please..

Our next question is from the line of Tim Anderson with Bernstein. Please go ahead..

Thank you. A few questions, please. You have several drugs for diabetes, either in the pipeline or that have recently been approved. This includes your new GLP 1, your insulin glargine, your novel basal, and empagliflozin, and then various iterations of those products.

Of the four that I have just listed, which one product excites you the most, in terms of the future commercial potential, let's say, five years out? And then a second question.

I would love to hear how you think the commercial rollout of your version of insulin glargine will play out, both in Europe and the US? Ignoring any of the legal challenges that are being mounted against you.

I know you can't really comment on price specifically, but can you confirm that, generally speaking, price is really the only selling point with a product like this? And therefore, you will likely price it at whatever it takes to compel payers and prescribers to get on board? And then last, third question, is just on Alimta.

You mentioned price erosion in the US.

It's not clear to me what the driver of that erosion would be?.

Tim thank you for the questions, Enrique can turn for the diabetes will have you handle the first two of the diabetes pipeline assets and insulin glargine and either Sue if you want to look at the U.S. performance and see what explanation you have for his question on Alimta U.S. piece.

Enrique?.

Tim, I really believe that I can make a strong case for each one of these products that you have mentioned. We just discussed Trulicity when Greg asked the question about, let's look at Jardiance for a second. We have the EMPA/LINA fixed dose combination coming up. We have a cardiovascular study that we've going to reel out in the middle of the year.

Those two are very significant events when we look at the brand.

I'll comment on insulin glargine in just a second and then of course we do believe that with our innovative basal insulin peglispro we've been able to show reductions in hemoglobin A1c versus the standard of care in basal insulin therapy which is something that has not been shown before. So I can make very good case for each of these products.

We have to basically launch this product and see how they are accepted by our customers. When it comes to insulin glargine, I would say that it priced the only way to compete, I would say no. And I won’t share how we intend to compete when it comes to our commercial rollout but clearly we do have a portfolio of diabetes solutions.

We know that diabetes price does play a role, we have the liver devices and we think that we will be able to offer our customers an important alternative when it comes to glargine, with our own insulin glargine product..

And then Tim, on the Alimta U.S. question, we had a very similar very low single digit less price benefit in the quarter like we had in the prior quarters. On various quarters there will be adjustments made for the accruals for rebase and discounts.

There is variability and noise in those kinds of adjustments this particular quarter this happens to be negative adjustments relative to Q4 2013 but there's nothing unusual on the underlying trends that we're seeing what we would have in past quarters..

Tom, next caller please..

Our next question is from the line of Mark Schoenebaum with Evercore ISI. Please go ahead..

This is Salim in for Mark. Thanks for all color. Three questions. One on your CETP.

Can you just tell us exactly how we should expect disclosure this year? And if you can just confirm for us that it's just a futility analysis? So the trial cannot be stopped for efficacy? And then just on diabetes, and with all the pricing pressure talks, can you remind us of the net price increases you have been taking? Maybe for 2014 and recently? And if you think that's sustainable going forward? And then on your GLP 1, Dulaglutide, is there -- is -- Novartis obviously made theirs -- at least are trying to develop their in Phase 3 for an oral.

Their [sinagatide] [ph] is an oral sinagatide. Is there a reason why you would or should not do the same thing for Dulaglutide? Thanks..

Thank you for the questions. We’ll have Dave Rick handle the first question on CETP inhibitor and then Enrique your diabetes question.

Dave?.

Thanks for your question. On Evacetrapib I think we’ve communicated in the past, we do have an event driven futility test which is in the near future, either be in Q1 or early Q2. I want to play down expectations of any great news coming out of that because the futility hurdle is pretty low in that test.

So we will be conducting this in a blinded fashion along with a normal periodic safety review. And this is really the last major set of reviews prior to conclusion of the study we hope in early 2016. So when we have to something to say about that, we can elaborate further.

Yes, we’ve said in the past, that’s not the kind of analysis, being a futility analysis, that would cause us if it is not met, in other words study continues any kind of press release. So we provide regular updates for example on next quarter's call if it's appropriate on the status of that particular analysis..

I assume your questions on the least price increases and net prices refers to our insulin franchise. We have taken least price increases but we also have increased our rebates that we basically - in how we control with the pairs. As we look at the results for Humalog in the U.S., where we basically saw a minus 2 comparing Q4 of 2014 versus Q4 of 2013.

A couple of things that I would have you keep in mind yes of course we did have pressure from managed care contracts. But we had two special events in fact in those results. We had wholesale buying patterns, nine points when it comes to Humalog or 9%.

And then adjustments due to prior periods, primarily driven by greater utilization in Medicaid and Medicare about seven points. So you can think of those anomalies for the quarter but clearly we do see a highly competitive market when it comes to diabetes.

On your question on GLP-1s, whether we are thinking about oral dulaglutide, I cannot comment on our specific class when it comes to GLP-1 but we have expressed that this is an area of interest to us..

Great. Thanks Enrique. Tom, next caller please..

Next question is from the line of Tony Butler with Guggenheim Securities. Please go ahead..

Good morning. Thank you very much for taking the questions. There are two. First is on Cyramza. I am curious if you might be able to provide some color of what you are hearing back in the field in gastric cancer.

And second to that question is, have you launched in non-small cell lung, given the recent approval? And if you have, any comments back from the field on that launch would be helpful.

And then second, back to solanezumab and EXPEDITION 3, clinic trials [ph] states enrollment continues, and I am just curious on the rate of enrollment? Given, I think, the total number is 2,100 or so.

So the question is, is that rate going -- or occurring in a timely fashion to what you would have expected, given that you are looking for individuals who have a positive plaque in the brain? Thanks very much..

Thank you, Tony. So Sue Mahony, President of Lilly Oncoloy for the first question on Cyramza and then Dave again on solanezumab..

Regarding Cyramza in the U.S. we’re hearing actually very good feedback on Cyramza in gastric cancer. Q4 sales of Cyramza was $34 million that really is on gastric cancer sales and given that we only had the combination approval towards the end of the year that really is mainly monotherapy.

Since these launched to combination study we’re seeing additional use of Cyramza in second-line gastric cancer with paclitaxel. We have NCCN category 1 status now both for the monotherapy and for the combination therapy in gastric cancer.

And with regards to the lung indication, we had the privilege, at the end of the last year we literally just launched that, so it's way too early to give you impact on that. But as I mentioned, we're feeling very good about the gastric updates..

On sola, we remain very encouraged by the enrollment in Expedition-3. I really think Lilly has a best in the industry capability on conducting late phase Alzheimer's studies. And as you pointed out we're through in significant complexity which is the requirement to prove positive amyloid to enter the study in a 100% of patients.

But I’m pleased to say I think our last update was we were two-thirds enrolled, we continue to progress to complete enrollment soon. I can't say we will mostly likely beat the enrollment window we saw on Expedition 1 and 2 which was a similar number of patients as reminded that was 22 months.

So we would expect the enrollment soon and then of course look for read out in 2016 as we've discussed previously..

Thanks Dave. Tom, next caller please..

Our next question is from the line of John Boris with SunTrust. Please go ahead..

Thanks for taking the questions. First question just has to do with your operating margins. Obviously exiting the period of YZ, your operating margins are in the high teens.

If you look across the businesses where you are having greatest amount of launches -- oncology, diabetes -- and you benchmark those businesses against your industry peers, the operating margins of some of those companies are in the high 30s.

So when you think about operating margin expansion going forward, can you maybe help us understand or characterize how those businesses are potentially going to be contributing to that? And any color on the magnitude of expansion would be helpful. Second question, on Alimta, Germany/UK.

Any update on the patent challenge that's going on there? And then lastly, just on the BioChaperone insulin lispro, if you can possibly characterize the profile of that product? What phase of development, and when you anticipate it might go into clinical? And how it might contrast with the insulin oligo that is being worked on by one of your peers? Thanks..

Thank you, John. So Derica obviously for your first question the operating margins and then Sue if you comment on the European patent litigation and then Enrique if you will take BioChaperone and Lispro and Jan if you can contribute if you like as well.

Derica?.

As you know we stated that we expect to get our OpEx as combination of SG&A and R&D as a percent of sales back to that 50% of sales or less by 2018 on a full year basis.

While I'm not in a position here on the call to break out the operating margin by business unit, let me just share with you some color as to how we see ourselves improving our margin overtime and provide some examples.

So, one of things we’ve talked about is we’re launching in the area of oncology, obviously highly specialized, we believe we have the commercial footprint in place so even if Sue is launching new product and new indications, we believe we can accommodate that within our existing footprint.

Likewise the same is true in diabetes as well where while we may be tweaking around the edges there are not any wholesale changes in our commercial footprint and from a sales force standpoint clearly there is the variable marketing spend behind these brands.

And then if you look on the manufacturing side, we see ourselves opportunity as we continue to execute and complete the tactical agenda in our insulin business.

And from a manufacturing standpoint which enables us to be able to produce the basal insulins that we’re launching in the same facilities today, where we produced our existing insulins in terms of Humulin and Humalog.

So therefore we’re getting a more throughput through the same existing manufacturing footprints which should bring down our per unit cost flowing through those facilities.

So these are some examples of how we believe we will be able to get increased leverage out of our existing infrastructure which will enable us to grow our OpEx at a slower rate and our cost base at our topline and giving us that positive leverage to return to the historical levels of profitability..

I actually don't have any update on the European patent situation, the two case is the German and the U.S. case as you know are both being appealed, the hearing for both of those is set for March. So we look to forward being able to provide data on that following those hearings..

It is requested the Germany and the U.K. case, not U.S. case in March..

Yeah, thank you..

On BioChaperone, this product is already in the clinic. We do have some Phase 1 data and the reason we did a partnership is as we looked both our internal problems as well as what was out there, we felt this was the most compelling assets when we looked at the profile.

We are looking for something that is factor-on and factor-off with the benefit that could basically bring including lower rates of hypoglycemia and lower variability when it comes to overall blood glucose..

Thank you, Enrique. Tom, we can go to the next caller please..

Our next question is from the line of Steve Scala with Cowen. Please go ahead..

Thank you. I have three questions. First, on the evacetrapib interim look, on the Q3 call, I believe the Company said that there are efficacy features to the interim look.

Can you give us examples of efficacy features? Are you just looking at HDL and LDL levels? Or are you also looking at trends and efficacy, or events? Secondly, in the PD-1 arena, I am curious as to why Lilly selected the Bristol PD1 for one study, and the Merck PD-1 for three others? Do you see clinical differences in the PD-1's you seek to accentuate? Or was it for financial or competitive reasons? And then lastly, a question for Jeff.

There are many emerging modalities in Animal Health. We recently saw approval of the first monoclonal antibody for cancer. As a leader in Animal Health, what emerging modalities does Lilly Animal Health find most interesting? Thank you..

Thank you for the questions. Dave Evacetrapib please and then Sue for the PD-1 question on the Bristol and Merck collaborations. And then Jeff for the animal health question.

Dave?.

On Evacetrapib we do expect an event driven interim look soon this is for futility. As I said before the bar from an efficacy perspective is low really ruling out absolute futility and we will look at major cardiovascular events in that look.

But I think we've said before, don't expect a major press release on both sides of that of course if we stop to study for futility we would announce that..

With regards the trials I wouldn’t lead anything into the number of charts that we got with each company. Basically the decision was made based on the interest of each company at that point in time. We foresee that we’ll continue to have ongoing collaborations in the future with other companies. Again it will depend on our interest and their interest..

Great question I think in Elanco we see a few very key spaces going forward in the medium and long term future. Continued animal disease continues to be a problem both at the respiratory and enteric levels, so that covers a couple key classes that we're worried about. So, Bovine respiratory disease continues to be a big challenge. So that’s one space.

Second is mastitis continues to be one of the most unmet needs in dairy at this stage and we’re expecting to make a nice innovation launch in that space in the U.S. this year.

And then I think the whole area of immune modulation turning the animals immune system and activating it against the disease, versus today when you look at current medications antibiotics et cetera, it's trying to introduce immune modulation. And I think the last one in the pet space is renal failure.

It's continuing to be major issue especially the fee line area. So those are some of the big spaces. Pain would be another one as well..

Great. Thanks Jeff. Tom, next caller please..

Our next question is from the line of Seamus Fernandez with Leerink Partners. Please go ahead..

Thanks very much for the questions. So a few here.

First off, can you talk a little bit about the BioChaperone, and really what needs to be proven to advance this program into Phase 3? The second question, can you also update us on what you are seeing globally in the premix market? How market share is evolving here? And what you seem from a demand perspective, for a once-daily premix product? And then lastly, on the CETP inhibitor, have you evaluated the LDLC reduction using Merck's -- or Merck has published, which is this beta quantitation method.

And if so, what did you see, in terms of the LDL reduction capabilities? And if you haven't done that, could you just give us what your estimate is of LDL reduction on top of statins, with the 130 milligram dose that's used in the Phase 3 outcome study? Thanks a lot..

Thanks Seamus. So Enrique again on BioChaperone, and as well as the premix question with regard what you’re seeing for share market as well as just demand for once daily premix outside of the U.S. it sounds like. And then back to Dave on the CETP inhibitor.

Enrique?.

I won't be able to - Seamus, unfortunately discuss the program that we have for BioChaperone. What you should expect is that we need to make sure that this product is going to be effective in both type 1 and type 2 diabetes and we intend to conduct the right clinical studies to ensure that we can have a thoughtful Phase 3 commercial decision.

As I mentioned, clearly we already have mealtime insulins in the market, so we need to show some benefits when it comes to differentiation vis-à-vis what’s already marketed but won’t be able to comment on that because we believe its important competitive information.

On the premix market, clearly the premix market has been in many areas of the world declining with exception of emerging markets where we see continued growth of this category. When we look at the share performance Lilly has done fairly well. So we are gaining share in this market whether it’s in U.S., whether it’s Europe, Japan or emerging markets.

And I'm not sure how to comment on whether once daily premix would be a strong benefit. We will have to see what the clinical data for that is. If I'm speculating about what you're talking about, right, a premix needs to provide I believe noninferior control to whatever the standard treatment is when it comes to diabetes.

And this particular premix that I think you are talking about, may -- did not meet the primarily endpoints when it comes to hemoglobin A1c control, vis-à-vis basal-bolus therapy. So clearly, all is going to depend on the actual clinical data..

Was there the CETP question?.

Okay. Yeah, sure. Sorry. The gap there. I thought there was another question between it. Seamus thanks for the question on CTP. I think a couple points of clarification. All along we've been quoting LBO reduction numbers for our program using these so called direct measurement methods.

I'm not actually familiar with the statement you made about Merck's method, but we use this direct method, which is the more accurate way and our numbers are made consistent throughout. Perhaps with our program the confusion has been, we reformulated as we went to Phase 3. We had tested 100 and 500 in Phase 2.

And the formulation of 130 that you mentioned is more bio-available than the 130 equivalents in the Phase 2 study, if that make sense. So, we would expect the LDL reductions between the one and the 500 that were previously published. And that puts you somewhere in the 30s in terms of percentage reduction using the direct LDL measurement..

Great. Thanks Dave. Tom, next caller, please..

Our next question is from the line of Jami Rubin with Goldman Sachs. Please go ahead..

Hi. It's Jay Olson in for Jami Rubin. Thank you for taking the question. Actually, just a couple questions on animal health.

Can you please tell us what Elanco's EBIT margins were in 2014? And then, when the Novartis Animal Health deal was announced, you guided to a dilutive impact on 2015 earnings, followed by accretion in 2016, with some cost synergies and mid 20% EBIT margins.

Can you just update us on whether all of your targets are still on track? And then finally, are you, now that the Novartis Animal Health deal is closed, are you comfortable with the size of Elanco? Or do you anticipate additional business development? And if so, would it be in the companion animal arena, or in livestock? Thank you..

Great, Jay. Thank you for the questions. Those were all for Jeff. Feel free, and then if you want a comment at all, Derica, on the accretion dilution as well..

Sure. I'll take the first one. For 2014 it was around 24% was the EBIT margin. And then, in regards to, just to clarify, when we announced the deal we did say it would be dilutive in 2015. And we said that we expect by 2017 to return the combined entity to the historical levels of profitability, which was in the mid-20s in terms of margins..

Right..

Yeah. And just to build on that, I think when you look at the Novartis, we feel good. It's better than expected in a couple of areas. Again, we're just a few days in, but close timing was better than expected and also the required divestitures really only meaning to sell one brand in the U.S. and all the other areas where we're clear on.

So, at this stage, we've only got limited detail on moving forward, being we're just a month in and we'll definitely give a better view more clear detail in Q2, Q3..

Great. Thanks Jeff..

About business development?.

About the business development and priorities..

Yeah. We're going to continue from business development perspective. I mean, we feel very good about scale and share our voice being able to -- and Novartis we see as vehicles for the next year of growth. And they've increased our portfolio, our pipeline, and our share of voice.

We're seeing that already in the early planning of both of these integrations which are working very well. I think we're going to look now very much as we have in the past with other acquisitions is where the strategic areas of need are.

So, vaccinations in that space, emerging markets in comp animals will continue to be targets and we'll probably be more regional than global in nature..

Great. Thanks Jeff. Tom, next caller please..

Our next question is from the line of Chris Schott with JPMorgan. Please go ahead..

This is actually Wendy Lin on for Chris Schott today. I have two questions on Alzheimer's. It's on the N3PG path-specific antibody.

Can you talk about the time lines and the next steps in here? And then on the base inhibitor, can you talk about your study design? How do you see that molecule comparing with Merck's? And when could you move it into Phase 3? Thank you..

Great. Thanks for the questions. Jan, if you'd like to lead off with commentary on the N3pG monoclonal antibody.

And then, Dave, if you'd like to provide the thoughts on the base study design? Jan?.

Okay. So the N3pG antibody is a plaque-specific antibody. And it's in Phase 1 studies, although it's actually done in patients with mild cognitive impairment or mild or moderate Alzheimer's. The purpose of that study is actually to look at safety and have some pharmacodynamic markets, so effects primarily looking at imaging before and after treatment.

And the planned completion of the trials are then second half this year..

Great. Thank you, Dave. As it relates to the base program in alliance with AstraZeneca we've announced to begun Phase 2/3 program. So one feature of this is, it say Phase 2 program to confirm dose and safety which will then convert into a Phase 3 perhaps toward the end of this year, early next year depending on enrollment. I think the two key things.

We don't have any comparative data with Merck's base inhibitor. Two key things I mentioned in terms of the study itself and then one operationally. We will be positively screening for amyloid as with the sola EXPEDITION 3 study in this program as well.

So the 100% of the patients in the study have confirmed Alzheimer's, and we know that’s an issue from other experiences in this field. And then, our study is a mild Alzheimer's disease study. And I believe Merck has a mild, moderate plus a prodromal, so different population mixes. We also have different endpoints we're looking at.

We favor the activities daily living and cognitive ADAS-Cog measurement points; I mean Merck's looking at different points as well. So there are differences. We'll have to see how it plays out. I would say operationally, for the previous comment on sola, we feel good about our team's ability to enroll patients in these types of studies.

And, of course, there is a race to get a drug to patient suffering from the illness. So we're very focused on timelines and feel confident in our ability to execute..

Great. Thanks Dave. Tom, if we can go to the next caller, please..

[Operator Instructions] Our next question is from the line of Vamil Divan with Credit Suisse. Please go ahead..

Good morning. This is Ari Jahja in for Vamil Divan. Thanks for taking my questions. I have three questions here. First, on gross margin guidance, can you please clarify to what extent the upward revision is impacted by inventory step-up and amortization related to the Novartis Animal Health deal? Second on pharma net pricing.

Can you share your thoughts on key headwinds and tailwinds in different regions? It is interesting that emerging markets is the only part delivering positive net effect last year. And then lastly, for Enrique, pertaining to the new insulin glargine product, can you talk about Lilly's preparedness ahead of the launch this year? Thank you..

Thanks Ari Jahja. And was your second question on animal health pricing or just pharma pricing? I'm sorry..

Pharma..

Okay.

So Derica, do you want to comment on the gross margin piece to start with?.

Sure. In regards to the gross margin change in our guidance, it only relates to FX. So this is not driven by the step up of inventory for the Novartis Animal Health acquisition. In fact, that was included in our regional guidance that we shared on our January 7th call.

So, the 78% gross margin projection today is solely due to the change in outlook in terms of the effect on inventories expected to be sold through the period..

Dave, you want to comment on other part?.

Yeah. Let me maybe just jump in on the -- you're commenting on the 2014 effect of price rate and volumes are we show here in the U.S. being down one on the year perhaps that’s a surprise. Remembering Japan had 2014 was the biannual price year, so we expected and planned for price pressure there.

ACE, I think we are macroeconomic pressure in our business along with the plan for generic event of Cymbalta which lead into this year. The U.S. is down primarily driven to the AG offers generic business transactions we conducted on both Evista and Cymbalta which had an effect on our price per unit in a significant way during the year.

So, I think that's more or less a one-time event for the U.S. market..

Great. And I apologize. I missed your last question..

Insulin glargine readiness..

Okay, Enrique great. Thank you. Got it..

I'm not sure. What I can say other than we are ready. Clearly, we expect to launch in Europe this year post the expiration of the license patent..

Excellent. Thank you, Enrique. Tom, next caller please..

And we have a follow-up question from Seamus Fernandez with Leerink Partners. Please go ahead..

Thanks a lot for the questions. So just two things.

One -- I don't know if I missed the answer to this question -- but pricing on the animal health side of the business? What was the driver there? And is that something that -- where we could see that kind of pricing power going forward? And then separately, as you look at the choice to enroll Amyvid-only patients, do you have internal data suggesting that the Amyvid staining, or the Amyvid biomarker-positive patient population in the EXPEDITION studies actually did have a wider magnitude of benefit? And suggesting that there could be greater power in EXPEDITION 3? Thanks..

Great. Thanks Seamus. So Jeff, for the animal health pricing question, and then back to Dave on solanezumab..

Yeah. So, on pricing and animal health, Seamus, a couple of comments. First of all, we have a very market-based pricing, especially on the food animal side. So as you’ve see economics get better in the meat and milk's business and our return and our value preposition changes, we base a lot of our pricing model of on that.

Second is we have taken a very global assessment of these markets and the value aspects of this, and have taken a global pricing approach that I think has also benefited. And then, I think lastly on pricing its liking to our value base strategy. As you know, we bought an analytics company and we're offering a broader set of solutions.

So those are the key things. I think we've got to continue to look as you go forward at the cyclical nature, especially of the food animal business and the competitive nature of the comp animal business.

So I think the intension is can you get a 1% to 3% price is a question that's out there in the industry that's still isn't validated yet, but I think those are the factors to watch going forward..

Thanks Jeff.

Dave?.

Yeah. As it relates to the amyloid positivity I should be clear, we test the primary number of subjects select for PET scan, some do receive, see themselves as well, but confirming positive amyloid we think is key to development in Alzheimer's.

And we believe that because we do have data in house that shows that patients who don't have amyloid do not respond to an anti-amyloid treatment. And we also know from larger scale population studies, they also don’t progress at the same rate. So if they're in the placebo arm they're going to over-perform.

So for all these reasons and just logic, we believe that's a critical element in Alzheimer's drug development..

Great. Thanks Dave. Tom, next caller please..

And we have a follow-up question from the line of Tim Anderson with Bernstein. Please go ahead..

Thank you. A couple questions. On your novel basal insulin, you continue to talk bullishly about it on your early January guidance call. And you said this remains a very important product for the Company. And that's just not congruent at all with how consensus views the drug.

Consensus is very skeptical, recognizing that there might be some positive efficacy attributes. But there is also some unique and potentially worrisome toxicities, like fatty liver. And in a competitive category like insulin, it seems that unique side effects could basically take down the commercial prospects for the product.

So I am hoping you can tell us what you think analysts are missing with this program. And then the second question on -- a general question on base inhibitors.

Are -- what are the theoretical safety issues to monitor with these compounds, given the magnitude to which they lower A-beta production? It seems like that's confounded by the fact that nobody really knows what the physiological role of A-beta is.

So how do you know what to watch for? And has there been any signals, in any human studies, that you are aware of? Or animal studies?.

Great. Thanks Tim. Enrique, if you'll handle the first question on the novel basal insulin peglispro, and then, Jan, if you'd like to hand the base question in terms of safety things looking out formally we've seen so far with molecules in humans.

Enrique?.

Sure. So, on the efficacy side, I think what we basically have is five positive Phase 3 trials against Lantus.

Now let's keep in mind that we have not disclosed what the level of improvement is, but statistically significant improvement in hemoglobin A1c in five trials is unprecedented and hemoglobin A1c reduction it is a -- has a tangible benefit when it comes to outcomes, in particular in terms of the development of macrovascular complications.

So we see this as extremely important. You spoke of some of the signals that we basically saw in our Phase 3 programs. At this stage though I think we have to wait for us to be able to disclose the beta at ADA for you to be able to see exactly what is the benefit risk profile of this product..

Thanks Enrique.

Jan?.

Yes, if we look at beta-secretase or base inhibitors, the current base inhibitors in the clinic affects both the base one and the base two enzyme and clearly for the Alzheimer indication and the thinking is it's the base one enzyme that is then cleaning the APP precursor.

If we look at potential side effects, we experience then probably other companies as well off target effects with some initial base inhibitors, which we believe then underline some of the liver toxicity, which is not unheard of with small molecules.

The more specific toxicology observations that we see is actually a deep pigmentation in some animals and the potential explanation for that is probably a base two effect. So this is something that also needs to be monitored in the clinic..

Thank you, Jan.

Tom, do we have any callers in queue?.

And we have a follow-up question from the line of Steve Scala with Cowen. Please go ahead..

Thank you. I have two questions. First, on your CGRP monoclonal antibody for migraine, looks spectacularly effective, but with significant safety concerns, including maybe cardiovascular, wound healing, intraocular pressure, maybe [teratogenicity] [ph]. What are next steps for this compound? And there are a number of similar compounds in development.

Why is Lilly's best in class? And then second question, on ixekizumab. Lilly has provided solid top line data in psoriasis. I know there are no head-to-head studies verses Novartis' secukinumab.

But based on the full data, which you have and we don't, would you say ixekizumab is comparable to secukinumab? Does it have a chance to be better? Or is ixekizumab less robust than secukinumab?.

Thank you, Steve. Jan, would you like to comment maybe on CGRP please and then….

Calcitonin gene related peptide or CGRP has been around for quite some time and has been and the mechanism has been studied both with small molecule oral agents as well and has more recently monoclonal antibodies.

And the studies with oral agents I think showed quite positive data in acute migraine treatment relief of symptoms, but due to probably off target liver talks these agents could not be used for more chronic treatment.

On the other hand, they were also tested in a variety of patients with other diseases and there were no real other side effects seen and this has been confirmed even more with the monoclonal antibodies, which have -- are very specific and we have not seen any side effects with these type of agents so far in our studies.

And currently we are then in migraine in Phase 2 preparing for Phase 3 with more safety and dose ranging studies and we're also studying these agents for osteoarthritis, but we are very bullish on this mechanism and realising it is a competitive area with several other players, but we're doing our utmost to execute the trials in a very rapid fashion..

Thank you, Jan.

Dave?.

As it relates to the IL-17s we're quite excited about this class.

We think both psoriasis has a lot of room for growth and IL-17s present really a compelling difference as a Group versus available therapies, I think you have a strongly exhibited in the topline results we put out in September which demonstrated a very significant effect size improvement over etanercept, in patients with moderate to severe psoriasis, with ixekizumab.

We don't have class comparisons as you mentioned and Steve you will see our data come up pretty soon with a more full look at what we’re looking at.

But I'll just say qualitatively, we think we have the potential to have the best drug in the class because at maximum doses, we see extraordinary rates of PASI 100 clearance and I think our numbers are high. So all the data is not out.

We need to see Amgen's full data set but I think we feel good that we could have the most effective medicine in the class. And as we reported safety of ixekizumab in the moderate to severe patients with psoriasis was similar to that we saw with etanercept..

Great. Thanks Dave. Tom, one last poll if we have any additional callers..

There are no questions in the queue at this time, sir. Please continue..

Thank you very much. I'll go ahead and turn it over to John and then to wrap up the call.

John?.

Thank you, Phil. A brief wrap-up here. To all those on the call, we thank you for your continued interest in our company and for your support. As we emerge from this journey that we have taken through years YZ, I'm extremely proud that we have executed on the strategy that we laid out for you and deliver on the commitments we shared five years ago.

On January 7th, we outlined our objectives for the balance of this decade. We intend to drive year-on-year revenue growth through the balance of this decade, spurred by new product launches from our pipeline. Next, we aim to turn that revenue growth into even greater earnings growth by controlling costs and leveraging existing infrastructure.

At the same time we aim to maintain a sustainable flow of innovative medicines from our pipeline. And finally we will deploy capital to create value which includes returning excess cash to shareholders via both the dividend and share repurchases.

We remain convinced that our strategy is the right one for Lilly in order to create value for patients, physicians, payers and our shareholders. And our ability to execute so far gives us increasing confidence at our future prospects. As always, we will keep you apprized of our progress. Thank you once again..

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