Dave Ricks, CEO of Eli Lilly | The All-In Interview

00:00:00.000 | All right, besties. I think that was another epic discussion. People love the interviews.

00:00:07.560 | I could hear him talk for hours. Absolutely. We crush your questions, I admit it. We are

00:00:12.560 | giving people ground truth data to underwrite your own opinion. What do you guys think?

00:00:16.720 | That was fun. That was great.

00:00:19.800 | Dave Ricks, welcome to the All In interview.

00:00:22.800 | Great to be here.

00:00:23.800 | Yeah, we had dinner together a couple of months ago and have been in touch. And obviously,

00:00:27.640 | I'm really excited to talk to you today about the work you're doing at Eli Lilly. So just

00:00:33.920 | for the audience, Dave is the CEO of Eli Lilly, which is the world's most valuable pharmaceutical

00:00:38.760 | company and the leader in the GLP-1 drug market, which some analysts have said could grow to

00:00:44.520 | as much as $150 billion in annual revenue over the next 10 years. Really kind of an

00:00:49.880 | extraordinary story. And Dave, you became CEO of Lilly in January 2017, when Lilly had

00:00:55.960 | a market cap of just $70 billion, following a year of $22 billion in revenue and $3.5

00:01:01.520 | in operating income. And today, Lilly's market cap is an astounding $878 billion, and the

00:01:07.720 | company is projected to do $46 billion in revenue and $15 billion in operating income

00:01:12.600 | this year. And few companies in history, I'd say, have seen such an extraordinary rise

00:01:16.560 | in revenue, profit, market value at this scale. Maybe Nvidia recently, which I'd say is the

00:01:22.920 | only company that kind of beat your performance in recent years. But I don't know of any that

00:01:26.920 | are not founder-led, maybe Satya running Microsoft, but it took him a little bit longer. So today,

00:01:33.180 | I'm really excited to talk to you about the work you're doing at Lilly, the chronic health

00:01:37.960 | problem of obesity and diabetes, GLP-1s, and what's happening in that market, what those

00:01:43.720 | products do, and the business of Eli Lilly. So thanks so much for being here, Dave.

00:01:49.360 | Yeah, excited to be here. I'm a big fan of the pod, so I'm excited to be on.

00:01:54.320 | That's great. Sorry you don't get harassed by the other three today, it's just me. So

00:01:58.840 | this is an extended science corner for all the nerds at home that wanted it, with a deep

00:02:03.700 | dive on an amazing business. So we'll start off by talking about the chronic health epidemic

00:02:09.360 | of obesity. According to the CDC, 74% of Americans are now overweight or clinically obese. Your

00:02:15.360 | statistics might be different. This condition is driving what is arguably the largest health

00:02:19.200 | epidemic in human history. Obesity and all the associated diseases like type 2 diabetes

00:02:25.040 | have so many negative health implications for our populations. And this has risen dramatically

00:02:30.980 | over the past 50 years, it's becoming a global problem. So let me pull up a couple of images

00:02:35.640 | we can use as we have this conversation here, Dave, and we'll dialogue about this. But obviously,

00:02:40.200 | what humans eat, what we consume has changed dramatically. Particularly here in the US,

00:02:44.440 | we've seen the American diet shift to a much more kind of caloric, lower nutrient density

00:02:51.000 | diet over the last 50 years. The average daily calorie consumed by Americans since 1961 has

00:02:57.520 | driven up from 2800 to about 3600. And you know, that sounds like a small number, but

00:03:03.400 | when you add it up over 365 days a year, it leads to a pretty dramatic increase in in

00:03:10.360 | obesity rates. This is a great chart that shows how the availability of calories and

00:03:14.920 | the consumption of calories in a population significantly correlates with the rate of

00:03:20.760 | obesity in that particular country. And the United States obviously has the largest caloric

00:03:27.700 | supply of any developed nation, and also has the highest percentage of people that are

00:03:33.480 | overweight or obese. And I would argue that many of the improvements that we've seen in

00:03:37.840 | agricultural technology and many of the systems in food that have made calories cheaper have

00:03:45.640 | resulted in this kind of surplus problem that has led to an obesity epidemic. And just looking

00:03:51.120 | at the US rates over the last 2025 years, you know, we see today, as I mentioned before,

00:03:56.720 | 75% of people overweight or obese and in this particular slide, we're showing 35% of obese

00:04:03.320 | and severe obese to today, 51% of Americans are either obese or severely obese, really

00:04:10.080 | extraordinary. And this is not just in the US as the calorie supplies increased around

00:04:15.120 | the world. We see obesity rates climbing in every developed nation, from Brazil to Mexico

00:04:21.320 | and now even recently in India. And so this is becoming a global problem. And I think,

00:04:26.360 | you know, Dave, maybe you could talk a little bit about the scale of the problem. I think

00:04:30.040 | you've highlighted a lot of this in your investor presentations. And this is one of your slides

00:04:33.960 | that you've used. So maybe you can kind of share how you guys forecast the obesity epidemic

00:04:39.160 | and the effect it's having worldwide.

00:04:41.840 | Yeah, that's a great backgrounder as it gets kicked off. You know, one thing just pointing

00:04:47.160 | out on the data you showed, some people notice a difference in the caloric intake numbers

00:04:52.160 | versus the kind of the macronutrient, micronutrient story, you go back. Yeah. So like the severe

00:04:59.000 | obesity in particular, kicking up, you know, the next slide there. Yeah. Kicking up almost

00:05:05.120 | doubling right in the last 20 years, whereas caloric intake certainly isn't moving at that

00:05:09.880 | same rate. So, you know, I think as we think about the problem, of course excess calories

00:05:15.520 | versus expenditure is a key part, but so is probably the ultra processed food story, which

00:05:22.560 | you didn't have data on there, but it is, you know, I think in the US we're now eating

00:05:26.240 | two thirds of our calories in our country are ultra processed. Yeah. And that compares

00:05:31.320 | to like 35% in Europe. So that's gotta be part of this equation as well. But no matter

00:05:37.120 | the cause, like if you go to that first slide I had, we now see about a billion people on

00:05:42.120 | the planet with clinical obesity or overweight. And as you're pointing out, probably that's

00:05:49.640 | going to grow a lot more in the developed or developing world than the developed world.

00:05:55.560 | There's a function of wealth accumulation and surplus food abundance basically that

00:06:02.120 | will drive this. India I think is 11% of the population's obese, but projected to go as

00:06:07.560 | much as 30% in the next 20 years. So on that population base, that alone would add almost

00:06:13.520 | half a billion people to this chart. Yeah. So your projection is obesity worldwide will

00:06:22.040 | affect about a billion people by 2030. Is that right? Yeah, that's right. Yeah. Yeah.

00:06:28.080 | And the problem with obesity is that it has an effect on many of the systems of the human

00:06:35.600 | body. Maybe you can highlight kind of how obesity, you know, causes many of the chronic

00:06:41.320 | health conditions and ailments that simply weren't around maybe a hundred years ago,

00:06:45.920 | but are certainly becoming far more frequent today. Yeah, absolutely. I mean, the first

00:06:50.280 | order effect of course, is on your metabolic processes in here, like cardiovascular disease,

00:06:54.780 | how we process lipids and other energy sources that leads to cardiovascular disease and it's

00:07:01.360 | other associated risks like stroke. I mean, there's a pretty new disease here called under

00:07:07.400 | the liver disease, which is what used to be called Nash is now confusingly called mash,

00:07:12.960 | but it's the same disease. It's fatty liver disease. And 30 years ago, like clinically

00:07:17.120 | you couldn't really find this in the adult population. And now it's one of the most common

00:07:22.920 | conditions obese people suffer from. And it ends up in fibrosis of the liver. And as you

00:07:28.680 | know, like we have a lot of every organ that's important, we have redundancy and accept the

00:07:32.840 | liver. So when your liver goes south, it's a bad news story for human health. Transplant

00:07:39.120 | is the only escape from that. We've got some new data on our drug. That used to be a disease

00:07:44.480 | limited to severe alcoholism. Right? Exactly. And, and that's the Nash word is actually

00:07:50.480 | starts with non-alcoholic fatty liver. So, but now there's much more, um, obesity driven

00:07:56.840 | fatty liver than any other cause, uh, as you're pointing out, but it results in transplant

00:08:01.920 | and terrible, uh, outcomes long-term. So, so much of the, the health problems, the chronic

00:08:07.920 | health issues that we deal with as a modern society are probably rooted. Many of them

00:08:14.160 | are rooted in the obesity epidemic. Yeah. So 230 diseases have been connected and you

00:08:20.480 | have these, these ones that are more like directly because of the caloric imbalance

00:08:24.440 | and fat accumulation. And then you have these ones in blue are sort of like derivative,

00:08:29.800 | like obstructive sleep apnea. That's like 14 million Americans have CPAP machines. And

00:08:35.240 | why? Because there's so much, um, fat accumulation around your respiratory system. You wake yourself

00:08:40.280 | up at night to breathe and GERD, of course, that's, you know, reflux, et cetera. So these

00:08:45.960 | are like more of the second order of fact. And then interestingly, you've got the mood

00:08:49.880 | anxiety pieces here. And there's an interesting study done by Epic. You know, they're the

00:08:55.720 | big health record company, which is retrospective and not tightly controlled, but it showed

00:09:01.120 | people on GLP one drugs. Incretins had remarkably lower rates of new clinical depression diagnoses,

00:09:08.320 | which is an interesting thing as well. So a lot of, uh, a lot of impacts, uh, obesity,

00:09:14.520 | like type two diabetes itself, which is an inability for the body to respond with an

00:09:19.400 | appropriate amount of insulin when there's glucose in the blood itself has a number of

00:09:24.080 | follow on effects. Obviously diabetes as, as many know, um, has become on its own, a

00:09:30.360 | chronic health epidemic. Uh, it can cause nephropathy. Uh, so damage to the kidneys,

00:09:38.000 | which has a significant effect on our ability to regulate protein in our body, diabetic

00:09:43.440 | retinopathy, hemorrhaging in the eyes, uh, that ultimately can lead to blindness. So

00:09:48.080 | having too much blood sugar and not having an ability to produce enough insulin to bring

00:09:52.920 | down the blood sugar level can, can lead to all these chronic health effects, which has

00:09:57.520 | made a bum. Yeah. And those are the micro vascular ones. There's the, I mean, the risk

00:10:02.400 | of heart attack. If you have type two diabetes is four times people who don't have diabetes.

00:10:06.680 | Yeah. So you also have the macro vascular, uh, events, stroke, heart attack. Okay. So

00:10:12.280 | the treatment for diabetes used to be insulin, right? And insulin. And if I remember the

00:10:18.360 | history of Eli Lilly correctly, uh, Eli Lilly was the first American company, uh, to produce

00:10:25.440 | insulin, which was done with initially processing, I believe pigs or cows, uh, to, to, to get

00:10:33.960 | the insulin. Yeah. Yeah. Yeah. It's an interesting story. So we were the first company, period.

00:10:38.280 | Um, there's a Danish company, Novo, who's our competitor in this space. We can come

00:10:42.480 | back to that. Cause it's not a coincidence. I remember the history of the, of the relationship.

00:10:48.000 | It's a really interesting history between the two companies, but yeah, kind of intertwined.

00:10:51.160 | Yeah. But we, we had a, like our head of science, uh, met with Toronto, this research set up

00:10:56.040 | there who discovered the mechanism of insulin, but they couldn't make it into a medicine.

00:11:00.880 | We produced the process that made it available at scale, which as you're pointing out, was

00:11:06.200 | derived from like a lot of the, you know, the history of our industry was like taking

00:11:09.440 | things in nature and refining them into medicine. And that was the case with insulin. We took

00:11:14.400 | something in nature, the pancreases of slaughtered meat animals, uh, really cows and pigs and

00:11:21.200 | essentially refined out of that, the protein, which is insulin. And that was the case until

00:11:26.680 | 1981 where we had partnered with Genentech to do another first, which is great. The first

00:11:32.360 | biotechnology product on planet earth, which was human insulin made in a, in a bacterial

00:11:38.640 | cell. Yeah. So in that case, that was the first recombinant biologic product, right?

00:11:44.200 | It was putting the genetic, the genetic code from human DNA that codes for human insulin

00:11:51.200 | into an E. coli bacteria. And you put that E. coli bacteria in a giant vat. And just

00:11:55.240 | like we ferment wine, we put sugar in and it started to make insulin. And that's how

00:11:59.480 | we make insulin around the world today is through that recombinant process. Right? Yeah,

00:12:04.440 | that's right. Still. And that was the first DNA based product, uh, made in, it solved

00:12:08.400 | the problem because we were actually, we had, we had per the obesity discussion, rising

00:12:13.320 | type two diabetes rates. It used to be type one diabetes, which is the childhood form.

00:12:18.120 | That's really an autoimmune disease, um, was most of the diabetes that needed insulin.

00:12:22.680 | But as this, uh, you know, abundancy grew and people got heavier, we saw earlier and

00:12:27.400 | earlier onset type two diabetes, which is the adult form. And we, we were worried we're

00:12:31.920 | going to run out of animals to slaughtered animal pancreases to refine. So it wasn't

00:12:37.320 | just a cool science thing. It was actually solving a pretty big public health problem,

00:12:40.640 | which was the risk of scarcity of insulin. Yeah. Yeah. And so look, I mean, biotech to

00:12:46.680 | the, to the rescue and we'll talk more about biologic drugs and all the other things that

00:12:52.600 | that have been addressed with recombinant systems, uh, meaning we put DNA and microbes

00:12:57.640 | and get those microbes to make a protein for us. And obviously there's been a lot of advancements

00:13:02.240 | in that space. It's probably worth, you know, hundreds of billions of dollars today. But,

00:13:06.400 | um, let's, let's fast forward to what happened after insulin. It sounds like in the history

00:13:12.320 | of, of research into diabetes and understanding some of these underlying mechanisms, uh, there

00:13:18.640 | was this discovery of GLP one at one point and let me try and explain it and you tell

00:13:24.160 | me if I get it right, but okay. GLP one, it sounds like is a protein that is expressed

00:13:31.920 | by L cells. These are little cells in the small intestine of a human. So when we eat

00:13:36.880 | food, those cells recognize that there's food in the intestines and they pump out a protein

00:13:44.560 | called GLP one. And that protein goes into the bloodstream and flows all over our body

00:13:51.040 | and turns on and off different parts of different cells telling them, Hey, there's food in the,

00:13:57.600 | in the intestines. So tells your brain, don't be hungry. But it also has other effects like

00:14:03.220 | secreting insulin, getting cells to make insulin. And as a result, GLP one is what's called

00:14:09.440 | a hormone. It's a regulator of all these different cells to do things when our intestines are

00:14:14.100 | full of food. Is that an accurate way of kind of describing what a GLP, what the GLP one

00:14:19.060 | protein is? Yeah, that was perfect. I would just step back one step though and say there's

00:14:23.400 | a broad, there's like a super family of these things. And this is going to come up later

00:14:26.760 | in the, when you're talking about the drugs, which we call incretins. And this was derived

00:14:31.140 | from a, even earlier on your chart here in the seventies, they observed that if you give

00:14:36.760 | someone nutrients intravenously, meaning it bypasses the GI system, that you have a higher

00:14:42.320 | spike in glucose than if you give it via the GI tract. So that's a curiosity, right? Which

00:14:49.600 | is why is that the GI tract was doing something and they call that the Incretin effect. And

00:14:54.120 | later we found out that there's a whole family, a super family really of these hormones signaling

00:14:59.920 | tools that are telling your body when you're fed to do different things. That makes a lot

00:15:04.640 | of sense because to survive as humans, feeding is like one of the top three essential processes

00:15:09.800 | next to breathing and other things. And so there's a lot of redundancy, but also different

00:15:15.400 | hormones for different chores. And GLP-1 was the first one that was made into a drug.

00:15:20.320 | And so in 1987, it was discovered that GLP-1 actually stimulates insulin production, insulin

00:15:26.200 | secretion, and then it was isolated. And ultimately, I mean, maybe you can tell us the history.

00:15:34.560 | I think there was a story about Nova Nordisk and Nova having some role in some of the early

00:15:40.120 | work with GLP-1 versus Lilly and tell us a little bit about the history and like what

00:15:45.240 | took so long for GLP-1s to go from, "Hey, it stimulates insulin secretion in 1987,"

00:15:52.400 | to kind of getting these first drugs on market for GLP-1s?

00:15:55.760 | Yeah, it's a great question. Both companies played around with this mechanism right after

00:15:59.560 | that paper was published in '87. And as I've said, back to the insulin story, it's not

00:16:03.680 | really an accident because we were two companies very focused on making peptides and diabetes.

00:16:09.520 | So this was a good thing to chase. But GLP-1 in its native form is not usable as a drug.

00:16:14.800 | Peptides are a small molecule, a small protein, right?

00:16:18.000 | Smaller protein, yeah. Less amino acids in a chain, which is what we call GLP-1 really.

00:16:22.560 | It's smaller than a protein. It's a hormone, but also called a peptide. But when you give

00:16:28.120 | it in its native form as a medicine, it has a half-life of like minutes. So you'd have

00:16:33.240 | to have continuous infusion in your life to use GLP-1s in the human form as it was designed.

00:16:39.360 | And of course, we can make it ourselves inside our bodies, but if you give it exogenously

00:16:45.360 | or from outside, you need a drug that lasts longer than a few minutes.

00:16:48.920 | So both companies set to work on that problem. It was actually Lilly that launched the first

00:16:53.760 | GLP-1 drug called Exendetide, which was a strange story. Another sidebar of a company

00:16:59.720 | discovered that in the saliva of a Gila monster, so this is the lizard that lives in the desert.

00:17:09.200 | In their saliva is basically a mimic of the human GLP-1. It's close but not identical.

00:17:16.120 | The amino acid change that it had made for its purposes in saliva actually prolonged

00:17:23.120 | its action in man to be more like six or seven hours. So this made for a twice-a-day injection

00:17:30.560 | and it allowed us to lower blood sugar in people with diabetes and it was super successful.

00:17:36.040 | It also, we noticed as happens in drug development, that you lost a little bit of weight with

00:17:41.360 | this. And we know in type 2 diabetes, that was good. In the background, Nova was working

00:17:45.000 | on their own once-a-day version and they engineered it versus found it in nature. Then Lilly made

00:17:51.520 | a once-a-week form called Duliglutide, which is now marketed as Trulicity. And then Nova

00:17:56.480 | made a weekly one, which is called Ozempic, which we now all know the name of now. And

00:18:00.880 | actually, not to nerd out too much on drug kinetics, but by going from daily to weekly,

00:18:08.360 | we were able to dose higher. And this is one of these situations where the glucose effect

00:18:12.840 | occurs at a lower dose than the weight loss effect. And we couldn't do that with a daily

00:18:18.520 | or twice-a-day drug because the side effects of these drugs, which are nausea and diarrhea,

00:18:22.840 | they're unpleasant, are kind of what we call a peak to trough effect. So you experience

00:18:27.800 | them when there's a big change in the drug in your body. But when it's steady state,

00:18:32.360 | we really reduce those symptoms. So it was really Nova's insight that we could push up

00:18:37.280 | the dose of semaglutide that allowed the obesity kind of threshold to be pushed. And then of

00:18:42.560 | course, we followed that with our latest one, Terzepatide, which is known as Monjaro. That's

00:18:47.440 | actually two hormones together. Yeah.

00:18:49.320 | - Well, so let me just take a step back just for folks that are listening to really understand

00:18:54.520 | this. So all proteins are made from a chain, like a beaded necklace of amino acids being

00:19:01.240 | stuck together. And when they're put together, that chain kind of collapses into a molecule,

00:19:07.240 | a structure, a protein structure. And that protein has some function because it's got

00:19:11.640 | shapes and curves on it, and it can do things in the body, it can bind to things, and it

00:19:15.880 | can do activities with different cells. But you don't necessarily need to use that exact

00:19:20.200 | chain of amino acids to get part of that protein to bind somewhere else in the body. You can

00:19:26.520 | use things that look like that protein. And that's really the effort in all of these what

00:19:31.960 | are called GLP-1 agonists, which are different than GLP-1 itself. They're different molecules,

00:19:38.560 | they're different proteins, but they can bind and have the same sort of activity. So there's

00:19:43.560 | this discovery process, this research process, as I understand it, to develop and identify

00:19:50.400 | new proteins that can have a similar, or perhaps even a more beneficial effect than GLP-1s

00:19:57.400 | in the body. Is that kind of fair?

00:19:59.160 | - Yeah, that's right. And I think this story itself is going from like finding the native

00:20:04.520 | human hormone, and then we found this accidentally, this one in nature that was what we call analog

00:20:10.360 | to it. So it had a similar function, but with a different kinetics, different absorption

00:20:15.360 | rate. And then Novo actually engineered that in lyriglutide. So they designed that in,

00:20:21.160 | and ever since then, we've been engineering in different changes in those amino acids,

00:20:25.560 | those beads, to drive different types of function. The latest one being this sort of dual acting

00:20:31.240 | one we have now, which like both ends, think of a chain with both ends with the active

00:20:35.640 | warhead versus just one end.

00:20:37.560 | - Right. So over time, in 1986, we kind of realized, hey, GLP-1s stimulate insulin secretion.

00:20:44.600 | So this is super interesting, and all this research begins. But since then, there have

00:20:48.680 | been a lot of studies on how GLP-1s maybe are regulating and affecting other organs

00:20:55.840 | in the human body. And I've got this chart up here that shows the effect of GLP-1 and

00:21:03.560 | GLP-1 analogs on the brain, on the heart, on the pancreas, on the liver. There are all

00:21:08.960 | these kind of interesting follow-on effects. The human body is so difficult to kind of

00:21:13.120 | map everything, but there's some intricate relationship and cross-regulatory process

00:21:17.480 | that happens between all of these different systems of the human body. So maybe you can

00:21:21.360 | talk about the evolution in our understanding on how GLP-1s and GLP-1 analogs maybe are

00:21:28.440 | affecting other organs in the body, not just turning off hunger and not just making more

00:21:33.800 | insulin.

00:21:34.800 | - Yeah. So of course, it's doing those two things. But as you're pointing out, a hormone

00:21:39.920 | is basically a messenger, right? So as you said earlier, it's telling your body you're

00:21:44.200 | fed. And with that, because nutrient absorption is like a survival instinct, and we're pre-selected

00:21:51.040 | for that, we're good at then processing that signal and acting differently. So that includes,

00:21:56.640 | you see like heart rate going up and lipid levels dropping in your cardiovascular system.

00:22:02.920 | And that's because you're responding to that food, the new nutrients entered into your

00:22:07.560 | body. Liver is a key part of metabolism, so there's tons of cross-signaling into the liver.

00:22:14.880 | And the pancreas is the source of insulin amongst other metabolic regulatory hormones.

00:22:19.040 | So what we don't even fully understand yet though, David, which is interesting, is that

00:22:24.720 | there are primary effects of GLP-1, certainly we can reproduce like in a test tube or a

00:22:29.920 | cell system, but then there's a whole myriad of other probably secondary effects because

00:22:35.360 | there might be intermediate signals we don't even know about yet in this whole metabolic

00:22:39.840 | process. So some of the ones listed here, I don't think have been proven as direct effects.

00:22:44.760 | Many of the brain ones, for instance, but clearly happen when you overstimulate GLP-1

00:22:50.200 | or give it exogenously as a medicine. And mostly in our nutrient-rich environment we

00:22:55.960 | covered earlier, these tend to be good things because you're tamping down hunger and you're

00:23:01.480 | improving absorption of the nutrients you already have.

00:23:05.160 | Yeah. So now the topic du jour is, "Hey, we could use GLP-1s not just for the indication

00:23:10.600 | of obesity and diabetes, but perhaps for other health indications and maybe going after other

00:23:16.960 | issues that people are having problems with."

00:23:20.280 | Yeah. I think there's two big stories. One is that, the other is that it turns out GLP-1

00:23:25.440 | isn't the only hormone that matters. And you're going to, I mean, we already have trizepatide,

00:23:29.840 | which is a whole nother hormone called GIP, glucagon insulinotropic peptide, which is

00:23:35.280 | a complicated name, but it has more of a bias toward fat release and basically allowing

00:23:41.280 | your fat cells to burn energy earlier in the starvation cycle. So as you're hungry, kind

00:23:47.000 | of unleashing fat energy versus just squeezing it out of our muscles, which is what your

00:23:53.380 | body does naturally as kind of a survival instinct. And then we've combined that into

00:23:58.080 | trizepatide.

00:23:59.080 | Next up is there's amylin-based drugs, that's another gut hormone, and glucagon, another

00:24:03.800 | one. So we've got triple-acting and all kinds of different ones coming. And that's a big

00:24:10.120 | part of the innovation story. I think we'll figure out through time which ones are best

00:24:14.160 | for what. Maintenance is a big issue in this class, inducing more rapid weight loss in

00:24:19.440 | people who are super obese. You know, if you have a BMI of 50 and you take trizepatide,

00:24:24.040 | our drug, and you lose on average 23% of your body weight, you're still obese, right? So

00:24:29.600 | we need more potency for those people. But there's many people who have a BMI of 31 and

00:24:34.200 | heart risk. They can get their BMI to normal on trizepatide or semaglutide, but how do

00:24:39.320 | they keep it there more easily versus a weekly injection? So that's another problem being

00:24:43.560 | solved.

00:24:44.560 | Right.

00:24:45.560 | The second thing, which you're touching on, is all the indications to go after. And as

00:24:50.120 | I mentioned earlier, there's more than 200 diseases that are tagged to obesity. Do they

00:24:55.320 | all cause, are they all caused by obesity? We don't know that yet. They're correlated.

00:25:00.400 | But so far, in our studies, this category of medicine is undefeated. We've never had

00:25:05.680 | an unsuccessful study in measuring an outcome in a chronic disease. And that's probably

00:25:10.680 | because we stack the ones that were most possible first or most confident in. But we're working

00:25:15.520 | down that list. Currently, literally, it's 105 studies going with trizepatide in these

00:25:20.960 | other diseases.

00:25:21.960 | Wow.

00:25:22.960 | So this is a massive, massive undertaking. You know, a clinical trial like that takes

00:25:27.520 | $100 or $200 million each. So you can do the math. It's a huge bet that we can convert

00:25:33.840 | weight loss into sustained health benefit in chronic disease.

00:25:36.880 | Yeah. So that's, I mean, I'm doing the math. That's $10 to $20 billion you're spending

00:25:41.200 | on clinical trials for, and I understand sleep apnea, maybe Alzheimer's, chronic kidney disease.

00:25:48.460 | Sounds like lots of different indications where you go after a patient population, you

00:25:53.320 | try perhaps one of these combo therapies, these new combo therapies that you have.

00:25:57.920 | Yeah. Trizepatide. Yeah. Manjaro.

00:26:00.000 | Yeah. Right. And then you see what the results are and if it works, then a doctor can prescribe

00:26:06.680 | it, right? Yeah.

00:26:07.680 | Yeah, exactly. So there's one we just read out, which we'll end up submitting, which

00:26:10.520 | is there's a lot of people, and we all may know them in our life, who say, "Oh, I was

00:26:14.280 | told I have pre-diabetes." What is that? That's, you know, otherwise healthy middle-aged adults

00:26:19.600 | who are overweight, right? And what happens, diabetes, like a lot of diseases, it's not

00:26:24.720 | a binary function, it's a continuous function. You begin to have resistance to your own insulin

00:26:31.120 | because of the stress being put on your fat cells, essentially, from overeating. And of

00:26:36.840 | course, reducing obesity might help that, and that's been tried without drugs, with

00:26:41.200 | diet and exercise, and it works. So we replicated those results, and we just read that study

00:26:46.640 | out with Manjaro, which showed that three years on our drug, 94% fewer new diagnosis

00:26:52.200 | of outright diabetes. So that's a huge national health problem, and if we can treat diabetes

00:26:57.880 | or obesity early in the life, we could potentially reduce diabetes downstream. So there's many

00:27:04.400 | examples of these, but we're going for dozens and dozens of these kinds of use cases for

00:27:08.960 | the technology.

00:27:10.120 | So when that gets approved, when you go through your clinical trial, you get a positive indication

00:27:14.020 | on the readout, a doctor can then prescribe that particular drug for that condition, and

00:27:23.220 | then what, insurance covers it? I mean, just help us understand kind of how payment happens

00:27:27.500 | in this, and ultimately, and we'll talk a little bit about pricing in a second.

00:27:33.180 | Yeah. So now we move from clinical experiment and science to the messy part of healthcare.

00:27:40.560 | So in America, I think we have a strong bias to reimburse things that are kind of obvious,

00:27:49.660 | and when things are new, it's harder. What we see today with whether it be Lilly's products

00:27:56.220 | in this category or Novo's is really broad acceptance by insurance and healthcare practitioners

00:28:03.140 | in treating outright diseases like diabetes, type two diabetes, and probably like these

00:28:08.380 | cardiovascular conditions we're studying. I think they'll be adopted quickly and reimbursed

00:28:12.540 | quickly, but that's when you already have the disease. Of course, the real promise here

00:28:16.260 | is to prevent those diseases, but in almost every case in this country, we don't really

00:28:21.220 | pay for prevention, right? So people who are obese and don't have those conditions, if

00:28:26.220 | you're, say, on Medicare, currently the rule of the federal government is they won't pay

00:28:30.460 | for these medications. You have to get diabetes before you can get the drug, which sounds

00:28:36.420 | pretty stupid, and I think it is, but the evidence needs to build. Our job is to invest

00:28:42.400 | in that evidence base I just spoke about so that we can show time and time again that

00:28:47.420 | all these chronic illnesses can be abated, slowed, or even eliminated, and in some cases

00:28:52.480 | even reversed if we can get people to lose a dramatic amount of weight safely, which

00:28:57.780 | is what these drugs do. That's in the process of sort of getting that idea adopted.

00:29:04.080 | Why is that controversial? Because if I'm an actuary underwriting the long-term cost

00:29:10.360 | of a patient or an individual in a program, an insurance program, I'm going to look at

00:29:15.160 | that patient or that person, I'm going to say, "Hey, if they stay overweight, there's

00:29:18.800 | going to be four diseases they're going to get over the next 30 years, and I'm going

00:29:21.960 | to have to pay for that, but if we can get them to lose the weight, I'm going to save

00:29:25.520 | all this money. Shouldn't I have a financial incentive, an economic incentive to change

00:29:31.760 | that?" What's the controversy there?

00:29:34.180 | Yeah, I think that's in process. I was actually in a big investor of mine's office a few weeks

00:29:40.800 | back and they said, "Oh, the last company in here was a reinsurance company and they're

00:29:44.640 | changing their actuarial tables for people who are on these drugs," which I was like,

00:29:51.080 | "Wow, you know you're making a difference when that's happening," but it hasn't trickled

00:29:54.520 | through the system. I think there's a lot of still stigma associated with obesity, frankly,

00:29:59.160 | like social stigma, and patients report to us, "A lot of doctors won't even use these

00:30:03.680 | drugs because they think it's a product of laziness." Why people become obese, we don't

00:30:11.400 | really understand completely yet why one person would and one person wouldn't. What we do

00:30:15.560 | know is once you become overweight or obese, losing that weight as an adult is really difficult.

00:30:22.280 | Some studies show less than 5% of people can reach a healthy body weight on diet and exercise

00:30:27.640 | once they're obese. So that's a very ineffective standard of care.

00:30:31.920 | So today, if I want to get trizepatide for weight loss, which I think you guys call ZepBound,

00:30:38.560 | right? Yeah. So can I go to my health insurance company and have them pay for it or am I paying

00:30:45.120 | out of pocket?

00:30:46.880 | Depends on who you work for, Dave. So right now, about 50% of the employer-sponsored insurance

00:30:53.920 | plans cover it. Lilly covers it. We cover the Novo ones, too, because we think obesity

00:30:59.840 | is a disease. Those skew toward companies with money, basically. I think health benefits

00:31:07.160 | are part of just attracting and retaining employees. So smaller businesses, businesses

00:31:13.480 | with lower margins like retailers, et cetera, really don't cover these meds yet.

00:31:18.280 | I think in five years, we'll look back and we'll say, "That was crazy." Once the evidence

00:31:22.680 | base is built up and there's more adoption and less stigma. But right now, that's the

00:31:28.000 | current state. So a lot of people do pay out of pocket and we've got some work to do to

00:31:32.680 | help them. The rule of the land in the U.S. is if you're in the federal benefit, you can't

00:31:40.440 | even accept savings cards from the manufacturer. But for those that have a commercial benefit,

00:31:47.480 | like if you work at a large employer like a retailer that doesn't cover it, we can actually

00:31:52.560 | buy down your out-of-pocket costs, and we do that.

00:31:55.360 | Did I hear correctly that you guys are doing a direct-to-consumer model as well? Is that

00:31:59.920 | right?

00:32:00.920 | Yeah, yeah. So to get at this very problem of both stigma and cost, back in January,

00:32:08.080 | we launched what we call Lilly Direct. So people can go to their doctor or use our telehealth

00:32:12.760 | platform. We have a bunch of partners who will see you as a physician and they're obesity

00:32:17.760 | specialists and they'll send the prescription to Lilly and we'll fulfill it directly via

00:32:22.520 | mail, DTC. This solves two problems. One is people can go to a place where they're not

00:32:26.840 | stigmatized for being overweight, and two, they always get it at the same price and it's

00:32:30.640 | the lowest price available to them. There's a lot of confusion in retail pharmacy about

00:32:35.520 | what people should pay, and there's some pharmacies marking these drugs up because of the supply

00:32:39.840 | issues.

00:32:40.840 | Is it $1,000 a month? Is that right, for curzapatam, curzapatam?

00:32:44.240 | List price. We have a savings card program that's about $600 per month. And then we also

00:32:52.000 | just launched in the lowest two doses, a vial form, which is a little easier for us to make.

00:32:58.000 | We can get into the supply issues here, maybe in this discussion too. And that's $399, basically,

00:33:05.600 | and $550 for those two doses. So almost 60% off.

00:33:10.000 | Still a lot. So what about the criticism and the research that has shown that if you go

00:33:15.160 | off of one of these drugs, the weight comes back? And as a result, we're kind of going

00:33:20.260 | from a chronically ill population to a chronically drug-dependent population. How do we address

00:33:27.080 | that concern? And what is the change that's needed over time for that not to be the case?

00:33:33.640 | Isn't there an economic incentive for Lilly to always be hoping that more people need

00:33:38.560 | the drug more frequently because that's how you guys make money? And how do we kind of

00:33:41.720 | talk about that change that's coming and whether you need to be on it forever?

00:33:46.800 | Yeah, yeah. Well, I mean, our mission is not what you said. Our mission is to solve human

00:33:52.960 | health problems. And ideally, that would be here where people could have a course of therapy

00:33:57.020 | and then not have to take medicine. The physiology of GOP1 and GIP right now, that's not how

00:34:04.880 | it works. If you don't have them on board, your body restores itself to its previous

00:34:10.480 | position. There is a theory that if you sustain low body weight for long enough, you can kind

00:34:17.520 | of reset your thermostat in a way. And your body will stop trying to defend what it perceives

00:34:23.680 | as a starvation state, which is you're not carrying as much weight as you normally would.

00:34:29.040 | But we haven't had these drugs around long enough to prove that out. We also know that

00:34:33.440 | some people lose weight and then do change everything about their life to sustain that

00:34:39.440 | body weight and go off successfully. That's not uncommon, but it's not the most probable

00:34:45.400 | outcome for most. So for now, we need to take the drugs long term. But we are working on

00:34:50.320 | drugs in our pipeline that do seek to reset the metabolic switch. And using like the PYY

00:34:57.880 | as a mechanism, it's a brain mechanism that's thought that maybe you could have a treatment

00:35:01.960 | course, lose weight, and then reset your thermostat, if you will, of what your body's supposed

00:35:09.640 | to weigh. We're working on this problem.

00:35:12.960 | Because my understanding is like, your base metabolism drops, so the number of calories

00:35:17.480 | per day that your body is burning to live goes down. So if you stop taking the drug,

00:35:23.320 | and the hunger switch gets slightly turned back on, even if you eat a normally healthy

00:35:27.780 | number of calories per day, 1,500, 2,000, 2,500, you start to gain weight again, because

00:35:32.480 | your metabolism has declined. But what I've heard from a lot of friends, I don't want

00:35:37.720 | to call everyone a biohacker, but it definitely seems to be in kind of the people that like

00:35:41.680 | to mess around and try new things crowd is to kind of go on and off. So people are trying

00:35:47.360 | lower doses, they're trying the drug for a period of time, they do it once a month, once

00:35:51.440 | a week, and then they kind of maintain a healthy weight without needing to be kind of on the

00:35:56.480 | typical regular cadence of the drug. Is that something you guys are seeing more frequently

00:36:00.440 | that the steady state do you think over time?

00:36:04.200 | We definitely see that in in in the clinic and in in in practice by people. And you know,

00:36:10.280 | back to the cost, of course, people want to spend less money. And if that works for them,

00:36:14.440 | you know, there's certainly in its under doctor supervision, we have no problem with that

00:36:18.280 | we need to do more studies in the space. You know what you have one drug on here, or not

00:36:22.520 | on here, which is coming in, it may be the most important drug because of the scale ability,

00:36:29.040 | which is it's called or for glupon. It's a, it's a chemical drug. So here, not an amino

00:36:33.200 | acid, but a organic chemistry that mimics that mimics the activating part of the peptide.

00:36:41.280 | And so it's a, it's an oral glp one, in our hands, it's about as good as as high dose

00:36:47.400 | as semaglutide. And we're doing phase three right now. So that will start to read out

00:36:53.080 | next year. The benefit of this is one, it's oral, so it's a little easier to take, you

00:36:57.760 | don't have to refrigerate, you don't have to worry about the injection. You know, some

00:37:01.280 | people don't like to inject. But the real thing is this is a this is a product for the

00:37:05.520 | masses because the systems we make these, these drugs in now are complicated to scale.

00:37:11.200 | And that's why there's been shortages, you know, we have approvals in more than 40 countries

00:37:15.040 | we haven't even launched in. That's not a normal thing for for a company. You can't

00:37:20.160 | make enough product. We can't make enough, right? And because we want to satisfy the

00:37:24.680 | markets we've already launched in. So, or further prawn, which is this phase three project

00:37:28.640 | is super key in that we could both supply, you know, people who could get away with just

00:37:35.160 | the one hormone drug glp one. And we're studying it as a maintenance option as well, which

00:37:41.600 | makes kind of sense to go through the injection, lose more weight, and then keep it off with

00:37:45.800 | something a little easier to take.

00:37:48.800 | What's your sense on how this is going to affect the food industry? So a lot of analysts

00:37:52.920 | have talked about, hey, food companies are going to get damaged by this. I'm going to,

00:37:56.400 | I'm an investor in a company called super gut, and we have high resistance starch fiber

00:38:00.920 | product that we're now selling and having a lot of success selling as a compliment to

00:38:04.840 | glp one. So you're on a glp one, or GIP drug, you take this product, and it kind of can

00:38:10.600 | help you during that period of time. And it's a new category that seems to be growing a

00:38:14.140 | lot of companies are launching around this similar concept. Now, do you think this is

00:38:18.240 | changing the food industry in the United States and in the West and ultimately around the

00:38:22.440 | world? And I don't know if you talk, do you talk to CEOs of food companies? Do they call

00:38:27.000 | you and like, what are you doing to our business?

00:38:29.520 | Yeah, I've got I've got a couple on my board, even. But so, you know, I, I think there are

00:38:36.320 | certainly displacing effects of this, this category. And I think it's great news overall,

00:38:42.040 | first is the health things we talked about. So people need, you know, less diabetes products,

00:38:47.360 | for sure, they'll need less other medicines. We're doing even doing study in like OA pain

00:38:52.200 | in the knee, because a lot of knee replacements are in obese people. And they get painful

00:38:58.360 | early in life, knee pain. And we hope to show you can prolong that. So that's a sort of

00:39:04.120 | a knock on effect. And then of course, food to be the next one you think about, I think

00:39:08.160 | you might know about the study. But last year, Walmart did this sort of what's in the cart

00:39:11.360 | study? Yeah, for people on ozempic or Manjaro, and it showed, they were buying about a third

00:39:15.960 | less calories. So that's a lot. But that's consistent with how the drugs work. But interesting

00:39:20.920 | also, fewer salty snack foods. Yes, they're buying more fruits and vegetables, shopping

00:39:26.280 | at the edge of the store versus the center. So that's happening, probably because we only

00:39:31.200 | have 10 or 11 million Americans on these drugs. We're not happening in an economic scale that's

00:39:36.480 | really changing food companies, bottom lines. But you know, enterprising companies, like

00:39:42.480 | the one you mentioned, you know, protein shake companies, there's a lot of things happening.

00:39:47.080 | I went to a quick serve restaurant. It was in California a few weeks back, and they actually

00:39:51.800 | had a like a GLP one side menu. That's what it's called. Exactly. If you're on these drugs,

00:39:58.240 | use these. So you know, it is, it's having a big social footprint.

00:40:01.800 | Yeah. Well, I mean, here's your stock price. So Eli Lilly's stock, I think may outperform.

00:40:09.880 | I don't know, it's probably pretty close. With Nvidia, it's an extraordinary stratospheric

00:40:15.320 | rise. And then just to look at how the business operates today. So you have this portfolio

00:40:20.360 | of products that you're developing, but in the last quarter, you did 11 billion in revenue

00:40:28.680 | and generated 3 billion net profit. I think it's 3.7 of operating profit. One of the key

00:40:36.320 | criticisms, and this is one of the things I wanted to get into was, how do you address

00:40:41.280 | and how do you deal with the political heat associated with your success? So you guys

00:40:47.800 | are operating a business that is having an extraordinary impact on people's lives. But

00:40:52.560 | you're also making an incredible amount of money. And in this environment today, that

00:40:56.760 | may be more challenging to deal with than it ever has been certain senators that we

00:41:03.080 | shall not name would look at this and say, hey, you're making an 81% gross margin selling

00:41:07.640 | these products to sick people. How can you justify that? So maybe talk a little bit about

00:41:12.080 | how you deal with the political environment in the US around the world, as you are successful

00:41:19.000 | and are projected to triple the business over the next couple of years here?

00:41:22.760 | Yeah, well, it's obviously a top of list issue for me every day. Maybe a couple things there,

00:41:27.720 | Dave. So I mean, first of all, this is a very long investment cycle business. As we talked

00:41:33.200 | about earlier, like we launched the first GLP-1 drug in the world in 2005. And since

00:41:37.640 | that time, we've been working for, you know, this kind of performance, because we took

00:41:42.240 | risk against that idea, right, and refined it and work that problem. And that, you know,

00:41:48.160 | I think that timescale is hard for people to think about. But also, you know, the dollar

00:41:52.080 | scale of the R&D, this year, we'll spend over $11 billion on R&D, which is a meaningful,

00:41:59.740 | it's like a nation state scale, like it's more than the country of Germany. So we're

00:42:05.160 | pushing forward new medicines, based on the revenue of today's medicines. And that virtuous

00:42:10.760 | cycle is sometimes just hard to articulate. But when you get it right, you can have a

00:42:14.880 | big societal impact. So that's the first thing. Secondly, you know, I think the pressure is

00:42:18.740 | a privilege in a way, it means we made something useful enough that a lot of people need it

00:42:23.320 | and want it. And now our job is to work with, you know, the healthcare system to sustainably

00:42:28.280 | adopt it. And we do see that as our responsibility to work with, you know, politicians, if that's

00:42:34.480 | who we work with, or health plans or employers to find a way to get this medicine, which

00:42:40.840 | we think is amazing, there's appetite to so many people, and do it in a way that's sustainable.

00:42:46.920 | Now, hopefully, we've created enough value that certainly the people who are getting

00:42:51.600 | the drug are benefiting, that the health plans are actually lowering costs in the long term,

00:42:55.920 | even though there may be an increase in the short term, and that we make a reasonable

00:42:59.400 | profit for our shareholders, and sustain R&D for the future. So I think that's what's happening

00:43:04.840 | here. I think this week, actually, Novo Nordisk, our competitor, was called before Congress

00:43:09.640 | to talk about this issue. There's a lot of other dysfunctions in the US system that we

00:43:14.840 | could talk about in terms of how inefficient healthcare is. I mean, here's a medicine that

00:43:19.320 | could augment 100, 200 adult diseases in a meaningful way. It's expensive, yes, probably

00:43:26.840 | net pricing for us, you know, is going to be something like $3,000, $4,000 a year in

00:43:32.640 | the steady state per person. But I think we'll create more value than that. We'll save the

00:43:37.360 | system more money than that per year per user. That's what we should be aiming for.

00:43:41.800 | I think what's interesting about it is the biologic products, the molecules are advancing,

00:43:49.280 | and they're advancing in a pretty kind of steady way. The issue, I think, with insulin,

00:43:56.040 | and there's obviously been a lot of legislation and regulatory and political scrutiny around

00:44:02.320 | insulin pricing, is it's the same molecule, and the price has just gone up, right? This

00:44:08.640 | is the old kind of pharmaceutical companies are bad story is they've got a product that

00:44:13.560 | they make for 10 cents, and then they sell it for 10 bucks, then someone says, let's

00:44:16.680 | charge 100. They're like, okay, let's charge 100. And so it's classified as price gouging.

00:44:22.000 | In this particular market, you guys are certainly making a healthy market, but the products

00:44:25.440 | are also advancing. There's new combination therapies coming out and the oral therapy.

00:44:30.840 | So there's a lot of investment in improving the overall landscape of what's possible.

00:44:34.840 | Yeah, let me address that because I took over in early 17, as you mentioned, and like that,

00:44:40.120 | the insulin pricing scandal, which Novo and Lilly were also center of, right, was hot

00:44:46.280 | and heavy. And so I took a lot of personal lessons from that. But, you know, every day

00:44:52.280 | since that we had reduced the price of insulin, even though, you know, we have this weird

00:44:57.040 | system in the U S where a lot of our two thirds of actually our gross price goes to PBMs and

00:45:04.520 | insurance companies. So of the gross price that's often quoted, the net for us is about

00:45:09.280 | a third of that. And insulin, it was even more, where does that money go? Well, it's

00:45:14.560 | used often to cross subsidize other things in healthcare. So we have to unwind that system

00:45:19.840 | if we really want to value innovation. And then the other thing, which is in this chart

00:45:23.360 | is, and I mentioned is some of that revenue from insulin we use to invest in the next

00:45:27.960 | generation of therapy, whether it be insulins, which we're still investing in new insulins

00:45:32.240 | or GLP one drugs, which of course we did. And that is hard to articulate in the moment,

00:45:37.720 | but it actually produces good economic and social value later. Here though, we, we took

00:45:43.040 | those lessons. We launched at a 20% discount to Novo's product, even though we have better

00:45:47.240 | efficacy data and we've only cut the price since then. And I think, um, we see a kind

00:45:52.720 | of a generational opportunity for the company to both be, have the best product. So efficacy

00:45:58.160 | and quality, but also mass production. And that requires a pricing strategy consistent

00:46:03.760 | with that. Well, you've also invested a lot in manufacturing in the United States, right?

00:46:07.920 | Didn't you just do like a $5 billion investment in Indiana to build new facilities?

00:46:11.720 | Yeah, we're building the largest API site in the history of the United States in Indiana.

00:46:16.080 | Yeah. So that's, I mean, that's got to feel good to the politicians too, that this isn't

00:46:19.960 | like, uh, optimizing for costs, but there's also infrastructure being built. So I've got

00:46:25.240 | a lot of numbers on forecast breakdown of product. I think like what's interesting is

00:46:29.680 | just, I don't know if these numbers seem right, but the analysts are projecting that your

00:46:33.760 | 20, 26 operating income numbers could grow to $32 billion. I mean, it's just such an

00:46:40.280 | incredible rise. And that obviously is the pipeline of indications, the pipeline of combo

00:46:47.280 | therapies, new modalities. And that's up from 7 billion last year, I believe, right? So

00:46:53.040 | a Forex in three years at the scale of operating income, it's really incredible.

00:46:57.600 | I hope they're right.

00:46:59.600 | Yeah. I mean, good for you. I heard that there was like internal forecasts that I won't reveal

00:47:07.960 | my source, uh, and all the forecasts got kind of blown out. Like the forecasts were too

00:47:13.600 | conservative in terms of where you guys are at with terzapatide. So, um, I wouldn't be

00:47:18.800 | surprised if you did. So if we look, look at the breakdown of Lily's portfolio of revenue

00:47:24.560 | today, uh, it's very obvious that what we've just been talking about, the GLP one GIP drugs

00:47:32.760 | are the vast majority of the portfolio and expected to be the vast contributor of growth

00:47:37.160 | in the years ahead. But maybe you can tell me a little bit, tell us a little bit about

00:47:40.960 | how you think about the portfolio of other opportunities to address disease and how you're

00:47:47.640 | investing there and how, you know, when you've got such a blockbuster like this and you've

00:47:50.800 | got a runaway train and you can't keep up with demand, how do you dedicate resources

00:47:55.360 | to the rest of the portfolio?

00:47:56.360 | And how do you think about that as a CEO, as a leader in getting your team to focus

00:48:00.840 | on other things that are also very. Yeah, I think, I mean, that's the key thing we'd

00:48:06.720 | spend a lot of time with our board on, you know, on the one hand, um, I think there's

00:48:11.320 | a lot of business books you could read that say, well, double down on your winners, right?

00:48:14.440 | And just keep going. But unlike other industries, you know, David, we don't really have a franchise

00:48:19.720 | value at the end of the patent life right there. When, when drugs go off patent, you

00:48:24.560 | have to actually have a better drug that competes with almost free. Yeah. And that's probably

00:48:31.200 | possible one or two times here. We're talking about Monjaro, Tulicity, our last, our GLP

00:48:36.880 | one only in semi-glutized GLP one only we'll go generic. And we think we have enough differentiation

00:48:41.720 | to keep growing through that. But at some point that story runs out, right? And so on

00:48:47.640 | a timescale of decades, you need other lines in the water. Um, in a lot of ways, this is

00:48:52.800 | like an options business. You know, we, we, we have to lay down bets across a variety

00:48:57.120 | of things. They have to be, you know, real unmet medical needs that you can get paid

00:49:02.240 | if you have a solution for, but also, you know, the technology bet, is it going to work

00:49:05.840 | and how to attack that. So my mindset is we have to walk and chew gum at the same time

00:49:11.800 | here. We have to execute like nobody else against this enormous kind of not, not even

00:49:17.640 | generational, maybe longer opportunity to build a company, affect human health and return

00:49:23.640 | capital to shareholders. At the same time, we, Lily's been around 148 years. Um, I think

00:49:28.720 | we have an obligation to our newest employee just joined to have a business by the time

00:49:33.880 | they get to a senior level. And we certainly have a role in the world changing human health.

00:49:39.000 | So we are investing pretty broadly in cancer and immunology, maybe in brain disease is

00:49:44.560 | the most important area we can invest more in. Um, because I think that's actually becoming

00:49:49.320 | more tractable and is about 40% of global suffering is some form of a brain or, or,

00:49:55.520 | um, neuroscience disease. And we have a lot of expertise there. So a little bit of balance

00:50:00.920 | and a lot of focus simultaneously. And we divide our organization so that we have four

00:50:06.800 | business leaders. And one of them is this franchise we were just talking about weight

00:50:10.620 | loss and cardiometabolic health. Three others have other agendas and their job is to compete

00:50:16.060 | and win that way. I'm proud that actually in Q2, Q2, our non-Incretin, our non-terzepatide

00:50:23.600 | business grew 17% on a pretty big base. So that's a healthy business as well. More on

00:50:28.800 | the scale of a regular pharma company, not the supersized thing we've become.

00:50:34.080 | What science are you excited about? I don't know if you're a big science nerd, um, as

00:50:38.040 | much, but you had like, so the Incretin products are, um, you know, uh, it's peptide manufacturing,

00:50:44.760 | but obviously there's, uh, uh, cell therapies. So programming cells to go into the body and

00:50:49.120 | do things. There's gene therapies where we have all sorts of mechanisms for altering

00:50:55.040 | gene expression and making, you know, permanent changes in, in, in human cells. And, um, and

00:51:00.980 | then there's all this interesting stuff in that, that I'm super fascinated by and excited

00:51:05.480 | by and like Yamanaka factors, these factors that can have a profound effect on the epigenome,

00:51:11.120 | uh, which can ultimately change how, how cells behave and radically affect the process of

00:51:16.760 | aging or what we consider to be aging. What else are you excited about? What's exciting

00:51:20.520 | in the portfolio and how do you invest internally versus do M&A versus venture to kind of access

00:51:26.220 | those interesting, you know, areas? Yeah. Well, let me talk about science and I'll get

00:51:30.400 | to the investment strategy, but we've talked about diseases here, but you know, we think

00:51:34.080 | about our, our role is like having a palette of ways to make medicines, which are basically,

00:51:40.240 | you know, new molecular matter against, uh, a set of diseases. We know something about

00:51:45.160 | that sort of, when those things converge, we do well. So what's in the palette, I think

00:51:49.520 | that's been expanding rapidly lately. And I think this whole new field of genetic medicine,

00:51:54.760 | which you talked about, um, like ex vivo gene therapy where you edit cells and they go do

00:51:59.760 | things like Cartes or, uh, gene edits themselves or gene inserts, which are exciting. You know,

00:52:06.760 | we had a medicine where we announced results this year that is focused on inner ear diseases

00:52:15.240 | of deafness, basically congenital deafness disorders that are monogenic. Um, and we,

00:52:19.800 | we've treated patients that have gone from like six, eight years of life, no hearing

00:52:22.880 | at all to now hearing, I mean, this is, it is Lazarus, like when you see it, but the,

00:52:28.640 | you know, I think the thing that excites me is when you can do amazing things at massive

00:52:32.040 | scale. So those two techniques, Carty and gene therapy, it's hard to think of like super

00:52:37.880 | scaled millions of people benefiting one new family of medicines. I'm excited about it.

00:52:43.440 | The so-called S I R N a, this is where we can knock down proteins that are aberrant

00:52:49.740 | or causing problems and do it pretty safely and surgically, um, and do it very infrequently.

00:52:57.040 | So like we have a project in phase three right now that knocks down the production of something

00:53:02.120 | called LP little a, which is a lipoprotein particle. That's probably thought to be about

00:53:07.280 | 25% of the remnant reasons why we still have cardiovascular disease. And there's no medicine

00:53:12.520 | for it today. This is promises to be a once a year dose. And so you take this once a year

00:53:19.140 | and it's catalytic and sales and it works and just keeps knocking down this protein.

00:53:23.720 | So if that translates into outcomes, I think that makes for a very scalable business. We

00:53:28.360 | could treat millions or a billion people with a medicine like that and have a big, big effect.

00:53:34.080 | So we're playing around with that toolbox, um, extensively these days.

00:53:37.920 | So scale has some scale matters, right? And then, well, that's our stress. I think that's

00:53:42.200 | what our Lily's for, right? Is to make things that aren't boutique, but things that are

00:53:46.300 | everywhere. So, you know, how do we do this? I mean, we, we, we have focused maybe more

00:53:52.440 | than anyone else on a lot of small deals that starts with our corporate venture group. So

00:53:57.440 | we have one of the most scaled corporate venture operations and all of corporate America, hundreds

00:54:03.560 | and hundreds of bets that are small in size. Usually we go in with, you know, with GPs

00:54:08.160 | as an LP and invest in small biotechs pre, pre, uh, public.

00:54:13.600 | And there we don't have to be so right. Mostly we're trying to learn and follow science and

00:54:18.160 | have a seat at the board or a seat at the table so that when things start to turn, we

00:54:22.320 | can move early. Um, we do a lot of M and a last year, you're both an LP in venture funds

00:54:29.240 | and you write checks direct. Is that right? Yeah. Both ways. Yeah. Okay. We also have

00:54:34.480 | a interesting project we're growing. I'm quite called catalyze three 60. And here are the

00:54:39.600 | ideas beyond money. What else can we do to help incubate small companies? And so we have

00:54:44.760 | both space, but also a service layer we're offering sometimes in a cost plus way, or

00:54:50.120 | sometimes we're downstream royalties where, you know, we're a big capable company when

00:54:54.520 | you're building a new company, like you've been doing in, in, um, ag, like sometimes

00:54:58.680 | you need something that's a pain in the ass to go build, you have to either buy a consultant

00:55:02.480 | or hire one person and you only need them for a few, few months.

00:55:06.680 | So here we're stepping in and say, well, we'll give you that console. If you need to interpret

00:55:09.520 | a tax results, like you can just call Lily's experts. So we're like a service layer to

00:55:14.400 | cultivate kind of this ecosystem around us. And then we do M and a, we buy companies last

00:55:19.960 | year, about two dozen, which was the most of any pharma company, but actually with some

00:55:24.520 | of the least capital deployed. So we're making, um, I think we spent $3 billion on 24 companies.

00:55:30.680 | So we're making lots of small bets. Right. And I think that is interesting because the

00:55:35.880 | longer we have, uh, residents, you know, sort of, uh, in a partnership or we own something,

00:55:41.160 | we can add more value. It also allows us to trade in front of the de-risking event. When

00:55:47.360 | things get de-risked in our sector, there's a huge inflection in value. And so you're

00:55:52.080 | basically paying the last shareholders, not yourself. Um, we think we can bet better than

00:55:56.920 | the market on what those, the probability of something converting to, to a success is.

00:56:02.840 | And if we're right about that, we'll, we'll be better off buying early.

00:56:06.080 | Yeah. Well, so as a lot is changing at the company and you're, you're at the scale you're

00:56:11.440 | at and growing as fast as you are, how do you think about, and this was an important

00:56:16.440 | one, I wanted to talk about leadership and culture. I've, uh, uh, someone that works

00:56:20.400 | with me at Ohalo, uh, her name's Megan. She worked at, at Lily for years. And so we had

00:56:25.400 | a long chat about this interview a few days ago and she talked to me about how great the

00:56:28.880 | culture is and 10,000 people on campus in Indianapolis. And it feels like a college

00:56:33.360 | campus. There's a track and field, there's a bar on campus, all these sorts of things

00:56:37.160 | that make it a great place to work. And she was really torn by the way and making a choice

00:56:40.760 | to go back to Lily or joining me. So I apologize that we, that we took her. But, um, uh, but,

00:56:46.400 | um, maybe tell me a little bit about how you kind of think about culture, keeping people

00:56:49.680 | aligned, motivated, keep the performance culture strong as you're kind of trying to execute

00:56:55.400 | at this extraordinary scale. Yeah. Exceptional question. I mean, that's of the things I worry

00:57:01.160 | about longterm. This is one of them. How do we keep what's so good about how we operate?

00:57:04.640 | I mean, the background of the company is important. It's an old company, right? And it was family

00:57:09.200 | run for a hundred years. Like it was one of the few exceptions in corporate America where

00:57:14.160 | the third generation didn't totally screw it up. Actually, they made it quite a bit,

00:57:18.720 | quite a bit better. Um, and because of that, I think there's a lot of loyalty and social

00:57:24.720 | cohesion in a company. As you mentioned, like we'd like coming to work and being together.

00:57:29.420 | It's a friendly place, but also scientifically super rigorous. Um, and that's, uh, that's

00:57:34.000 | often not two things that fly well together. So I think it's got a lot of exceptional attributes.

00:57:39.680 | When I started though, I think in my kind of view of like, when you're running a big

00:57:43.000 | ship like this, probably changing the culture is like beyond your, your capability. But

00:57:49.240 | what you can do is like extent, turn up the things that are good and turn down the things

00:57:53.820 | that are less good. And we've been cultivating that. So like one thing that was less good,

00:57:58.080 | but is now really clicking for us is sort of like use our scale or enterprise wide capability

00:58:03.800 | as a, as a benefit, not a, not a detractor. So many companies get big and get bureaucratic

00:58:09.680 | and terrible. Like, I mean, they just can't get out of their own way. Totally. And we

00:58:14.400 | really lean into, okay, it's everyone's job to solve for Lily first. It's everyone's job

00:58:19.520 | to get the patient healthy. Now let's talk about our departments as a derivative of that,

00:58:23.960 | not the main goal. And somehow those things get flipped around in big companies and people

00:58:28.160 | focus on how they look or who's, which department's best. And none of that matters. And we have

00:58:33.400 | to emphasize that. Another thing I've really focused on is speed at scale. And we measure

00:58:38.720 | that rigorously. That's more of an engineering thing. I mean, we really track things very

00:58:43.480 | carefully on speed and we've moved the drug development timeline, which the industry is

00:58:47.780 | about nine years from first human dose to FDA approval. And when I started ours was

00:58:54.180 | about 11 and now we're 6.1. So how did you, how did you, how did you incentivize that?

00:58:59.720 | How did you reward that and create the model for individuals to contribute to that goal?

00:59:04.280 | Yeah. Kind of one big idea. And then a thousand little things. The big idea is like this ratchet

00:59:08.560 | mindset that every time we beat a timeline, that becomes the new norm. And so we like

00:59:15.840 | to just re benchmark internally. And when we were at 11 and it was as at nine, everyone

00:59:20.480 | wants to jump to be, okay, let's be industry average, but that's actually quite hard in

00:59:24.280 | a big company. So we just said, okay, if it, we have a submission document to get in and

00:59:28.680 | it used to be our standard was 120 days from when you had the data to when you send it

00:59:32.600 | to the FDA. We're now doing that routinely inside of two weeks. So we've basically taken

00:59:38.240 | 80% of the time out, but that came in lots of little bites, but overarching everyone

00:59:43.920 | who works in development knows it's about time to patient. That's the, that's the big

00:59:47.680 | idea solve for that. So yeah, that's, you know, those are some of the kind of culture

00:59:53.320 | dynamics we, we deal with. And of course we want to attract new people. We've expanded

00:59:57.160 | dramatically on the coast. Our science operations, like if you go, you know, South San Francisco

01:00:01.800 | is now pretty big campus for us. We just built a huge building in Seaport, Boston that'll

01:00:06.520 | hold 500 genetic scientists. So for some domains, we need to go where the people are, um, and

01:00:13.080 | be a more of a kind of a mothership with satellites versus having everyone here in Indianapolis.

01:00:17.840 | And do you, and I know we got to wrap in a minute, but, and do you worry about AI? There's

01:00:21.440 | a lot of startups with very smart people that have built, uh, LLMs and other models that

01:00:26.080 | are now trying to apply those learnings and develop new systems for discovery of molecules

01:00:31.920 | that will have some particular action and doing it all in silico rather than searching

01:00:37.000 | through the domain space of molecules that we're either synthesizing or we're discovering

01:00:40.440 | in nature. And is that a partnership for you at Lilly? Because you guys can operate at

01:00:45.320 | scale and manufacture and distribute and market, or is that a disruptive force that could really

01:00:50.800 | damage the 20 year out kind of horizon for Lilly's business? How much do you really think

01:00:55.200 | or worry about this? Oh, we spent a lot of time on this. You know, of course we have

01:00:59.800 | our own efforts, um, pretty significant AI efforts internally and a lot of partnerships,

01:01:05.600 | including with, you know, open AI and Microsoft, Amazon, et cetera. Um, all basically all the,

01:01:11.640 | the large scale players, Google isomorphic. So we have to pay a lot of attention to it.

01:01:18.040 | Here's what I noticed so far is there's a lot of money. I think last year, 5 billion

01:01:21.960 | with a B went into new venture backed tech bios, you know, that's what they like to call

01:01:27.040 | themselves. And that money is coming not so much from the traditional bio VC world, but

01:01:33.080 | from the tech world, which is people got a lot more, a lot more to splash around. Right.

01:01:37.520 | That's right. But a lot of those, I think if you look at their, their pitch decks, they're

01:01:41.920 | really saying, Oh, we're going to invent, we're going to run the whole process in silico.

01:01:47.160 | And I think that's really naive actually. Um, and what I think will end up in the medium

01:01:53.680 | term being very valuable is more of the tool builder approach. Like we can take a process

01:01:58.400 | like add me. So that's where you're trying to optimize chemical properties of a drug.

01:02:02.760 | Like we're talking about GOP one. So it's not twice a day, it's once a week. And there,

01:02:07.160 | I think by chunking problems smaller, the machines can really help a lot more. We have

01:02:12.400 | more data on some specific acute use cases, and we can have a tighter loop between the

01:02:18.320 | experiment in the, on the bench and the data process behind the, the model learning, the

01:02:25.120 | idea that you're going to throw on, you know, turn a switch on a computer, and it's going

01:02:28.080 | to think about something and invent, you know, the next Prozac. I don't know. I think we're

01:02:32.400 | a long way from that day, but we'll, we're paying attention to all of it.

01:02:36.720 | Yeah. So wet lab and clinic integration is critical. It's not all going to be in silico.

01:02:40.360 | There's going to be a good chunk of the time. Yeah. It's a copilot model where the machine

01:02:45.560 | can do predictions. Probably now where we see the most value is eliminating bad ideas

01:02:50.360 | that humans don't see, but in hindsight look obvious. So like, cause you can integrate

01:02:54.880 | a lot of multi source data and say the probability of this working based on prior experiments

01:02:59.720 | is like 2%. Yeah. And there's human factors where scientists like their, their last idea

01:03:04.720 | the most, but also we have trouble seeing across all this field domains of data. Machines

01:03:10.240 | are good at that. That that can add value immediately. Awesome. Well, are you glad you

01:03:14.240 | took the job seven and a half years ago or what are you most happy about? And what's

01:03:18.280 | the biggest disappointment? Last, last question here. Do we wrap up? Yeah, of course. I mean,

01:03:24.240 | what an honor to be in a company like this at this moment. We all need to get better

01:03:28.600 | all the time. I mean, I, I find myself disappointed mostly by, but not being prepared, not thinking

01:03:34.560 | in advance of, of things, but you know, it's, um, when you become a kind of a, yeah, that

01:03:41.840 | looks obvious in hindsight, which we all have. It's a complicated business. You know, I should

01:03:45.960 | give myself grace on it, but it happens more often than I would hope. And I, I think that

01:03:50.920 | staying humble about that is like one of the most important things that successful CEOs

01:03:55.120 | can do. I mean, you always have to learn and you always have to learn from your own mistakes.

01:03:59.200 | That's something we talk about a lot here. I, you know, I think it's, it's cool that

01:04:03.480 | we've become more of a cultural icon. That's cool. But it's also a big responsibility because

01:04:09.200 | like you said, with the Lily direct and, you know, being more of a consumer household name,

01:04:14.320 | people expect a lot more of us. And we've got to change from being just like a Midwestern

01:04:19.320 | quiet medicine company to something a lot more. And we're not there yet. We have to,

01:04:24.480 | we have to get better. So yeah, yeah. More to do no. Great. Well, thanks so much for

01:04:28.920 | taking the time to chat with me today, Dave. It's been an honor and a pleasure. And I wish

01:04:33.600 | you the best of luck with Lily. Congrats on, on all the success. Thanks a lot. We'll have

01:04:38.040 | to have you come out to our lab sometime. I will. Yeah, no, I'm, uh, next time I'm in

01:04:41.440 | the Midwest, I will certainly take you up on that. I'd love to come visit. It'd be awesome.

01:04:44.920 | Awesome.

01:04:45.440 | [inaudible].

01:04:50.440 | [inaudible].

01:04:55.440 | you

Dave Ricks, CEO of Eli Lilly | The All-In Interview

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