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I'm
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going all right besties I think that was
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another epic discussion people love the
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interviews I could hear him talk for
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hours absolutely we crush your questions
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admit it we are giving people ground
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truth data to underwrite your own
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opinion what you guys think that was fun
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pal Dave Ricks welcome to the Allin
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interview great to be here yeah we had
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dinner together a couple of months ago
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and I've been in touch and obviously I'm
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really excited to talk to you uh today
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about the work you're doing at Eli ly so
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just for the audience Dave is the CEO of
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Eli ly which is the world's most
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valuable pharmaceutical company and the
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leader in the glp1 uh drug Market which
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some analysts have said could grow to as
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much as 150 billion in annual revenue
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over the next 10 years really kind of an
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extraordinary story and Dave you became
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CEO of Lily in January 2017 when Lily
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had a market cap of just $70 billion
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following a year of 20 billion in
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revenue and three and a half in
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operating income and today Lily's Market
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Cap is an astounding $878 billion and
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the company's projected to do 46 billion
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in revenue and 15 billion in operating
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income this year and few companies in
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history I'd say have seen such an
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extraordinary rise in Revenue profit
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market value at this scale maybe Nvidia
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recently which I'd say is the only
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company that kind of beat your
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performance in recent years but I don't
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know of any that are not founder Le
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maybe SAA running Microsoft
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but it took him a little bit longer and
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so today I'm really excited to talk to
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you about the work you're doing at Lily
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The Chronic health problem of obesity
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and diabetes gp1s and what's happening
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in that market what those uh products do
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and The Business of Eli Lily so thanks
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so much for being here da yeah excited
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to be here I'm a big fan of the Pod so
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I'm I'm excited to be on that's great um
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sorry you don't get uh harassed by the
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other three today it's just me uh so
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this is a an extended science corner for
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all the Nerds at home that wanted it
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with a a deep dive on on an amazing
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business so we'll start off by talking
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about the the The Chronic Health
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epidemic of obesity according to this
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CDC 74% of Americans are now overweight
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or clinically obese your statistics
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might be different this condition is
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driving what is arguably the largest
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Health epidemic in human history obesity
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and all the associated diseases like
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type 2 diabetes have so many negative
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Health implications for our
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populations and this is dramatically
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over the past 50 years is becoming a
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global problem so let me pull up a
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couple of images we can use as we have
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this conversation here Dave and will
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dialogue about this but obviously what
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humans eat what we consume has changed
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dramatically particularly here in the US
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we've seen the American diet a shift to
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a much more kind of caloric lower
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nutrient density diet over the last 50
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years the average daily calorie consumed
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by Americans since 1961 has driven up
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from 2800 to about 3600 and you know
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that sounds like a small number but when
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you add it up over 365 days a year it
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leads to a pretty dramatic increase in
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in obesity rates this is a great chart
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that shows how the availability of
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calories and the consumption of calories
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in a population significantly correlates
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with the rate of
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obesity in that particular country and
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the United States obviously has the
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largest caloric supply of any developed
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nation and also has the highest
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percentage of people that are overweight
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or obese and I would argue that many of
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the improvements that we've seen in
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agricultural technology and many of the
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systems um in in food that have made
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calories cheaper have resulted in this
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kind of surplus problem that has led to
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an obesity epidemic and just looking at
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the US rates over the last 20 25 years
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you know we see today as I mentioned
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before 75% of people overweight or obese
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and in this particular
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slide we're showing 35% of obese and
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severe obese to today 51% of Americans
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are either obese or severely obese
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really
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extraordinary and this is not just in
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the US as the calorie supplies increased
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around the world we see obesity rates
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climbing in every developed Nation from
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Brazil to Mexico and now even recently
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in India and so this is becoming a
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global problem and I think you know Dave
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maybe you could talk a little bit about
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the scale of the problem I think you've
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highlighted a lot of this in your
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investor presentations and and this is
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one of your slides that you've used so
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maybe you can kind of share how you guys
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forecast the Obesity epidemic and and
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the effect it's having
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worldwide yeah that's a great
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backgrounder to get us kicked off you
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know one thing just pointing out on the
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data you showed some people notice a
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difference in the caloric intake numbers
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versus the um kind of the macronutrient
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micronutrient story you go back yeah so
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like the the severe obesity particular
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kicking up here on the next slide there
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um yeah kicking up almost doubling right
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in the last 20 years whereas caloric
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intake certainly isn't moving at that
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same rate so you know I think as we
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think about the problem of course um
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excess calories versus expenditure is a
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key part but so is probably the ultr
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processed food story which you didn't
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have data on there but is you know I
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think in the US we're now eating
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two-thirds of our calories in our
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country are ultr processed yeah and that
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compares to like 35% in Europe so that's
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got to be part of this equation as well
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but no matter the cause like if you go
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to that first slide I had we now see
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about a billion people on the planet
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with clinical obesity or overweight and
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as you're pointing out probably that's
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um going to grow a lot more in the
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developed or developing world than the
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developed world there's a function of
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wealth accumulation and um Surplus uh
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food
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abundance basically that will drive this
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India I think is 11% of the population's
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obese but projected to go as much as 30%
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in the next 20 years so on that
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population base that alone would would
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add almost half a billion people um to
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this this chart yeah so your projection
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is obesity worldwide will affect about a
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billion people by 2030 is that right
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yeah that's right yeah yeah and the
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problem with obesity is that it has an
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effect on many of uh the the systems of
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the human body maybe you can highlight
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kind of how obesity uh you know causes
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many of The Chronic health conditions
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and ailments that simply weren't around
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maybe hundred years ago but are
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certainly becoming far more frequent
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today yeah absolutely I mean the first
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order effect of course is on your
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metabolic processes in here you like
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like cardiovascular disease how we
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process lipids and other energy sources
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that leads to cardiovascular disease and
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its um other Associated risk like stroke
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um I mean there's a pretty new disease
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here called under the liver disease
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which is what's used to be called Nash
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is now confusingly called Mash but it's
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the same disease it's fatty liver
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disease and 30 years ago like clinically
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you couldn't really find this in the
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adult population and now it's one of the
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most common conditions obese people
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suffer from and it ends up in fibrosis
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of the liver and as you know like we
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have a lot of every organ that's
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important we have redundancy and except
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the liver so when your liver goes south
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it's a bad news story for human health
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transplant is is the only escape from
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that um we've got some used to be a that
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used to be a disease limited to severe
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alcoholism right exactly and and this
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the Nash word is actually starts with
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non-alcoholic yeah fatty liver so but
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now there's much more um obesity-driven
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fatty liver than any other cause as
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pointing out but it results in
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transplant and terrible uh outcomes long
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term so so much of the the health
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problems The Chronic health issues that
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we deal with as a modern society are
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probably rooted many of them are rooted
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in the Obesity epidemic yeah so 230
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diseases have have been connected and
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you have these these ones that are more
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like directly because of the caloric
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imbalance and fat accumulation and then
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you have these ones in blue are sort of
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like derivative like obstructive sleep
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apnea that's like 14 million Americans
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have cpat machines and why because
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there's so much um fat accumulation
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around your respiratory system you you
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wake yourself up at night to
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breathe and gird of course that's you
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know reflux Etc so these are like more
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the second order effect and then
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interestingly you've got the mood
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anxiety pieces here there's an
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interesting study done by epic you know
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they're the big health record company
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yeah which is retrospective and not
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tightly controlled but it showed people
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on gop1 drugs incron had remarkably
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lower rates of new clinical depression
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diagnosis which is an interesting thing
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as well so a lot of lot of
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impact like type two diabetes itself
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which is an inability for the body to
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respond with an appropriate amount of
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insulin when there's glucose in the
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blood itself has a number of follow-on
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effects obviously diabetes as as many
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know um has become own a chronic Health
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epidemic it can
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cause nephropathy so damage to the
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kidneys which has a significant effect
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on our ability to regulate protein in
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our body diabetic retinopathy
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hemorrhaging in the eyes uh that
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ultimately can lead to to blindness so
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having too much blood sugar and not
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having an ability to produce enough
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insulin to bring down the blood sugar
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level can can lead to all these chronic
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health effects which have
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obious yeah those are the microvascular
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ones there's the I mean the the risk of
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heart attack if you have type two
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diabetes is four times people who don't
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have diabetes yeah so you also have the
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macrovascular events stroke heart attack
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okay so the treatment for diabetes used
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to be insulin right and insulin and if I
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remember the history of Eli Lily
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correctly Eli Lily was the first
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American company uh to produce insulin
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which was done with initially
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processing I believe pigs or cows uh to
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to to to get the insulin both yeah yeah
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it's an interesting story so we were the
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first company period um there's a Danish
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company Novo who's our competitor in
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this space we can come back to that
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because it's not a
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coincidence that I remember the history
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of of the relationship it's a really
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interesting history between the two
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companies but kind of intertwined yeah
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but we we had a like our head of science
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uh met with Toronto this researchers up
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there who discovered the mo the
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mechanism of insulin but they couldn't
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make get into a medicine we produced the
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process that made it available at scale
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which as you're pointing out was derived
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from like a lot of the you know the
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history of our industry was like taking
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things in nature and refining them into
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medicine and that was the case with
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insulin we took something in nature the
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pancreases of slaughtered meat animals
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really cows and pigs and essentially
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refined out of that the protein which is
00:11:24
insulin and that was the case until 1981
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where we had partnered with Genentech to
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do another first which is create the
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first biotechnology product on planet
00:11:33
Earth which was human insulin made in a
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in a bacterial cell yeah so in in that
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case that was the first Rec combinant
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biologic product right it was pudding
00:11:45
the genetic the genetic code from human
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DNA that codes for human insulin into an
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ecoli bacteria then you put that ecoli
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bacteria in a giant vat and just like we
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ferment wine we put sugar in and it
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started to make insulin and that's how
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we make insulin around the world today
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is through that recent process right
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yeah that's right still and that was the
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first DNA based product made and it
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solved a problem because we were
00:12:09
actually we had we had per the Obesity
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discussion Rising type two diabetes
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rates it used to be type 1 diabetes
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which is the childhood form that's
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really autoimmune disease um was most of
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the diabetes that needed insulin but as
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this uh you know abundancy grew and
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people got heavier we saw earlier and
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earlier onset type 2 diabetes which is
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the adult form right and we we worried
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we're going to run out of animals to
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slaughtered animal pancreases to refine
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so it wasn't just a cool science thing
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it was actually solving a pretty big
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public health problem which was the risk
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of scarcity of insulin yeah yeah and so
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look I mean biotech to the to the rescue
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and we'll talk more about biologic drugs
00:12:50
and all the other things that that have
00:12:52
been addressed with recombinant systems
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meaning we put DNA in microbes and get
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those microbes to make a protein for us
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and obviously there's been a lot of
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advancements in that space it's probably
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worth you know hundreds of billions of
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dollars today but um let's let's fast
00:13:08
forward to what happened after
00:13:10
insulin it sounds like in the history of
00:13:12
of research into diabetes and
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understanding some of these underlying
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mechanisms uh there was this discovery
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of
00:13:20
glp1 at one point and let me try and
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explain it and you tell me if I get it
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right but okay
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glp1 it sounds like is a protein that is
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expressed by L cells these are little
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cells in the small intestine of a human
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so when we eat food those cells
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recognize that there's food in the
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intestines and they pump out a protein
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called gp1 and that protein goes into
00:13:47
the bloodstream and flows all over our
00:13:49
body and turns on and off different
00:13:53
parts of different cells telling them
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hey there's food in the in the
00:13:57
intestines so tells your brain don't be
00:14:00
hungry but it also has other effects
00:14:03
like secreting insulin getting cells to
00:14:05
make insulin and as a result glp1 is
00:14:08
what's called a hormone it's a regulator
00:14:10
of all these different cells to do
00:14:12
things when our intestines are full of
00:14:14
food is that an accurate way of kind of
00:14:16
describing what a glp what the glp1
00:14:19
protein is yeah that was perfect I would
00:14:21
just step back one step though and say
00:14:23
there's a broad there's like a super
00:14:24
family of these things and this going to
00:14:26
come up later in the when we talk about
00:14:27
the drugs which we call incron and this
00:14:30
was derived from a even earlier on your
00:14:32
chart here in the 70s they observed that
00:14:35
if you give someone nutrients
00:14:38
intervenous meaning it bypasses the GI
00:14:40
system that you have a higher spike in
00:14:44
glucose than if you give it via the GI
00:14:47
track so that's a curiosity right which
00:14:49
is why is that the GI track was doing
00:14:51
something and they call that the inchron
00:14:53
effect and later we found out that
00:14:55
there's a whole family a super family
00:14:57
really of these hormones signaling tools
00:15:00
that are telling your body when you're
00:15:02
fed to do different things that makes a
00:15:04
lot of sense because to survive as
00:15:06
humans feeding is like one of the top
00:15:08
three essential processes next to
00:15:10
breathing and other things and so
00:15:12
there's a lot of redundancy but also uh
00:15:15
different hormones for different chores
00:15:16
and gop1 was the first one that was made
00:15:18
into a drug and so in 1987 it was
00:15:22
discovered that gp1 actually stimulates
00:15:24
insulin production insulin
00:15:26
secretion and and then it was isolated
00:15:29
and um
00:15:32
ultimately I mean maybe you can tell us
00:15:33
the history I think there was a story
00:15:35
about Nova Nordisk and noo having some
00:15:38
um some role and some of the early work
00:15:40
with glp1 versus Lily and and tell us a
00:15:43
little bit about the history and like
00:15:45
what took so long for gp1s to go from
00:15:49
hey it stimulates insulin secretion in
00:15:51
1987 to kind of getting these first
00:15:53
drugs on market for gp1 yeah it's a
00:15:56
great question both companies played
00:15:58
around with this me ISM right after that
00:15:59
paper was published in '87 and as I said
00:16:02
back to the insulin story it's not
00:16:03
really an accident because we were two
00:16:05
companies very focused on making
00:16:07
peptides and and diabetes right so this
00:16:09
was a good thing to chase but gop1 in
00:16:12
its native form is not peptides are a
00:16:15
small molecule small protein right just
00:16:17
just smaller protein yeah less amino
00:16:19
acids in a chain um which is what we
00:16:21
call gop1 really it's smaller than a
00:16:23
protein it's a hormone but but also
00:16:25
called a peptide but we when you give it
00:16:28
in its native form as a medicine it has
00:16:30
a halflife of like minutes so you'd have
00:16:33
to have continuous infusion in your life
00:16:35
to use gp1s in the human form as it was
00:16:38
designed and of course we have plenty we
00:16:41
can make it ourselves um inside our
00:16:43
bodies but if you give it exogenously or
00:16:45
from outside that you need a drug that
00:16:47
lasts longer than a few minutes so you
00:16:49
know both companies set to work on that
00:16:51
problem it was actually Lily that
00:16:52
launched the first gp1 drug called
00:16:55
exenatide which was this strange Story
00:16:57
another sidebar of a company discovered
00:17:00
that in the saliva of a hila monster so
00:17:04
this is the
00:17:06
the desert yeah in their saliva is a is
00:17:10
basically a mimic of the go human gop1
00:17:13
it's close but not identical and the
00:17:16
amino acid change that it had made for
00:17:18
its purposes in saliva actually uh
00:17:22
prolonged its action in man to be more
00:17:25
like six or seven hours so this made for
00:17:28
twice a day injection and it was it
00:17:31
allowed us to lower blood sugar in
00:17:33
people with diabetes and it was super
00:17:34
successful it also we noticed as happens
00:17:37
in drug development that you lost a
00:17:40
little bit of weight with this and we
00:17:41
know in type two diabetes that was good
00:17:43
in the background Nova was working on
00:17:45
their own once a day version and they
00:17:47
engineered it versus found it in nature
00:17:50
then Lily uh made a once a week form
00:17:52
called Doula glutide which is now
00:17:54
marketed as trulicity and then Nova made
00:17:56
a weekly one which is called OIC which
00:17:58
we all know the name of now and actually
00:18:01
you know in kind of uh not to nerd out
00:18:03
too much on drug kinetics but by going
00:18:06
from daily to weekly we were able to
00:18:08
dose higher and this is one of these
00:18:10
situations where the glucose effect
00:18:12
occurs at a lower dose than the weight
00:18:14
loss effect and we couldn't do that with
00:18:17
a daily or twice a day drug because the
00:18:20
side effects of these drugs which are
00:18:21
nausea and diarrhea they're unpleasant
00:18:23
are kind of a what we call a peak to
00:18:25
trough effect so you experience them
00:18:27
when there's a big change in the drug in
00:18:29
your body but when it's steady state you
00:18:32
we really reduce those symptoms so it
00:18:34
was really novo's Insight that we could
00:18:36
push up the dose of semaglutide that
00:18:39
allowed the Obesity kind of threshold to
00:18:41
be pushed and then of course we followed
00:18:43
that with our latest one tepati which is
00:18:45
known as mararo that's actually two
00:18:47
hormones together yeah well so so let me
00:18:50
just um take a step back I just for
00:18:52
folks that are listening to really
00:18:54
understand this so all proteins are made
00:18:57
from a chain like a beaded necklace of
00:19:00
amino acids being stuck together and
00:19:02
when they're put together that chain
00:19:03
kind of collapses into a a molecule
00:19:07
structure a protein structure and that
00:19:09
protein has some function because it's
00:19:11
got shapes and curves on it and it can
00:19:13
do things in the body it can bind to
00:19:14
things and they can do activities with
00:19:17
different cells but you don't
00:19:18
necessarily need to use that exact chain
00:19:20
of amino acids to get part of that
00:19:22
protein to bind somewhere else in the
00:19:25
body you can use things that look like
00:19:27
that protein and that's really the
00:19:29
effort in all of these what are called
00:19:32
glp1 agonists which are different than
00:19:36
glp1 itself they're different molecules
00:19:38
they're different proteins but they
00:19:40
combined and have the same sort of
00:19:41
activity so so there's this discovery
00:19:44
process this research process as I
00:19:47
understand it to to develop and identify
00:19:50
new proteins that can have a similar or
00:19:53
perhaps even a more beneficial effect
00:19:55
than gp1s in the body is that is that
00:19:58
kindir yeah that's right and I think you
00:20:00
know this story itself is going from
00:20:02
like finding the native human hormone
00:20:05
and then we found this accidentally this
00:20:08
one in nature that was what we call an
00:20:09
analog to it so it had a similar
00:20:11
function but with a different kinetics
00:20:14
different absorption rate and then Novo
00:20:16
actually uh engineered that in L glutide
00:20:19
so they designed that in and ever since
00:20:21
then we've been Engineering in different
00:20:24
changes in those amino acids those beads
00:20:26
to drive different types of function
00:20:29
the latest one being this sort of dual
00:20:30
acting one we have now which like both
00:20:33
ends think of a chain with both ends
00:20:35
with active Warhead versus just one in
00:20:37
right so over time in 1986 we kind of
00:20:40
realized hey gp1s stimulate insulin
00:20:43
secretion so this is super interesting
00:20:45
and all this research begins but since
00:20:48
then there have been a lot of
00:20:49
studies on how gp1s maybe are regulating
00:20:53
and affecting other organs in the human
00:20:56
body and you know I've got this chart up
00:20:59
here that shows the effect of
00:21:02
gp1 um and gp1 analoges on the brain on
00:21:05
the heart on the pancreas on the liver
00:21:08
there are all these kind of interesting
00:21:10
follow-on effects the human body is so
00:21:12
difficult to kind of map everything but
00:21:14
there's some intricate relationship and
00:21:16
cross-regulatory process that happens
00:21:18
between all of these different systems
00:21:20
of the human body so maybe you can talk
00:21:21
about the evolution in our understanding
00:21:25
on how gp1s and gp1 analoges maybe are
00:21:28
affecting other organs in the body not
00:21:31
just turning off hunger and not just
00:21:33
making more
00:21:34
insulin yeah so of course it's doing
00:21:36
those two things but as you're pointing
00:21:38
out you know the hormone is basically a
00:21:40
messenger right so as as you said
00:21:42
earlier it's telling your body you're
00:21:44
fed and with that um because nutrient
00:21:47
absorption is like a survival Instinct
00:21:49
and um we're pre-selected for that we're
00:21:52
good at then processing that signal and
00:21:53
acting differently so that includes um
00:21:56
you see like heart rate going up and um
00:21:59
lipid levels dropping uh in your
00:22:01
cardiovascular system and that's because
00:22:03
you're responding to that food the new
00:22:05
nutrients entered into into into your
00:22:07
body liver is a key part of metabolism
00:22:10
so there's tons of cross signaling into
00:22:12
the into the liver um and the pancreas
00:22:15
is the source of insulin amongst other
00:22:17
metabolic regulatory hormones so so what
00:22:19
we don't even fully understand yet
00:22:21
though David which is interesting is is
00:22:24
that there are primary effects of gop1
00:22:26
certainly we can reproduce like in a in
00:22:28
a a test tube or a cell system but then
00:22:31
there's a whole Myriad of other probably
00:22:33
secondary effects because there might be
00:22:35
intermediate signals we don't even know
00:22:37
about yet in this whole metabolic
00:22:40
process so some of the ones listed here
00:22:42
I don't think have been proven as Direct
00:22:43
effects many of the brain ones for
00:22:45
instance but uh clearly happen when you
00:22:48
overstimulate gop1 or give it
00:22:50
exogenously as a medicine and uh mostly
00:22:54
in our nutrient Rich environment we
00:22:56
covered earlier these tend to be good
00:22:58
things
00:22:59
because you're tamping down hunger and
00:23:01
you're improving absorption of the
00:23:03
nutrients you already have yeah so now
00:23:06
the topic to jure is hey we could use
00:23:08
gp1s not just for the indication of
00:23:10
obesity and diabetes but perhaps for
00:23:13
other health indications and maybe going
00:23:16
after other issues that people are
00:23:19
having problems with yeah I think I
00:23:21
think there two big stories one is that
00:23:23
the other is that it turns out gop1
00:23:25
isn't the only hormone that matters and
00:23:27
you're going to I mean we already have
00:23:29
tepati which is a whole another hormone
00:23:31
called Gip glucagon insulinotropic
00:23:34
peptide which is a complicated name but
00:23:36
has more of a bias toward fat release
00:23:39
and basically allowing your fat cells to
00:23:42
burn energy earlier in the starvation
00:23:44
cycle so as you're hungry kind of
00:23:47
unleashing fat energy versus just
00:23:49
squeezing it out of our muscles um which
00:23:52
is what your body does naturally as kind
00:23:55
of a survival Instinct and then we've
00:23:56
combined that into tepati next next up
00:23:58
is there's amaline based drugs that's
00:24:00
another gut hormone uh and glucagon
00:24:03
another one so we we've got triple
00:24:05
acting and all kinds of different ones
00:24:08
coming and that's a big part of the
00:24:10
Innovation story I think we'll figure
00:24:12
out through time which ones are best for
00:24:14
what maintenance is a big issue in this
00:24:16
class inducing more rapid weight loss in
00:24:19
people who are super obese you know if
00:24:21
you have a BMI 50 and you take tepati
00:24:23
our drug and you lose on average 23% of
00:24:26
your body weight you're still obese
00:24:28
right so we we need more potency for
00:24:31
those people but there's many people
00:24:32
have a BMI of 31 and heart risk they can
00:24:35
get their BMI to normal on tpde or
00:24:38
semaglutide but how do they keep it
00:24:39
there more easily versus a weekly
00:24:41
injection so that's another problem
00:24:43
being solved the second thing which
00:24:45
you're touching on is all the
00:24:47
indications to go after and as I
00:24:50
mentioned earlier there's more than 200
00:24:51
diseases that are tagged to obesity do
00:24:55
they all cause are they all caused by
00:24:57
obesity we don't know that yet they're
00:24:59
correlated but so far um in our studies
00:25:03
this category medicine's undefeated
00:25:05
we've never had an unsuccessful study in
00:25:07
measuring an outcome in a chronic
00:25:09
disease and that's probably because we
00:25:11
stacked the ones that were most possible
00:25:12
first or most confident in um but we're
00:25:15
working down that list currently Lily
00:25:17
has 105 studies going with tepati in
00:25:20
these other diseases wow so this is a
00:25:23
massive massive undertaking you know a
00:25:26
clinical trial like that takes a 100 or
00:25:28
200 million doll each so you can do the
00:25:30
math it's a it's a huge bet that we can
00:25:32
convert weight loss into sustained
00:25:35
health benefit in chronic disease yeah
00:25:37
so that's I mean I'm doing the math
00:25:39
that's 10 to 20 billion dollars you're
00:25:40
spending on clinical trials for and I
00:25:44
understand sleep apnea maybe Alzheimer's
00:25:46
chronic kidney disease sounds like lots
00:25:48
of different indications where you go
00:25:51
after a patient population you try
00:25:54
perhaps one of these combo therapies
00:25:56
these new combo therapies that you have
00:25:59
Y
00:25:59
and yeah right and then you see what the
00:26:02
results are and if it works
00:26:04
yeah a doctor can prescribe it right
00:26:07
yeah yeah exactly so there's one we just
00:26:08
read out which we'll end up submitting
00:26:10
which is um there's a lot of people you
00:26:12
and we all may know them in our life who
00:26:13
say oh I was told I have pre-diabetes
00:26:15
what is that that's you know otherwise
00:26:18
healthy middle-age adults who are
00:26:20
overweight right and what happens
00:26:22
diabetes like a lot of diseases it's not
00:26:24
a binary function it's a continuous
00:26:26
function you you begin to have
00:26:28
resistance to your own insulin because
00:26:31
of the stress being put on your fat
00:26:33
cells essentially from overeating and of
00:26:36
course reducing obesity might help that
00:26:39
and that's been tried without drugs with
00:26:41
you know diet and exercise and it works
00:26:43
so we replicated that we those results
00:26:45
and we just read that study out with
00:26:46
mjara which showed that three years on
00:26:49
our drug 94% fewer new diagnosis of
00:26:52
outright diabetes so that's a huge
00:26:54
national health problem and if we can
00:26:56
treat diabetes uh or obesity early in
00:26:59
the life we could potentially reduce
00:27:01
diabetes Downstream so all there's many
00:27:04
examples of these but we're going for
00:27:06
dozens and dozens of these kinds of use
00:27:08
cases for the technology so when that
00:27:10
gets approved when you go through your
00:27:11
clinical trial you get a positive
00:27:13
indication on the the the readout a
00:27:16
doctor can then prescribe that
00:27:18
particular drug for that that condition
00:27:22
and and then what insurance covers it I
00:27:24
mean just help us understand kind of how
00:27:26
how payment happens in this and
00:27:28
you know ultimately and we'll talk a
00:27:30
little bit about pricing in a second
00:27:33
yeah I mean so that now we move from
00:27:36
Clinical experiment and science to the
00:27:38
messy part of Health Care so you know in
00:27:42
America um I think we have a a strong
00:27:46
bias to reimburse things that are kind
00:27:48
of obvious and when things are new it's
00:27:51
harder what we see today with whether it
00:27:54
be Lily's products in this category or
00:27:57
noos is really broad acceptance of by
00:28:01
insurance and Healthcare practitioners
00:28:03
in treating outright diseases like
00:28:05
diabetes type two diabetes and probably
00:28:08
like these cardiovascular conditions
00:28:09
we're studying I think they'll be
00:28:11
adopted quickly and reimbursed quickly
00:28:13
but that's when you already have the
00:28:14
disease of course the real promise here
00:28:16
is to prevent those diseases but in
00:28:18
almost every case in this country we
00:28:20
don't really pay for prevention right so
00:28:23
um people who are obese and don't have
00:28:25
those conditions if you're say on
00:28:26
Medicare currently the rule of the
00:28:28
federal government is they won't pay for
00:28:30
these medications you have to get
00:28:32
diabetes before you can get the
00:28:34
drug which sounds pretty stupid and I
00:28:37
think it is but you know the evidence
00:28:40
needs needs to build our job is to
00:28:42
invest in that evidence base I just
00:28:43
spoke about so that we can show time and
00:28:46
time again that all these chronic
00:28:48
illnesses can be abated slowed or even
00:28:50
eliminated and in some cases even
00:28:53
reversed um if we can get people to lose
00:28:55
a dramatic amount of weight safely which
00:28:57
is what the drugs do that's you know in
00:29:00
the process of sort of getting that idea
00:29:03
adopted why why is that um controversial
00:29:06
because if I'm an actuary underwriting
00:29:09
the long-term cost of a patient or an
00:29:11
individual in a in a in a program in
00:29:13
insurance program I'm GNA look at that
00:29:15
patient I'm like or that person I'm
00:29:16
gonna say hey if they stay overweight
00:29:18
there's going to be four diseases
00:29:20
they're going to get over the next 30
00:29:21
years and I'm gonna have to pay for that
00:29:23
but if we can get them to lose the
00:29:24
weight I'm going to save all this money
00:29:26
shouldn't I want I have a financial
00:29:28
incentive an economic incentive to to
00:29:31
change that what's what's the
00:29:32
controversy there yeah I think you know
00:29:35
that's in process I was actually in a
00:29:37
big you know um investor of mind's
00:29:39
office a few weeks back and they said oh
00:29:42
the last company in here was a
00:29:43
reinsurance company and they're changing
00:29:44
their Actuarial tables yeah for people
00:29:47
who have are on these drugs which you
00:29:50
know I was like wow you know you're
00:29:51
making a difference when when that's
00:29:53
happening but it hasn't trickled through
00:29:54
the system I think there's a lot of
00:29:56
still stigma associated with obesity
00:29:58
frankly like social stigma and patients
00:30:01
report to us a lot of doctors won't even
00:30:03
use these drugs because they're they
00:30:05
think it's a it's a product of laziness
00:30:08
um and you know why people become obese
00:30:11
we don't really understand completely
00:30:12
yet why one person would and one person
00:30:14
wouldn't what we do know is once you
00:30:16
become overweight or obese losing that
00:30:18
weight as an adult is really difficult
00:30:22
some studies show like less than 5% of
00:30:24
people can reach a healthy body weight
00:30:26
on diet and exercise once obese so
00:30:29
that's a very ineffective standard of
00:30:31
care so today if I want to get tepati
00:30:35
for a weight loss which I think you guys
00:30:37
called Zep bound right yeah so um can I
00:30:41
go to my my health insurance company and
00:30:43
have them pay forward or am I paying out
00:30:45
of pocket depends on who you work for
00:30:47
Dave so um right now about 50% of the
00:30:52
employer sponsored insurance plans cover
00:30:54
it Lily covers it for we we cover the
00:30:57
Nova ones too um because we think
00:30:59
obesity is a disease those skew toward
00:31:02
you know companies with money basically
00:31:05
um you know I think health benefits are
00:31:08
part part of just attracting and
00:31:09
retaining employees so smaller
00:31:12
businesses businesses with lower margins
00:31:14
like retailers Etc really don't cover
00:31:17
these meds yet I think in five years
00:31:19
we'll look back and we'll say that was
00:31:20
crazy um once the evidence base is built
00:31:23
up and there's more adoption and less
00:31:26
stigma but right now that's the current
00:31:28
state so a lot of people do pay out of
00:31:30
pocket and we've got some work to do to
00:31:32
help them you know if you're the rule of
00:31:35
the land in the US is if your insurance
00:31:37
uh if you're in the federal benefit um
00:31:40
you can't even
00:31:41
accept uh savings cards from the
00:31:44
manufacturer but for those that have
00:31:46
have a commercial benefit like if you
00:31:47
work at an employer large employer like
00:31:50
a retailer that doesn't cover it we can
00:31:52
actually buy down your out of pocket
00:31:53
cost and we do that and so did I hear
00:31:55
correctly that you guys are doing a
00:31:57
directed consumer model as well is that
00:31:59
right yeah yeah yeah so to get at this
00:32:02
very problem of both stigma and cost you
00:32:05
know back um in January we launched what
00:32:08
we call Lily direct so people can go to
00:32:10
their doctor or use our tella Health
00:32:13
platform we have a bunch of Partners who
00:32:15
will see you as a physician and their
00:32:17
obesity specialist and they'll send the
00:32:18
prescription to Lily and we'll fulfill
00:32:21
it directly via male DTC this solves two
00:32:24
problems one is people can go to a place
00:32:26
where they're not stigmatized for being
00:32:27
over and two they always get it at the
00:32:29
same price and it's the lowest price
00:32:31
available to them there's a lot of
00:32:33
confusion in retail pharmacy about what
00:32:35
people should pay and there's some
00:32:36
pharmacies marking these drugs up
00:32:38
because of the supply issues is it a
00:32:41
thousand bucks a month is that right for
00:32:43
um t for list price list price we have a
00:32:47
a savings card program that's about $600
00:32:50
per month and then we also just launched
00:32:52
in the lowest two doses uh a vial form
00:32:56
which is a little easier for us to make
00:32:57
we can get into the supply issues here
00:32:59
maybe in this discussion too and that's
00:33:02
um
00:33:03
399 basically and 550 for those two
00:33:07
doses so almost you know 60% off still a
00:33:10
lot so what about the criticism and the
00:33:13
research that has shown that if you go
00:33:15
off of one of these drugs the weight
00:33:17
comes back and as a result we're kind of
00:33:20
going from a chronically ill population
00:33:22
to a chronically drug dependent
00:33:25
population how do we address that
00:33:27
concern and you know what is the change
00:33:30
that's needed over time for that not to
00:33:32
be the case isn't there an economic
00:33:34
incentive for Lily to always be you know
00:33:37
hoping that more people need the drug
00:33:38
more frequently because that's how you
00:33:40
guys make money and you know how do we
00:33:41
kind of talk about that change that's
00:33:43
that's coming and and whether you need
00:33:45
to be on it forever yeah yeah well I
00:33:48
mean our mission is to is not what you
00:33:51
said our mission is to solve human
00:33:52
health problems and ideally that would
00:33:55
be here where people could have a course
00:33:56
of therapy and then not have to take
00:33:58
medicine the the physiology of gop1 and
00:34:02
Gip right now that's not how it works
00:34:05
right if if you don't have them on board
00:34:07
your body res restores itself to its
00:34:10
previous position we yeah there is a
00:34:12
theory that if you sustain low body
00:34:15
weight for long enough you can kind of
00:34:17
reset your thermostat in a way and your
00:34:20
body will stop trying to defend what it
00:34:23
perceives as a starvation state which is
00:34:26
you you're not carrying as much weight
00:34:27
as you nor normally would but you know
00:34:29
we haven't had these drugs around long
00:34:30
enough to prove that out we also know
00:34:33
that some people um lose weight and then
00:34:36
do change everything about their life to
00:34:38
sustain that body weight and go off
00:34:40
successfully that's not uncommon but
00:34:42
it's not the most um probable outcome
00:34:45
for most so for now we need to take the
00:34:48
drugs longterm but we are working on
00:34:50
drugs in our pipeline that do uh seek to
00:34:53
reset uh the metabolic switch and using
00:34:57
like the Y is a mechanism it's a brain
00:34:59
mechanism that's thought that maybe you
00:35:01
could have a treatment course lose
00:35:02
weight and then reset um your your self
00:35:07
sort of that thermostat if you will of
00:35:08
what your body's supposed to weigh um
00:35:11
we're working on this problem but
00:35:13
understanding is like your base
00:35:15
metabolism drops so the number of
00:35:17
calories per day that your body is
00:35:18
burning to live goes down so if you stop
00:35:21
taking the drug and the hunger switch
00:35:24
gets slightly turned back on even if you
00:35:26
eat a healthy normally number of
00:35:28
calories per day 1500 2, 2500 you start
00:35:31
to gain weight again because your
00:35:32
metabolism has declined but what I've
00:35:34
heard from a lot of friends um I don't
00:35:37
want to call everyone a biohacker but it
00:35:39
definitely seems to be in kind of the
00:35:41
people that like to mess around and try
00:35:42
new things uh crowd is to kind of go on
00:35:46
and off so people are trying lower doses
00:35:48
they're they're trying the drug for a
00:35:49
period of time they do it once a month
00:35:51
once a week and then they kind of
00:35:52
maintain a healthy weight without
00:35:54
needing to be kind of um on the the
00:35:56
typical regular Cadence of the drug is
00:35:58
that something you guys are seeing more
00:36:00
frequently is that the steady state do
00:36:01
you think over
00:36:03
time we definitely see that in in in the
00:36:06
clinic and in in in practice by people
00:36:09
and you know back to the cost of course
00:36:11
people want to spend less money and if
00:36:13
that works for them you know there
00:36:14
certainly um and it's under do Dr
00:36:16
supervision we have no problem with that
00:36:18
we need to do more studies in the space
00:36:20
um you know what you have one drug on
00:36:21
here or not on here which is coming and
00:36:23
it may be the most important drug
00:36:26
because of the scale uh
00:36:28
ability which is it's called ororon it's
00:36:30
a it's a chemical drug so here not an
00:36:32
amino acid but a organic chemistry that
00:36:36
mimics that mimics the activating uh
00:36:39
part of the peptide um and so it's a
00:36:42
it's an oral gop1 um in our hands it's
00:36:45
about as good as as highd do semaglutide
00:36:48
and w're we're doing phase three right
00:36:51
now um so that will'll start to read out
00:36:53
next year the benefit of this is one
00:36:55
it's oral so it's a little easier to
00:36:57
take you don't have to refrigerate you
00:36:59
don't have to worry about the injection
00:37:00
you know some people don't like to
00:37:01
inject but the real thing is this is a
00:37:04
this is a product for the masses because
00:37:07
the systems we make these these drugs in
00:37:09
now are complicated to scale and that's
00:37:11
why there's been shortages you know we
00:37:13
have approvals in more than 40 countries
00:37:15
we haven't even launched in that's not a
00:37:17
normal thing for for a company that
00:37:19
wants to Max you can't make enough
00:37:20
product we can't make enough right and
00:37:23
because we want to satisfy the markets
00:37:24
we've already launched in so or for
00:37:26
apron which is this phase three project
00:37:28
is super key in that um we could both
00:37:32
Supply you know people who could get
00:37:34
away with just the worn hormone drug
00:37:36
glp1 and we're studying it as a
00:37:39
maintenance option as well which makes
00:37:41
kind of sense to go through the
00:37:43
injection lose more weight and then keep
00:37:45
it off with something uh a little easier
00:37:47
to take what's your sense on how this is
00:37:49
going to affect the food industry so a
00:37:52
lot of analysts have talked about hey
00:37:53
food companies are going to get damaged
00:37:55
by this I'm going to I'm an investor in
00:37:57
a company called super gut and we have a
00:37:59
high resistance starch fiber product
00:38:01
that we're now selling and having a lot
00:38:03
of success selling as a complement to
00:38:04
glp1 so you're you're on a gp1 or GP
00:38:07
drug you take this product and it kind
00:38:10
of can help you during that period of
00:38:12
time and it's a new category that seems
00:38:13
to be growing a lot of companies are
00:38:14
launching around this similar concept
00:38:17
now do you think this is changing the
00:38:18
food industry in the United States and
00:38:21
in the west and ultimately around the
00:38:22
world and I don't know if you talk talk
00:38:24
do you talk to CEOs of food companies do
00:38:26
they call you you doing to our business
00:38:28
like yeah I've got I've got a couple on
00:38:31
my board even but so you know I I I
00:38:35
think there are um certainly displacing
00:38:38
effects of this this category and I
00:38:40
think it's great news overall first is
00:38:42
the health things we talked about so
00:38:43
people will need you know uh less
00:38:46
diabetes products for sure they'll need
00:38:48
less other medicines we're do even doing
00:38:50
study in like OA pain in the knee
00:38:53
because a lot of knee Replacements are
00:38:55
in obese people and they get get painful
00:38:58
early in life uh knee pain and we hope
00:39:01
to show you can prolong that so that's a
00:39:03
sort of a knock on effect and then of
00:39:05
course food would be the next one you
00:39:06
think about I think you might know about
00:39:08
the study but last year Walmart did the
00:39:10
sort of what's in the cart study for
00:39:12
people on OIC or Monaro and it showed
00:39:14
they were buying about a third less
00:39:16
calories so that's a lot but that's
00:39:18
consistent with how the drugs work but
00:39:20
interestingly also few were salty snack
00:39:22
foods yes they buying more fruits and
00:39:25
vegetables shopping at the edge of the
00:39:26
store versus the center so that's
00:39:29
happening probably because we only have
00:39:31
10 or 11 million Americans on these
00:39:33
drugs it's not happening in an economic
00:39:35
scale that's really changing food
00:39:38
companies um bottom lines but you know
00:39:41
enterprising companies like the one you
00:39:42
mentioned you know protein shake
00:39:44
companies there's a lot of things
00:39:46
happening I went to a a Quick Serve
00:39:48
restaurant it was in California a few
00:39:50
weeks back and they actually had a like
00:39:52
a gop1 side menu that's what it was
00:39:55
called yeah exactly on these drugs use
00:39:58
these uh so you know it is it's having a
00:40:00
big social uh footprint yeah well I mean
00:40:04
here's your stock price so Eli LLY stock
00:40:07
I think may outperform I don't know it's
00:40:10
probably pretty close I with Nvidia it's
00:40:12
it's an an extraordinary stratospheric
00:40:15
rise and then just to look at how the
00:40:17
business operates today so you have this
00:40:19
portfolio of products that you're
00:40:21
developing but in the last quarter um
00:40:25
you did 11 billion in Revenue
00:40:28
and generated um 3 billion net profit I
00:40:31
think it's 3.7 of of operating profit
00:40:34
one of the the the key criticisms um and
00:40:37
this is one of the things I wanted to
00:40:39
get into was how do you address and how
00:40:41
do you deal with the political heat
00:40:45
associated with your success so you guys
00:40:47
are operating a business that is having
00:40:49
an extraordinary impact on people's
00:40:51
lives but you're also making an
00:40:53
incredible amount of money and in this
00:40:54
environment today that may be more
00:40:57
challenging to deal with than it ever
00:41:00
has been certain Senators that we shall
00:41:03
not name would look at this and say hey
00:41:04
you're making an 81% gross margin
00:41:07
selling these products to sick people
00:41:09
how can you justify that so maybe talk a
00:41:11
little bit about how you deal with the
00:41:13
political environment in the US around
00:41:16
the world as you are successful and are
00:41:19
projected to Triple the business over
00:41:21
the next couple of years here yeah well
00:41:23
it's it's obviously a top of list issue
00:41:25
for me every day maybe a couple things
00:41:27
there Dave so I mean first of all this
00:41:29
is a very long investment cycle business
00:41:32
um as we talked about earlier like we
00:41:34
launched the first gp1 drug in the world
00:41:35
in 2005 and since that time we've been
00:41:38
working for you know this kind of
00:41:40
performance because we took risk against
00:41:43
that idea right and refined it and
00:41:45
worked that problem and that it you know
00:41:48
I think that time scale is hard for
00:41:49
people to think about but also you know
00:41:51
the dollar scale of the R&D this year
00:41:53
we'll spend over 11 billion dollars on
00:41:56
R&D which is a meaningful uh it's like a
00:41:59
nation state scale like that's more than
00:42:01
the country of Germany um so we we're
00:42:05
pushing forward new medicines based on
00:42:08
the revenue of today's medicines and
00:42:10
that virtuous cycle is sometimes just
00:42:11
hard to articulate but when you get it
00:42:14
right you can have a big societal impact
00:42:15
so that's the first thing secondly you
00:42:17
know I think the pressure is a privilege
00:42:19
in a way it means we made something
00:42:21
useful enough that a lot of people
00:42:22
needed and want it and now our job is to
00:42:25
work with you know the Healthcare System
00:42:27
to sustainably adopt it and we do see
00:42:30
that as our responsibility to work with
00:42:33
you know politicians if that's who we
00:42:34
work with or um health plans or
00:42:36
employers to find a way to get this
00:42:39
medicine which we think is amazing to
00:42:41
eptide to so many people um and do it in
00:42:45
a way that's sustainable now hopefully
00:42:47
we've created enough value that the
00:42:49
certainly the the people are getting the
00:42:51
drug or benefiting that the health plans
00:42:53
are actually lowering costs in the long
00:42:55
term even that there may be an increase
00:42:56
in short term and that we make a
00:42:59
reasonable profit for our shareholders
00:43:00
and sustain R&D for the future so I
00:43:03
think that's what's happening here I
00:43:05
think this week actually Nova nordis our
00:43:07
competitor was hauled before Congress to
00:43:09
talk about this issue there's a lot of
00:43:12
other dysfunctions in the US system that
00:43:14
we could talk about in terms of how
00:43:15
inefficient healthc care is I mean here
00:43:18
is a medicine that could augment 100 200
00:43:22
adult diseases in a meaningful way it's
00:43:25
expensive yes probably net pricing uh
00:43:28
for us you know is going to be something
00:43:30
like three $4,000 a year in the steady
00:43:33
state per person but I think we'll
00:43:35
create more value than that we'll save
00:43:37
the system more money than that per year
00:43:38
per user that's what we should be aiming
00:43:41
for I think what's interesting about it
00:43:43
is the the the pro the biologic products
00:43:46
are the the molecules are advancing and
00:43:49
they're advancing in a in a a pretty
00:43:51
kind of steady
00:43:53
way the issue I think with insulin and
00:43:55
and there's obviously been a lot of
00:43:58
legislation and Regulatory and political
00:44:01
scrutiny around insulin pricing is it's
00:44:04
the same molecule and the price has just
00:44:07
gone up right this is this is the old
00:44:09
kind of pharmaceutical companies or bad
00:44:11
story is they've got a product that they
00:44:13
make for 10 cents and then they sell it
00:44:15
for 10 bucks then someone says let's
00:44:16
charge 100 they're like okay let's
00:44:17
charge 100 and so it's classified as
00:44:20
price gouging in this particular Market
00:44:23
you guys are certainly making a healthy
00:44:24
Market but the products are also
00:44:25
advancing there's new combination
00:44:27
therapies coming out and uh the oral
00:44:30
therapy so there's a lot of investment
00:44:31
in improving the overall landscape of
00:44:34
what's possible yeah let me address that
00:44:36
because I I took over in early 17 as you
00:44:38
mentioned and like that the insulin
00:44:40
pricing Scandal which Novo and Lily were
00:44:42
also Center of right was um hot and
00:44:46
heavy and I so I took a lot of personal
00:44:49
lessons from that but you know every day
00:44:52
since that we had reduced the price of
00:44:54
insulin even though you know we have
00:44:56
this weird system in the US where a lot
00:44:59
of our two-thirds of actually our gross
00:45:01
price goes to pbms and insurance company
00:45:05
so right of the gross price that's often
00:45:07
quoted the net for us is about a third
00:45:10
of that and in insulin it was even more
00:45:13
where does that money go well it's used
00:45:14
often to cross- subsidize other things
00:45:16
in healthcare so we have to unwind that
00:45:19
system if we really want to value
00:45:20
innovation and then the other thing
00:45:22
which is in this chart is and I
00:45:24
mentioned is some of that revenue from
00:45:26
insulin we Ed to invest in the next
00:45:27
generation of therapy whether it be
00:45:29
insulins which we're still investing in
00:45:31
new insulins or gop1 drugs which of
00:45:33
course we did um and that is hard to
00:45:36
articulate in the moment but it actually
00:45:38
produces good economic and social value
00:45:40
later yeah here though we we took those
00:45:43
lessons we launched at a 20% discount to
00:45:45
Nova's product even though we have
00:45:47
better efficacy data and we've only cut
00:45:49
the price since then and I think um we
00:45:51
see a kind of a generational opportunity
00:45:53
for the company to both be have the best
00:45:57
product so efficacy and quality but also
00:46:00
mass production and that requires a
00:46:02
pricing strategy consistent with that
00:46:04
well you've also invested a lot in
00:46:06
manufacturing in the United States right
00:46:07
didn't you just do like A5 billion doll
00:46:09
investment in Indiana to build new
00:46:11
facilities um yeah we're building the
00:46:13
largest API site in the history of the
00:46:14
United States in Indiana yeah so it's h
00:46:17
so I mean that's got to feel good to the
00:46:18
politicians too that this isn't like
00:46:20
yeah uh optimizing for cost but there's
00:46:22
also infrastructure being built so I've
00:46:25
got a lot of numbers on forast breakdown
00:46:27
of product I think like what's
00:46:29
interesting is just I don't know if
00:46:30
these numbers seem right but the
00:46:32
analysts are projecting that you're
00:46:35
20126 operating income numbers could
00:46:37
grow to $32 billion I mean it's just
00:46:40
such an incredible rise and that
00:46:41
obviously is the the pipeline of
00:46:43
indications the
00:46:45
pipeline of combo therapies new
00:46:48
modalities and that's up from 7 billion
00:46:51
last year I believe right so a 4X in 3
00:46:54
years at the scale of operating income
00:46:56
is really
00:46:57
incredible I hope they're right yeah Ian
00:47:01
good for you hard on this I heard that
00:47:03
there was like internal forecasts that I
00:47:07
won't reveal my source uh and all the
00:47:10
forecasts got kind of blown out like the
00:47:12
forecasts were too conservative in terms
00:47:15
of where you guys are at with tepati so
00:47:18
um I wouldn't be surprised if you did so
00:47:20
if we look look at the breakdown of
00:47:22
Lily's portfolio of Revenue today uh
00:47:26
it's very obvious that what we've just
00:47:28
been talking about the gp1 Gip drugs are
00:47:33
the vast majority of the portfolio and
00:47:35
expect it to be the vast contributor of
00:47:36
growth in the years ahead but maybe you
00:47:39
can tell me a little bit tell us a
00:47:40
little bit about how you think about the
00:47:43
portfolio of other opportunities to
00:47:45
address disease and how you're investing
00:47:48
there and how you know when you've got
00:47:49
such a blockbuster like this and you've
00:47:50
got a runaway train and you can't keep
00:47:52
up with demand how do you dedicate
00:47:54
resources to the rest of the portfolio
00:47:56
and how do you think about that as a CEO
00:47:58
as a leader in getting your team to
00:48:00
focus on other things that are also very
00:48:03
important yeah I think I mean that's a
00:48:05
key thing we spend a lot of time with
00:48:07
our board on you know on the one hand um
00:48:10
I think there's a lot of business books
00:48:12
you could read that say well double down
00:48:13
on your winners right and just keep
00:48:15
going but unlike other Industries you
00:48:17
know D we don't really have a franchise
00:48:19
value at the end of the patent life
00:48:21
right there when when drugs go off
00:48:24
patent you have to actually have a
00:48:25
better drug that competes with almost
00:48:28
free yeah and that's probably possible
00:48:31
one or two times here we're talking
00:48:33
about
00:48:34
monjaro trulicity our last or gop1 only
00:48:37
and semaglutide gop1 only will go
00:48:39
generic and we think we have enough
00:48:40
differentiation to keep growing through
00:48:42
that but at some point that story runs
00:48:44
out right and so on a time scale of
00:48:48
decades you need other lines in the
00:48:50
water um in a lot of ways this is like
00:48:52
an options business you know we we we
00:48:55
have to lay down bets across variety of
00:48:57
things they have to be you know real
00:48:59
unmet medical needs that you can get
00:49:01
paid if you have a solution for but also
00:49:04
you know the technology bet is it going
00:49:05
to work and how to attack that so my
00:49:08
mindset is we have to walk and chew gum
00:49:11
at the same time here we have to execute
00:49:13
like nobody else against this enormous
00:49:15
kind of not not even generational maybe
00:49:18
longer opportunity to build the company
00:49:21
affect human health and return Capital
00:49:23
to shareholders at the same time we l
00:49:26
has been around 148 years um I think we
00:49:29
have an obligation to our newest
00:49:31
employee just joined to have a business
00:49:33
by the time they get to a senior level
00:49:35
and we certainly have a role in the
00:49:37
world at changing human health so we are
00:49:39
investing pretty broadly in cancer and
00:49:42
Immunology maybe in brain disease is the
00:49:44
most important area we can invest more
00:49:46
in um because I think that's actually
00:49:48
becoming more tractable and is about 40%
00:49:51
of global suffering is some form of a
00:49:54
brain or or um Neuroscience dis disease
00:49:57
and we have a lot of expertise there so
00:50:00
a little bit of balance and a lot of
00:50:01
focus simultaneously and we divide our
00:50:04
organization so that we have four
00:50:06
Business Leaders and one of them is this
00:50:09
franchise we were just talking about
00:50:10
weight loss and cardiometabolic health
00:50:12
three others have other agendas and
00:50:15
their job is to compete and win that way
00:50:17
I'm proud that actually in Q2 Q2 are non
00:50:20
incron our non tepati uh business grew
00:50:24
17% on a pretty big base so a healthy
00:50:27
business as well more on the scale of a
00:50:29
regular Pharma company not the super
00:50:31
sized thing we become what are what
00:50:34
science are you excited about I don't
00:50:35
know if you're a big science nerd um as
00:50:38
much but yeah like yeah so the inchron
00:50:40
products are um you know uh it's peptide
00:50:43
manufacturing but obviously there's uh
00:50:46
cell therapies so programming cells to
00:50:48
go into the body and do things there's
00:50:49
Gene therapies where we have all sorts
00:50:52
of mechanisms for altering gene
00:50:55
expression and making you know prent
00:50:56
changes in in in human cells and um and
00:51:00
then there's all this interesting stuff
00:51:02
in that that I'm super fascinated by and
00:51:05
excited by like yamanaka factors these
00:51:07
factors that can have a profound effect
00:51:10
on the epigenome uh which can ultimately
00:51:12
change how how cells behave and
00:51:15
radically affect the process of Aging or
00:51:17
what we consider to be aging what else
00:51:19
are you excited about what's exciting in
00:51:20
the portfolio and how do you invest
00:51:22
internally versus do m&a versus venture
00:51:25
to kind of access those in you know
00:51:28
areas yeah well let me talk about the
00:51:29
science and I'll get to the investment
00:51:30
strategy but we've talked about diseases
00:51:33
here but you know we think about our our
00:51:35
role is like having a pallet of ways to
00:51:38
make medicines which are basically you
00:51:40
know new molecular matter against uh a
00:51:43
set of diseases we know something about
00:51:45
that's sort of when those things
00:51:46
converge we do well so what's in the
00:51:48
pallet I think that's been expanding
00:51:50
rapidly lately and I think this whole
00:51:52
new field of genetic medicine which you
00:51:55
talked about um like xvivo gene therapy
00:51:58
where you edit cells and they go do
00:51:59
things like cares or uh Gene edits
00:52:03
themselves or Gene inserts which are
00:52:05
exciting you know we had a um medicine
00:52:08
where we announced results this year
00:52:10
that is focused on inner
00:52:13
ear diseases of deafness basically
00:52:16
congenital deafness disorders that are
00:52:18
monogenic um and we we've treated
00:52:20
patients that have gone from like six
00:52:21
eight years of life no hearing at all to
00:52:23
now hearing I mean this is it is LA like
00:52:27
when you see it but the you know I think
00:52:29
the thing that excites me is when you
00:52:30
can do amazing things at massive scale
00:52:32
so those two techniques car and gene
00:52:35
therapy it's hard to think of like super
00:52:37
scaled millions of people benefiting one
00:52:41
new family of medicines I'm excited
00:52:43
about the so-called
00:52:44
sna this is where we can knock down
00:52:47
proteins that are aberant or causing
00:52:50
problems and do it pretty safely and
00:52:53
surgically um and do it very
00:52:55
infrequently so like we have a project
00:52:58
in phase three right now that knocks
00:53:00
down the production of something called
00:53:02
LP little a which is a lipoprotein
00:53:04
particle that's probably thought to be
00:53:07
about 25% of the remnant reasons why we
00:53:09
still have cardiovascular disease and
00:53:11
there's no medicine for it today this is
00:53:14
promises to be a once a year dose and so
00:53:18
you take this once a year and it's
00:53:19
catalytic in sales and it works and just
00:53:21
keeps knocking down this protein so if
00:53:23
that translates into outcomes I think
00:53:25
that makes for a big very scalable
00:53:27
business we could treat millions or a
00:53:29
billion people with a medicine like that
00:53:32
and have a big big effect so we're
00:53:34
playing around with that toolbox um
00:53:36
extensively these days so scale has to
00:53:39
scale matters right and then well that's
00:53:41
our Str I think that's what a Lily's for
00:53:43
right is to make things that aren't
00:53:44
Boutique but things that are everywhere
00:53:47
so you know how do we do this I mean we
00:53:50
we we have focused maybe more than
00:53:52
anyone else on a lot of small deals that
00:53:55
starts with our corpor Venture group so
00:53:57
we have one of the most scaled corporate
00:53:58
Venture operations in all of corporate
00:54:02
America hundreds and hundreds of bets
00:54:04
that are small in size usually we go
00:54:06
with you know with GPS as an LP and
00:54:09
invest in small biotechs pre pre uh
00:54:12
public and there we don't have to be so
00:54:14
right mostly we're trying to learn and
00:54:16
follow science and have a seat at the
00:54:18
board or a seat at the table so that
00:54:20
when things start to turn we can move
00:54:22
early um we do a lot of m&a last year
00:54:26
sorry you're both you're both an LP in
00:54:28
Venture funds and you write checks
00:54:30
direct is that right yeah both ways yeah
00:54:33
okay okay we also have a interesting
00:54:35
project we're growing I'm qu called
00:54:37
catalyze 360 and here the idea is beyond
00:54:40
money what else can we do to help
00:54:42
incubate small companies and so we have
00:54:44
both space but also a service layer
00:54:47
we're offering sometimes in a Cost Plus
00:54:49
way or sometimes for Downstream
00:54:51
royalties where you know we're a big
00:54:53
capable company when you're building a
00:54:54
new company like you've been doing in in
00:54:57
um a like sometimes you need something
00:54:59
that's a pain in the ass to go build you
00:55:01
have to either buy a consultant or hire
00:55:02
one person and you only need them for a
00:55:05
few few months so here we're stepping in
00:55:07
and say well we'll give you that consult
00:55:08
if you need to interpret a talkx result
00:55:10
like you can just call Lily's experts so
00:55:13
we're like a service layer to cultivate
00:55:15
kind of this ecosystem around us and
00:55:17
then we do m&a we buy companies last
00:55:19
year about two dozen which was the most
00:55:22
of any Pharma company but actually with
00:55:24
some of the least Capital deployed so
00:55:26
we're making um I think we spent three
00:55:28
billion dollars on 24 companies so we're
00:55:30
making lots of small bets right and I
00:55:33
think that is interesting because the
00:55:35
longer we have uh residents you know
00:55:38
sort of uh in a partnership or we own
00:55:40
something we can add more value it also
00:55:43
allows us to trade in front of the
00:55:45
drisking event when things get drisk in
00:55:48
our sector there's a huge inflection in
00:55:50
value yeah and so you're basically
00:55:52
paying the last shareholders not
00:55:53
yourself um we think we can bet better
00:55:56
than the market on what those the
00:55:59
probability of something converting to
00:56:01
to a success is and if we're right about
00:56:03
that we'll we'll be better off buying
00:56:05
early yeah well so as a lot is changing
00:56:09
at the company and you're you're at the
00:56:10
scale you're at and growing as fast as
00:56:12
you are how do you think about and this
00:56:15
was an important one I wanted to talk
00:56:16
about leadership and culture I've uh uh
00:56:19
someone that works with me at ohal uh
00:56:22
her name's uh Megan she worked at at
00:56:24
Lily for years and so we had a long chat
00:56:25
about this interview a few days ago and
00:56:27
she talked to me about how great the
00:56:28
culture is and 10,000 people on campus
00:56:31
in Indianapolis and it feels like a
00:56:32
college campus there's a track and field
00:56:35
there's a bar on campus all these sort
00:56:36
of things that make it a great place to
00:56:38
work and she was really torn by the way
00:56:39
in making a choice to go back to Lily or
00:56:41
joining me so I apologize that we that
00:56:43
we took her but um uh but uh um maybe
00:56:47
tell me a little bit about how you kind
00:56:48
of think about culture keeping people uh
00:56:50
aligned motivated keep the performance
00:56:52
culture strong as you're kind of trying
00:56:54
to execute at this extraordinary skill
00:56:56
scale yeah exceptional question I mean
00:56:59
that's of the things I worry about
00:57:01
longterm this is one of them how do we
00:57:02
keep what's so good about how we operate
00:57:05
yeah I mean the background of the
00:57:06
company is important it's an old company
00:57:08
right and it was family run for a
00:57:10
hundred years like it was one of the few
00:57:12
exceptions in Corporate America where
00:57:14
the third generation didn't totally
00:57:15
screw it up actually they made it quite
00:57:17
quite a bit quite a bit better um and
00:57:21
because of that I think there's a lot of
00:57:23
loyalty and social cohesion in the
00:57:25
company as you mentioned like we like
00:57:27
coming to work and being together it's a
00:57:29
friendly place but also scientifically
00:57:31
super rigorous um and that's a that's
00:57:33
often not two things that fly well
00:57:36
together so I think it's got a a lot of
00:57:38
exceptional attributes when I started
00:57:40
though I think in my kind of view of
00:57:41
like when you're running a big ship like
00:57:43
this probably changing the culture is
00:57:46
like beyond your your capability but
00:57:49
what you can do is like exent turn up
00:57:51
the things that are good and turn down
00:57:52
the things that are less good and we've
00:57:54
been cultivating that so like one thing
00:57:56
that was less good but is now really
00:57:58
clicking for us is sort of like use our
00:58:01
scale or enterprise-wide capability as a
00:58:04
as a benefit not a not a a detractor so
00:58:07
many companies get big and get
00:58:09
bureaucratic and terrible like I mean
00:58:11
they just can't get out of their own way
00:58:13
totally and we really lean into okay
00:58:15
it's everyone's job to solve for Lily
00:58:17
first it's everyone's job to get the
00:58:19
patient healthy now let's talk about our
00:58:22
departments as a derivative of that not
00:58:24
the main goal and somehow those things
00:58:26
get flipped around in big companies and
00:58:27
people focus on how they look or who's
00:58:30
which Department's best and none of that
00:58:32
matters and we have to emphasize that
00:58:34
another thing I've really focused on is
00:58:36
speed at scale and we measure that
00:58:38
rigorously that's more of an engineering
00:58:40
thing I mean we really track things very
00:58:43
carefully on speed and we've moved the
00:58:45
drug development timeline which the
00:58:47
industry is about nine years from first
00:58:50
human dose to FDA approval and when I
00:58:53
started ours was about 11 and now we're
00:58:56
6.1 so how did you how did you how did
00:58:58
you incentivize that how did you reward
00:59:00
that and create the model for
00:59:02
individuals to contribute to that goal
00:59:04
yeah kind of one big idea and then a
00:59:06
thousand little things the big idea is
00:59:07
like this ratchet mindset that every
00:59:10
time we beat a timeline that becomes the
00:59:12
new
00:59:13
norm and so we like just re Benchmark
00:59:16
internally and when we were at 11 and
00:59:18
every was as at nine everyone wants to
00:59:20
jump to be okay let's be industry
00:59:22
average but that's actually quite hard
00:59:24
in a big company so we just said okay if
00:59:26
it we have a submission document to get
00:59:28
in and it used to be our standard was
00:59:29
120 days from when you had the data to
00:59:32
when you send it to the FDA we're now
00:59:34
doing that routinely inside of two weeks
00:59:36
so we've basically taken 80% of the time
00:59:39
out but that came in lots of little
00:59:41
bites but overarching everyone who works
00:59:44
in development knows it's about time to
00:59:45
patient that's the that's the big idea
00:59:48
solve for that so yeah that's you know
00:59:51
those are some of the kind of culture
00:59:53
Dynamics we we deal with and of course
00:59:54
we want to attract new people we've
00:59:56
expanded dramatically on the coast our
00:59:58
science operations like if you go you
01:00:00
know South San Francisco is now a pretty
01:00:02
big campus for us we just built a huge
01:00:04
building in seport Boston that'll hold
01:00:06
500 genetic scientists so for some
01:00:10
domains we need to go where the people
01:00:11
are um and be more of a kind of a
01:00:14
Mothership of satellites versus having
01:00:16
everyone here in Indianapolis and do you
01:00:18
and I know we got to wrap in a minute
01:00:19
but and do you worry about AI there's a
01:00:21
lot of startups with very smart people
01:00:23
that have built uh llms and other models
01:00:26
that are now trying to apply those
01:00:27
learnings and develop new systems for
01:00:30
discovery of molecules that will have
01:00:32
some particular action and doing it all
01:00:35
in silico rather than searching through
01:00:37
the domain space of molecules that we're
01:00:39
either synthesizing or discovering in
01:00:40
nature and is that a partnership for you
01:00:43
at Lily because you guys can operate at
01:00:45
scale and manufacture and distribute and
01:00:47
Market or is that a disruptive force
01:00:49
that could really damage the the 20-
01:00:51
year out kind of horizon for Lily's
01:00:54
business how much do you really think or
01:00:55
worry about this
01:00:57
oh we spent a lot of time on this you
01:00:59
know of course we have our own efforts
01:01:01
um pretty significant AI efforts
01:01:03
internally and a lot of Partnerships
01:01:05
including with you know open Ai and
01:01:07
Microsoft Amazon Etc um all basically
01:01:10
all the the large scale players Google
01:01:14
isomorphic so we have to pay a lot of
01:01:16
attention to it here's what I noticed so
01:01:19
far is there's a lot of money I think
01:01:20
last year five billion with a B went
01:01:23
into new venture-backed tech bios you
01:01:25
you know that's what they like to call
01:01:27
themselves and that money is coming not
01:01:30
So Much from the traditional bio VC
01:01:32
world but from the tech world s people
01:01:35
got a lot more lot more to Splash around
01:01:37
right that's right but a lot of those I
01:01:39
think if you look at their their pitch
01:01:41
decks they're really saying oh we're
01:01:43
gonna invent we're going to run the
01:01:44
whole process in silico and I I think
01:01:47
that's really naive
01:01:50
actually and what I think will end up in
01:01:53
the medium term being very valuable is
01:01:55
more the tool Builder approach like we
01:01:57
can take a process like adme so that's
01:01:59
where you're trying to optimize chemical
01:02:01
properties of a drug like we're talking
01:02:03
about gop1 so it's not twice a day it's
01:02:04
once a week and there I think by
01:02:07
chunking problems smaller the machines
01:02:10
can really help a lot more we have more
01:02:12
data on some specific acute use cases
01:02:15
and um we can have a tighter Loop
01:02:17
between the experiment in the on the
01:02:19
bench and the data process behind the
01:02:23
the model learning the idea that you're
01:02:25
going to throw on you know turn a switch
01:02:27
on a computer and it's going to think
01:02:28
about something and invent you know the
01:02:30
next Prozac I don't know I I think we're
01:02:32
a long way from that day yeah but we
01:02:35
we're paying attention to all of it yeah
01:02:36
so wet lab and Clinic integration is
01:02:38
critical it's not all going to be in
01:02:39
silico there's going to
01:02:41
be a good chunk of the time yeah it's a
01:02:43
co-pilot model where the machine can do
01:02:45
predictions probably now where we see
01:02:47
the most value is eliminating bad ideas
01:02:50
that humans don't see but in hindsight
01:02:52
look obvious so like because it can
01:02:54
integrate a lot of multi Source data and
01:02:57
say the probability of this working
01:02:58
based on prior experiments is like 2%
01:03:01
yeah and there's human factors where
01:03:03
scientists like they their last idea the
01:03:04
most but also we have trouble seeing
01:03:07
across all this fi domains of data
01:03:09
machines are good at that that that can
01:03:11
add value immediately awesome well are
01:03:13
you glad you took the job seven and a
01:03:15
half years ago and uh what are you most
01:03:17
happy about and what's the biggest
01:03:18
disappointment last uh last question
01:03:21
here as we wrap up yeah of course I mean
01:03:24
what an honor to the company like this
01:03:26
at this moment um we all need to get
01:03:28
better all the time I mean I I find
01:03:30
myself disappointed
01:03:31
mostly by but not being prepared not
01:03:34
thinking in advance of of things but you
01:03:37
know it's um when you miss we become a
01:03:39
kind of a yeah that looks obvious in
01:03:42
hindsight which we all have it's a
01:03:44
complicated business you know I should
01:03:45
give myself Grace on it but it happens
01:03:47
more often than I would hope and I I
01:03:50
think that staying humble about that is
01:03:52
like one of the most important things
01:03:53
that successful CEOs can do I mean you
01:03:56
always have to learn and you always have
01:03:57
to learn from your own mistakes that's
01:03:59
something we talk about a lot here I you
01:04:02
know I think it's it's cool that we
01:04:03
become more of a cultural icon that's
01:04:05
cool but it's also a big responsibility
01:04:08
because like you said with the Lily
01:04:10
direct and you know being more of a
01:04:12
consumer household name people expect a
01:04:14
lot more of us and we've got to change
01:04:17
from being just like a Midwestern quiet
01:04:19
medicine company to something a lot more
01:04:22
and we're not there yet we have to we
01:04:24
have to get better so yeah more to do no
01:04:27
great well thanks so much for taking the
01:04:29
time to chat with me today Dave it's
01:04:30
been an honor and a pleasure and I wish
01:04:33
you the best of luck with Lily congrats
01:04:35
on on all the success thanks a lot we'll
01:04:37
have to have have you come out to our
01:04:39
lab sometime I will yeah no I'm uh next
01:04:41
time I'm in the midwest I will certainly
01:04:42
kick you up on that I'd love to come
01:04:43
visit be awesome
01:04:47
[Music]
01:04:51
awesome I'm going all in
