Ladies and gentlemen, thank you for standing by, and welcome to the Eli Lilly Q1 2017 earnings call. For the conference, all the participants are in a listen-only mode. There will be an opportunity for your questions. Instructions will be given at that time. If you need any assistance during the call, please press star then zero, an operator will assist you offline. As a reminder, today's call is being recorded. I'll turn the conference now over to your host, Mr. Dave Ricks. Please go ahead, sir.
Good morning. Thank you for joining Eli Lilly and Company's first quarter 2017 earnings call. I'm Dave Ricks, Lilly's President and CEO. Joining me on today's call are Derica Rice, our Chief Financial Officer, Dr. Jan M. Lundberg, President of Lilly Research Labs, Enrique Conterno, President of Lilly Diabetes and Lilly USA, Dr. Sue Mahony, President of Lilly Oncology, Jeff Simmons, President of Elanco Animal Health, and I'd like to extend a special welcome to Christi Shaw, who joined us earlier this month as President of Lilly Bio-Medicines. Welcome, Christi. We're also joined by Kristina Wright, Chris Ogden, and Phil Johnson of the IR team. During this conference call, we anticipate making projections and forward-looking statements based on our current expectations.
Our actual results could differ materially due to a number of factors, including those listed on slide three, and those outlined in our latest forms 10-K and 10-Q filed with the SEC. The information we provide about our products and pipeline is for the benefit of the investment community. It is not intended to be promotional, and it is not sufficient for prescribing decisions. Before discussing key events for the quarter, I'll start with a summary of our progress on our strategic objectives since our earnings call in January. Starting with grow revenue, Q1, we generated worldwide revenue growth of 7%, which was driven by 9% volume growth in our pharmaceutical business, led by our new products. On our strategic objective of expand margins, our non-GAAP gross margin %, excluding the effect of FX on international inventories sold, increased by nearly 220 basis points compared to Q1 2016.
Total operating expenses as a % of revenue also declined by nearly 220 basis points. Under the heading of sustaining the flow of innovation, we launched baricitinib under the trade name Olumiant in Europe for rheumatoid arthritis. While here in the U.S., we were disappointed to receive a Complete Response Letter from the FDA for baricitinib in RA. We remain confident the benefit-risk of baricitinib as a new treatment option for adults with moderate to severe rheumatoid arthritis, and we will work with the FDA to determine a path forward to ultimately bring baricitinib to patients in the U.S. As I'll discuss in more detail later, we had a positive phase III readouts for abemaciclib, for Taltz, and for CYRAMZA. Finally, on deploying capital to create value, we completed the acquisition of CoLucid Pharmaceuticals, which adds lasmiditan for acute migraines to our late-stage pipeline.
We returned over $500 million to shareholders via our dividends. Our continued progress in 2017 keeps us on track to achieve our midterm goals for each of our strategic objectives. Let's move to slide five for a more detailed review of the key events that occurred since our last earnings call. On the commercial front, here in the U.S., in collaboration with Boehringer Ingelheim, we launched SYNJARDY XR, a once-daily combination tablet containing empagliflozin, an extended-release metformin for the treatment of adults with type 2 diabetes. As I mentioned earlier, we launched Olumiant in Europe for the treatment of moderate to severe rheumatoid arthritis following European Commission approval earlier this year. On the regulatory front, the U.S. FDA issued a Complete Response Letter for baricitinib for rheumatoid arthritis. The letter indicated that the FDA was unable to approve the application in its current form.
Specifically, the FDA indicated that additional clinical data are needed to determine the most appropriate doses and to further characterize safety concerns. Lilly and Incyte disagree with the agency's conclusion, we look forward to meeting with the FDA in the coming months to determine appropriate next steps. We'll provide you a status update after we meet with the FDA. Here in the U.S., the FDA approved an update to the Trulicity label to include use in combination with basal insulin for adults with type 2 diabetes. In Europe, along with Boehringer Ingelheim, we received European Commission approval of an update to the SYNJARDY label to include a change to the indication statement, as well as data from the EMPA-REG OUTCOME trial on the reduction of cardiovascular death.
On the clinical front, we announced that MONARCH 2, the phase III trial of abemaciclib, combination with fulvestrant in women with HR-positive, HER2-negative breast cancer met its primary endpoint of improved progression-free survival. We look forward to presenting data from this study at ASCO in early June, and we'll hold a call the evening of Saturday, June 3rd, to discuss these results with the investment community. We've decided to move FDA submission of MONARCH 2 from the previously announced timing of Q3 up into Q2. Just yesterday, we announced that the MONARCH 3 study of abemaciclib met its primary endpoint at an interim analysis, demonstrating that women with HR-positive, HER2-negative advanced breast cancer who had not received prior systemic therapy experienced a statistically significant improvement in PFS when treated with abemaciclib plus an aromatase inhibitor compared to placebo plus an aromatase inhibitor.
Improvement was also shown in a key secondary endpoint of objective response rate. We intend to begin global regulatory submissions of these results in Q3 2017. For the RAINFALL study of ramucirumab in first-line gastric cancer, the Independent Data Monitoring Committee recently met to review the primary analysis. While we remain blinded to the data, we're pleased to report that the IDMC stated that the study met its primary endpoint of improved progression-free survival. Consistent with our prior communication, our expectation remains that regulatory submissions could occur after we have the final overall survival data in 2018. At the American Academy of Dermatology meeting, we presented phase III data showing that patients with moderate to severe plaque psoriasis treated with ixekizumab or Taltz demonstrated superior efficacy at 24 weeks compared to patients treated with STELARA.
Along with Boehringer Ingelheim, we initiated two phase III studies of JARDIANCE for the treatment of chronic heart failure. These trials will enroll patients with and without diabetes and with both preserved as well as reduced ejection fraction heart failure. Moving to slide six, as I mentioned earlier, in business development news, we completed the acquisition of CoLucid Pharmaceuticals. In other news, in Japan, the IP High Court ruled in our favor in the invalidation trials initiated by Eisai regarding our vitamin regimen patents for ALIMTA. If the patents are ultimately upheld through all the challenges, they could provide intellectual property protection for ALIMTA in Japan until June 2021. To support increased demand for our products in our pipeline, we announced plans to invest $850 million in our U.S. operations in 2017, including research laboratories, manufacturing facilities, and some administrative areas.
We also distributed over $500 million to shareholders via the dividends. Now I'll turn the call over to Phil for a discussion of our financial performance for the quarter.
Great. Thanks, Dave. Slide seven summarizes our presentation of GAAP results and non-GAAP measures, while slide eight provides a summary of our GAAP results. I'll focus my comments on our non-GAAP adjusted measures to provide insight into the underlying trends in our business. Please refer to today's earnings press release for a detailed description of the year-on-year changes in our first quarter GAAP results. Looking at the non-GAAP measures on slide nine, you can see that Q1 2017 revenue increased 7% compared to Q1 2016, reaching $5.2 billion. Gross margin as a percent of revenue was 78.1%, an increase of 180 basis points over Q1 2016. The effect of foreign exchange rates on international inventories sold resulted in a benefit to both this year's and last year's quarter, with the benefit being slightly larger last year.
Excluding this FX effect, our gross margin percent increased by nearly 220 basis points, going from 74.9% in last year's quarter to 77.1% this quarter, driven by manufacturing efficiencies. Total operating expense increased 3% compared to Q1 2016. This increase is lower than the increase in revenue, leading total operating expense as a percent of revenue to decline by nearly 220 basis points to 53.2%. Looking at the component parts of total operating expense, marketing, selling, and administrative expenses increased 5%, while R&D expenses increased just 1%. In marketing, selling, and administrative expenses, higher spending to support new products was partially offset by lower spending on late lifecycle products. Other income and expense was income of $15 million this quarter, compared to $55 million reported in last year's quarter.
Our tax rate was 21.2%, an increase of 3.3 percentage points compared to the same quarter last year. This increase was primarily due to the net discrete tax benefit of approximately $50 million in last year's Q1. At the bottom line, net income and earnings per share both increased 18%. We achieved this significant earnings growth by delivering high single-digit volume-based revenue growth while improving our gross margin percent and reducing our OPEX%, creating positive leverage. Slide 10 provides a reconciliation between reported and non-GAAP EPS, and you'll find additional details on these adjustments on slide 22. Now let's take a look at the effect of price, rate, and volume on revenue growth. On slide 11, in the gray highlighted row at the bottom of the table, you'll see the 7% revenue growth that I mentioned earlier.
The effect of foreign exchange on revenue growth was minimal this quarter, and excluding the slight headwind from FX, our worldwide revenue growth on a performance basis was 8% and was driven entirely by volume. By geography, you'll notice that U.S. pharma revenue increased 16%, driven primarily by volume. Trulicity was the main driver of U.S. volume growth, with meaningful contributions also coming from Taltz and Lartruvo. The decline in European human pharmaceutical revenue of 5% was driven by the negative effect of price and unfavorable foreign exchange movement, partially offset by higher volume. On a constant currency or performance basis, European revenue decreased 1%. This performance decrease was driven primarily by Cymbalta and Olumiant, partially offset by the uptake of new products led by Trulicity. In Japan, despite a large negative impact from the entry of generic Cymbalta last June, pharma revenue increased 5%.
This increase was driven by a 6% benefit from higher volumes, and to a lesser extent, from a stronger yen, partially offset by a 4% negative price effect from last year's biannual price cuts. On a constant currency basis, Japan pharma revenue increased 3%, while excluding Zyprexa, Japan pharma revenue in Q1 grew 16% on a constant currency basis, led by Cyramza with meaningful contributions from Cymbalta and Trulicity. Turning to our pharma revenue in the rest of world, or ROW, revenue this quarter increased 2% as volume growth of 7% was largely offset by lower prices and the negative effect of FX. On a performance basis, ROW revenue increased 4% as growth in Humalog, Trulicity, Trajenta, Cyramza, and Jardiance was partially offset by lower sales of Cymbalta, ALIMTA, and Cialis. Turning to animal health.
This quarter, worldwide revenue increased 2%, driven by higher volume for our acquisition of Boehringer Ingelheim Vetmedica's U.S. vaccines business. The effect of FX as well as price was minimal. Excluding the BI Vetmedica vaccines acquisition, the rest of our animal health revenue decreased 3%. As we've done in recent quarters, let's now take a look at the drivers of our worldwide volume growth on slide 12. As I mentioned earlier, excluding FX, our worldwide revenue grew 8% this quarter, driven by an 8% increase in volume. In total, our new products, comprised of Trulicity, Cyramza, Jardiance, Taltz, Basaglar, Lartruvo, Portrazza, and now Olumiant in the EU, were again the engine of our worldwide volume growth. You can see that these products drove 10.1 percentage points of volume growth this quarter. Humalog contributed 50 basis points. Trajenta contributed 40 basis points.
Animal health, due to the Boehringer Ingelheim Vetmedica U.S. vaccines acquisition, contributed 30 basis points of volume growth. Lower Cialis volume provided a headwind of 90 basis points, primarily due to lower volume in the U.S. as a result of a decline in the overall ED market, as well as increased use of off-label generic sildenafil. ALIMTA trimmed 1.1 percentage points from our volume growth, due primarily to competitive pressures in the U.S., while the loss of exclusivity for Zyprexa, Cymbalta, and Evista provided a drag of 1.8 percentage points. Now, let me turn the call over to Derica.
Thanks, Phil. As in prior quarters, I'll start by sharing some color on our new product launches. As you can see on the graph on slide 13, our new products generated over $800 million in revenue this quarter, led by Trulicity and Cyramza. This represents over 15% of our total worldwide revenue, up from 12% last quarter. As Phil mentioned earlier, these products drove 10.1 percentage points of our worldwide volume growth this quarter. Trulicity performance continues to be strong and is benefiting from both growing market share and a rapidly expanding GLP-1 class. In the U.S., we're pleased that our new to brand share with endocrinologists, which we view as a key leading indicator, is comparable to Victoza. We've also recently expanded our efforts to reach primary care physicians and are encouraged by the early results.
Cyramza continues to grow globally, driven largely by Japan, where we're seeing strong adoption in gastric cancer, more recently, have seen uptake in both lung and colorectal cancer. OUS markets now account for nearly two-thirds of our worldwide Cyramza sales, we look forward to continued OUS growth. U.S. Cyramza sales declined this quarter, largely due to pressure from IO agents in non-small cell lung cancer. Moving to Jardiance. In the U.S., we're pleased that our new to therapy share with both endocrinologists and primary care physicians has increased substantially since the FDA approval of the CV indication and the update to the American Diabetes Association's diabetes treatment guidelines. In absolute terms, Jardiance new to therapy volume has increased by 75% since we began active promotion of the new CV indication. We continue to see rapid uptake of Taltz, as well as continued strong growth of the IL-17A class in psoriasis.
We're excited that our new to brand share of market with dermatologists, a proxy for use in psoriasis, exceeds that of ENBREL and COSENTYX. On Basaglar, we launched here in the U.S. in mid-December and are seeing strong uptake early this year, largely driven by switching and high control PBM formularies. U.S. new to brand share of market is approaching Levemir and exceeds that of both Tresiba and Toujeo. In Q4, we also launched Lartruvo for soft tissue sarcoma in the U.S. and in early launch markets in Europe, this quarter have began to launch in select rest of world countries. We're excited by initial physician feedback and the potential of this molecule to help patients with soft tissue sarcoma. Finally, earlier this quarter, we launched Olumiant in Europe, with this quarter's sales representing initial stocking in Germany.
We're pleased with the initial customer feedback, we see great potential for this molecule in Europe. Moving to slide 14, you'll see that changes in foreign exchange rates had a modest effect on our Q1 2017 results. Growth in non-GAAP EPS was 18%, including the effect of FX, and 22% in constant currency terms. Moving on to our pipeline update. Slide 15 shows our NME pipeline as of April 18th. We had positive movement, which included the European approval of Olumiant, the addition of lasmiditan for acute migraine treatment via our acquisition of CoLucid, initiation of human testing for a long-acting insulin, and termination of development of a phase I diabetes asset.
In our NME pipeline on slide 16, you'll see the initiation, in collaboration with Boehringer Ingelheim, of the phase III heart failure program for empagliflozin, as well as the initiation of phase II work with abemaciclib in pancreatic cancer. Turning to slide 17. Let's recap the recent progress we've made on the key events we projected for 2017. Since our last call, we've added check marks for the initiation of the EMPEROR studies of empagliflozin for heart failure in collaboration with Boehringer Ingelheim, the positive PFS readout for the ramucirumab RAINFALL trial, the U.S. submission of ixekizumab for psoriatic arthritis, the EU approval of baricitinib for rheumatoid arthritis, the closing of the CoLucid acquisition, and the favorable Japanese Supreme Court ruling upholding our ALIMTA IP. We've also added a red check mark for the FDA's Complete Response Letter for baricitinib.
You'll also see that we've moved the MONARCH 3 data readout from the internal readouts to the external disclosure section based on the positive interim analysis that will allow us to present the data at a medical meeting in the second half of the year. We've also added potential key events for the global regulatory submissions of the abemaciclib MONARCH 3 data, the readout, and likely presentation at a medical meeting later this year for the second phase III trial of lasmiditan, and for the potential FDA action on the sBLA for ixekizumab for psoriatic arthritis. Turning to our 2017 financial guidance on slide 18. Our expectations for 2017 are largely unchanged from our last update in late January. You'll see that our non-GAAP line item guidance remains the same.
However, we have adjusted our GAAP EPS guidance primarily due to the global severance charges related to actions to improve our cost structure. Before we go to the Q&A session, let me briefly sum up. 2017 is off to a strong start. Led by our new products, worldwide revenue grew 7%. By driving improvements in our cost structure, we leveraged that top-line growth into 18% non-GAAP EPS growth, or 22% growth when excluding FX. While we're disappointed with the delay of baricitinib here in the U.S., we continue to have strong momentum behind our innovation-based strategy. Since our last earnings call, we've launched Olumiant in Europe and had positive phase III readouts for abemaciclib, Taltz, and CYRAMZA. We also closed the CoLucid acquisition, bolstering our phase III pipeline with the addition of lasmiditan.
Going forward, our management team will remain focused on launching new products with excellence, reloading our late-stage pipeline, driving increased productivity to expand our operating margins, and investing in the core drivers of our business, talent, scientific capabilities, and technology platforms to ensure our future growth prospects. This concludes our prepared remarks. I'll turn the call over to Phil to moderate the Q&A session. Phil?
Great. Thanks, Derica. We would like to take as many questions from callers as we can, we would ask that you limit your questions to two or a single two-part question, we thank you in advance for collaborating with this request. John, if you could go ahead and provide the instructions for the Q&A session, we're ready for the first caller.
Certainly, ladies and gentlemen, if you would like to ask a question, please press star then one on your touch-tone phone. You'll hear a tone indicating you've been placed in a queue. If your question gets answered or you wish to remove yourself from the queue, please press the pound key. Again, star one if you have a question. First go to Tim Anderson with Bernstein. Please go ahead.
Yes, hi.
Tim Anderson, do you have a question?
Yes. Sorry about that. A question is on abemaciclib and your latest thinking about the ability to show that your drug is more efficacious than palbociclib. Naturally, that has certain limitations, so it seems that the difference with abema would have to be quite big to really be perceived as a better product. Is this something that you think is achievable? I'd like to get your latest thinking on that. Then a payer question, if you can just talk about payer trends and rebating trends in the SGLT2 category. If you addressed that earlier, I was on another call, so I apologize.
On CYRAMZA, any additional color on, you I think mentioned U.S. pricing erosion, which is unusual with a medical benefit drug in the U.S.
Okay, Tim, thank you for the questions. Sue, if you'll handle maybe the first question that we had on abemaciclib.
Yep
CYRAMZA.
Yeah.
Enrique, if you'd like to comment on the SGLT2 pricing question.
Hi, Tim. Yeah, thanks for the question on abemaciclib. As you say, there are no comparative studies of the CDK4 and 6 inhibitors. We believe that it's going to be important that we look at the totality of the data across multiple trials as we look at these agents. I think I've been consistently saying that we believe that we could have a best-in-class CDK4 and 6 inhibitor, and I continue to believe that based on the attributes of the molecule, as well as we, as I say, look at the consistency of data across multiple trials, that hopefully we will read out two of them this year, and we will have others coming in the future. Why do I say that? Well, as we mentioned before, this molecule selectively inhibits CDK4 versus CDK6. It's actually 14 times more potent on CDK4 than CDK6.
It has the ability to cross the blood-brain barrier, and we have seen therapeutic levels on brain tissue. The continuous dosing, we believe, is important for a cell cycle inhibitor, not just from an efficacy perspective, but also from a convenience perspective to patients. We have seen in our previous trials, and have consistent results that the diarrhea, which is the main side effect, is manageable and actually is transient. We now have our MONARCH 1 trial in our refractory patients who have had multiple treatments and have seen in that trial single agent activity with this agent. We now have two positive phase III trials with the patients on our second-line MONARCH 2 trial, which had previous endocrine therapy, and we're looking forward to presenting that data at ASCO and also hopefully publishing that data this year, too.
Of course, yesterday we announced the MONARCH 3 first-line study against the aromatase inhibitors, where we saw at the interim, and we've mentioned previously that we had high bar interim, we saw that at interim we achieved our PFS endpoint, which is the primary endpoint, as well as a secondary endpoint of overall response rate. We're excited as we look at the whole molecule here, and we encourage you as you see the data in the future to look at the totality of the data across all the trials.
On the Cyramza piece.
Oh, Cyramza. With regard to Cyramza, yeah. As we're looking at Cyramza performance in the U.S., Tim, we continue to see challenges in the lung cancer market, mainly due to IOs. We've essentially seen sort of flat to declining sales in the U.S. over the last few quarters, which of course is the complete opposite to Japan, where we're seeing phenomenal sales. Our focus in the U.S., it's really a gross-to-net adjustment that you mentioned there, so I wouldn't read too much into the pricing. Our focus is to continue to ensure that we have uptake in gastric cancer, which is a very differentiated market. A lot of doctors who treat gastric cancer in the U.S. treat one patient a year, really getting to them on time to ensure that they know to use Cyramza in the appropriate patient is our focus on gastric cancer.
In lung cancer, as people are getting used to knowing where to use the IOs in second-line and then as they move to front line, we've been clear on the patient that we believe can benefit from Cyramza.
Great. Just to complement Sue's answer on that gross-to-net adjustment, it was essentially a benefit that was recognized as we trued up the estimates for rebates and discounts in Q1 of 2016. This is leading to the negative year-on-year compare. Nothing unusual that we're seeing in the actual contracting or pricing for the product. Enrique?
Thank you. The SGLT2 class, similarly to other diabetes classes, is highly managed from a formulary perspective. We are in a unique position given the data and the label that we basically have with Jardiance. As I had previously shared, even prior to us getting the label, our formulary positioning was very strong. Just to give a sense, we have nearly 90% access on commercial plans and about 70% in Part D, and we feel that's a very strong position for us. The SGLT2 class, for the most part, is being contracted as one of 2 type contracts. These are not sole exclusive contracts. Of course, we're advocates for open access, and at this point in time, we are excited about the early trends that we're seeing for our products.
Great. Thanks, Enrique. John, if we can go to the next caller, please.
That will be Seamus Fernandez with Leerink Partners. Please go ahead. Mr. Fernandez, your line is open if you have a question.
Oh, sorry, I was on mute. Thanks for taking the questions. Just a couple of quick ones. First on abemaciclib, can you guys talk a little bit about what you think is a differentiated response rate in the setting, whether it be for MONARCH III? Again, my understanding is that we're seeing in combination with aromatase inhibitors response rates between 52%-55%. It seems like the response rate dynamic is something that you're focusing in on. I'd love to just better understand what you see as a uniquely meaningful response rate, or if you're really just focused on the monotherapy response rate that you see with abemaciclib, and we already knew. The second question, when I look at the revenue that was generated relative to the scripts for Basaglar, it certainly came in a bit below our expectations.
Just trying to get a better sense of what the dynamics are in that market, in particular, that would have the revenue come in below those expectations. That's also factoring in the stocking that occurred in the fourth quarter. I don't see that as a full explanation. Lastly, in terms of the dynamics with baricitinib, some of the questions that we get from investors are the reasons why Lilly chose to incorporate the language in the press release with regard to its disagreement with the agency. That seems to imply that Lilly will pursue all avenues before being forced to do additional clinical studies. Just trying to get a better sense of why you chose to incorporate that language into the press release. Thanks so much.
Great, Seamus. Thanks for the questions. Sue, we'll start with you for abemaciclib, then the question on overall response rate. Enrique for BASAGLAR revenue here in the U.S. relative to scripts. Christi, your first question on baricitinib and the language we had in the press release. Sue?
Thanks, Seamus, for the question. I think, again, I'll go back to, I think it's going to be really important that we look at the totality of the data as we look at the trials across multiple trials with the CDK4 and 6 inhibitors. We look at the magnitude and the depth of response, which is a key secondary endpoint that we had in our studies as well as we said, the PFS and the totality of the data.
Enrique?
Seamus as I look at it, stocking does, in our view, basically explain the difference revenue for us and given the script level is basically tracking as we had expected. I think it's important as we look at this product, we are clearly right now north of 20% when it comes to NBRx share. Importantly, a big part of that is driven by switches as we've seen different payers take or choose BASAGLAR as an exclusive option. I think what we're also encouraged is when we look at basically new patients to a basal insulin, we also see our share basically improving. We're now at 7% on that specific metric. We are very encouraged for what we see, and at this point in time, we do think that the revenue and the scripts are aligned based on what we had expected.
Great. Thank you, Enrique. Christi?
Hi. Yeah, thanks for the question. I think what you read is exactly right regarding Bari. We continue to believe in the risk-benefit profile of baricitinib at the four and two milligram. What we need to do next is really get with FDA and understand specifically what their concerns are. The answer is yes, we disagree, we want to meet with them and make sure that we understand completely and see if we can find a path forward quickly to allow patients that are suffering access to baricitinib.
Great. Thanks, Christi. Before we go to the next caller, Seamus, I believe the numbers that you're citing for overall response rate are in fact for those patients with measurable disease. Just to highlight that when you see data from our trials, make sure that you're looking at a similar patient population and cut of the data. John, if we can go to the next caller, please.
That will be Gregg Gilbert with Deutsche Bank. Please go ahead.
Thanks, team. One two-parter here. First, when you announced the baricitinib delay, you reiterated your 5% revenue growth goal. My question is, since it will be harder to get there without baricitinib, and assuming that doesn't show up in that timeframe, what are the caveats that you would offer in terms of reaching that goal without baricitinib other than the ALIMTA caveat you've mentioned before? Hoping for a little more granularity underpinning your confidence in achieving that. Secondly, on Animal Health, can you go a little bit deeper into the trends in the quarter, perhaps with and without acquisition? Jeff, any sort of headwinds, tailwinds you'd want us to understand in the quarter and as it relates for the rest of the year for your business? Thanks.
Great. Greg, thank you for the questions. Derica, we'll start out with you for the long-term growth question, then over to you, Jeff, for the Animal Health question. Derica?
Good morning, Greg, and thanks for your question. As it relates to the midterm guidance of achieving a minimum of 5% on average revenue growth between 2016 and the end of the decade, there are no new additional caveats that I can offer, Greg. We feel as confident about achieving that goal today as we did when we put that guidance out last year in July. Recall that we've always said that the growth prospects for Lilly did not reside or rest on a single asset. It really is about the strength across the portfolio of opportunities that we talked about. Up till now, we've launched seven new products and eight if you include ALIMTA in Europe.
We feel very good about our growth prospects going forward, we've factored in that we may not always have 100% success across each molecule, in aggregate, we're very confident we can achieve that minimum 5% goal.
Great. Thanks, Derica. Jeff?
Yeah, Greg, on Animal Health, a few comments. First of all, as we signaled earlier this year, and as Q1 indicates, we anticipate growth for the year will be back half loaded. This is due to some one-time events in Q1 as well as our SAP 2016 implementation, which will impact Q2. As such, though, although Q1 was a little lighter than expected, we anticipate improving growth trends later this year. What will drive that, Greg, is really a few things. First of all, launches. We're seeing good uptake initially here with Galliprant, our deal with Aratana, as well as we've got some launches in aquaculture. Secondly is companion animals, some share shift, and then on the food animal side, vaccines. That'll be the drivers of our second half return to growth. We continue to be excited about the BI acquisition, and that's progressing well.
I also would say, finally, we continue to progress our strategic agenda, focusing on our key growth engines, which we've talked a lot about, vaccines, nutritionals, and companion animal therapeutics. The integration of BI, again, is going well, and that's on track, and we've completed the sale of our Dundee, Scotland manufacturing site to Argenta as part of our broader manufacturing agenda. Overall industry, I think the things to watch, I think the fundamentals for the medium and long term are still strong with the trends, with durable brands. I think the things to watch, innovation is representing an increasing amount of growth and becoming increasingly important. We're not seeing, for instance, in food animal as much innovation, so that segment has not grown as much. I think in the slower growth segments, we're seeing, of course, increasing competitive pressures.
Those are some things I think to watch going forward.
Great. Thanks, Jeff.
Thanks.
Can we go to the next caller, please?
We'll go to Andrew Baum with Citi. Please go ahead.
Thank you. A couple of questions. You obviously showed some very significant improvement in your gross margin during the quarter, citing manufacturing efficiencies. Could you just separate out mix versus manufacturing and then within manufacturing, procurement yield and so on to help us understand how far there's room to go here? Second, on JARDIANCE, could you just outline the rate limiting steps for this product, both in terms of class awareness and obviously the pending CANVAS data to grow the awareness of the class? Secondly, in terms of education of physicians of the potential advantages, what can be done by you in order to break down barriers to accelerate uptake?
Andrew, thank you for the questions. Derica, we'll go to you for the question on the gross margin percent, then Enrique for the JARDIANCE question. Derica?
Hi, Andrew. In this question, I really have to give kudos to our manufacturing team. The gross margin improvement is really driven by lowering our per unit cost. That means that it should be sustainable going forward. Do recall also that in the second half of the year, you're going to see negative pressure on our gross margins because we began to feel the impact of the next round of patent expiries. We will have lost Strattera and Effient in the U.S., that's what brings down the drag that we expect in the second half. Again, what's helping us to weather that is by the manufacturing team absolutely reducing our per unit cost.
Thanks, Derica. Enrique?
Sure. Let me first provide a little bit of color on Jardiance and what we're seeing since the launch of our cardiovascular indication. As you know, we received that indication in December, and we launched in mid-January. Since we've launched that indication, we have seen a significant inflection on new patient starts for Jardiance . Just in three months, we've seen a 70% increase on new patient starts. The class overall has grown about 30%, which has driven now the class to basically re-accelerate when it comes to new patient starts. The class was actually quite flat before this indication. As we look at the four-week growth versus the previous year, we're now at 16%. We are encouraged in terms of what we're seeing with Jardiance .
Clearly, we are in a certain way, it is a paradigm shift when it comes to treating diabetes, and in particular, the risk of death for people with type 2 diabetes and established cardiovascular disease. For us, therefore, peer-to-peer is hugely important, and that's something that we've been quite focused on. We are very excited by our level of activity and interest and attendance to these peer-to-peer sessions. All in all, we are pleased with our progress, and we expect more. There are lots of questions when it comes to the outcomes from CANVAS. We basically see maybe generally 3 types of outcomes, let me just outline them. Clearly, if outcomes were to be a negative, a neutral trial when it comes to cardiovascular, that probably would be the worst outcome for us.
We clearly believe in our data is highly compelling, clearly, we could benefit from that tailwind of having another SGLT2 basically have this similar data. If their data is positive is not as positive as ours, that's probably the best case scenario for us. It's also quite positive if their data looks similar to us. We clearly have a lot of momentum with our product. We are hoping that they have a positive trial and are waiting to see what the results are.
Great. Thank you, Enrique. John, if we can go to the next caller, please.
We'll go to John Boris, SunTrust. Please go ahead.
Thanks for taking the questions. In light of the successful launch of Basaglar across your diabetes franchise, strategically, is this a consideration to partner with other companies for biosimilars across possibly oncology or possibly across your immunology franchise with a product like Humira? Second question on productivity gains. For Derica, what have you learned about YZ that makes you confident as you prepare for another loss of exclusivity in 2018 for Cialis that you're prepared to navigate through that? Any qualitative commentary you can give on the consensus earnings growth of 7% in 2018. I know you haven't given guidance there, but certainly a topical question. Lastly on Jardiance, certainly the product had some pretty significant renal benefits.
Are you doing anything with the agency to further quantify the benefits for the agency to possibly go back to them to try and secure that within the label of Jardiance? Thanks.
Great, John. Thank you for the questions. We'll go to Dave for the question on our interest in moving more into biosimilars, Derek there for the productivity question, what he learned in YZ that can help for next year with 2018, Enrique for the Jardiance renal. Dave?
Thanks, John. Well, I think we've addressed this question before, but just to reiterate, Basaglar is a great fit for us because we already have an asset base to make the product, we have a commercial investment that can sell the product, we have devices that are world-class that the product goes in. It's really a drop-in to a broader insulin play and rounds out an important part of the portfolio we weren't participating in, which is the innovative basal segment, which is obviously a big segment of the diabetes market. Our core strategy in diabetes is to innovate above and beyond the benefits of glargine in basal insulin as it is all other therapies. That's really the same as our other therapy areas, oncology, immunology. Our main focus is on innovation to beat the standard of care today with something better for patients.
If those same dynamics played out for a TNF biosimilar or something else, sure, we'd look at it. We can get a lot of leverage financially, and it tucks into your portfolio, that could make good sense. We don't have a broad-based division associated with biosimilars. We're not pursuing that at this moment.
Great. Thanks, Dave. Derica?
Hi, John. In regards to learnings from our YZ experience, the biggest difference is the fact that with this next wave of patent expiries, we are able to offset that with new product launches. When we lost our four largest products during that YZ period, we did not have any new product launches during that period. The real key is having new product launches, and then that's really contingent on our ability to sustain the flow of R&D output. You'll see we're very committed to that, and that's why you saw us announce the CoLucid deal earlier this quarter, which is again, another increased effort in bolstering our late-phase pipeline. The third learning is just having a sustained productivity agenda.
That's why we came out in 2015 and saying, "Hey, we believe we" Or excuse me, actually in 2012, "We believe we can get to that 50% watermark in 2018 in terms of OPEX as a percent of revenue." We said that we can improve our gross margins between 2015 and 2020. While we set the 50% watermark for 2018, we're not resting on our laurels thinking that's the end of the journey. We think we can improve beyond that. We just haven't put those statements out there at this point in time.
Great. Thanks, Derica. Enrique?
Clearly the renal data for JARDIANCE is quite encouraging. As we had a number of discussions with the regulatory authorities, it is pretty clear that for us to be able to make a claim, it is quite likely that we will need to do an additional trial.
Great. Thanks, Enrique. John, if we could go to the next caller, please.
That'll be Jami Rubin with Goldman Sachs. Please go ahead.
Thank you. Just a few questions. This is to Dave and Derek. Is it safe to assume that in reiterating your medium-term guidance out to 2020, that you do ascribe some value to baricitinib? Derek, you also just said that Lilly's not dependent on any one single product, but a portfolio of products. If you could clarify that. Just curious to know your plans for baricitinib and the other indications such as AD, lupus, psoriatic arthritis. I know those are studies that are still early, phase II. Are those indications on hold until pending positive resolution on RA, or is it possible that you would go ahead with those plans?
Is there a scenario where you decide not to go further with that RA if FDA is requiring large trials that would be expensive and might mean being no longer the first and best-in-class drug on the market? Just lastly, Dave, solanezumab, unfortunately, that was a very expensive setback, but that happens. Now we have the baricitinib setback. At what point can you justify to yourself a much more substantial restructuring initiative that really focuses on the company's cost structure? We acknowledge this quarter we did see good operating margin improvement, but going out and looking at where Lilly's margins are today relative to the industry average, you got a long way to go to reach parity. Just wondering if you could share your thoughts on that, and at what point you actually start to get more aggressive on the margin side. Thanks very much.
Great, Jami. Thanks for the question. We'll have Derek address the medium-term outlook as it relates to baricitinib and clarify our thoughts there. Christi, we'll have you talk about our other indications for baricitinib, Dave, the question that we've got on the longer-term outlook. Derek?
Hi, Jami. In regards to our mid-term guidance and the relevance of barri in the U.S., absolutely, we were planning for success of that molecule, and we have not given up on the prospects of that opportunity. As Christi said earlier, we're looking forward to engaging with the FDA, and we'll work diligently to try to find a pathway forward to bring that molecule to patients here in the U.S. That being said, that guidance that we put out there around the 5%, that's what we believe to be the minimum performance that we thought we could achieve. What we didn't do is provide what we thought was the maximum what we could achieve. Even taking into account the impact of barri, we still believe we can stay above that 5% minimum goal that we established in terms of average growth between 2015 and 2020.
Again, our confidence is still very high in our ability to achieve that objective.
Thanks, Derica. Christi?
Sure. I think the first question I'll take is the one on rheumatoid arthritis. We have not contemplated a scenario in which we will not pursue baricitinib for rheumatoid arthritis. We continue to believe, as I said, in the safety-benefit risk profile. Of note, I think it's important to say that the submission that we had in Europe was exactly the same as that we had in the United States, and we stand behind the European decision and the label that they granted. As we look at other studies, and clinical studies, we actually are continuing those. Obviously, we'll take into account our discussions with the FDA, but we're looking at continuing those studies and starting a phase III trial in psoriatic arthritis by the end of this year.
Thanks, Christi. David?
Yeah, sure. Thanks. I think Jami, your question is, if I heard it right, is would we undertake some very large cost restructuring program to sort of make a one-time move in operating margins? Right now, under the scenario we see, and per the discussion that I also had with Derica today, we see a continuous top-line revenue growth driven by new products. The kind of performance we put up in Q1, if we just compound that out, I think will yield impressive margin gains. Reminding people, 7% top line, 3% cost growth, yielding 18% income growth. If we compound that over the next several years, you'll be looking at top-tier financial performance out of Lilly, and that's what we're focused on, rather than try to have some disruptive event that would perhaps set us back in terms of revenue growth and R&D productivity.
Right now, that's what we're focused on. Of course, we have scenarios, as Derica had described, that have different mixes of products that get us to that 5% average top line. Some scenarios that get us well above it. We're very comfortable with that guidance now.
Just to be clear, Dave, the improvement in operating margin is highly dependent on top-line growth and top-line mix as opposed to any cuts to operating expenses.
Yeah. It's primarily based on the top-line growth. That's right. If you do the math, there are targeted cost reductions, which we have met and will continue to undertake to reshape the company and make it as competitive as it needs to be, as well as service the R&D engine, as well as the launches that are underway.
Thank you.
You're welcome.
John, if we can go to the next caller, please.
We'll go to Steve Scala with Cowen. Please go ahead.
Thank you. A few questions. First on Jardiance, would you speak specifically to the disconnect between revenue and scripts in Q1? I'm not sure that was fully explained. Secondly, I appreciate that you have not met with FDA yet on baricitinib, but based solely on what's in the CRL and Lilly's interpretation of it, when would Lilly be in a position to answer FDA questions? Would that be a 2017 event or a 2018 event? Lastly, would you elaborate on the dynamics around the JUNIPER trial of abemaciclib in lung cancer? The primary completion has moved a couple times now. One interpretation could be that Lilly is cutting its losses and giving up, but maybe you can clarify. Thank you.
Thank you for the question. Enrique, I'll go to you for the Jardiance question on the disconnect between TRX and revenue. Christi for the question on the baricitinib response letter, over to Susan for the JUNIPER study with abemaciclib in lung cancer. Enrique?
We don't think there's a disconnect between TRX and revenue. The quarter for Jardiance was pretty clean, we didn't have changes in estimates when it comes to rebates and discounts. Let's recall, of course, in the case of Jardiance, we share 50/50 the gross margin for the product with BI. That's basically what we book as revenue. Right now, I think it's fair to say that the current revenue basically is a good reflection of the underlying scripts.
Great. Thanks, Enrique. Christi?
Yeah. In terms of the baricitinib timing, really, we can't give you an estimate on whether it's this year or next year until we meet with the FDA, which we are hoping we will do within the next 60 days.
Christi, thank you very much. Sue?
Yeah, with regards to the JUNIPER study, no, we are continuing with that study and are very interested in the role of the CDK4 and 6 in KRAS mutation positive lung cancer. We have made some changes to the study to ensure enrollment and to ensure that it hits the high bar given the changes that we've seen in FDA guidance and labeling on olaparib, we continue that study and are actively enrolling it.
Great. Thank you, Sue. John, next caller, please.
We'll go to Chris Schott with J.P. Morgan. Please go ahead.
Great. Thanks very much. Just had two questions here, both on diabetes. Maybe first on Humalog. With biosimilars coming to market in 2018, 2019, can you maybe compare and contrast some of the dynamics of the rapid-acting market versus what we're just seeing right now with the basal market, where you've launched Basaglar, and it's done very well from a share perspective? The second question was more broadly just discussing your latest longer-term views on diabetes pricing. The Street seems to be concerned here. We've had a market that's been in flux over the past few years. Lilly's obviously benefited from its broader portfolio, but your competitors have struggled.
The question is just longer term, do you see the pricing dynamics continuing to erode or even get worse, or could we see dynamics stabilize a bit here as we've gone through at least a few of these categories, pretty aggressive price competition. Does that at some point stabilize or are you preparing for an environment where things continue to be challenging? Thanks very much.
Great. Thank you, Chris, for the questions. Enrique, they're both for you.
Sure. The first question is an interesting one because clearly we are on both sides of that equation. You can imagine we're going to take all the learnings of the launch of BASAGLAR as we think about how do we ensure that we protect our Humalog franchise. It is fair to say that Humalog has slightly different makeup in terms of we think of the product, as you know, it's not just the rapid-acting, but it's also the mixtures, which are about 30% of the volume. Clearly, we do have a strong position when it comes to payers. Importantly, the contracting already is on exclusive status for really mealtime insulins across all of the major plans. That is different from the type of contracting when it comes to basal insulins, where basically we had a number of products in formulary.
Anytime that you basically narrow the formulary, there's an opportunity for a payer to have an economic benefit from a larger rebate. The dynamics are a little bit different. We clearly are preparing and thinking through that, and I won't be able to comment more on that. I do think that our position with Humalog is quite strong. When it comes to diabetes pricing, what we basically see is a continuation of the current trends. We don't see significant step changes. We basically see, at this point in time, different classes are in different stages. As I just mentioned, mealtime insulins, all major plans have made a 1-on-1 exclusive type decision when it comes to a mealtime insulin. SGLT2s, there's 1 of 2 status for most plans. GLP-1 is something similar.
What we basically see is a continuation of trends rather than a step change. Clearly, we are pretty well positioned given the breadth of our portfolio and really strong share and momentum that we have with our product, which is key as different payers make the formulary decisions.
Great. Thank you, Enrique. John, if we can go to the next caller, please.
We'll go to Geoff Meacham with Barclays. Please go ahead.
Hey, guys. Good morning, and thanks for taking the question. On Taltz, I wonder if you can talk about the new to brand share trends in the U.S., say, over the past six months. Are there many plans that you still don't have formulary status in? In Europe, can you speak to countries that you expect to come on board fully for this calendar year? On baricitinib, I know it's hard to say, but were extension studies for all the pivotals part of the filing? I'm just trying to figure out what data haven't yet been submitted or analysis not yet done that you could add that would be new to the CRL. Thanks.
Great, Geoff. Thank you very much. Christi, if you want to take the first question on the Taltz new to brand trends, and feel free if you want to answer the second question, we're happy to help with that one as well.
Sure. The data coming new to Lilly, obviously the data we saw on Taltz in the studies plays out in the marketplace. It's really remarkable, the PASI 100 data and how physicians are seeing the benefits play out with patients in their offices. That's what's really leading to the NBRx share gains and growth. The growth continues. As you probably know, we passed ENBREL early last year. We passed COSENTYX later in the year. We continue to believe that the IL-17s are the best in class and a huge market opportunity for us as we close the NBRx share on STELARA. That, in spite of not having a lot of formulary access with all of the payers. We continue to work on that. Yes, there is opportunity to grow in that area.
In terms of the data that was submitted, Geoff, there were data, obviously, from the four pivotal studies as well as from data we would have at the time, and I believe over the course of the review from the extension study. There is additional data that we have generated in the extension study that I'm mentioning that we have not submitted to FDA. Christi talked about earlier, we'll look forward to meeting with the FDA here in the next 60 days or so to see if any of the additional data that we have could be helpful to them in their consideration of the safety concerns that they raised in the Complete Response Letter. John, if we can go to the next caller, please.
We'll go to Tony Butler with Guggenheim Securities. Please go ahead.
Yes, thanks very much, and good morning. Two brief questions. Susan, CYRAMZA in Japan has been perhaps the better geographic growth driver for the product. However, in quarter to quarter, it does look as if it had peaked in Q4, and I'm curious if that is, in fact, the case, being down in Q1. Enrique, again, back to, I guess Steve Scala's question on JARDIANCE. Also or similarly, the Q4 to Q1, at least Lilly's share of the gross profit is effectively flat and slightly down. Is it because demand is in a lower revenue-generating channel, for example, perhaps more Medicaid patients are being prescribed the product than maybe those from managed care? Thanks very much.
Great, Tony. Thanks for the question. For the CYRAMZA Japan question, and then Enrique for the JARDIANCE follow-up.
Hi, Tony. Thanks very much for the question on CYRAMZA in Japan. You're right, it is going very well in Japan. The quarter-on-quarter is just a timing. If you look at last year, you would've seen the same dynamics. What we are continuing to see is strong growth of CYRAMZA in Japan in the gastric cancer indication, where it now has a market share of 57%. In fact, I think CYRAMZA is one of the most successful oncology launches now in Japan. We also are now seeing uptake in both the lung and the colorectal cancer indications. There's quite a high overlap. As you know, the prevalence in Japan of gastric cancer is a lot higher than the U.S. We are seeing a lot of overlap between users of CYRAMZA in gastric cancer and those that treat colorectal cancer.
We see a good opportunity for uptake in that indication, too. We're currently seeing that and also in lung. We feel very good about the continued uptake of CYRAMZA in Japan.
Thank you, Sue. Enrique?
There's really not an issue when it comes, Tony, to segment mix. We had in Q4 of 2016 a positive benefit, roughly about $15 million worth of Lilly revenue due to changes in the estimates of rebates and discounts and co-pay cards. That's basically why that comparison doesn't follow the script trend. If anything, we should see basically improved pricing when it comes to Jardiance just because we made some changes to our co-pay cards. We are gonna be less reliant on them as time goes through. That should basically give us some benefit over time when it comes to the net realized prices that we see.
Thank you, Enrique. John, if we can go to the next caller.
That will be David Risinger with Morgan Stanley. Please go ahead. David, your line is open if you're on mute, maybe.
Be as unrestrained as many of my peers. Instead, Phil, I'll follow your instructions and ask two questions. First, Dave, could you please discuss near-term M&A opportunities to acquire small biotech companies with new launch prospects in order to enhance your new launch pipeline flow late decade? Second, Enrique, I was actually surprised with JARDIANCE that given its extraordinary cardiovascular benefit, which is actually better than many drugs that are solely approved for cardiovascular disease, I would've thought that Lilly would've gone to payers and said to payers, "We need to reduce our rebate payments to you." Obviously, from an ethical standpoint, JARDIANCE has to be Tier 2 irrespective of rebates. I guess I'm just hoping that you could provide a little bit more color on why Lilly has to enhance rebates for such an extraordinary drug. Thank you.
Great, Dave. Thank you for the two questions. Dave, we'll go to you for the near-term M&A question and back to Enrique for the JARDIANCE question.
Yeah, thanks, Dave. Well, our posture on M&A really hasn't changed. It's a top priority for deployment of capital. Of course, we are very interested in targets that would enhance our position, whether it be pipeline or otherwise, in oncology, in diabetes and immunology or in Alzheimer's or pain. When we see those things, we've moved quickly. I think CoLucid is an example of that. The reality in the world, though, is I think there are constraints. One of them is pricing. We're not the only company looking for these assets. The other is strategic fit. We're gonna be disciplined to stick to therapeutic areas where we have an ongoing interest. We think where we have information advantage, and we wanna trade on that. I think the asset fit within our pipeline.
When we're talking about pipeline assets, we seek to acquire things that can be producing interesting combinations or fill gaps. We're very focused on this space. Obviously, we have one transaction in Q1
Hope we can find more like it, because we see a lot of value in CoLucid as an example. It's top priority for me, and we continue to scour the planet for good opportunities to add to Lilly's growth story.
Thanks, Dave. Enrique?
Tim, I agree that Jardiance is indeed compelling value for payers. I'm unable to discuss what our rebate strategy is on this forum. I think it's important. There's, of course, public knowledge when it comes to, for example, Germany and Japan. In both of those cases, in the case of Germany, we have a new price, a higher price for Jardiance based on the indication. In the case of Japan, we did not get the price cut. We got a minor positive price adjustment. Yes, we do believe that this product offers compelling value to payers and to patients.
Thank you, Enrique. John, if we can go to the next caller, please.
That will be Umer Raffat with Evercore. Please go ahead.
Guys, thanks for taking my question. I wanted to ask directly, do you think you need a new trial for baricitinib, number 1? And number 2, let's say there's a scenario where only two-milligram dose is approved. Do you think baricitinib will be able to get the head-to-head versus Humira on label?
For those two questions, Umer, I'm not sure if you were cut out, if that was two questions.
I'm so sorry. Let me try again. First of all, just wanted to ask directly, do you think you need a new trial on baricitinib? In a scenario where only 2-milligram dose is approved, do you think you'll be able to get the superiority language versus HUMIRA on label? Thank you.
Christi, would you like to handle this?
Sure. We don't know what we'll need until we actually meet with the FDA. As I said before, we believe in the benefit risk profile of the 4 milligrams and the 2 milligrams across dosage groups. That's what we continue to see with the data, and we want to make sure that what we provide to the marketplace is something that is effective and safe for the patients that it serves. Right now, we're looking at a 4 milligram and 2 milligram and open to the discussions with the FDA. We'll see how they go and be back to you after that.
Thank you, Christi. Just as a reminder, the R&D study just had the four milligram in it against viral. I think if that's your question, just remind the group that was that particular head. Okay, thanks, Dave. John, next caller, please.
We'll go to Alex Arpaia with BMO Capital Markets. Please go ahead.
Good morning. Thank you, folks, for taking the questions. Most of my questions have been asked, a couple more for Enrique and diabetes. First on Humalog, how comfortable are you about the sustainability of the exclusive arrangements that you have with payers? The economic benefit that you mentioned from the rebates, that obviously has come under increased scrutiny. What are the risks there? Following up, obviously Trulicity is doing well. What is your competitive outlook there on the GLP-1 class, particularly from the oral GLP-1 in phase III from Novo? Thank you.
Great, Alex. Thank you very much for the question. Enrique, again to you.
Sure. Clearly as we contract with payers, it's not only the economic benefit, but of course, all of the clinical benefits of each one of the products. In the case of Humalog, it's always difficult to say as we go through the contracting season, but I think what we can say is as we looked at historically, once a payer has made a decision on a particular product, basically, once it comes time to renew, they typically have continued with that choice that they initially made in particular when there are not new entrants basically coming into the marketplace. We see this not only in diabetes, but I think in other therapeutic classes.
As you can imagine, if we have a market with two major players, in this particular case, maybe Lilly and Novo, and we were in dual status and we go to exclusive status, you are switching 50% of the patients. Once somebody is on exclusive status, now basically the disruption is significantly higher, and clearly the economics from a benefit of the rebate perspective are really not gonna be there because they're already getting basically top exclusive rates. When it comes to Trulicity, clearly the product is doing extremely well. We are very excited about the overall growth of the class. We see significant expansion of the GLP-1 class continuing. Of course, Trulicity has superior share performance within that class. We do see additional competition coming in both when it comes to semaglutide as well as the oral GLP-1.
Of course, we need to wait for additional data. What type of label will these products get? Clearly the efficacy of sema is, we believe, very good, but they also had a signal when it comes to retinopathy. We need to see what is their label gonna look like, because we do think that it's not just efficacy, but the entire profile. One of the great benefit that Trulicity, I think is offering, is we basically feel that Trulicity is almost redefining the first injection experience because patients don't have to touch the needle or see the needle. In a certain way, the feedback that we get from the experience, I think is just fantastic. We've said that we are interested in oral GLP-1s and that's something that we're actively working on.
Great. Thanks, Enrique. John, next caller, please.
That will be Vamil Divan with Credit Suisse. Please go ahead.
Great. Thanks so much. One, just follow up on the diabetes side. Can you give a sense of the share now for the SGLT2s and the GLP-1s that's coming from primary care physicians as opposed to the specialists? I guess if you want to throw the DPP-4s in there as well, that'd be helpful. My second question, just on the 2017 guidance, just wanted to clarify. I believe you've not incorporated any expectations around the potential approval from KEYNOTE-021G for ALIMTA in combination with carboplatin and KEYTRUDA. Can you just confirm that's correct and would that then be upside if that approval does come next month? Thanks.
Okay, Vamil, thank you very much for the questions. Enrique, if you'd like to handle the question with regard to split between PCP and specialists for SGLT2s or DPP-4s as well, if you have it. Then, Derica, any comment you have on how the KEYNOTE-021G approval, if that comes through, could impact our expectations for 2017. Enrique?
Yeah. When it comes to orals and SGLT2s and DPP-4 are pretty alike, we basically see primary care basically driving about 80% of the overall scripts. Now, one thing that we've been watching is basically, what about cardiologists? What we basically see is that while cardiologists, in the case of JARDIANCE, are a significant source of authority, and while we have seen an increase, the base of prescribe is extremely small. I don't have the actual split for the GLP-1s, and I'm cautious about making it because that class has been evolving very quickly. What we basically see is huge growth when it comes to primary care right now. That class used to be about 50/50, and we'll provide the specifics of where we are now.
Great. Thank you, Enrique. Derek?
In regards to the guidance, as you saw in our press release and in our remarks here this morning, we reaffirmed our guidance for 2017. As it relates to the KEYNOTE data, we're excited about the data itself. We look forward to hearing the feedback and the outcome with the discussions with the FDA. Clearly, if it's positive, it would go to support that guidance. When we put our guidance together, we contemplate, again, as I stated earlier, a number of various scenarios that we will have to contend with, whether it's over the next 12 months in terms of our annual guidance or as it relates to our mid to longer term guidance when we're talking about the 5%. This would just be one of those additional scenarios that's factored in.
Thanks, Derek. John, next caller, please.
That will be Marc Goodman with UBS. Please go ahead.
Morning, Sue. Can you talk about how your oncology strategy's evolved and what are the key phase II assets we should be focused on? Second, just in animal health, can you tell us what was the impact of the BI sales in the quarter for the acquisition? Thanks.
Marc, thank you for the question. Sue, for the oncology strategy question, can you give us some color on phase II assets. Jeff, back to you for commentary on the impact of the BI Vetmedica acquisition and the results for the quarter. Sue?
Sure. Thanks for the question. Clearly, as we look at our strategy, the oncology environment is changing pretty rapidly, and we want to make sure that as we're looking at agents that we're bringing through really agents that are standard of care change and have the potential to be standard of care changing and be foundational agents. We believe that we have a number of those. We've just launched Lartruvo for soft tissue sarcoma, which is the first agent that has been approved to show an overall survival advantage over standard of care in 40 years, showing an improvement of 12 months nearly in soft tissue sarcoma. I think that is one that we can say clearly has the potential to be standard of care changing and foundational. We have abemaciclib data that we're excited about, too. We have a number of assets in our portfolio.
We're actually currently going through a strategy review and prioritization, which we are looking forward to giving you more details on over the next months. There are a number of agents that we're excited by. I think that we look at our Chk1 inhibitor, prexasertib. Data on that is pretty exciting, and you should see more on that coming through over the next few months as you see how we're continuing to develop that further. With regards to our ERK inhibitor, we're pretty excited about that, too. That's in phase I at the moment. We also have potential combination options with our PI3K mTOR inhibitor and abemaciclib. You're going to see more as we continue to roll out our prioritization of our portfolio. We have a number of assets in our portfolio now.
What we want to do is really focus on those ones that have the potential to be foundational standard of care changing and have rapid development of those, that's where our focus is.
Thanks, Sue. Jeff?
Yes. On the impact of the BI, we sold $40.8 million in the first quarter. That's aligned with our plans, again, as mentioned in the results, we were up 2% with the impact of BI. Without it was minus 3%.
Just Marc overall, if you saw from our prepared remarks that the Vetmedica added about 30 basis points of our overall 8% volume growth in the quarter.
Great. Thanks, Derica. John, next question, please.
We'll go to Geoff Meacham with Jefferies. Please go ahead.
Hi. Thanks for taking my question. Clearly, Trulicity's been having a great launch and is expected to going forward. I get a lot of questions from investors just around sustainability of pricing in the GLP-1 segment. Just maybe ask you to gaze into a crystal ball a little bit through maybe the upcoming contracting and one or two years out, how you just see that potentially being different from the insulin markets, obviously, where pricing pressure's been a bit more difficult. The second question, just really going back to baricitinib a little bit and the clinical trial design there. There is quite a lot of crossover in some of those clinical trials, some up and down dosing.
Just wanted to get any feedback that you can potentially give us on how comfortable the FDA was with that design right from the outset, and whether any of this crossover and up and down dosing in the trials was potentially discussed at mid-cycle review. Thank you.
Great, Geoff. Thank you for the questions. Enrique, if you'll comment on Trulicity pricing question. Dave, do you want to take the question for the baricitinib trial design? Enrique?
Sure. Just on Trulicity, first, our access right now is outstanding. I think it reflects, given the clinical and business performance of the product, Trulicity is now basically added in most plans. Our access in both commercial and Part D is north of 80%. Unfortunately, I'm unable to provide forward-looking expectations in terms of pricing.
Okay, Enrique. Thank you. Dave?
Just briefly on baricitinib, you're correct in saying the program had a number of step up after the initial placebo-controlled phases. Many patients moved from two to four milligrams or placebo to four as rescue. That's standard in RA studies. We also, in the long-term study everyone rolled into, we had a step-down feature. We have a lot of data about two versus four, and we look forward to talking to the FDA more about that data in the coming 60 days or so.
Thanks, Dave. John, next caller, please.
We actually have no further questions in queue.
Okay, let me just give a few seconds to see if someone wants to queue. If not, we'll go to the close. Let's give a couple of seconds for that, please. Did anyone queue, John?
No further questions coming in.
Thank you very much. Dave, why don't you go ahead and close out the call.
Okay. Thanks, Phil. We appreciate your participation in today's earnings call and your interest in Eli Lilly and Company. As we've discussed before, Lilly is entering a period of growth driven by new product launches. The diversity of our product portfolio, our top-line growth prospects, and the opportunity for margin expansions over the balance of the decade provide a compelling thesis for investors. I look forward to our continued interactions and keeping you informed of our progress. Please follow up with our IR team if you have any questions we didn't address today. Thanks again, and have a good day.
Ladies and gentlemen, that does conclude your conference. Thank you for your participation. You may now disconnect.