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Executives

Philip Johnson

Enrique A. Conterno - Senior Vice President and President of Lilly Diabetes

David Kendall

Mary Jane Geiger

Melvin Prince

John Beals

Scott Jacober

Analysts

David Risinger - Morgan Stanley, Research Division

Mark J. Schoenebaum - ISI Group Inc., Research Division

Catherine J. Arnold - Crédit Suisse AG, Research Division

Christopher Schott - JP Morgan Chase & Co, Research Division

Alex Arfaei - BMO Capital Markets U.S.

Eli Lilly and Company (LLY) Lilly Diabetes Pipeline Update Call June 11, 2012 7:00 PM ET

Philip Johnson

All right. Good evening. Welcome to Lilly Diabetes Pipeline Update. I'm Phil Johnson, the Vice President of Investor Relations. This is a very exciting time for Lilly Diabetes, and we're very pleased to have this opportunity to talk with you about data that has been presented recently on 2 of our 4 Phase III diabetes molecules, our novel basal insulin analog, as well as our GLP-1 agonist, dulaglutide. Tonight, we'll begin with some remarks from the President of Lilly Diabetes, Enrique Conterno. Then, after David Kendall, Distinguished Medical Fellow will talk about data that has been presented over the past few days at the ADA meeting across the Street for our novel basal insulin analog. Then, Dr. Mary Jane Geiger will talk about dulaglutide, focusing on some of the Phase II hemodynamic study data that was presented at the ASH meeting in May. Finally, we'll have a Q&A session with our presenters. We're also joined today by a number of Lilly Diabetes management as well as our Chief Scientific Officer, Dr. Jan Lundberg. Following the Q&A session, Lilly management will be available for some informal interaction.

Now we will make statements during today's presentation and during the Q&A session that do contain forward-looking statements and are based on current estimates. Actual results could differ materially due to a variety of factors, including those listed on Slide 2. And for a full list of the factors that can affect our business, please go ahead and refer to our Forms 10-K and 10-Q filed with the Securities and Exchange Commission. The information provided about our pipeline and products is for the benefit of the investment community and is not intended to be promotional and is not sufficient for prescribing decisions.

Now it's my pleasure to turn the meeting to Enrique Conterno.

Enrique A. Conterno

Thank you, Phil. I'm delighted to have this opportunity to share with you our exciting future in Lilly Diabetes. Our Phase III pipeline is one of the broadest and most innovative pipelines in diabetes curve today. With 4 potential regulatory submissions within the next 2 years, we have the opportunity to help even more patients improve outcomes and drive significant growth for our business.

Before I move into the presentation, I'd like to acknowledge our colleagues at Boehringer Ingelheim. Lilly and Boehringer are partnering on 3 of the 4 molecules I would be highlighting today, empagliflozin and the 2 basal insulins. This is an addition of course to Trajenta, which we have launched now in over 20 markets worldwide.

I'd like to start with a brief overview of our late-stage pipeline. As you know, Lilly's strategy is based on innovation. It is innovation that will enable us to breach the current period of patent expirations, drive future growth and create shareholder value. Lilly today has 12 molecules in Phase III. The fact that 8 of these 12 are large molecules attest to our biotech expertise.

These 12 potential new medicines target diseases in large unmet -- with large unmet needs; neuroscience disorders, including Alzheimer's, cancer, autoimmune diseases and of course diabetes. With this pipeline, we expect to return the company to growth after 2014 and Lilly Diabetes is expected to play a pivotal role. As I outlined at our Investor Presentation last June, our diabetes strategy includes offering a broad portfolio of solutions, including oral treatments, GLP-1s and a full range of insulin products.

We believe that our broad portfolio will allow us to best support the needs of the world's large growing and diverse population of people with diabetes, by offering a comprehensive portfolio of treatment along the continuum of care, as well as delivery devices, patient support programs and other resources, we believe Lilly Diabetes, together with our partners, can offer personal solutions that are valued by patients, health care professionals and payers. This broad complementary portfolio is not a distant dream. We could be making 4 new product submissions in 2013, 2014, positioning Lilly Diabetes to play a critical role in driving the corporation return to growth post-2014.

I'll provide now a brief snapshot of each of these 4 Phase III molecules. First, empagliflozin is an SGLT2 inhibitor, which we're partnering with Boehringer Ingelheim. As you know, through our alliance with BI, we now have a presence in the growing and very important oral segment, first, of course, with Trajenta and soon we anticipate with empagliflozin. Our pivotal trial for empagliflozin will complete this year with a possible submission in the U.S. and Europe in 2013. Yesterday, we shared some new 90-week Phase II data on empagliflozin and specifically, the results show empagliflozin alone or as an add-on to metformin, reduce hemoglobin A1C, fasting plasma glucose and body weight when given to adults with type 2 diabetes. These additional results with empagliflozin provide important information on the use of empagliflozin in type 2 diabetes and support our Phase III trials, which are underway to confirm the drug's efficacy and safety.

Let me next highlight dulaglutide, which Lilly is developing independently. You will hear more about dulaglutide, our once weekly GLP-1 analog, and the readout from our recent ambulatory blood pressure monitoring study later in our program. Our study was the first large prospective randomized trial using ABPM to assess the long-term effects of a GLP-1 analog on both blood pressure and heart rate. We are very encouraged by the clinical trial results. Phase III trials are underway to further confirm an emerging profile for dulaglutide that could potentially combine in one medicine a series of compelling attributes, including efficacy, tolerability and ease-of-use. Registration trials are expected to complete during 2012 and early 2013, and could support the regulatory submission in 2013.

I will turn now to our basal insulin candidates. Insulin remains the largest segment in diabetes care when it comes to revenue. As the global population of people with diabetes grows, we expect this market segment, and in particular, the market segment for products that offer meaningful clinical differences to continue to grow. Until now, we have not had a presence in basal analogs. We expect to change this with not 1 but 2 basal insulins in late stage development. We are developing both with Boehringer Ingelheim. Phase III trials for our new insulin glargine products are now underway and if successful, we could submit this product to regulatory authorities in 2013. As we have said in the past, we intend to leverage our considerable manufacturing capacity, as well as our device capabilities to deliver a very competitive product.

Finally, let me highlight our novel basal insulin. In just a moment, Dr. Kendall will provide what I think are compelling data on our innovative basal insulin. Based on studies completed, our innovative basal insulin appears to work preferentially in the liver, which is more like the body's own insulin. Dr. Kendall would explain the potential for clinical benefits above existing insulin therapies, including glycemic control, hypoglycemia, glucose variability and weight. That is a pretty tall order but so far, we like what our data are telling us as you will hear very shortly.

To summarize, we believe that each of these 4 Phase III molecules will offer value to our customers, and offer attributes that are very relevant in the world of diabetes. We are excited about the quality of our late-stage assets and our potential to make a real difference in the lives of people with diabetes.

I will now turn the program over to Dr. Kendall.

David Kendall

Well, thank you, Enrique, and good evening to all of you, who are joining us not only here in Philadelphia but remotely. It's both an honor and a pleasure to have the opportunity on behalf of innumerable colleagues in our discovery development and medical team here at Lilly Diabetes to provide you a summary of data that many of you here at the meetings have seen presented in both poster and oral abstract sessions during the course of the 72nd scientific session of the American Diabetes Association. And as Enrique alluded to, we've very pleased to have the opportunity to make the disclosure of the Phase II clinical trials with our novel basal insulin analog available and provide you this evening not only with a summary of these data but a perspective both on some of the potential novel characteristics and a glimpse of our Phase III development program for this novel basal insulin. As Enrique also alluded to, we're pleased to develop these basal insulin assets in collaboration with our partners at Boehringer Ingelheim.

So for a background and perspective on the discussion of this novel basal insulin, which for the sake of brevity and clarity, I will occasionally refer to as the LY insulin assets, I'll give important and we feel critical background, not only on the unmet need in insulin therapies, but also on the basis of naturally occurring insulin physiology, that is the physiology of so-called endogenously released insulin, and an understanding of the effects and the physiology of currently available exogenously administered insulins. We'll provide this as important background in an attempt to put forth to you, our working hypothesis on some of the potentially unique, both clinical and mechanism of action attributes that the LY insulin assets may possess.

Most of you who have been present at this and other scientific meetings are well aware of the significant and growing unmet need, not only in insulin therapies, but for the care and treatment of both type 1 and type 2 diabetes, in particular, related to insulin therapy's simplicity and convenience of dosing that will provide not only patients the tools that are required to better manage their diabetes but we would hope would reduce the clinical inertia and allow providers with their patients to not only initiate insulin therapy when appropriate but do titrate that therapy to the best clinical effects possible. Obviously, this goes along with the needs of not only insulin therapies with diabetes therapies in general for patients with special needs, including those with significant complications of diabetes, including renal disease. In addition as Enrique alluded to, one of the significant potential limitations of titrated insulin therapy has been the insulin-associated weight gain that occurs and may further impair the interest and intensity with which providers and patients manage insulin therapy in both type 1 and type 2 diabetes.

So for background to the physiology, I wanted to first provide a brief schematic representation of this novel basal insulin analog, which is built upon the insulin lispro backbone. That is insulin lispro currently marketed as Humalog we then modified with the covalently bound polyethylene glycol moiety. This PEG moiety when added to lispro results in unique physicochemical characteristics of this novel basal insulin analog represented on the right-hand portion of this figure. This large physicochemical size is estimated to measure between 71 and 98 kilodaltons. And the importance of this large physicochemical size is highlighted by the fact that this is not only as large but estimated to be larger than the most common circulating and ubiquitous albumin protein. We know that albumin in particular has varying access to tissues due in part to this large size and it would be anticipated that these physicochemical characteristics would not only provide the potential for unique absorption and distribution characteristics, but also potentially alter its activity profile and its elimination.

Well, this is a detailed slide of the understanding of the physiology of both endogenous, or naturally released insulin, as well as an understanding of the physiology of currently available exogenously insulin. This is critical to the grounding of the understanding of the potential for this novel basal insulin to exert its effect in unique ways. Shown on the left-hand side of this figure is not only in the graph at the top, the estimated relative effect of secreted insulin on the liver or hepatic tissues but also the relative affect in peripheral tissues, in particular, muscle and fat.

It's obviously known that naturally occurring insulin is released directly into the portal vein and first acts at the level of the liver, acting on hepatocytes, and indeed undergo significant so-called first pass hepatic metabolism with the significant majority of secreted insulin not only acting but being cleared by the liver. This results in a relatively greater effect in the hepatic tissues and a lesser effect in peripheral tissues, in particular, muscle and fat as described here.

However, there are important checks and balances and important physiological understandings in these peripheral tissues, namely, that insulin both in the basal or fasting state as well as following meals, needs to be present in appropriate amounts and act to specific levels to allow for appropriate glucose disposal. An uptake into muscle, but particularly during prolonged periods of fasting, which often occur overnight, that those insulin levels in insulin action need to be appropriately low so that excess glucose uptake is not promoted, increasing the risk for hypoglycemia.

In addition, there are important effects of peripheral insulin on the regulation and metabolism of fat. At high insulin concentrations, there is the promotion of fat uptake and storage of fats in adipose tissues. The naturally occurring relatively lower peripheral activity of insulin that is naturally released results in a maintained balance between fat storage and fat liberation, allowing for fat to be utilized during periods of fasting and to allow for controlling excess fat deposition during food intake.

In the middle is the important understanding of currently available exogenous insulins and their same actions. Exogenous insulins that are administered subcutaneously, are absorbed into the peripheral circulation and not directly delivered into the hepatic circulation as with endogenous insulin. This results in an imbalance and significantly greater peripheral activity relative to the hepatic activity with the currently available exogenously administered insulin. The implications of this are not only this loss of natural balance between hepatic and peripheral activity but the potential for exogenously administered insulins available in their current forms to promote glucose uptake at higher levels even during periods of prolonged fasting, which would result clinically in an increase in the risk of nocturnal hypoglycemia.

In addition, it's known that exogenously administered insulins in their current form can promote significant clearance of circulating fats or free fatty acids from the circulation, which may, in great part, contribute not only to the lowering of triglyceride levels seen with insulin administration but an increase in the uptake of fat into adipose tissue or fat cells. This is one of the significant mechanisms that contributes to insulin-associated weight gain.

So finally, to provide you a perspective on our current hypothesis for the actions of our novel basal insulin analog, I'll refer to the right-hand portion of the figure. Given our understanding of the physicochemical size and the potential for this insulin because of the size to act preferentially on the liver, it is estimated that there is a restoration or at least a return towards the normal balance of hepatic versus peripheral activity. The consequences of this can allow us to understand or at least propose the hypothesis that with the administration of this novel basal insulin analog, we to return closer to the necessary balance of peripheral insulin activity during the fasting state and restore some of the normal balance in the metabolism of peripheral fat and storage of fats in fat tissues.

This would be anticipated at the level of the muscle and particularly with the basal insulin during prolonged periods of fasting overnight to result in the potential for a reduced risk of nocturnal hypoglycemia and, if indeed fat metabolism is affected, much more like endogenous insulin with hepatic preferential action to decrease the risk of fat deposition and insulin-associated weight gain. We'll return to that issue this effect on peripheral fat cells as we discuss some of the results of lipid profiles in these studies.

To provide one piece of additional background, single-dose studies with LYs compared to glargine have been previously performed and the data are shown here on the left-hand side of the figure, demonstrating glargine in blue and our novel basal insulin analog shown in red. These data supports the known profile of glargine with its absorption over the first 48 hours after a single subcutaneous injection and action that rises and falls over an approximate 24-hour period shown here at 2 separate doses.

Compare this to the same single dose studies with our novel basal insulin or the LY insulin asset, which, given as a single of dose, show the same increase in insulin action over these first 4 to 8 hours but consistent and in fact flat insulin effect over a period in excess of 24 hours. In multi-dose studies in patients with type 2 diabetes, this has demonstrated that after one week of administration, we achieved these flat and consistent doses, which give low peak-to-trough variability of insulin effect, as well as low PK variability within patients, which would be anticipated to result in a consistent insulin effect or insulin profile.

So let me now take the majority of this section to review with you data that many of you have seen at the sessions here in Philadelphia, that is, both the Phase II study design and a high-level summary of the results. As many of you may recall, these studies were performed both in patients with type 1 and type 2 diabetes. Those insulin requiring patients with type 1 diabetes shown in the upper portion of this figure received either randomization to our novel basal insulin or insulin glargine substituted for their usual basal insulin treatment with glargine and continued mealtime insulin therapy. These adult patients with inadequate glycemic control were then after 8 weeks of therapy crossed over to the alternate or comparative compound and the results will be shown for the 8 weeks of active treatment both with the LY insulin asset and glargine. This allows not only comparison of patient effects on the 2 insulin therapies but allows patients to serve as their own control for comparison.

This study differs in construct from that performed in type 2 diabetes, where patients inadequately treated on existing basal insulin therapy, the majority on insulin glargine, were randomized either to 12 weeks of treatment with our novel basal insulin or with insulin glargine, both insulins titrated to pre-specified fasting glucose targets.

Shown here are the summary of the primary endpoint in the study of patients with type 1 diabetes. On the left-hand portion is the baseline mean fasting glucose or mean daily blood glucose, pardon me, shown in black and the improvements and mean daily blood glucose observed with both glargine and the LY compound in these patients with type 1 diabetes. Treatment with the LY compound during that active interval of titration and therapy resulted not only in non-inferior controlled insulin glargine but indeed by this measure of mean daily blood glucose over 8 weeks of therapy, showed significantly greater reductions in mean daily blood glucose in patients with type 1 diabetes treated with this novel basal insulin analog.

Shown on the right-hand portion of this figure are the details of the time points demonstrating that in particular, those periods later in the day showed significantly lower blood glucoses in patients during the interval of treatment with the novel basal insulin analog. While 8 weeks of therapy is generally considered too short a period of time to utilize the gold standard for overall glycemic control or hemoglobin A1C, these values were collected as a secondary endpoint in this trial.

And again, bearing in mind the crossover nature of the study design, you can see on the left-hand portion of the figure, the improvements in hemoglobin A1C that occurred with titrated basal insulin therapy in both treatment groups over the first 8 weeks of therapy followed by the pattern of that improvement following conversion to the novel basal insulin. While again both approaches to titrated basal insulin in type 1 diabetes demonstrated significant improvements in hemoglobin A1C, there were significantly greater reductions in A1C seen in patients during active treatment with our novel basal insulin analog.

Shown here are the results of glycemic control and the primary endpoint for the study in patients with type 2 diabetes. A reminder again that these individuals were receiving basal insulin at baseline but were -- had inadequate glycemic control and were then randomize either in blue to insulin glargine or the data shown in red to the novel basal insulin analog. The primary endpoint was fasting blood glucose over the 12 weeks of therapy either measured by self-monitored blood glucose or a central laboratory measure and as you can see on the left-hand portion, significant improvements in fasting blood glucose with titrated basal insulin glargine and our novel basal insulin analog. Again, as with the results in type 1 diabetes, the improvements in glycemic control as measured here were non-inferior when comparing our novel basal insulin to the most commonly used basal insulin in type 2 diabetes, insulin glargine.

As with the type 1 diabetes study, hemoglobin A1C values were also reported and as a secondary endpoint, you can see moving from the left to the right-hand portion of this figure, significant improvements in the hemoglobin A1C and in both groups approaching, but not achieving the recommended average A1C target of less than 7%, but significant improvements in both groups and indeed, treatment with the novel basal insulin was non-inferior to titrated insulin glargine.

Let me move now to the results of the impacts of these basal insulin therapies on body weight. Shown that again here first, the results in the study of patients with type 1 diabetes. Shown on the left-hand portion of this figure, patients first receiving glargine shown in blue versus those with our novel basal insulin shown in red and then after the crossover period, the run chart of time course and the change of body weight. And for both brevity and knowing that many of you have seen these data, the summary of the comparison of patients with type 1 diabetes actively treated with our novel basal insulin versus the time period during their treatment with insulin glargine, showed not only significant weight reductions during treatment with our novel basal insulin, but significantly lower body weights when compared to patients with insulin glargine, who on average, gained body weight.

At the end of this 8 weeks of treatment, our novel basal insulin analog had a body weight that was 1.9 kilograms lower than those -- than during the treatment interval with insulin glargine over 8 weeks of therapy. Shown here are similar results for patients with type 2 diabetes, again randomized to either basal insulin glargine or our novel basal insulin analog. As is commonly seen with titrated basal insulin therapies currently available, there was weight gain that occurred over the 12 weeks of therapy when insulin glargine was utilized, averaging approximately 0.3 kilograms, with weight reductions seen following conversion from their usual basal insulin to our novel basal insulin analog with the weight difference at the end of the 12 weeks of therapy comparing our novel basal insulin to insulin glargine of approximately 0.8 kilograms.

One of the most important, if not the most important safety measure understood when assessing insulin therapy, is not only in the clinic but in clinical trials of diabetes compounds, is the rates of both total and nocturnal hypoglycemia. The results of those measures for the study in patients with type 1 diabetes are shown here, again, insulin glargine in blue and the novel basal insulin shown in red. Treatment with the novel basal insulin analog resulted in modest but increased rates of total hypoglycemia during the 8 weeks of active treatment with the novel basal insulin. But in contrast, significantly lower rates of nocturnal hypoglycemia when basal insulins are acting in the absence of food intake and generally in the absence of both food intake and activity. So this decrease in the rates of nocturnal hypoglycemia likely represents one important measure of the effect of basal insulin in these patients with type 1 diabetes and I would emphasize that lower rates of nocturnal hypoglycemia were seen with our novel basal insulin analog.

In patients with type 2 diabetes shown here as both the proportion and the event rate of both total and nocturnal hypoglycemia rates [ph] , you can see emphasizing on the left, the total rates of hypoglycemia on the left-hand side of both figures, the total rates of hypoglycemia were comparable when patients with type 2 diabetes used either insulin glargine or our novel basal insulin analog, but that there were significant reductions in both the rate and the total incidence of -- nocturnal hypoglycemia events when treated with the novel basal insulin analog. So again, during periods of fasting and particular, overnight when basal insulins are often acting unopposed by food intake and unaffected by activity, there were significantly lower rates of hypoglycemia seen during treatment with our novel basal insulin analog.

As many heard during the oral abstract session today, a sub-study of patients with type 2 diabetes was performed utilizing continuous glucose monitoring. This allowed us capture not only reported events and recorded self-monitored blood glucose hypoglycemic events, but actually allows an estimation of the proportion of time patients may spend during a 24-hour period with blood glucose values below a pre-specified range. Shown on the left are the rates of total time spent with blood glucose values less than 70, one estimate of the potential risk for hypoglycemia.

Shown in blue is the increase in the total time spent with blood glucose values below this range during active treatment with titrated insulin glargine with no significant increase in the total time is spent during hypoglycemia in patients receiving the novel basal insulin. In that comparison, there were significantly lower rates of time spent below this blood glucose value not only in totality through the day but during the nighttime period as well. So continuous blood glucose monitoring in this sub-study provided another qualitative estimate of the potential risk of both total and nocturnal hypoglycemia as measured by the time spent with blood glucose values below these ranges.

I alluded earlier to the important balance of peripheral insulin versus hepatic insulin action and the known balance in this action with endogenously secreted insulin and the known data with currently available exogenous insulins. Importantly in the middle portion of this figure, we know that the relatively higher peripheral action of exogenously administered insulin available in its current forms not only allows for a promotion of fat storage or lipogenesis, but suppresses lipolysis and this clinically results in the reduction in circulating free fatty acid and triglyceride levels.

One potential consequence of approaching or attempting to reestablish the balance between peripheral and hepatic insulin action is shown by working hypothesis on the right, where reduced peripheral action in this hypothesis as to the action of our novel basal insulin would results in a decrease in the potential promotion of lipid or free fatty acid storage and the potential to re-liberate or reestablish the so-called metabolic flux or use of fats during the period of fasting. This would be expected to release free fatty acids, generally in the form of triglycerides rich lipoproteins into the circulation for recirculation back to the liver for use either as energy or for repackaging in lipoprotein particles. The detail behind this is again important as a working hypothesis to try to help us understand some of the potential impacts in both body weight as described and circulating lipid levels.

Shown here are the lipid concentrations during the periods of treatment with either insulin glargine or with our novel basal insulin patients with type 1 diabetes as well as the routine -- routinely monitored hepatocellular enzymes, ALT and AST. As was previously reported at this meeting in the poster session, patients receiving insulin glargine had no significant change in either HDL, LDL or triglyceride, while patients receiving our novel basal insulin analog, when converted from their usual basal insulin glargine therapy, demonstrated a small but significant increase in circulating triglyceride concentration.

It should be noted that the mean value fall still within the recommended range by the National Cholesterol Education Program but this increase in triglyceride was also associated with a small but significant reduction in HDL-cholesterol and an increase in LDL-cholesterol concentrations. The liver function studies shown here which were previously reported also showed modest increases of both ALT and AST. And while mean values fell within the normal range for both of these measures on average, these values did significantly increase during periods of treatment with our novel basal insulin.

Shown here are the same results for both lipids and liver function studies in patients with type 2 diabetes. And while comparable or similar patterns in the liver function studies were shown in patients receiving the novel basal insulin in the setting of type 2 diabetes, in contrast to those with type 1 diabetes, there were no significant changes in either HDL cholesterol or LDL cholesterol. But again, as might be anticipated from the proposed working hypothesis of the mechanism of action, if free fatty acid liberation is allowed when attempting to reestablish this balance between peripheral and hepatic insulin action, there was a small but significant increase in the circulating concentrations of triglyceride.

So with these data, we're obviously both pleased to have the opportunity to present the results of these Phase II clinical trials, but also this provides us the opportunity to now give you background as to our ongoing Phase III development program. Obviously, the encouraging results of these Phase II programs have allowed us to proceed with the continued development of this novel basal insulin an I'll conclude by providing a brief summary of our large and ongoing Phase III or so-called IMAGINE program. Again, we're partnering with our alliance partner, Boehringer Ingelheim, on this comprehensive Phase III clinical program using this novel basal insulin and currently have underway 5 pivotal trials in both type 1 and type 2 diabetes focusing specifically on the capacity of this novel basal insulin to not only improve glycemic control, but improve glycemic control and make comparisons to the most commonly utilized basal insulin, that is insulin glargine.

This treat-to-target approach will allow for careful assessment of the improvements in glycemic control, the primary measure of insulin efficacy required. And in addition, 3 of these studies are uniquely blinded in a vial and syringe blinding approach. This allows for careful assessment not only of improvements in glycemic control but will allow these studies to be statistically powered for an assessment of the difference in the rates of both total and nocturnal hypoglycemia. In addition, a series of additional Phase III clinical trials are planned and being developed that will allow us to further support both the clinical differentiation and better understand the potential mechanisms by which this unique and novel basal insulin exerts its clinical and mechanistic effects.

So in summary, again, I'm pleased to have the opportunity on behalf of all of my colleagues and in particular the patients who volunteered for this in many clinical trials to allow the assessment of potentially unique compounds to meet unmet needs in diabetes. We've reviewed the improved glycemic control seen with titrated novel basal insulin when compared to insulin glargine in both type 1 and type 2 diabetes and have demonstrated non-inferiority in both comparisons and indeed superiority in mean daily blood glucose over 8 weeks of therapy with the novel basal insulin in the setting of type 1 diabetes.

In addition, we've reported these early short-term Phase II results and the impact on both body weights and rates of total and nocturnal hypoglycemia. And we feel that the results from these Phase II studies not only provide the support for our ongoing development program but provide additional insights into both the mechanistic and clinical studies that will be part of our comprehensive Phase III program to allow for further differentiation and to assess the full efficacy and safety and evaluate the clinical significance of these changes in the management of their type 1 and type 2 diabetes.

So with that, thank you again for this opportunity and for your attention this evening, and I'm pleased to turn the podium over to my colleague, Mary Jane Geiger, who will report on our dulaglutide investigational GLP-1 analog program. Thank you very much, and Mary Jane, welcome.

Mary Jane Geiger

Thank you, David. Good evening, everyone, and welcome. I'm delighted to have this opportunity to share with you an overview of the dulaglutide development program on behalf of our entire team. Dulaglutide is Lilly's investigational, once weekly GLP analog that is currently in development for the treatment of type 2 diabetes.

I am particularly pleased to have this opportunity tonight for 2 reasons. First, I've been involved in the development of dulaglutide for the past 6 years, since the completion of our early Phase I clinical trial. In addition, being part of this program has afforded me the opportunity to marry my knowledge and experience in cardiovascular medicine with diabetes. We all know that diabetes is a -- cardiovascular disease is a serious comorbidity for diabetics and more importantly is important for us to the deliver therapeutic products that do not increase this risk.

There are 3 topics that I'll cover tonight, the past, the present and the future of our development program. We'll begin with a look back at the results of 2 completed Phase II clinical trials. Then we'll move to the present and I'll share with you the results that were recently reported last month at the American Society of Hypertension on a study that specifically looked at the effects of dulaglutide on blood pressure and heart rate using ambulatory blood pressure monitoring. And then finally, we'll conclude at a look into the future and our ongoing and additional trials in Phase III. So the past, the present and the future.

However, before we get into any data, let's take a look at the molecule itself. The structure of dulaglutide is unique. It is a recombinant GLP-1Fc fusion protein. The structure of the molecule is depicted on the cartoon on the right portion of the slide. There are 2 GLP-1 analogs or peptide that are linked to a smaller peptide and these are then attached to the Fc portion of a human immunoglobulin. The GLP-1 peptides have been slightly modified to render them more stable against inactivation by the enzyme dipeptidyl peptidase-IV.

In addition, dulaglutide has been purposely engineered to have a longer duration of action and we know from our pharmacokinetic data that they support the once weekly administration of dulaglutide. In addition, dulaglutide was engineered to be more soluble and have a reduced immunogenic potential. The dulaglutide is a recombinant GLP Fc fusion protein.

Now let's take a look back and review the results from 2 of our completed Phase II clinical trials in which both of these studies supported that dulaglutide does in fact possess the expected GLP-1 mediated pharmacodynamic effects on glucose lowering. In one study, dulaglutide was assessed in patients who are inadequately controlled on a background of 2 oral anti-hypoglycemic agents and in the second study, dulaglutide was assessed as monotherapy.

There was a wide range of doses that were investigated in both trials with the highest dose being 2 milligrams administered subcutaneously once weekly. Both studies showed that we observed significant dose-dependent reductions in hemoglobin A1C and fasting blood glucose in the patients treated with dulaglutide when compared to those treated with placebo. In addition, we observed dose-dependent reductions in body weight in both clinical trials. To give you a frame of reference, in those patients treated with 2 milligrams of dulaglutide for 16 weeks, the change from baseline in HbA1 observed was overall 1.5% and a 2.5-kilogram reduction in weight was observed.

In looking at the overall safety profile of those exposed to dulaglutide, our findings were very similar to what's been reported for other GLP-1 agonists in this class. Not surprisingly, gastrointestinal effects were the most commonly reported adverse events. However, it's important to also note that we observed very low incidence of dulaglutide anti-drug antibody. There are over 400 patients enrolled in both clinical trials combined and of all the patients exposed to dulaglutide, only one of them developed antidrug antibodies. This tighter [ph] was transient and diminished rapidly over the remaining course of the study.

The clinical significance for these findings remains to be determined. In addition, there have been no reported systemic, allergic or hypersensitivity-type reactions in patients treated in both of these trials. Thus, we encouraged by our early clinical Phase II findings from these studies, they demonstrated that dulaglutide does possess the expected reductions in glucose and there is an overall safety profile commensurate of what's been reported in the class. However, the findings from these studies remain to be confirmed with our ongoing Phase III clinical trial.

So that was the past. Let's now move to the present. Last month at the American Society of Hypertension, we reported on the results of a first-ever, large, randomized, prospective study that looked at the effects of a GLP-1, specifically dulaglutide, on blood pressure and heart rate using the gold standard technique of ambulatory blood pressure monitoring.

Let's begin with a common understanding of what is ambulatory blood pressure monitoring. ABPM is a noninvasive automated technique, in which an individual's blood pressure is measured approximately every 15 to 30 minutes over an extended period of time, usually 24 hours. These recordings are typically obtained during the weekday or under the conditions of one's normal activity. As a result, approximately 50 to 100 blood pressure readings are accumulated over this period of time. You can then plot all of these readings over 24 hours and obtain a 24-hour blood pressure profile to assess not only the full 24-hour blood pressure readings but daytime and nighttime as well, and these are depicted in the cartoon in the lower right portion of the slide.

When you combine the readings and average them, you get the mean 24-hour blood pressure and that is currently our best estimate of an individual's true blood pressure. Similarly, you can take the individual components of daytime and nighttime and average those blood pressure readings to obtain the average time during that period.

Now you may ask yourself why would Lilly do an ambulatory blood pressure study? There are a number of reasons. First, we know that from studies investigating other GLP-1 analogs that they have reported small reductions in systolic blood pressure as well as small increases in heart rate. However, these findings are based on clinic measures done at safety assessments in these trials, not primary endpoints. In addition, we know that there is a need for us to thoroughly assess the cardiac risk of our ongoing and newly developing diabetes therapy.

When you combine these findings, it was evident to us that we wanted to definitively assess the effects of dulaglutide on blood pressure and heart rate and to do this, we wanted to use the gold standard technique and that's ABPM. ABPM is widely recognized as the modality to investigate hypertension in clinical trials, it's unique and that it affords the evaluation of a drug's effect over 24 hours and it includes an assessment of nighttime blood pressures, there is no other currently available technology that can provide us this information. And finally, ABP is a better predictor of clinical cardiovascular outcomes than our vital sign measurement.

So for all the reasons combined, we decided to definitively go ahead with a prospective study to look at the effects of dulaglutide on blood pressure and heart rate. The design of this study, as shown here on this slide, is a multi-center, randomized, double-blind placebo-controlled 26-week study in patients with type 2 diabetes who are treated with one or more oral agents. 67% of the population coming into this study have pre-existing diagnosis of hypertension. Every one of the participants had well-controlled blood pressure.

This was a large study. We enrolled over 755 patients. This was a very enormous study for ABPM, as well as Phase II. All eligible participants underwent an initial baseline 24-hour ABPM recording session. They were then randomized to either 1 of 3 treatment groups, dula 0.75 milligrams, dula 1.5 milligrams or a placebo. These were injected subcutaneously once weekly for a total duration of 26 weeks.

All patients remain on their background anti-diabetic regimen, as well as their antihypertensive therapy. However, with regards to the latter, no changes were permitted during the course of the trial. Following randomization, 3 additional 24-hour ABPM recording sessions were performed.

The objectives are shown on this slide. The primary objective was to look at the change from baseline in mean 24-hour systolic blood pressure of 2 doses of dulaglutide 0.75 and 1.5 milligrams to evaluate non-inferiority when compared to placebo using ABPM and a non-inferiority margin of 3 millimeters of mercury. It should be important to note that the 2 doses of dulaglutide under investigation in this ABPM study are the 2 doses that are currently under investigation in our Phase III clinical program.

Secondly, we chose systolic blood pressure as the primary objective or measure of this trial because we know that blood pressure increases with age, predominantly systolic blood pressure after the age of 50. It is a significant risk factor for cardiovascular disease and systolic hypertension is far more prevalent than diastolic hypertension and contributes far great -- more greatly to the burden -- global burden of hypertension than the diastolic blood pressure.

In addition, we looked at the primary hypothesis at 16 weeks because we know that GLP-1s are associated with weight reduction and weight reduction can influence blood pressure and thus to minimize any confounding effects, we tested our hypothesis at 16 weeks. Of course, there were many additional secondary objectives, the 2 key ones included the assessment of your 2 doses of dulaglutide versus placebo, again based on the non-inferiority comparisons on mean 24-hour diastolic blood pressure as well as 24-hour heart rate. It goes without saying dulaglutide's being developed as a therapy for treatment of diabetes, type 2 diabetes, and therefore, we also did, of course, look at glycemic response in this trial. And I'll share these results with you now.

On this slide are the primary study results looking at the effects on mean 24-hour systolic blood pressure. What you're seeing in the bar graph are the overall average changes from baseline at either 16 or 26 weeks for each of the respective 3 treatment group. In particular, it's important to note that there were reductions in systolic blood pressure in all 3 treatment groups, however, far more bit within the dula group compared to placebo.

When treatment comparisons for each dose of dulaglutide were made against placebo, we were able to demonstrate that the non-inferiority margin of 3 millimeters of mercury were satisfied for both doses of dulaglutide and hence, the primary objective of the study was met. However, based on our pre-specified statistical methodology, we were able to go on and conduct superiority comparisons and in fact, we showed that the high dose of dulaglutide significantly reduced mean 24-hour systolic blood pressure by 2.79 millimeters of mercury at 16 weeks when compared to placebo and these findings were similar at 26 weeks.

Weight reductions were observed in this study with both doses of dulaglutide. However, we have assessed the change in weight versus the change in systolic blood pressure and there are no confounding effects of the weight reduction on these primary endpoint results supporting the notion that in fact this is a true effect of the drug. Based on this, we are able to demonstrate that we met the primary objective of non-inferiority of both doses of dulaglutide in this trial and in fact that significant reductions and systolic blood pressure were observed in the high dose of dula.

A key secondary objective of the study was looking at mean 24-hour diastolic blood pressure. The changes with any treatment group are shown on this slide and you can see that, overall, within each 3 treatment groups, very small changes from baseline were observed at both 16 and at 26 weeks. The pre-specified non-inferiority margin was 2.5 millimeters of mercury and when treatment comparisons for both doses of dula were made versus placebo, these criteria were satisfied and thus we have demonstrated in this trial that in fact, both of these doses of dulaglutide are clinically equivalent to that of placebo.

With ambulatory blood pressure monitoring, we also obtained heart rate recordings, and of course, we looked at those and as an additional secondary objective. The results of these evaluations are shown on this slide. In all 3 treatment groups, we observed small increases in heart rate. The pre-specified non-inferiority margin for this assessment was 3 beats per minute. When the low dose of dulaglutide 0.75 milligrams was compared against the changes in placebo, these non-inferiority criteria were in fact satisfied. This, however, was not the case for the high dose of dulaglutide and thus we did observe small changes or small increases in heart rate with dula 1.5 at both 16 and 26 weeks.

The findings of the high dose of dulaglutide are consistent with what's been reported for other GLP-1 analogs in class. Therefore in conclusion, the low dose of dulaglutide was shown to be equivalent to placebo in terms of mean 24-hour heart rate. However, as I've stated already, we have observed some small incremental increases at heart rate with the high-dose.

Now this is a blood pressure study. We did enroll patients with type 2 diabetes, but they were on at least one or more background anti-diabetic agents, so on a variety of different therapeutic agents. Nonetheless, what we observed at entry into the study was that the overall mean HbA1C in all 3 treatment groups was 7.9% and you can see that in the populations treated with dulaglutide, there were significant reductions in HbA1C when compared against placebo at both 16 and 26 weeks.

In particular, with a high dose of dulaglutide in this blood pressure study, we observed mean reduction within group from baseline of 1.2%. These support the earlier Phase II clinical trial results that I shared with you, and we are certainly encouraged by these findings and look forward to the confirmity of -- confirmatory investigations at our ongoing Phase III trials. Shown on this slide are the treatment emergent adverse events reported in the context of this study. Not surprisingly, gastrointestinal events were the most commonly reported adverse events and there were no reports of any severe hypoglycemic episodes.

Thus in conclusion, Lilly has completed and executed the first, large, randomized prospective study to look at the effects of the GLP-1, namely dulaglutide, on blood pressure and heart rate using the gold standard technique of ambulatory blood pressure monitoring. Thus, we have a definitive assessment of the effects of our drugs on these hemodynamic parameters. And in the context of this study, we successfully met the primary objective and demonstrated that both of these doses are non-inferior to placebo and in fact, the high-dose of dula significantly reduces mean 24-hour systolic blood pressure.

Furthermore, we demonstrated that both these doses are clinically equivalent when we assess it in terms of mean 24-hour diastolic blood pressure and similar findings were noted for the low dose of dulaglutide when compared on heart rate against placebo. However, for the high dose, we did observe small increases in heart rate, again consistent with what we've seen reported with other GLP-1 analogs in class. These data provided was an overall 24-hour profile of dulaglutide on blood pressure in treatment effects in patients during their normal, usual activity.

So that was the past and the present. Let's now take a glimpse into the future. We currently have 5 ongoing Phase III clinical trials. These are referred to as award 1 through award 5. These studies are all fully enrolled and actively ongoing. The key point to note from this trial is that 4 of these studies are going to conclude later this year and the fifth one will conclude in early 2013.

Pending these results, Lilly may submit to regulatory authorities as early as next year. In addition, we already have an ongoing cardiovascular outcomes trial known as rewind. This is a very large multi-center study that is recruiting across 20 trials currently. It will be assessing the effects of dulaglutide on major adverse cardiovascular events when compared to placebo and both added to the existing standard of care in patients with type 2 diabetes.

Finally, I'd be remiss if I didn't mention these, but there are 2 additional award studies that are soon to commence, award 6 and award 7. Award 6 will be a head-to-head comparison of dulaglutide versus liraglutide and award 7 will look at effects of dulaglutide in patients with chronic kidney disease. Recruitment for both these trials is about to begin.

Thus in summary, when looking at the totality of dulaglutide in our development program, we are encouraged by our early clinical trial findings and we look forward to the completion of our ongoing Phase III trial in the ensuing several months. Moreover, we in Lilly Diabetes are tremendous excited about the number of therapeutic agents we have in development in our pipeline as you've heard this evening. This enables us many potential opportunities to meet the individual needs of patients with diabetes.

With that, I conclude this portion of our presentation. I thank you for your attention, and I now invite Mr. Conterno and Dr. Kendall back to the podium for questions and answers. Thank you.

Question-and-Answer Session

Philip Johnson

All right. Very good. For those of you that are here in the room, I have my 2 colleagues in Investor Relations group, Ilissa Rassner and Travis Coy armed with the microphones. If you would go ahead and state your name and the firm that you're with when you ask your question for the benefit of those that are listening on the line. So go ahead and hold up your hand, try to get one of their attentions. We'll start here in the back, Ilissa. Dave?

David Risinger - Morgan Stanley, Research Division

Dave Risinger from Morgan Stanley. I have 2 questions. First, with respect to the accumulation in the liver of the key drug presented, LY as you're calling it, could you just talk about the ALT and AST outliers and how we should think about the liver safety of the drug? And then second on the SGLT-2, if you could please comment on differentiation versus dapagliflozin?

David Kendall

Thank you for regarding the measures of hepatocellular enzymes, AST and ALT, as was stated, the mean values, while increased from baseline during treatment with LY in both type 1 and type 2 diabetes, these were values within the normal range. Your specific question about the outliers in the study of patients with type 1 diabetes and I'll also refer to my colleague Dr. Mel Prince, who leads the development program, that patient showed elevations greater than 3x the upper limit during active treatment. This then improved in the follow-up period. Dr. Prince, if you could maybe provide additional detail on patients with type 2 diabetes and I'll preface that by saying patients with type 2 diabetes obviously often are known to have elevated liver function studies, even at baseline. So Mel, please, if you can provide that additional information.

Melvin Prince

Sure, David. Again, I'm Dr. Mel Prince, the Medical Director for the program. So in the type 1 study, if you remember, it was a crossover study where patients received either LY or glargine for 8 weeks and then they transferred over to the alternate drug. And we had one case in the type 1 study that reached a level of 3x the upper limit of normal for ALT and AST and that's the level that's considered clinically relevant, okay. And this happened actually on their last visit at the end of the study and then follow-up they had that elevation. We don't have subsequent follow-ups since then. But again, this was a very brief 8-week exposure in which they only had an elevation at the very last visit. So we really didn't have the opportunity in that context to follow the natural history of that elevation. The other thing that's very important is that there was no elevation in bilirubin. And so when you really think about hepatotoxicity it's in the context of not only having an elevated ALT but also having an elevated bilirubin at a certain level such that you reach something that's referred to as Hy's Law, where you have not only an ALT that's 3x the upper limit of normal, but you also have to have a bilirubin that's 2x elevated and we of course did not see that. Now in the type 2 study, we actually saw no one in the type 2 study that had an ALT or AST elevation during the treatment phase of 3x or greater. What we did see in the follow-up period was one patient that have an elevated level of ALT and AST, and then we had one other patient only in the follow-up period that had an isolated abrupt rise in AST that returned quickly back to baseline. And again, that was in the absence of any abnormality in bilirubin. And even more importantly, you have to remember that in the type 2 study, we'd not only had more patience on LY, okay, but they went an additional 4 weeks. And we didn't see anyone during the treatment phase with an elevated ALT or AST greater 3x normal.

Enrique A. Conterno

Maybe I can answer the question on the SGL T-2. We are running with the Boehringer Ingelheim, a very comprehensive program when it comes to empagliflozin. At this stage, I'm going to defer to the question on differentiation until we have the readout of our Phase III program, which we expect is going to be later this year. We expect to have disclosure of results at the ADA next year. But I think suffice it to say that we are expecting that we will have a competitive product when we look at both the safety and the efficacy of our product within that class.

Philip Johnson

Okay, Travis, if we could go ahead and move around the room, up here to the very front, and then we'll come back to the back.

Mark J. Schoenebaum - ISI Group Inc., Research Division

It's Mark Schoenebaum from ISI Group. On dula, my question is, you haven't given the weight loss data, so maybe I can ask. Might you give the weight loss data? And number two, I assume patients lost weight similar to the Phase II trial I think you said 2.5 kilograms roughly speaking? And if one assumes that there's a well-known -- I think there's a well-known correlation between weight loss and decreases in diastolic blood pressure in literature. So just curious your comments as to why you didn't see a decrease in diastolic blood pressure. I think we also note from literature that for certain other glibs that blood pressure effect is acute versus the weight loss takes time. So I'd be curious to know if you had blood pressure readings at time point earlier in this study perhaps at 4 weeks. And then my one question on the novel, if I may -- I had forgotten my chemistry, so if you can do my homework for me. How much PEG and how much insulin roughly is actually delivered to the liver every day at the doses you're using?

Mary Jane Geiger

Okay. I'll begin with the questions on dulaglutide. So yes, we have, in our Phase II clinical trials, observed dose-dependent reductions in dulaglutide with the high dose, the 2 milligram understudy in those trials, we observed, on average, a 1 point -- of rather, excuse me, a 2.5 kilogram weight reduction in the persons treated with that dose. In the ABPM study, we also did observe weight reductions and with the dula 1.5, we did observe an overall reduction over 16 and 26 weeks of 1.85 kilograms. So fairly consistent with what we observed in the Phase II clinical trials. We anticipate though that our Phase III clinical programs will be the confirmatory evidence of our effects on weight reduction of the doses under investigation. We did look at the change in weight versus the change in blood pressure and though those reports are not presented here tonight, there was no confounding effects on our blood pressure either systolic or in terms of diastolic. I think you had one other question but I can't read my writing...

David Kendall

The acute early drafts...

Mary Jane Geiger

Thank you. Can't read my writing. So yes, we did look at ambulatory blood pressure monitoring after 4 weeks of therapy. Dulaglutide is a once weekly administered therapy and it takes approximately 2 to 3 weeks to reach steady-state. So we did look at those effects, if you will, once steady-state was reached and we'll be reporting those results in future publications. Obviously, we cannot make comparisons against what's been reported with other GLP-1s in class. But we are very encouraged by these findings. We feel that this is representatively true blood pressure effect and that weight is not influencing our findings in that study.

David Kendall

Thank you for your questions on the novel basal insulin. If I understand them correctly and first, the issue of the total amount of PEG that's delivered. Obviously, insulin doses vary from patient to patient but it's estimated based on what is known about approved biologic therapies that currently use the PEGylation approach, that these amounts are at least qualitatively comparable to those that are otherwise administered chronically. Again, qualifying that these are short-term Phase II studies where we're assessing safety and efficacy while that doesn't directly address the amount of molecule delivered, certainly, the long-term studies of both efficacy and safety will be required to understand the clinical effects. Your second question, on I think as I understood it, how much insulin is delivered to the liver each day, obviously, again, this varies significantly based on an individual's insulin requirements based on insulin sensitivity and insulin resistance. So very difficult to estimate either from our clinical trials or even studies in otherwise healthy humans or those with diabetes.

Philip Johnson

Okay. Ilissa, we can go to Tony [ph] , please.

Unknown Analyst

Tony Buffer [ph], Barclays Capital. Three questions. Dr. Kendall, 2 for you. First, do you know, or is there any evidence for what -- for hypoglycemia in renally-impaired patients who have insulin glargine or LY? And the second is, if you actually put -- if you PEGylate the insulin molecule, does it not change confirmation and if it does change confirmation, how does it actually get in the cell? Is it by an active or is it by an inactive mechanism? And if it's active, is it through the same receptor? And then Dr. Geiger for you, if the GLP-1 molecule is now large, how -- the question really is how -- is does less of it actually get to the brain and therefore the overall amount of weight that may be lost would actually be less than some of the GLP-1s that are currently in the market?

David Kendall

Thanks for your question. In response to the inquiry about hypoglycemia and renally impaired patients, in the studies reported in Phase 2, no patients with significant renal insufficiency were included in those studies, so generalizations cannot be drawn. It is known and published in the literature that patients with renal disease currently receiving other exogenous insulin do have altered clearance of insulin molecules. And again, I would refer you to the literature to look at rates of hypoglycemia when utilizing those other insulins. There was a report at this meeting from our Discovery Science Group that looked at the PK and PD of the novel basal insulin in patients across a range of renal disease and each have no difference in the PK or PD, pharmacokinetics and pharmacodynamics across that range, suggesting that renal clearance and changes in renal function do not substantially alter those measures with the LY molecule. Your question about the PEGylated molecule, particularly PEGylated insulin and its actions [indiscernible] to receptor and acting on tissues. Obviously, the clinical measure of insulin action is glycemic control. We feel that the primary endpoint reported in these studies reflects that at least the primary effects of glucose lowering supports that insulin binding, again, on paper reported at this meeting in the data looking at specific insulin binding have been reported. In terms of the mechanism of internalization, I'll refer to my colleague Dr. John Beals if any specific effects are known with PEGylated or otherwise modified molecules in terms of internalization of insulin molecules after binding.

John Beals

My name is John Beals. I'm a Research Fellow at Eli Lilly & Co. We know that the PEGylated insulin molecule interacts with the receptor. We know that it's internalized and we presume that it is degraded because we lose activity over time intracellularly. So that's what we know at this point in time.

Mary Jane Geiger

Okay. With regards to your question on dulaglutide, thank you. Yes, it is a relatively large molecule, approximately 59 kilodalton. However, we've not conducted any study to know whether or not dulaglutide successfully passes into the blood grade burial [ph] and through potentially being 2 areas that we believe [indiscernible] may be crossing. And without any direct head-to-head comparator studies to assess either this or translates in through the brain and therefore obviously, its effect on weight, I think it will be difficult to speculate at this point.

Philip Johnson

Travis, you can come over to the front to Greg Gilbert {ph} please. Thank you.

Unknown Analyst

I have 2 questions on the less novel insulin, if I may call it that. First, how much uncertainty remains on what the FDA will actually require for approval there? And secondly, how much do you know about the actual profile of that product that you're not sharing with us? You can share with us if you want, but curious how much technical risk remains from your point of view. We heard the comment about device and manufacturing. On the novel, does the weight loss continue over time or do you only have that data through 12 weeks -- after 12 weeks of treatment at this point?

Enrique A. Conterno

I'll take the question on our new insulin glargine product. Clearly, there -- the FDA has published guidelines when it comes to biosimilars. It's -- I'm going to say, a little bit tricky to go through those guidelines because as you know, insulin have been registered for the most part, through NDAs and not DLAs. So when we look at the actual pathway, there is some uncertainty in terms of how would regulatory authorities basically determine whether a product is biosimilar or not. Those are designations that they will -- the FDA at some point in time and other regulatory authorities determine. That's why we are very careful when we talk about our product and we talk about our new insulin glargine product. Suffice it to say that the way that we have approached this is by conducting very comprehensive program so that we can deliver this product under a range of different scenarios. So we are confident that the program that we have said would allow us to meet the requirements that we have with the FDA even with some of the uncertainties that we basically see. So we have not tried to do -- I would classify as a minimum package. We do know quite a bit, and at this stage, this product is in Phase III and we need to go through that Phase III trial. But clearly, before going into Phase III, we basically have to be somewhat certain that we would be -- when we look at the profile of this new insulin glargine product. We felt that it will be comparable to glargine. So at this stage, that's as much as we can share, but we do have the capability -- we understand how to make insulin, how to develop insulin products, and we felt confident that our program will allow us to give it to meet the requirements to get approval in the U.S. and elsewhere.

David Kendall

And specific to your question about the pattern and persistence of weight-loss. Obviously, I cannot speculate nor project given the result of the 8-week trial in type 1 diabetes in the 12-week trial are the only periods of observation we have to date. So obviously, the Phase III programs that I've described will not only allow for longer assessment of this but allow for assessment of weight changes in the setting of blinded therapy in the 3 trials described using the blinded approach. In addition, these are patients included in the Phase II trials who are converted from an existing basal insulin, obviously required in type 1 diabetes utilized in this population in type 2 diabetes and not only comparisons of this novel basal insulin to insulin glargine over longer periods of time will be required to fully address your question, but an understanding of what weight effects may occur in patients who are initiated this, who are previously insulin naive will be an important understanding in this part of our Phase III program plan.

Philip Johnson

Ilissa, if we can go over to the right side of the room we haven't been to yet, Catherine Arnold. If you do want to ask a question, why don't you raise your hand so I can sort of see who's in queue and we'll try to get to as many of you as we can during the session.

Catherine J. Arnold - Crédit Suisse AG, Research Division

I'd like to ask you, in terms of your novel insulin LY, could you tell me, is there any opportunity for dose flexibility relative to insulin glargine that might be incorporated into your Phase III plan? Second question on that, are you doing anything from a conservative nature to continue to assess the lipid and transaminase levels and manage patients if they would have an event of 3x upper limits of normal obviously with or without Lilly? And then, lastly, in terms of a degradation of the PEG, is there anything that is noteworthy in terms of accumulation over an extended period of time and exposure maybe from your animal work or something you would share with us?

David Kendall

So I'll address first the dosing in dose flexibility in the Phase II trials. The morning dosing was utilized in both the type 1 and type 2 diabetes studies. In the Phase III program described currently underway, evening dosing will be utilized. Obviously, given the pharmacokinetic and pharmacodynamic profile, there are plans in place to initiate studies of dose flexibility of this in a once-daily dosing form. In terms of lipid and transaminase monitoring, again, I'll ask my colleagues to provide additional information, but certainly these are ongoing both secondary and safety measures that will be monitored throughout the course of the Phase III program. And the usual and customary precautions to monitor, increases in transaminases and other safety measures will be undertaken. I'll refer in a moment to Dr. Prince if additional detail is required. In terms of the degradation of PEG, what is known is that the PEG is degraded intracellularly by proteolysis and cleared through both renal and hepatic routes. Obviously, the long-term studies and other detailed discovery studies of PEG both degradation and clearance, I'll refer to Dr. Beals who has done that work. So Mel any additional comes on the monitoring of liver function studies?

Melvin Prince

Just in terms of the -- first of all, the lipid analysis in our Phase III program, obviously, we want to understand that in a high degree of rigor. So we're looking at lipids at a frequency that would be greater than what otherwise be done in a Phase III program so we could really understand the profile. And number two, we're doing additional analysis that go beyond just the typical fast and lipid profile in terms of assessing particle concentration and size of the particle, so it's a rigorous assessment. Similarly, with the liver function test as well, frequent assessment and then we're obviously in our clinical program, we're using the same guidelines that is uniform across clinical trials in terms of FDA directed responses to any elevations that you might see in liver function tests and the appropriate guidance and how to follow that up.

David Kendall

And John, any additional comments in the degradation of PEG and the mechanism in clearance?

John Beals

So our current belief is that the insulin becomes separated from the PEG, degraded, and the PEG is excreted back into the plasma where it's removed renally or by biliary or hepatic roots. It's consistent with other data that exists out there in the space. With regards to PEG accumulation, we have no data to date that would suggest we have PEG accumulation.

Philip Johnson

Great. Ilissa, if we could go to Chris Schott, JPMorgan, on the back, please.

Christopher Schott - JP Morgan Chase & Co, Research Division

Great. Just 2 quick questions. Maybe coming back to the novel basal you have versus the biosimilar. Assuming success of both these programs, I think you're going to get your novel -- your biosimilar data potentially before the full program reports out to the more novel products. How do you position those 2 products as you think from a commercial standpoint where one might be more of a price sale, one more of a differentiation, maybe ideally a higher priced market? And then the second question is, and I think you've addressed a little bit of this, but given the different -- differentiated profile of this insulin and I think you've put this hypothesis forward but certainly a little bit of elevation of trigs, do you expect more scrutiny from the FDA and more focus on the CB profile of this insulin versus maybe some other programs that run forward? And how do you kind of think about that risk as you’re developing the program?

Enrique A. Conterno

So on the -- our 2 basal insulins, we do intend, assuming both programs are successful, to market both. Now there is a caveat right, clearly, when it comes -- there's a hurdle rate for our innovative basal insulin and that it needs to show clinical differentiation versus glargine. Otherwise, it would not make sense. Why does this make sense to us? Well, with that clinical profile that we would expect, we believe that our innovative basil insulin will have a premium over Lantus. And as we look at how we expect the market to behave, we do see this next-generation insulin in this particular case, yes to have to have an important uptick, but we do expect that glargine, in general, will be very significant still. As we think about glargine, we do believe that there is an opportunity for us in particular to participate in that particular segment. So for us, when we model how whether we could do best just with one or actually having both the value that we can create by having both products is much greater. As you know, we do have the infrastructure, commercially from manufacturing perspective, so we have the delivery devices, so it is not a huge incremental expense for us to be able to do that.

David Kendall

And regards, you question on triglycerides, obviously, given the working hypothesis that we presented, it's imperative that we not only perform the studies but look carefully at the Phase III data to understand both the time course and potentially the adaptive nature of this as was described exogenous insulins that act significantly for free to lower triglycerides whether this is a return towards the normal adaptive state and what the implications are for long-term lipid measures can only be ascertained in the longer-term Phase III studies. I won't speculate on the level of scrutiny by the regulators other than to reaffirm what Dr. Prince said that the repeated measures of lipids and additional measures of lipoprotein particle concentrations and makeup will be obtained and obviously all of these as with other Phase III clinical programs will be developed and submitted as part of our application of this novel basal insulin.

Philip Johnson

We'll try and take 2 more questions before we close the Q&A here in the middle of the room. Travis, please, thank you.

Alex Arfaei - BMO Capital Markets U.S.

Alex Arfaei from BMO. Question on the basal insulin. So no differences in total hypoglycemia even though directionally it was lower. I guess the question is, to what extent was that related to differences in short acting insulin these patients if any? And do you think that could be a competitive disadvantage since the novel drug -- the next-generation novel insulin has shown, I believe, has shown lower total hypoglycemia compared to glargine?

David Kendall

So just for clarity, you're referring to the study in type 1 diabetes with the reported increase in total hypoglycemia with the decrease in nocturnal, correct? So it's important to understand in this clinical trial that the patients with type 1 diabetes obviously require not only basal insulin but mealtime insulin. And given that this was the first large study in a population with type 1 diabetes an attempt to understand the adjustments in both basal insulin and the aggressiveness with which our algorithm allowed that to be initiated while permitting adjustments in mealtime insulin, it's interesting to note and as was recorded at the completion of the trial, patients with type 1 diabetes ultimately required 24% less mealtime insulin, suggesting that one potential cause of the increased rate early in the course of the trial, the majority of these events were reported early after initiation, were perhaps in consequence to the aggressive initiation algorithm in the later adjustment of mealtime insulin resulted in a significantly lower number of these reported events. So I believe that certainly in the Phase III program with a less aggressive initiation algorithm will be given the opportunity to understand what initiation of the novel basal insulin to type 1 diabetes does, more specifically to the total rate and obviously nocturnal rates of hypoglycemia.

Philip Johnson

We have time for one last question.

Unknown Analyst

This is [indiscernible] from Bloomberg Industries. Two if I may. One is about the crossover study with type 1. I'm not sure where and when you measured -- took blood samples. It would've been possible to look at the profile, or would it be possible to look at the profile, switching from glargine to LY whether you had a rise in both lipids and liver enzymes and the opposite for the other arms? And secondly, on dulaglutides ABPM study, is there -- did you examine -- I've seen some of the pictures of the 24-hour curve -- average 24-hour curve, did you have any data or have you looked to see whether any individual populations outliers, quartiles where they may have been the slightly different response where maybe blood pressure went up or didn't go down as much? Just a little color on that would be nice.

David Kendall

I'll begin with the question about the measurement in the mean blood glucose and actually defer again to my development colleague, Dr. Jacober who can go through in further descriptive detail about the timing of this. Before Scott addresses that, obviously, in the Phase III clinical programs, hemoglobin A1C is an integrated measure which is obviously both the gold standard for overall glycemic control, will be utilized as the endpoint. But obviously, in shorter term trials, this means average blood glucose allowed us interpretation over a shorter treatment interval. So Dr. Jacober?

Scott Jacober

I'm a Medical Fellow in the build development program -- sorry the LY development program. What happens is the measurements of the mean -- the drive, the mean blood glucose, the profiles were done at fixed intervals during the course of the trial. And so the actual acute aspect could not be really assessed. Similarly, that with the crossover with the lipid profiles, the lipids were measured only at the end of 8 weeks and at baseline.

Mary Jane Geiger

Okay. In terms of your ABPM question, thank you. So with respect to looking at the blood pressure effects on terms of outliers or other influential factors, we did pre-specify a large number of analyses that we've investigated and now look forward to sharing those results at a future date.

Philip Johnson

Great. That concludes our session. I thank all of you here in the room, as well as those of you listening online for your interest. This really is an exciting time for Lilly Diabetes, the potential for 3 of our Phase III molecules to be submitted to regulatory authorities in 2013, another one in 2014, with Lilly Diabetes positioned to increase significantly the products that it has to offer to help patients with diabetes manage their disease. And also, Lilly Diabetes positioned to be a very key player in returning the company to growth post-2014.

Thank you very much for your interest in the Eli Lilly & Co. We look forward to talking to you soon. Have a great night.

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Source: Eli Lilly's Management Host Lilly Diabetes Pipeline Update Call (Transcript)
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