Lilly(Eli) & Company (LLY) — Q2 2023 Earnings Call Transcript

Good morning. Thank you for joining us for Eli Lilly and Company's Q2 2023 Earnings Call. I'm Joe Fletcher, Senior Vice President of Investor Relations. And joining me on today's call are Dave Ricks, Lilly's Chair and CEO; Anat Ashkenazi, Chief Financial Officer; Dr. Dan Skovronsky, Chief Scientific and Medical Officer; Anne White, President of Lilly Neuroscience; Ilya Yuffa, President of Lilly International; Jake Van Naarden, President of Loxo at Lilly; Mike Mason, President of Lilly Diabetes; and Patrik Jonsson, President of Lilly Immunology and Lilly U.S.A. We're also joined by Michaela Irons, Mike Springnether and Lauren Zierki 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 several factors, including those listed on Slide 3. Additional information concerning factors that could cause actual results to differ materially is contained in our latest Form 10-K and subsequent Forms 10-Q and 8-K 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's not intended to be promotional and is not sufficient for prescribing decisions. As we transition to our prepared remarks, please note that our commentary will focus on non-GAAP financial measures. Now I'll turn over the call to Dave.

Thanks, Joe. In the second quarter, Lilly's momentum continued. We advanced our R&D pipeline, progressed our ambitious manufacturing agenda and delivered strong financial results. Our business saw an acceleration of revenue growth driven by Mounjaro, Verzenio and Jardiance. As base period headwinds from COVID-19 antibody revenue and Alimta's loss of exclusivity recede, we do expect strong growth to continue in the quarters ahead. Lilly has made substantial progress in advancing our pipeline of innovative medicines in recent years, but the past few months have been particularly noteworthy. In early May, we shared the top line results of the Phase III TRAILBLAZER-ALZ 2 trial, which showed donanemab treatment slowed clinical decline in Alzheimer's by 35%. While differences in enrollment criteria and study design make cross-trial comparisons difficult, this represents the greatest percentage cognitive slowing in a primary end point of any disease-modifying Alzheimer's disease treatment reported to date, and the only Phase II to Phase III replication to date. Three weeks ago at the Alzheimer's Association International Conference in Amsterdam and simultaneously published in JAMA, we shared the detailed results, including new analysis, which demonstrates the potential of even greater cognitive slowing in patients in the earlier stages of Alzheimer's disease. At the ADA scientific sessions in June, we shared positive Phase II data on two next-generation diabetes and obesity product candidates: orforglipron and retatrutide. And less than two weeks ago, we shared top line results from the SURMOUNT-3 and SURMOUNT-4 Phase III trials, which showed participants on tirzepatide following intensive lifestyle intervention or with continued tirzepatide treatment, achieved up to 26.6% mean weight loss. Dan will share more perspectives in his R&D update on these and other exciting areas of pipeline progress. Moving to our results. You can see on Slide 4 the continued progress made on our strategic deliverables so far this year. Excluding revenue from Baqsimi and from the sales of COVID-19 antibodies in 2022, Q2 revenue grew 22% on 23% volume growth. Volume growth in Q2 was driven by Mounjaro, which leads our new products category. That category also includes Jaypirca and now Omvoh, which saw its first sales in Japan in Q2 and launched in Germany in July. In the second quarter of this year, new products and growth product categories combined contributed approximately 26 percentage points of volume growth. These products, coupled with potential upcoming launches, solidify Lilly's strong growth profile through this decade. We've had several important pipeline updates since our Q1 earnings call. For mirikizumab, approval in the EU and resubmission of our U.S. application with regulatory action expected by the end of this year. Regulatory submissions in the U.S. for tirzepatide for chronic weight management; regulatory submission of donanemab for traditional approval to the FDA and EMA following the positive Phase III results from the TRAILBLAZER-ALZ 2 trial; and positive Phase III top line readouts for SURMOUNT-3 and 4 in the third and fourth global studies evaluating tirzepatide in chronic weight management. The second quarter also was productive for business development. We've commented in the past on our active exploration and pursuit of external innovation and are pleased to have announced agreements to acquire two clinical-stage companies in the second quarter: DICE Therapeutics and Versanis Bio. These companies operate in different therapeutic areas, and each is a fit with Lilly's strategy. We also closed the sale of global rights to Baqsimi, and the financial impact of this transaction is reflected in our Q2 results. After quarter end, we closed the sale of rights to our olanzapine portfolio, which will be reflected in our Q3 financial results. Both these transactions are now incorporated into our updated 2023 financial guidance. We continued to progress the most ambitious manufacturing expansion agenda in the 147-year history of our company. We're happy to share that commercial production to support our incretin portfolio has begun at our Research Triangle Park site in North Carolina. Beyond the capacity expansion that will come as we ramp production at this site, we're also pursuing other near-term paths to expand access to our incretins to patients around the world. Anat will provide more detail on these efforts. And finally, we distributed over $1 billion in dividends this quarter. On Slide 5, you'll see a list of key events since our Q1 earnings call, including several important regulatory, clinical and other updates we're sharing today. So without further ado, I'll turn this over to Anat to share our Q2 results.

Thanks, Dave. Slide 6 summarizes financial performance in the second quarter of 2023. I'll focus my comments today on non-GAAP performance. In Q2, revenue increased 28% versus Q2 of 2022. Excluding revenue from Baqsimi and from COVID-19 antibodies in the base period, revenue increased 22% or 23% on a constant currency basis. This acceleration on revenue growth was achieved despite lingering headwinds from Alimta's loss of exclusivity in the United States, which occurred in the first half of last year, and the effects of which should normalize going forward. Gross margin as a percent of revenue was flat in Q2 at 79.8%. Gross margin in the quarter benefited from product mix, including one-time revenue from the sales of rights to Baqsimi, which was offset by increases in manufacturing expenses related to labor costs and our investments in capacity expansion. Total operating expenses increased 14% this quarter. Marketing, selling and administrative expenses increased 18%, driven by higher marketing and selling expenses associated with recent and upcoming new product launches and additional indications. R&D expenses increased 32%, driven by higher development expenses for late-stage assets and additional investments in early-stage research. This quarter, we recognized acquired IPR&D charges of $97 million or $0.09 of EPS. In Q2 2022, acquired IPR&D charges totaled $440 million or $0.46 of EPS. Operating income increased 69% in Q2 driven by higher revenue, including revenue associated with the sales of rights for Baqsimi and lower IPR&D charges, partially offset by higher R&D and SG&A expenses. Operating income as a percent of revenue was 27% for the quarter and reflected a negative impact of approximately 115 basis points attributable to acquired IPR&D charges. Our Q2 effective tax rate was 16.1%. This represents an increase of 190 basis points compared to the same period in 2022 driven by the impact of the new Puerto Rico tax regime and the sales of rights for Baqsimi. At the bottom line, we delivered earnings per share of $2.11 in Q2, a 69% increase versus Q2 of 2022, inclusive of $0.43 of EPS associated with the sales of rights for Baqsimi. On Slide 8, we quantify the effect of price, rate and volume on revenue growth. This quarter, U.S. revenue increased 41%. When excluding revenue from COVID-19 antibodies and Baqsimi, U.S. revenue grew 30% driven by robust growth from Mounjaro, Verzenio and Jardiance. Net price in the U.S. increased 2% for the quarter driven by Mounjaro access and savings card dynamics. Excluding Mounjaro, net price in the U.S. decreased by low single digits, consistent with prior trends. As I mentioned in our Q1 earnings call, we expect Mounjaro access and saving cards dynamics to have an even greater effect on reported U.S. price changes in the second half of this year. Europe continued its growth trajectory with revenue in Q2 up 6% in constant currency driven primarily by volume growth for Verzenio, Jardiance and Taltz. Volume in Europe increased 12% in the second quarter. For Japan, Q2 revenue increased 7% in constant currency as we continue to see robust growth in our newer medicine, led by Verzenio, and to a lesser extent, Jardiance, Olumiant and Mounjaro, the last of which launched in Japan in April. Moving to China. Revenue increased 20% in constant currency with volume growth only minimally offset by price declines. Volume growth in Q2 was driven by Tyvyt and Verzenio. We are pleased to see our China business return to growth. Revenue in the rest of the world increased 19% in constant currency as volume growth of 20% was driven by Mounjaro, Verzenio and Jardiance. Slide 9 shows the contribution to worldwide volume growth by product category. As you may recall on our Q1 earnings call, we simplified the categorization of our products with a focus on two categories: new products and growth products. As you can see, the new and growth categories combined contributed 26 percentage points of volume growth for the quarter. The volume growth for all other categories was driven by the sale of rights to Baqsimi. The lack of revenue from COVID-19 antibodies compared to the base period was a milder headwind to growth in Q2 compared to Q1 and will continue to be a modest impact to prior year comparisons.

Thanks, Anat. It's been a productive and busy few months for Lilly R&D. Since our last earnings call, we've had a few major readouts across our therapeutic areas, and we've announced several business development transactions. Let me start with the data that we shared in June at the American Diabetes Association. We presented over 40 abstracts across our portfolio and shared data during two ADA-sponsored symposia. The first was for the Phase III results from the SURMOUNT-2 study of tirzepatide in adults with obesity or overweight and type 2 diabetes, which was simultaneously published in the New England Journal of Medicine. And the second symposium was for the results from two Phase II trials of retatrutide, our GIP/GLP glucagon tri-agonist in adults with obesity and overweight as well as in people with type 2 diabetes. The retatrutide results in obesity and type 2 diabetes were simultaneously published in New England Journal of Medicine and Lancet, respectively. We also shared an oral presentation on our Phase II trial results for orforglipron, our once-daily, non-peptide oral GLP-1 in adults with obesity or overweight. These results were simultaneously published in New England Journal. We also presented results from a Phase II trial of orforglipron in patients with type 2 diabetes, and these were published in the Lancet. Clearly, we're proud of all of this data in diabetes and obesity portfolio. Since we discussed the top line data for SURMOUNT-2 tirzepatide trial during our last earnings call, I'll focus my updates today on the Phase II data shared for orforglipron and retatrutide, starting with orforglipron on Slide 14. The orforglipron presentation highlighted safety and efficacy data across six dose arms in our Phase II study in obesity. With an overall mean body weight at baseline of 109 kilograms, orforglipron demonstrated an average of up to 14.7% body weight reduction at 36 weeks. At the second highest dose tested in the study, 75% of participants reached a weight reduction goal of 10% or more. We also shared data showing a dose-dependent decrease in systolic blood pressure and an overall improvement in lipid levels. The most common adverse events were GI-related and generally occurred earlier in the trial during the titration phase and were mostly mild to moderate. While we've not yet shared the dosing details for our Phase III studies, these Phase II results have informed our approach to dose escalation. We also presented data at ADA from a similar Phase II study of orforglipron in people with type 2 diabetes, the results of which are highlighted on Slide 15. Orforglipron demonstrated a mean reduction in hemoglobin A1c at 26 weeks of up to 2.1%, and over 90% of participants on the highest three doses achieved A1c levels less than 7%. We initiated Phase III trials for orforglipron in both obesity and type 2 diabetes in the second quarter, and we look forward to those results in 2025. For retatrutide, the full results of two Phase II trials were presented during an ADA-sponsored symposium, which discussed efficacy and safety in adults with obesity or overweight with at least one weight-related comorbidity as well as in people with type 2 diabetes. There's also a segment of the symposium focused on liver fat and NASH-related biomarker data in patients with nonalcoholic fatty liver disease, which showed relative liver fat reduction of over 80% at 24 weeks for the doses. Slide 16 highlights key results from the obesity Phase II trial in which retatrutide met the primary endpoint at 24 weeks, demonstrating mean weight reduction up to 17.5%. The safety profile of retatrutide was similar to other incretin-based therapies. In a secondary endpoint of weight reduction at 48 weeks, participants treated with the highest dose of retatrutide demonstrated a mean weight reduction of up to 24.2% or almost 58 pounds on average. If confirmed in registrational trials, we believe that magnitude of mean weight reduction would represent a new high watermark for weight loss from a pharmacologic agent at this time point. It's also worth noting that the Phase II retatrutide trial in obesity was well balanced between genders with females representing just under half of all participants in the trial. This was intentional and is atypical for incretin clinical trials in obesity, which often have a higher proportion of female participants, a subgroup that typically experiences greater weight loss than males. Indeed, in the retatrutide Phase II obesity trial, the mean change in body weight for female participants at the highest dose was 28.5%. Given these encouraging results, we moved rapidly to initiate the Triumph Phase III program, which will evaluate the safety and efficacy of retatrutide for chronic weight management, obstructive sleep apnea and knee osteoarthritis in people with overweight and obesity. These four Phase III trials will each run between 68 and 80 weeks. The trajectory of weight loss seen in the Phase II study reinforces our belief that retatrutide can potentially represent a further improvement and additional option for patients seeking pharmacological treatment for obesity and its complications. While retatrutide's Phase II results in obesity garnered much attention at ADA, the Phase II results in patients with type 2 diabetes are also very encouraging with participants receiving retatrutide achieving a hemoglobin A1c reduction of up to 2% on average in addition to meaningful levels of weight loss. I'm pleased to share that we plan to advance retatrutide into Phase III for type 2 diabetes. Moving to tirzepatide on Slide 17. We were delighted to announce in late July that SURMOUNT-3 and SURMOUNT-4 trials of tirzepatide in obesity met all primary and key secondary objectives. In key secondary objectives for both these studies, participants achieved similar mean weight reduction, 26.6% in SURMOUNT-3 and 26.0% in SURMOUNT-4. While these two trials were not required for our chronic weight management submission to the FDA, they provide important additional information regarding the role tirzepatide plays in maintaining or adding to the weight loss achieved with either intensive lifestyle intervention or pharmacotherapy in adults living with obesity or overweight. SURMOUNT-3 evaluated tirzepatide following an intensive lifestyle modification program and demonstrated that even in people who have a weight loss response to lifestyle intervention, tirzepatide provides significant additional weight loss. SURMOUNT-4 was a randomized withdrawal study in which all participants received tirzepatide for a 36-week lead-in period, at which point, half the participants were switched to placebo and the other half continued treatment with tirzepatide. This study demonstrated that those participants who continued on tirzepatide experienced continued weight loss, while those who switched to placebo started to regain weight. These data reinforce our understanding that obesity is a complex chronic disease for which multiple treatment approaches, including lifestyle modification and effective medications, are needed. We believe tirzepatide is well-positioned to be one such treatment option. Accordingly, we submitted an application for tirzepatide for chronic weight management to the FDA during Q2. The FDA granted this application priority review designation, and we anticipate FDA action by year-end. Slide 18 shows select pipeline opportunities as of August 4, and Slide 19 shows potential key events for the year. I've covered the major updates in diabetes, including the advancement of orforglipron and retatrutide into Phase III since our last earnings call. Turning then to our neuroscience portfolio. Three weeks ago at the AIC meeting in Amsterdam and simultaneously published in JAMA, we were excited to share the detailed results from the TRAILBLAZER-ALZ 2 study, highlighting donanemab's robust efficacy profile across a number of new analyses that reinforce our belief in the medicine's ability to meaningfully slow the progression of Alzheimer's disease, especially in patients earlier in disease progression. We covered the results in some detail during our AIC investor call, so I won't cover that again, except to note that we submitted donanemab to the FDA and to the EMA for approval, and we look forward to FDA action before the end of this year. Shifting to oncology, launch progress continues with Jaypirca and mantle cell lymphoma, and we are pleased to have the detailed chronic lymphocytic leukemia results from the BRUIN Phase I/II trial published in New England Journal in early July. Following the discussion with the FDA, we've now submitted an application for accelerated approval for Jaypirca in CLL patients previously treated with both a covalent BTK inhibitor and venetoclax based on the results from the BRUIN Phase I/II study. We expect FDA action by year-end. Also during the quarter, we completed the regulatory submission in Japan for pirtobrutinib for patients with MCL. We continue to study pirtobrutinib in multiple Phase III trials and look forward to the results from the BRUIN 321 trial in CLL, which we now expect to see before the end of this year, and it has been added to our key events slide. In other oncology developments, at ASCO in June, we presented new data from the Verzenio monarchE trial in high-risk early breast cancer. For the first time, we showed data demonstrating the efficacy of the medicine in this setting is not compromised when patients undergo dose reductions. We believe that the ability to manage Verzenio's side effects while preserving efficacy could be very important to ensuring that patients complete their two years of therapy. This is an emerging part of Verzenio's differentiation in this class. We're also very excited about last week's announcement regarding the randomized trial of Retevmo in treatment-naive RET fusion-positive lung cancer. As we communicated in the press release, this randomized trial was declared successful on its primary endpoint of progression-free survival, the first time any targeted therapy in lung cancer has ever shown superiority to a PD-1 plus chemotherapy regimen. While we remain disappointed by the low levels of genomic profiling done at the time of lung cancer diagnosis, we're hopeful that these data will continue to advance the practice of genomic-driven medicine. We look forward to sharing the full results of the study at an upcoming medical meeting. In our earlier-stage oncology portfolio, the combination experiment of our KRAS G12C inhibitor with pembrolizumab continues to mature nicely, and we're now working to initiate Phase III trials in first-line G12C-mutated lung cancer in the next six to nine months. More broadly, we're excited to see the overall progress of our oncology portfolio. In addition to last week's Retevmo announcement, we expect another seven randomized trial readouts in four to six new first-in-human trials across small molecules and biologics in oncology over the next 12 months. With the acquisition of Loxo Oncology four years ago, we catalyzed a change in the strategy and direction of oncology at Lilly, and we're seeing the fruits of these efforts. Finally, in immunology, we have several updates related to mirikizumab. A Digestive Disease Week in May, we presented new analyses from the Phase III LUCENT-1 and LUCENT-2 studies, demonstrating that remission of key symptoms of ulcerative colitis, including bowel urgency, was associated with significant improvement in the quality-of-life assessment in adults with UC. In Q2, we launched mirikizumab marketed as Omvoh in Japan as a treatment for adults with moderately to severe active UC. In late May, we received approval for Onvio in the EU and have subsequently launched Omvoh in Germany and planned additional launches in the EU later this year. In the U.S., we've resubmitted our application to the FDA. We now expect regulatory action by the end of this year. For lebrikizumab, our IL-13 monoclonal antibody under regulatory review for atopic dermatitis, we presented a new secondary analysis at the Revolutionizing Atopic Dermatitis Conference in May. This post-hoc analysis demonstrated improvement or clearance of face or hand dermatitis in adult and adolescent patients treated with lebrikizumab. These are parts of the body that are highly visible and for which dermatitis can be particularly burdensome and stigmatizing. We expect regulatory action for lebrikizumab in both the U.S. and EU later this year. Together with Almirall, our development and commercialization partner in Europe, we look forward to potentially bringing this important medicine to patients who suffer from this chronic disease. Looking earlier in our immunology pipeline, we're pleased in May to have the detailed results from our Phase IIa study of peresolimab in rheumatoid arthritis published in the New England Journal. These data were first presented as a late-breaking abstract at the American College of Rheumatology Annual Meeting in late 2022 and represent the first clinical evidence that stimulating the endogenous PD-1 inhibitory pathway could be an effective approach to treat rheumatologic disease. As you can see, Q2 was another productive quarter for Lilly R&D with important progress in each of our therapeutic areas. Now I'll turn the call back to Dave for closing remarks.

Thank you, Dan. Before we go to Q&A, let me briefly sum up our progress in the second quarter. This quarter saw an acceleration of revenue growth as our recently launched product portfolio gathers momentum. Excluding COVID-19 antibodies and Baqsimi revenue, we grew 22% driven by Mounjaro, Verzenio and Jardiance. The quarter also saw a continuation of investment in our future growth in manufacturing expansion, late-stage medicines, early phase capabilities, and business development. Notwithstanding these long-term investments, we continue to expect our revenue will grow more rapidly than our expense base in the coming years and see significant opportunity for margin expansion. We also achieved meaningful advances in our near-term pipeline with positive phase results, detailed data disclosures, and submission of donanemab for traditional approval to the FDA and EMA, and completion of the tirzepatide submission in chronic weight management, alongside positive top line results from two more Phase III trials for the SURMOUNT program. We also shared data from four mid-stage clinical trials for orforglipron and retatrutide and initiated Phase III trials for both assets. Lastly, we announced several targeted business development moves intended to bolster our early- and mid-stage portfolio and our R&D capabilities, and we returned over $1 billion to shareholders via the dividend. Now I'll turn the call over to Joe to moderate the Q&A session.

Thanks, Dave. We want to take questions from as many callers as possible and wrap up our call on time. Paul, please provide the instructions for the Q&A session, and then we can move on to the first caller.

Just wanted to ask you about the Novo SELECT study that came out this morning. What kind of read-throughs do you see for the industry? And do you think it will help improve reimbursement for obesity and overweight drugs?

Thanks, Louise. We'll go to Mike for that question on the recent SELECT news.

Thanks, Louise. I assume we probably would get a question on the SELECT trial, and thanks for starting out the call with that. The SELECT trial read out as we expected. I think the results are great for the anti-obesity medication class. It should really support access for any payers who are on the fence of whether they should add anti-obesity medications or not. I think importantly, it should turn the conversation of the benefits of weight loss away from aesthetics and more toward the health benefit for people living with obesity. When you look overall, there are 236 obesity-related health complications. To name a few, obesity increases the risk of type 2 diabetes by 243%, coronary heart disease by 69%, hypertension by 113%, dyslipidemia by 74%. The overall cost of obesity-related complications and comorbidities are massive, accounting for $370 billion in direct medical cost, over $1 trillion in indirect annual costs in the U.S. People living with obesity or overweight drive 2.7 greater health care costs than normal-weight individuals. The global health stakeholders really need to be moved beyond the debate and really move to action on the AOM class. With tirzepatide's potential to provide over 20% weight loss, it should provide great value for payers. We have a comprehensive real-world evidence plan and clinical plan to demonstrate tirzepatide's value, including our MMO OUTCOMES trial. Based on the SELECT trial results, we can't wait to see the results of tirzepatide/MMO study. We do believe that additional weight loss will matter. This is a fantastic day for people living with obesity. Now do I think most payers will adopt AOMs overnight because of SELECT trial? I don't think so. I think, as I said earlier, those who are on the fence, this will push them over. But I think it is an important milestone in a long-term goal to get broad access for anti-obesity medications.

I know that we're a year into the program, but I wanted to get a view of persistent rates. The question is, are you seeing drug holidays after weight loss troughs? And I wasn't sure if there were differences between diabetes and obesity indications at this point just with regard to duration of use.

Thanks, Geoff. I'll go back to Mike for that question on persistence rates of Mounjaro.

Okay. Geoff, thanks for your question. Right now, we only market Mounjaro for type 2 diabetes. So the only end-market real-world persistency rates that we have are for Mounjaro in type 2 diabetes patients. What we do know is that people living with type 2 diabetes have had good experiences with Mounjaro. In the first launch, like at the first phase of launch before we've made savings card and experienced supply spot outages, type 2 diabetes patients with Mounjaro did have better persistency than Trulicity, which is important because Trulicity historically has had the best compliance in the diabetes market. So we're confident in the experiences that people who use Mounjaro for type 2 diabetes have. And we're excited to see what that will be for people living with product weight management when and if we get approved by the FDA.

So just going back to SELECT, a commonly held view is that positive results benefit every company in the category. And that's our view as well. But of course, Novo will be able to make the claim for quite some time that they're the only drug to have a proven cardiovascular benefit. So could that actually give them a big commercial advantage in the marketplace on things like payer coverage that would actually be to Lilly's detriment?

Thanks, Tim. I'll go back to Mike for that question, a follow-up on SELECT.

No, it's a good question. I don't think that will be the case. What we've seen is payers opt into the class, not a particular drug. So I don't think that will give them a differential impact within payer access. I think commercially, typically, health care professionals when they see results like this, it really helps the class more than any one individual product.

On the guidance, please, on OpEx. So clearly, operating costs are higher than at least the market anticipated in Q2. And you are now guiding to spend more on SG&A R&D through this year. So I'm just interested to learn more about what has changed through this quarter to continue to raise that OpEx outlook versus your previous record. Can you elaborate on the key drivers of that, please?

Thanks, Kerry, for the question. And yes, we'll go to Anat with that commentary on the OpEx guide and additional context.

Thanks, Kerry, for the questions. So we have raised, you're right, both SG&A guidance as well as R&D. The SG&A increases are primarily as a result of continued investment in the upcoming launches we have yet this year. As we're seeing the opportunities, we're excited to invest efficiently behind these opportunities and make them a reality for patients and for Lilly. On the R&D side, Dan provided a robust outline of the progress we've seen in our pipeline. And there are really, I would say, three to four key drivers of that increase. One is additional new studies that we've announced primarily in Phase III. And you mean the broadening of the investments we're making in our incretin portfolio, initiating multiple Phase III studies for both orforglipron and retatrutide and announcing new studies, coupled with continued advancement. We're seeing great success in our early-stage pipeline and we're investing behind that. We're also seeing continued success in our enrollment rates for currently for our Phase III program. So that's continued to enroll well. And then the three business development transactions, the inbound that we've announced, are now going to be incorporated in our second half R&D run rate. So all these combined are the drivers of the increase this year. So they represent really a tremendous opportunity for continued investments in a very successful pipeline.