I'm

going all right besties I think that was

another epic discussion people love the

interviews I could hear him talk for

hours absolutely we crush your questions

admit it we are giving people ground

truth data to underwrite your own

opinion what you guys think that was fun

pal Dave Ricks welcome to the Allin

interview great to be here yeah we had

dinner together a couple of months ago

and I've been in touch and obviously I'm

really excited to talk to you uh today

about the work you're doing at Eli ly so

just for the audience Dave is the CEO of

Eli ly which is the world's most

valuable pharmaceutical company and the

leader in the glp1 uh drug Market which

some analysts have said could grow to as

much as 150 billion in annual revenue

over the next 10 years really kind of an

extraordinary story and Dave you became

CEO of Lily in January 2017 when Lily

had a market cap of just $70 billion

following a year of 20 billion in

revenue and three and a half in

operating income and today Lily's Market

Cap is an astounding $878 billion and

the company's projected to do 46 billion

in revenue and 15 billion in operating

income this year and few companies in

history I'd say have seen such an

extraordinary rise in Revenue profit

market value at this scale maybe Nvidia

recently which I'd say is the only

company that kind of beat your

performance in recent years but I don't

know of any that are not founder Le

maybe SAA running Microsoft

but it took him a little bit longer and

so today I'm really excited to talk to

you about the work you're doing at Lily

The Chronic health problem of obesity

and diabetes gp1s and what's happening

in that market what those uh products do

and The Business of Eli Lily so thanks

so much for being here da yeah excited

to be here I'm a big fan of the Pod so

I'm I'm excited to be on that's great um

sorry you don't get uh harassed by the

other three today it's just me uh so

this is a an extended science corner for

all the Nerds at home that wanted it

with a a deep dive on on an amazing

business so we'll start off by talking

about the the The Chronic Health

epidemic of obesity according to this

CDC 74% of Americans are now overweight

or clinically obese your statistics

might be different this condition is

driving what is arguably the largest

Health epidemic in human history obesity

and all the associated diseases like

type 2 diabetes have so many negative

Health implications for our

populations and this is dramatically

over the past 50 years is becoming a

global problem so let me pull up a

couple of images we can use as we have

this conversation here Dave and will

dialogue about this but obviously what

humans eat what we consume has changed

dramatically particularly here in the US

we've seen the American diet a shift to

a much more kind of caloric lower

nutrient density diet over the last 50

years the average daily calorie consumed

by Americans since 1961 has driven up

from 2800 to about 3600 and you know

that sounds like a small number but when

you add it up over 365 days a year it

leads to a pretty dramatic increase in

in obesity rates this is a great chart

that shows how the availability of

calories and the consumption of calories

in a population significantly correlates

with the rate of

obesity in that particular country and

the United States obviously has the

largest caloric supply of any developed

nation and also has the highest

percentage of people that are overweight

or obese and I would argue that many of

the improvements that we've seen in

agricultural technology and many of the

systems um in in food that have made

calories cheaper have resulted in this

kind of surplus problem that has led to

an obesity epidemic and just looking at

the US rates over the last 20 25 years

you know we see today as I mentioned

before 75% of people overweight or obese

and in this particular

slide we're showing 35% of obese and

severe obese to today 51% of Americans

are either obese or severely obese

really

extraordinary and this is not just in

the US as the calorie supplies increased

around the world we see obesity rates

climbing in every developed Nation from

Brazil to Mexico and now even recently

in India and so this is becoming a

global problem and I think you know Dave

maybe you could talk a little bit about

the scale of the problem I think you've

highlighted a lot of this in your

investor presentations and and this is

one of your slides that you've used so

maybe you can kind of share how you guys

forecast the Obesity epidemic and and

the effect it's having

worldwide yeah that's a great

backgrounder to get us kicked off you

know one thing just pointing out on the

data you showed some people notice a

difference in the caloric intake numbers

versus the um kind of the macronutrient

micronutrient story you go back yeah so

like the the severe obesity particular

kicking up here on the next slide there

um yeah kicking up almost doubling right

in the last 20 years whereas caloric

intake certainly isn't moving at that

same rate so you know I think as we

think about the problem of course um

excess calories versus expenditure is a

key part but so is probably the ultr

processed food story which you didn't

have data on there but is you know I

think in the US we're now eating

two-thirds of our calories in our

country are ultr processed yeah and that

compares to like 35% in Europe so that's

got to be part of this equation as well

but no matter the cause like if you go

to that first slide I had we now see

about a billion people on the planet

with clinical obesity or overweight and

as you're pointing out probably that's

um going to grow a lot more in the

developed or developing world than the

developed world there's a function of

wealth accumulation and um Surplus uh

food

abundance basically that will drive this

India I think is 11% of the population's

obese but projected to go as much as 30%

in the next 20 years so on that

population base that alone would would

add almost half a billion people um to

this this chart yeah so your projection

is obesity worldwide will affect about a

billion people by 2030 is that right

yeah that's right yeah yeah and the

problem with obesity is that it has an

effect on many of uh the the systems of

the human body maybe you can highlight

kind of how obesity uh you know causes

many of The Chronic health conditions

and ailments that simply weren't around

maybe hundred years ago but are

certainly becoming far more frequent

today yeah absolutely I mean the first

order effect of course is on your

metabolic processes in here you like

like cardiovascular disease how we

process lipids and other energy sources

that leads to cardiovascular disease and

its um other Associated risk like stroke

um I mean there's a pretty new disease

here called under the liver disease

which is what's used to be called Nash

is now confusingly called Mash but it's

the same disease it's fatty liver

disease and 30 years ago like clinically

you couldn't really find this in the

adult population and now it's one of the

most common conditions obese people

suffer from and it ends up in fibrosis

of the liver and as you know like we

have a lot of every organ that's

important we have redundancy and except

the liver so when your liver goes south

it's a bad news story for human health

transplant is is the only escape from

that um we've got some used to be a that

used to be a disease limited to severe

alcoholism right exactly and and this

the Nash word is actually starts with

non-alcoholic yeah fatty liver so but

now there's much more um obesity-driven

fatty liver than any other cause as

pointing out but it results in

transplant and terrible uh outcomes long

term so so much of the the health

problems The Chronic health issues that

we deal with as a modern society are

probably rooted many of them are rooted

in the Obesity epidemic yeah so 230

diseases have have been connected and

you have these these ones that are more

like directly because of the caloric

imbalance and fat accumulation and then

you have these ones in blue are sort of

like derivative like obstructive sleep

apnea that's like 14 million Americans

have cpat machines and why because

there's so much um fat accumulation

around your respiratory system you you

wake yourself up at night to

breathe and gird of course that's you

know reflux Etc so these are like more

the second order effect and then

interestingly you've got the mood

anxiety pieces here there's an

interesting study done by epic you know

they're the big health record company

yeah which is retrospective and not

tightly controlled but it showed people

on gop1 drugs incron had remarkably

lower rates of new clinical depression

diagnosis which is an interesting thing

as well so a lot of lot of

impact like type two diabetes itself

which is an inability for the body to

respond with an appropriate amount of

insulin when there's glucose in the

blood itself has a number of follow-on

effects obviously diabetes as as many

know um has become own a chronic Health

epidemic it can

cause nephropathy so damage to the

kidneys which has a significant effect

on our ability to regulate protein in

our body diabetic retinopathy

hemorrhaging in the eyes uh that

ultimately can lead to to blindness so

having too much blood sugar and not

having an ability to produce enough

insulin to bring down the blood sugar

level can can lead to all these chronic

health effects which have

obious yeah those are the microvascular

ones there's the I mean the the risk of

heart attack if you have type two

diabetes is four times people who don't

have diabetes yeah so you also have the

macrovascular events stroke heart attack

okay so the treatment for diabetes used

to be insulin right and insulin and if I

remember the history of Eli Lily

correctly Eli Lily was the first

American company uh to produce insulin

which was done with initially

processing I believe pigs or cows uh to

to to to get the insulin both yeah yeah

it's an interesting story so we were the

first company period um there's a Danish

company Novo who's our competitor in

this space we can come back to that

because it's not a

coincidence that I remember the history

of of the relationship it's a really

interesting history between the two

companies but kind of intertwined yeah

but we we had a like our head of science

uh met with Toronto this researchers up

there who discovered the mo the

mechanism of insulin but they couldn't

make get into a medicine we produced the

process that made it available at scale

which as you're pointing out was derived

from like a lot of the you know the

history of our industry was like taking

things in nature and refining them into

medicine and that was the case with

insulin we took something in nature the

pancreases of slaughtered meat animals

really cows and pigs and essentially

refined out of that the protein which is

insulin and that was the case until 1981

where we had partnered with Genentech to

do another first which is create the

first biotechnology product on planet

Earth which was human insulin made in a

in a bacterial cell yeah so in in that

case that was the first Rec combinant

biologic product right it was pudding

the genetic the genetic code from human

DNA that codes for human insulin into an

ecoli bacteria then you put that ecoli

bacteria in a giant vat and just like we

ferment wine we put sugar in and it

started to make insulin and that's how

we make insulin around the world today

is through that recent process right

yeah that's right still and that was the

first DNA based product made and it

solved a problem because we were

actually we had we had per the Obesity

discussion Rising type two diabetes

rates it used to be type 1 diabetes

which is the childhood form that's

really autoimmune disease um was most of

the diabetes that needed insulin but as

this uh you know abundancy grew and

people got heavier we saw earlier and

earlier onset type 2 diabetes which is

the adult form right and we we worried

we're going to run out of animals to

slaughtered animal pancreases to refine

so it wasn't just a cool science thing

it was actually solving a pretty big

public health problem which was the risk

of scarcity of insulin yeah yeah and so

look I mean biotech to the to the rescue

and we'll talk more about biologic drugs

and all the other things that that have

been addressed with recombinant systems

meaning we put DNA in microbes and get

those microbes to make a protein for us

and obviously there's been a lot of

advancements in that space it's probably

worth you know hundreds of billions of

dollars today but um let's let's fast

forward to what happened after

insulin it sounds like in the history of

of research into diabetes and

understanding some of these underlying

mechanisms uh there was this discovery

of

glp1 at one point and let me try and

explain it and you tell me if I get it

right but okay

glp1 it sounds like is a protein that is

expressed by L cells these are little

cells in the small intestine of a human

so when we eat food those cells

recognize that there's food in the

intestines and they pump out a protein

called gp1 and that protein goes into

the bloodstream and flows all over our

body and turns on and off different

parts of different cells telling them

hey there's food in the in the

intestines so tells your brain don't be

hungry but it also has other effects

like secreting insulin getting cells to

make insulin and as a result glp1 is

what's called a hormone it's a regulator

of all these different cells to do

things when our intestines are full of

food is that an accurate way of kind of

describing what a glp what the glp1

protein is yeah that was perfect I would

just step back one step though and say

there's a broad there's like a super

family of these things and this going to

come up later in the when we talk about

the drugs which we call incron and this

was derived from a even earlier on your

chart here in the 70s they observed that

if you give someone nutrients

intervenous meaning it bypasses the GI

system that you have a higher spike in

glucose than if you give it via the GI

track so that's a curiosity right which

is why is that the GI track was doing

something and they call that the inchron

effect and later we found out that

there's a whole family a super family

really of these hormones signaling tools

that are telling your body when you're

fed to do different things that makes a

lot of sense because to survive as

humans feeding is like one of the top

three essential processes next to

breathing and other things and so

there's a lot of redundancy but also uh

different hormones for different chores

and gop1 was the first one that was made

into a drug and so in 1987 it was

discovered that gp1 actually stimulates

insulin production insulin

secretion and and then it was isolated

and um

ultimately I mean maybe you can tell us

the history I think there was a story

about Nova Nordisk and noo having some

um some role and some of the early work

with glp1 versus Lily and and tell us a

little bit about the history and like

what took so long for gp1s to go from

hey it stimulates insulin secretion in

1987 to kind of getting these first

drugs on market for gp1 yeah it's a

great question both companies played

around with this me ISM right after that

paper was published in '87 and as I said

back to the insulin story it's not

really an accident because we were two

companies very focused on making

peptides and and diabetes right so this

was a good thing to chase but gop1 in

its native form is not peptides are a

small molecule small protein right just

just smaller protein yeah less amino

acids in a chain um which is what we

call gop1 really it's smaller than a

protein it's a hormone but but also

called a peptide but we when you give it

in its native form as a medicine it has

a halflife of like minutes so you'd have

to have continuous infusion in your life

to use gp1s in the human form as it was

designed and of course we have plenty we

can make it ourselves um inside our

bodies but if you give it exogenously or

from outside that you need a drug that

lasts longer than a few minutes so you

know both companies set to work on that

problem it was actually Lily that

launched the first gp1 drug called

exenatide which was this strange Story

another sidebar of a company discovered

that in the saliva of a hila monster so

this is the

the desert yeah in their saliva is a is

basically a mimic of the go human gop1

it's close but not identical and the

amino acid change that it had made for

its purposes in saliva actually uh

prolonged its action in man to be more

like six or seven hours so this made for

twice a day injection and it was it

allowed us to lower blood sugar in

people with diabetes and it was super

successful it also we noticed as happens

in drug development that you lost a

little bit of weight with this and we

know in type two diabetes that was good

in the background Nova was working on

their own once a day version and they

engineered it versus found it in nature

then Lily uh made a once a week form

called Doula glutide which is now

marketed as trulicity and then Nova made

a weekly one which is called OIC which

we all know the name of now and actually

you know in kind of uh not to nerd out

too much on drug kinetics but by going

from daily to weekly we were able to

dose higher and this is one of these

situations where the glucose effect

occurs at a lower dose than the weight

loss effect and we couldn't do that with

a daily or twice a day drug because the

side effects of these drugs which are

nausea and diarrhea they're unpleasant

are kind of a what we call a peak to

trough effect so you experience them

when there's a big change in the drug in

your body but when it's steady state you

we really reduce those symptoms so it

was really novo's Insight that we could

push up the dose of semaglutide that

allowed the Obesity kind of threshold to

be pushed and then of course we followed

that with our latest one tepati which is

known as mararo that's actually two

hormones together yeah well so so let me

just um take a step back I just for

folks that are listening to really

understand this so all proteins are made

from a chain like a beaded necklace of

amino acids being stuck together and

when they're put together that chain

kind of collapses into a a molecule

structure a protein structure and that

protein has some function because it's

got shapes and curves on it and it can

do things in the body it can bind to

things and they can do activities with

different cells but you don't

necessarily need to use that exact chain

of amino acids to get part of that

protein to bind somewhere else in the

body you can use things that look like

that protein and that's really the

effort in all of these what are called

glp1 agonists which are different than

glp1 itself they're different molecules

they're different proteins but they

combined and have the same sort of

activity so so there's this discovery

process this research process as I

understand it to to develop and identify

new proteins that can have a similar or

perhaps even a more beneficial effect

than gp1s in the body is that is that

kindir yeah that's right and I think you

know this story itself is going from

like finding the native human hormone

and then we found this accidentally this

one in nature that was what we call an

analog to it so it had a similar

function but with a different kinetics

different absorption rate and then Novo

actually uh engineered that in L glutide

so they designed that in and ever since

then we've been Engineering in different

changes in those amino acids those beads

to drive different types of function

the latest one being this sort of dual

acting one we have now which like both

ends think of a chain with both ends

with active Warhead versus just one in

right so over time in 1986 we kind of

realized hey gp1s stimulate insulin

secretion so this is super interesting

and all this research begins but since

then there have been a lot of

studies on how gp1s maybe are regulating

and affecting other organs in the human

body and you know I've got this chart up

here that shows the effect of

gp1 um and gp1 analoges on the brain on

the heart on the pancreas on the liver

there are all these kind of interesting

follow-on effects the human body is so

difficult to kind of map everything but

there's some intricate relationship and

cross-regulatory process that happens

between all of these different systems

of the human body so maybe you can talk

about the evolution in our understanding

on how gp1s and gp1 analoges maybe are

affecting other organs in the body not

just turning off hunger and not just

making more

insulin yeah so of course it's doing

those two things but as you're pointing

out you know the hormone is basically a

messenger right so as as you said

earlier it's telling your body you're

fed and with that um because nutrient

absorption is like a survival Instinct

and um we're pre-selected for that we're

good at then processing that signal and

acting differently so that includes um

you see like heart rate going up and um

lipid levels dropping uh in your

cardiovascular system and that's because

you're responding to that food the new

nutrients entered into into into your

body liver is a key part of metabolism

so there's tons of cross signaling into

the into the liver um and the pancreas

is the source of insulin amongst other

metabolic regulatory hormones so so what

we don't even fully understand yet

though David which is interesting is is

that there are primary effects of gop1

certainly we can reproduce like in a in

a a test tube or a cell system but then

there's a whole Myriad of other probably

secondary effects because there might be

intermediate signals we don't even know

about yet in this whole metabolic

process so some of the ones listed here

I don't think have been proven as Direct

effects many of the brain ones for

instance but uh clearly happen when you

overstimulate gop1 or give it

exogenously as a medicine and uh mostly

in our nutrient Rich environment we

covered earlier these tend to be good

things

because you're tamping down hunger and

you're improving absorption of the

nutrients you already have yeah so now

the topic to jure is hey we could use

gp1s not just for the indication of

obesity and diabetes but perhaps for

other health indications and maybe going

after other issues that people are

having problems with yeah I think I

think there two big stories one is that

the other is that it turns out gop1

isn't the only hormone that matters and

you're going to I mean we already have

tepati which is a whole another hormone

called Gip glucagon insulinotropic

peptide which is a complicated name but

has more of a bias toward fat release

and basically allowing your fat cells to

burn energy earlier in the starvation

cycle so as you're hungry kind of

unleashing fat energy versus just

squeezing it out of our muscles um which

is what your body does naturally as kind

of a survival Instinct and then we've

combined that into tepati next next up

is there's amaline based drugs that's

another gut hormone uh and glucagon

another one so we we've got triple

acting and all kinds of different ones

coming and that's a big part of the

Innovation story I think we'll figure

out through time which ones are best for

what maintenance is a big issue in this

class inducing more rapid weight loss in

people who are super obese you know if

you have a BMI 50 and you take tepati

our drug and you lose on average 23% of

your body weight you're still obese

right so we we need more potency for

those people but there's many people

have a BMI of 31 and heart risk they can

get their BMI to normal on tpde or

semaglutide but how do they keep it

there more easily versus a weekly

injection so that's another problem

being solved the second thing which

you're touching on is all the

indications to go after and as I

mentioned earlier there's more than 200

diseases that are tagged to obesity do

they all cause are they all caused by

obesity we don't know that yet they're

correlated but so far um in our studies

this category medicine's undefeated

we've never had an unsuccessful study in

measuring an outcome in a chronic

disease and that's probably because we

stacked the ones that were most possible

first or most confident in um but we're

working down that list currently Lily

has 105 studies going with tepati in

these other diseases wow so this is a

massive massive undertaking you know a

clinical trial like that takes a 100 or

200 million doll each so you can do the

math it's a it's a huge bet that we can

convert weight loss into sustained

health benefit in chronic disease yeah

so that's I mean I'm doing the math

that's 10 to 20 billion dollars you're

spending on clinical trials for and I

understand sleep apnea maybe Alzheimer's

chronic kidney disease sounds like lots

of different indications where you go

after a patient population you try

perhaps one of these combo therapies

these new combo therapies that you have

Y

and yeah right and then you see what the

results are and if it works

yeah a doctor can prescribe it right

yeah yeah exactly so there's one we just

read out which we'll end up submitting

which is um there's a lot of people you

and we all may know them in our life who

say oh I was told I have pre-diabetes

what is that that's you know otherwise

healthy middle-age adults who are

overweight right and what happens

diabetes like a lot of diseases it's not

a binary function it's a continuous

function you you begin to have

resistance to your own insulin because

of the stress being put on your fat

cells essentially from overeating and of

course reducing obesity might help that

and that's been tried without drugs with

you know diet and exercise and it works

so we replicated that we those results

and we just read that study out with

mjara which showed that three years on

our drug 94% fewer new diagnosis of

outright diabetes so that's a huge

national health problem and if we can

treat diabetes uh or obesity early in

the life we could potentially reduce

diabetes Downstream so all there's many

examples of these but we're going for

dozens and dozens of these kinds of use

cases for the technology so when that

gets approved when you go through your

clinical trial you get a positive

indication on the the the readout a

doctor can then prescribe that

particular drug for that that condition

and and then what insurance covers it I

mean just help us understand kind of how

how payment happens in this and

you know ultimately and we'll talk a

little bit about pricing in a second

yeah I mean so that now we move from

Clinical experiment and science to the

messy part of Health Care so you know in

America um I think we have a a strong

bias to reimburse things that are kind

of obvious and when things are new it's

harder what we see today with whether it

be Lily's products in this category or

noos is really broad acceptance of by

insurance and Healthcare practitioners

in treating outright diseases like

diabetes type two diabetes and probably

like these cardiovascular conditions

we're studying I think they'll be

adopted quickly and reimbursed quickly

but that's when you already have the

disease of course the real promise here

is to prevent those diseases but in

almost every case in this country we

don't really pay for prevention right so

um people who are obese and don't have

those conditions if you're say on

Medicare currently the rule of the

federal government is they won't pay for

these medications you have to get

diabetes before you can get the

drug which sounds pretty stupid and I

think it is but you know the evidence

needs needs to build our job is to

invest in that evidence base I just

spoke about so that we can show time and

time again that all these chronic

illnesses can be abated slowed or even

eliminated and in some cases even

reversed um if we can get people to lose

a dramatic amount of weight safely which

is what the drugs do that's you know in

the process of sort of getting that idea

adopted why why is that um controversial

because if I'm an actuary underwriting

the long-term cost of a patient or an

individual in a in a in a program in

insurance program I'm GNA look at that

patient I'm like or that person I'm

gonna say hey if they stay overweight

there's going to be four diseases

they're going to get over the next 30

years and I'm gonna have to pay for that

but if we can get them to lose the

weight I'm going to save all this money

shouldn't I want I have a financial

incentive an economic incentive to to

change that what's what's the

controversy there yeah I think you know

that's in process I was actually in a

big you know um investor of mind's

office a few weeks back and they said oh

the last company in here was a

reinsurance company and they're changing

their Actuarial tables yeah for people

who have are on these drugs which you

know I was like wow you know you're

making a difference when when that's

happening but it hasn't trickled through

the system I think there's a lot of

still stigma associated with obesity

frankly like social stigma and patients

report to us a lot of doctors won't even

use these drugs because they're they

think it's a it's a product of laziness

um and you know why people become obese

we don't really understand completely

yet why one person would and one person

wouldn't what we do know is once you

become overweight or obese losing that

weight as an adult is really difficult

some studies show like less than 5% of

people can reach a healthy body weight

on diet and exercise once obese so

that's a very ineffective standard of

care so today if I want to get tepati

for a weight loss which I think you guys

called Zep bound right yeah so um can I

go to my my health insurance company and

have them pay forward or am I paying out

of pocket depends on who you work for

Dave so um right now about 50% of the

employer sponsored insurance plans cover

it Lily covers it for we we cover the

Nova ones too um because we think

obesity is a disease those skew toward

you know companies with money basically

um you know I think health benefits are

part part of just attracting and

retaining employees so smaller

businesses businesses with lower margins

like retailers Etc really don't cover

these meds yet I think in five years

we'll look back and we'll say that was

crazy um once the evidence base is built

up and there's more adoption and less

stigma but right now that's the current

state so a lot of people do pay out of

pocket and we've got some work to do to

help them you know if you're the rule of

the land in the US is if your insurance

uh if you're in the federal benefit um

you can't even

accept uh savings cards from the

manufacturer but for those that have

have a commercial benefit like if you

work at an employer large employer like

a retailer that doesn't cover it we can

actually buy down your out of pocket

cost and we do that and so did I hear

correctly that you guys are doing a

directed consumer model as well is that

right yeah yeah yeah so to get at this

very problem of both stigma and cost you

know back um in January we launched what

we call Lily direct so people can go to

their doctor or use our tella Health

platform we have a bunch of Partners who

will see you as a physician and their

obesity specialist and they'll send the

prescription to Lily and we'll fulfill

it directly via male DTC this solves two

problems one is people can go to a place

where they're not stigmatized for being

over and two they always get it at the

same price and it's the lowest price

available to them there's a lot of

confusion in retail pharmacy about what

people should pay and there's some

pharmacies marking these drugs up

because of the supply issues is it a

thousand bucks a month is that right for

um t for list price list price we have a

a savings card program that's about $600

per month and then we also just launched

in the lowest two doses uh a vial form

which is a little easier for us to make

we can get into the supply issues here

maybe in this discussion too and that's

um

399 basically and 550 for those two

doses so almost you know 60% off still a

lot so what about the criticism and the

research that has shown that if you go

off of one of these drugs the weight

comes back and as a result we're kind of

going from a chronically ill population

to a chronically drug dependent

population how do we address that

concern and you know what is the change

that's needed over time for that not to

be the case isn't there an economic

incentive for Lily to always be you know

hoping that more people need the drug

more frequently because that's how you

guys make money and you know how do we

kind of talk about that change that's

that's coming and and whether you need

to be on it forever yeah yeah well I

mean our mission is to is not what you

said our mission is to solve human

health problems and ideally that would

be here where people could have a course

of therapy and then not have to take

medicine the the physiology of gop1 and

Gip right now that's not how it works

right if if you don't have them on board

your body res restores itself to its

previous position we yeah there is a

theory that if you sustain low body

weight for long enough you can kind of

reset your thermostat in a way and your

body will stop trying to defend what it

perceives as a starvation state which is

you you're not carrying as much weight

as you nor normally would but you know

we haven't had these drugs around long

enough to prove that out we also know

that some people um lose weight and then

do change everything about their life to

sustain that body weight and go off

successfully that's not uncommon but

it's not the most um probable outcome

for most so for now we need to take the

drugs longterm but we are working on

drugs in our pipeline that do uh seek to

reset uh the metabolic switch and using

like the Y is a mechanism it's a brain

mechanism that's thought that maybe you

could have a treatment course lose

weight and then reset um your your self

sort of that thermostat if you will of

what your body's supposed to weigh um

we're working on this problem but

understanding is like your base

metabolism drops so the number of

calories per day that your body is

burning to live goes down so if you stop

taking the drug and the hunger switch

gets slightly turned back on even if you

eat a healthy normally number of

calories per day 1500 2, 2500 you start

to gain weight again because your

metabolism has declined but what I've

heard from a lot of friends um I don't

want to call everyone a biohacker but it

definitely seems to be in kind of the

people that like to mess around and try

new things uh crowd is to kind of go on

and off so people are trying lower doses

they're they're trying the drug for a

period of time they do it once a month

once a week and then they kind of

maintain a healthy weight without

needing to be kind of um on the the

typical regular Cadence of the drug is

that something you guys are seeing more

frequently is that the steady state do

you think over

time we definitely see that in in in the

clinic and in in in practice by people

and you know back to the cost of course

people want to spend less money and if

that works for them you know there

certainly um and it's under do Dr

supervision we have no problem with that

we need to do more studies in the space

um you know what you have one drug on

here or not on here which is coming and

it may be the most important drug

because of the scale uh

ability which is it's called ororon it's

a it's a chemical drug so here not an

amino acid but a organic chemistry that

mimics that mimics the activating uh

part of the peptide um and so it's a

it's an oral gop1 um in our hands it's

about as good as as highd do semaglutide

and w're we're doing phase three right

now um so that will'll start to read out

next year the benefit of this is one

it's oral so it's a little easier to

take you don't have to refrigerate you

don't have to worry about the injection

you know some people don't like to

inject but the real thing is this is a

this is a product for the masses because

the systems we make these these drugs in

now are complicated to scale and that's

why there's been shortages you know we

have approvals in more than 40 countries

we haven't even launched in that's not a

normal thing for for a company that

wants to Max you can't make enough

product we can't make enough right and

because we want to satisfy the markets

we've already launched in so or for

apron which is this phase three project

is super key in that um we could both

Supply you know people who could get

away with just the worn hormone drug

glp1 and we're studying it as a

maintenance option as well which makes

kind of sense to go through the

injection lose more weight and then keep

it off with something uh a little easier

to take what's your sense on how this is

going to affect the food industry so a

lot of analysts have talked about hey

food companies are going to get damaged

by this I'm going to I'm an investor in

a company called super gut and we have a

high resistance starch fiber product

that we're now selling and having a lot

of success selling as a complement to

glp1 so you're you're on a gp1 or GP

drug you take this product and it kind

of can help you during that period of

time and it's a new category that seems

to be growing a lot of companies are

launching around this similar concept

now do you think this is changing the

food industry in the United States and

in the west and ultimately around the

world and I don't know if you talk talk

do you talk to CEOs of food companies do

they call you you doing to our business

like yeah I've got I've got a couple on

my board even but so you know I I I

think there are um certainly displacing

effects of this this category and I

think it's great news overall first is

the health things we talked about so

people will need you know uh less

diabetes products for sure they'll need

less other medicines we're do even doing

study in like OA pain in the knee

because a lot of knee Replacements are

in obese people and they get get painful

early in life uh knee pain and we hope

to show you can prolong that so that's a

sort of a knock on effect and then of

course food would be the next one you

think about I think you might know about

the study but last year Walmart did the

sort of what's in the cart study for

people on OIC or Monaro and it showed

they were buying about a third less

calories so that's a lot but that's

consistent with how the drugs work but

interestingly also few were salty snack

foods yes they buying more fruits and

vegetables shopping at the edge of the

store versus the center so that's

happening probably because we only have

10 or 11 million Americans on these

drugs it's not happening in an economic

scale that's really changing food

companies um bottom lines but you know

enterprising companies like the one you

mentioned you know protein shake

companies there's a lot of things

happening I went to a a Quick Serve

restaurant it was in California a few

weeks back and they actually had a like

a gop1 side menu that's what it was

called yeah exactly on these drugs use

these uh so you know it is it's having a

big social uh footprint yeah well I mean

here's your stock price so Eli LLY stock

I think may outperform I don't know it's

probably pretty close I with Nvidia it's

it's an an extraordinary stratospheric

rise and then just to look at how the

business operates today so you have this

portfolio of products that you're

developing but in the last quarter um

you did 11 billion in Revenue

and generated um 3 billion net profit I

think it's 3.7 of of operating profit

one of the the the key criticisms um and

this is one of the things I wanted to

get into was how do you address and how

do you deal with the political heat

associated with your success so you guys

are operating a business that is having

an extraordinary impact on people's

lives but you're also making an

incredible amount of money and in this

environment today that may be more

challenging to deal with than it ever

has been certain Senators that we shall

not name would look at this and say hey

you're making an 81% gross margin

selling these products to sick people

how can you justify that so maybe talk a

little bit about how you deal with the

political environment in the US around

the world as you are successful and are

projected to Triple the business over

the next couple of years here yeah well

it's it's obviously a top of list issue

for me every day maybe a couple things

there Dave so I mean first of all this

is a very long investment cycle business

um as we talked about earlier like we

launched the first gp1 drug in the world

in 2005 and since that time we've been

working for you know this kind of

performance because we took risk against

that idea right and refined it and

worked that problem and that it you know

I think that time scale is hard for

people to think about but also you know

the dollar scale of the R&D this year

we'll spend over 11 billion dollars on

R&D which is a meaningful uh it's like a

nation state scale like that's more than

the country of Germany um so we we're

pushing forward new medicines based on

the revenue of today's medicines and

that virtuous cycle is sometimes just

hard to articulate but when you get it

right you can have a big societal impact

so that's the first thing secondly you

know I think the pressure is a privilege

in a way it means we made something

useful enough that a lot of people

needed and want it and now our job is to

work with you know the Healthcare System

to sustainably adopt it and we do see

that as our responsibility to work with

you know politicians if that's who we

work with or um health plans or

employers to find a way to get this

medicine which we think is amazing to

eptide to so many people um and do it in

a way that's sustainable now hopefully

we've created enough value that the

certainly the the people are getting the

drug or benefiting that the health plans

are actually lowering costs in the long

term even that there may be an increase

in short term and that we make a

reasonable profit for our shareholders

and sustain R&D for the future so I

think that's what's happening here I

think this week actually Nova nordis our

competitor was hauled before Congress to

talk about this issue there's a lot of

other dysfunctions in the US system that

we could talk about in terms of how

inefficient healthc care is I mean here

is a medicine that could augment 100 200

adult diseases in a meaningful way it's

expensive yes probably net pricing uh

for us you know is going to be something

like three $4,000 a year in the steady

state per person but I think we'll

create more value than that we'll save

the system more money than that per year

per user that's what we should be aiming

for I think what's interesting about it

is the the the pro the biologic products

are the the molecules are advancing and

they're advancing in a in a a pretty

kind of steady

way the issue I think with insulin and

and there's obviously been a lot of

legislation and Regulatory and political

scrutiny around insulin pricing is it's

the same molecule and the price has just

gone up right this is this is the old

kind of pharmaceutical companies or bad

story is they've got a product that they

make for 10 cents and then they sell it

for 10 bucks then someone says let's

charge 100 they're like okay let's

charge 100 and so it's classified as

price gouging in this particular Market

you guys are certainly making a healthy

Market but the products are also

advancing there's new combination

therapies coming out and uh the oral

therapy so there's a lot of investment

in improving the overall landscape of

what's possible yeah let me address that

because I I took over in early 17 as you

mentioned and like that the insulin

pricing Scandal which Novo and Lily were

also Center of right was um hot and

heavy and I so I took a lot of personal

lessons from that but you know every day

since that we had reduced the price of

insulin even though you know we have

this weird system in the US where a lot

of our two-thirds of actually our gross

price goes to pbms and insurance company

so right of the gross price that's often

quoted the net for us is about a third

of that and in insulin it was even more

where does that money go well it's used

often to cross- subsidize other things

in healthcare so we have to unwind that

system if we really want to value

innovation and then the other thing

which is in this chart is and I

mentioned is some of that revenue from

insulin we Ed to invest in the next

generation of therapy whether it be

insulins which we're still investing in

new insulins or gop1 drugs which of

course we did um and that is hard to

articulate in the moment but it actually

produces good economic and social value

later yeah here though we we took those

lessons we launched at a 20% discount to

Nova's product even though we have

better efficacy data and we've only cut

the price since then and I think um we

see a kind of a generational opportunity

for the company to both be have the best

product so efficacy and quality but also

mass production and that requires a

pricing strategy consistent with that

well you've also invested a lot in

manufacturing in the United States right

didn't you just do like A5 billion doll

investment in Indiana to build new

facilities um yeah we're building the

largest API site in the history of the

United States in Indiana yeah so it's h

so I mean that's got to feel good to the

politicians too that this isn't like

yeah uh optimizing for cost but there's

also infrastructure being built so I've

got a lot of numbers on forast breakdown

of product I think like what's

interesting is just I don't know if

these numbers seem right but the

analysts are projecting that you're

20126 operating income numbers could

grow to $32 billion I mean it's just

such an incredible rise and that

obviously is the the pipeline of

indications the

pipeline of combo therapies new

modalities and that's up from 7 billion

last year I believe right so a 4X in 3

years at the scale of operating income

is really

incredible I hope they're right yeah Ian

good for you hard on this I heard that

there was like internal forecasts that I

won't reveal my source uh and all the

forecasts got kind of blown out like the

forecasts were too conservative in terms

of where you guys are at with tepati so

um I wouldn't be surprised if you did so

if we look look at the breakdown of

Lily's portfolio of Revenue today uh

it's very obvious that what we've just

been talking about the gp1 Gip drugs are

the vast majority of the portfolio and

expect it to be the vast contributor of

growth in the years ahead but maybe you

can tell me a little bit tell us a

little bit about how you think about the

portfolio of other opportunities to

address disease and how you're investing

there and how you know when you've got

such a blockbuster like this and you've

got a runaway train and you can't keep

up with demand how do you dedicate

resources to the rest of the portfolio

and how do you think about that as a CEO

as a leader in getting your team to

focus on other things that are also very

important yeah I think I mean that's a

key thing we spend a lot of time with

our board on you know on the one hand um

I think there's a lot of business books

you could read that say well double down

on your winners right and just keep

going but unlike other Industries you

know D we don't really have a franchise

value at the end of the patent life

right there when when drugs go off

patent you have to actually have a

better drug that competes with almost

free yeah and that's probably possible

one or two times here we're talking

about

monjaro trulicity our last or gop1 only

and semaglutide gop1 only will go

generic and we think we have enough

differentiation to keep growing through

that but at some point that story runs

out right and so on a time scale of

decades you need other lines in the

water um in a lot of ways this is like

an options business you know we we we

have to lay down bets across variety of

things they have to be you know real

unmet medical needs that you can get

paid if you have a solution for but also

you know the technology bet is it going

to work and how to attack that so my

mindset is we have to walk and chew gum

at the same time here we have to execute

like nobody else against this enormous

kind of not not even generational maybe

longer opportunity to build the company

affect human health and return Capital

to shareholders at the same time we l

has been around 148 years um I think we

have an obligation to our newest

employee just joined to have a business

by the time they get to a senior level

and we certainly have a role in the

world at changing human health so we are

investing pretty broadly in cancer and

Immunology maybe in brain disease is the

most important area we can invest more

in um because I think that's actually

becoming more tractable and is about 40%

of global suffering is some form of a

brain or or um Neuroscience dis disease

and we have a lot of expertise there so

a little bit of balance and a lot of

focus simultaneously and we divide our

organization so that we have four

Business Leaders and one of them is this

franchise we were just talking about

weight loss and cardiometabolic health

three others have other agendas and

their job is to compete and win that way

I'm proud that actually in Q2 Q2 are non

incron our non tepati uh business grew

17% on a pretty big base so a healthy

business as well more on the scale of a

regular Pharma company not the super

sized thing we become what are what

science are you excited about I don't

know if you're a big science nerd um as

much but yeah like yeah so the inchron

products are um you know uh it's peptide

manufacturing but obviously there's uh

cell therapies so programming cells to

go into the body and do things there's

Gene therapies where we have all sorts

of mechanisms for altering gene

expression and making you know prent

changes in in in human cells and um and

then there's all this interesting stuff

in that that I'm super fascinated by and

excited by like yamanaka factors these

factors that can have a profound effect

on the epigenome uh which can ultimately

change how how cells behave and

radically affect the process of Aging or

what we consider to be aging what else

are you excited about what's exciting in

the portfolio and how do you invest

internally versus do m&a versus venture

to kind of access those in you know

areas yeah well let me talk about the

science and I'll get to the investment

strategy but we've talked about diseases

here but you know we think about our our

role is like having a pallet of ways to

make medicines which are basically you

know new molecular matter against uh a

set of diseases we know something about

that's sort of when those things

converge we do well so what's in the

pallet I think that's been expanding

rapidly lately and I think this whole

new field of genetic medicine which you

talked about um like xvivo gene therapy

where you edit cells and they go do

things like cares or uh Gene edits

themselves or Gene inserts which are

exciting you know we had a um medicine

where we announced results this year

that is focused on inner

ear diseases of deafness basically

congenital deafness disorders that are

monogenic um and we we've treated

patients that have gone from like six

eight years of life no hearing at all to

now hearing I mean this is it is LA like

when you see it but the you know I think

the thing that excites me is when you

can do amazing things at massive scale

so those two techniques car and gene

therapy it's hard to think of like super

scaled millions of people benefiting one

new family of medicines I'm excited

about the so-called

sna this is where we can knock down

proteins that are aberant or causing

problems and do it pretty safely and

surgically um and do it very

infrequently so like we have a project

in phase three right now that knocks

down the production of something called

LP little a which is a lipoprotein

particle that's probably thought to be

about 25% of the remnant reasons why we

still have cardiovascular disease and

there's no medicine for it today this is

promises to be a once a year dose and so

you take this once a year and it's

catalytic in sales and it works and just

keeps knocking down this protein so if

that translates into outcomes I think

that makes for a big very scalable

business we could treat millions or a

billion people with a medicine like that

and have a big big effect so we're

playing around with that toolbox um

extensively these days so scale has to

scale matters right and then well that's

our Str I think that's what a Lily's for

right is to make things that aren't

Boutique but things that are everywhere

so you know how do we do this I mean we

we we have focused maybe more than

anyone else on a lot of small deals that

starts with our corpor Venture group so

we have one of the most scaled corporate

Venture operations in all of corporate

America hundreds and hundreds of bets

that are small in size usually we go

with you know with GPS as an LP and

invest in small biotechs pre pre uh

public and there we don't have to be so

right mostly we're trying to learn and

follow science and have a seat at the

board or a seat at the table so that

when things start to turn we can move

early um we do a lot of m&a last year

sorry you're both you're both an LP in

Venture funds and you write checks

direct is that right yeah both ways yeah

okay okay we also have a interesting

project we're growing I'm qu called

catalyze 360 and here the idea is beyond

money what else can we do to help

incubate small companies and so we have

both space but also a service layer

we're offering sometimes in a Cost Plus

way or sometimes for Downstream

royalties where you know we're a big

capable company when you're building a

new company like you've been doing in in

um a like sometimes you need something

that's a pain in the ass to go build you

have to either buy a consultant or hire

one person and you only need them for a

few few months so here we're stepping in

and say well we'll give you that consult

if you need to interpret a talkx result

like you can just call Lily's experts so

we're like a service layer to cultivate

kind of this ecosystem around us and

then we do m&a we buy companies last

year about two dozen which was the most

of any Pharma company but actually with

some of the least Capital deployed so

we're making um I think we spent three

billion dollars on 24 companies so we're

making lots of small bets right and I

think that is interesting because the

longer we have uh residents you know

sort of uh in a partnership or we own

something we can add more value it also

allows us to trade in front of the

drisking event when things get drisk in

our sector there's a huge inflection in

value yeah and so you're basically

paying the last shareholders not

yourself um we think we can bet better

than the market on what those the

probability of something converting to

to a success is and if we're right about

that we'll we'll be better off buying

early yeah well so as a lot is changing

at the company and you're you're at the

scale you're at and growing as fast as

you are how do you think about and this

was an important one I wanted to talk

about leadership and culture I've uh uh

someone that works with me at ohal uh

her name's uh Megan she worked at at

Lily for years and so we had a long chat

about this interview a few days ago and

she talked to me about how great the

culture is and 10,000 people on campus

in Indianapolis and it feels like a

college campus there's a track and field

there's a bar on campus all these sort

of things that make it a great place to

work and she was really torn by the way

in making a choice to go back to Lily or

joining me so I apologize that we that

we took her but um uh but uh um maybe

tell me a little bit about how you kind

of think about culture keeping people uh

aligned motivated keep the performance

culture strong as you're kind of trying

to execute at this extraordinary skill

scale yeah exceptional question I mean

that's of the things I worry about

longterm this is one of them how do we

keep what's so good about how we operate

yeah I mean the background of the

company is important it's an old company

right and it was family run for a

hundred years like it was one of the few

exceptions in Corporate America where

the third generation didn't totally

screw it up actually they made it quite

quite a bit quite a bit better um and

because of that I think there's a lot of

loyalty and social cohesion in the

company as you mentioned like we like

coming to work and being together it's a

friendly place but also scientifically

super rigorous um and that's a that's

often not two things that fly well

together so I think it's got a a lot of

exceptional attributes when I started

though I think in my kind of view of

like when you're running a big ship like

this probably changing the culture is

like beyond your your capability but

what you can do is like exent turn up

the things that are good and turn down

the things that are less good and we've

been cultivating that so like one thing

that was less good but is now really

clicking for us is sort of like use our

scale or enterprise-wide capability as a

as a benefit not a not a a detractor so

many companies get big and get

bureaucratic and terrible like I mean

they just can't get out of their own way

totally and we really lean into okay

it's everyone's job to solve for Lily

first it's everyone's job to get the

patient healthy now let's talk about our

departments as a derivative of that not

the main goal and somehow those things

get flipped around in big companies and

people focus on how they look or who's

which Department's best and none of that

matters and we have to emphasize that

another thing I've really focused on is

speed at scale and we measure that

rigorously that's more of an engineering

thing I mean we really track things very

carefully on speed and we've moved the

drug development timeline which the

industry is about nine years from first

human dose to FDA approval and when I

started ours was about 11 and now we're

6.1 so how did you how did you how did

you incentivize that how did you reward

that and create the model for

individuals to contribute to that goal

yeah kind of one big idea and then a

thousand little things the big idea is

like this ratchet mindset that every

time we beat a timeline that becomes the

new

norm and so we like just re Benchmark

internally and when we were at 11 and

every was as at nine everyone wants to

jump to be okay let's be industry

average but that's actually quite hard

in a big company so we just said okay if

it we have a submission document to get

in and it used to be our standard was

120 days from when you had the data to

when you send it to the FDA we're now

doing that routinely inside of two weeks

so we've basically taken 80% of the time

out but that came in lots of little

bites but overarching everyone who works

in development knows it's about time to

patient that's the that's the big idea

solve for that so yeah that's you know

those are some of the kind of culture

Dynamics we we deal with and of course

we want to attract new people we've

expanded dramatically on the coast our

science operations like if you go you

know South San Francisco is now a pretty

big campus for us we just built a huge

building in seport Boston that'll hold

500 genetic scientists so for some

domains we need to go where the people

are um and be more of a kind of a

Mothership of satellites versus having

everyone here in Indianapolis and do you

and I know we got to wrap in a minute

but and do you worry about AI there's a

lot of startups with very smart people

that have built uh llms and other models

that are now trying to apply those

learnings and develop new systems for

discovery of molecules that will have

some particular action and doing it all

in silico rather than searching through

the domain space of molecules that we're

either synthesizing or discovering in

nature and is that a partnership for you

at Lily because you guys can operate at

scale and manufacture and distribute and

Market or is that a disruptive force

that could really damage the the 20-

year out kind of horizon for Lily's

business how much do you really think or

worry about this

oh we spent a lot of time on this you

know of course we have our own efforts

um pretty significant AI efforts

internally and a lot of Partnerships

including with you know open Ai and

Microsoft Amazon Etc um all basically

all the the large scale players Google

isomorphic so we have to pay a lot of

attention to it here's what I noticed so

far is there's a lot of money I think

last year five billion with a B went

into new venture-backed tech bios you

you know that's what they like to call

themselves and that money is coming not

So Much from the traditional bio VC

world but from the tech world s people

got a lot more lot more to Splash around

right that's right but a lot of those I

think if you look at their their pitch

decks they're really saying oh we're

gonna invent we're going to run the

whole process in silico and I I think

that's really naive

actually and what I think will end up in

the medium term being very valuable is

more the tool Builder approach like we

can take a process like adme so that's

where you're trying to optimize chemical

properties of a drug like we're talking

about gop1 so it's not twice a day it's

once a week and there I think by

chunking problems smaller the machines

can really help a lot more we have more

data on some specific acute use cases

and um we can have a tighter Loop

between the experiment in the on the

bench and the data process behind the

the model learning the idea that you're

going to throw on you know turn a switch

on a computer and it's going to think

about something and invent you know the

next Prozac I don't know I I think we're

a long way from that day yeah but we

we're paying attention to all of it yeah

so wet lab and Clinic integration is

critical it's not all going to be in

silico there's going to

be a good chunk of the time yeah it's a

co-pilot model where the machine can do

predictions probably now where we see

the most value is eliminating bad ideas

that humans don't see but in hindsight

look obvious so like because it can

integrate a lot of multi Source data and

say the probability of this working

based on prior experiments is like 2%

yeah and there's human factors where

scientists like they their last idea the

most but also we have trouble seeing

across all this fi domains of data

machines are good at that that that can

add value immediately awesome well are

you glad you took the job seven and a

half years ago and uh what are you most

happy about and what's the biggest

disappointment last uh last question

here as we wrap up yeah of course I mean

what an honor to the company like this

at this moment um we all need to get

better all the time I mean I I find

myself disappointed

mostly by but not being prepared not

thinking in advance of of things but you

know it's um when you miss we become a

kind of a yeah that looks obvious in

hindsight which we all have it's a

complicated business you know I should

give myself Grace on it but it happens

more often than I would hope and I I

think that staying humble about that is

like one of the most important things

that successful CEOs can do I mean you

always have to learn and you always have

to learn from your own mistakes that's

something we talk about a lot here I you

know I think it's it's cool that we

become more of a cultural icon that's

cool but it's also a big responsibility

because like you said with the Lily

direct and you know being more of a

consumer household name people expect a

lot more of us and we've got to change

from being just like a Midwestern quiet

medicine company to something a lot more

and we're not there yet we have to we

have to get better so yeah more to do no

great well thanks so much for taking the

time to chat with me today Dave it's

been an honor and a pleasure and I wish

you the best of luck with Lily congrats

on on all the success thanks a lot we'll

have to have have you come out to our

lab sometime I will yeah no I'm uh next

time I'm in the midwest I will certainly

kick you up on that I'd love to come

visit be awesome

[Music]

awesome I'm going all in