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, I admit it. We are giving people ground truth data to underwrite your own opinion. What do you guys think? That was fun. That was great.

Dave Ricks, welcome to the All In interview. Great to be here. Yeah, we had dinner together a couple of months ago and have been in touch. And obviously, I'm really excited to talk to you today about the work you're doing at Eli Lilly. So just for the audience, Dave is the CEO of Eli Lilly, which is the world's most valuable pharmaceutical company and the leader in the GLP-1 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 Lilly in January 2017, when Lilly had a market cap of just $70 billion, following a year of $22 billion in revenue and $3.5 in operating income. And today, Lilly's market cap is an astounding $878 billion, and the company is 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-led, maybe Satya running Microsoft, but it took him a little bit longer.

So today, I'm really excited to talk to you about the work you're doing at Lilly, the chronic health problem of obesity and diabetes, GLP-1s, and what's happening in that market, what those products do, and the business of Eli Lilly. So thanks so much for being here, Dave. Yeah, excited to be here.

I'm a big fan of the pod, so I'm excited to be on. That's great. Sorry you don't get harassed by the other three today, it's just me. So this is an extended science corner for all the nerds at home that wanted it, with a deep dive on an amazing business.

So we'll start off by talking about the chronic health epidemic of obesity. According to the 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 has risen dramatically over the past 50 years, it's becoming a global problem. So let me pull up a couple of images we can use as we have this conversation here, Dave, and we'll 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 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 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 2025 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 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 the effect it's having worldwide. Yeah, that's a great backgrounder as it gets 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 kind of the macronutrient, micronutrient story, you go back. Yeah. So like the severe obesity in particular, kicking up, you know, the next slide there. 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 excess calories versus expenditure is a key part, but so is probably the ultra processed food story, which you didn't have data on there, but it is, you know, I think in the US we're now eating two thirds of our calories in our country are ultra processed.

Yeah. And that compares to like 35% in Europe. So that's gotta 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 going to grow a lot more in the developed or developing world than the developed world.

There's a function of wealth accumulation and surplus 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 add almost half a billion people to 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 the systems of the human body. Maybe you can highlight kind of how obesity, you know, causes many of the chronic health conditions and ailments that simply weren't around maybe a 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, like cardiovascular disease, how we process lipids and other energy sources that leads to cardiovascular disease and it's other associated risks like stroke. I mean, there's a pretty new disease here called under the liver disease, which is what 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 accept the liver.

So when your liver goes south, it's a bad news story for human health. Transplant is the only escape from that. We've got some new data on our drug. That used to be a disease limited to severe alcoholism. Right? Exactly. And, and that's the Nash word is actually starts with non-alcoholic fatty liver.

So, but now there's much more, um, obesity driven fatty liver than any other cause, uh, as you're 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 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 CPAP machines. And why? Because there's so much, um, fat accumulation around your respiratory system. You wake yourself up at night to breathe and GERD, of course, that's, you know, reflux, et cetera. So these are like more of the second order of fact. And then interestingly, you've got the mood anxiety pieces here.

And there's an interesting study done by Epic. You know, they're the big health record company, which is retrospective and not tightly controlled, but it showed people on GLP one drugs. Incretins had remarkably lower rates of new clinical depression diagnoses, which is an interesting thing as well. So a lot of, uh, a lot of impacts, uh, obesity, 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 on its own, a chronic health epidemic. Uh, it can cause nephropathy. Uh, 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 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 has made a bum. Yeah. And those are the micro vascular ones. There's the, I mean, 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 macro vascular, uh, 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 Lilly correctly, uh, Eli Lilly was the first American company, uh, to produce insulin, which was done with initially processing, I believe pigs or cows, uh, to, to, to get the insulin.

Yeah. 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. Cause it's not a coincidence. I remember the history of the, of the relationship. It's a really interesting history between the two companies, but yeah, kind of intertwined.

Yeah. But we, we had a, like our head of science, uh, met with Toronto, this research set up there who discovered the mechanism of insulin, but they couldn't make it 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, uh, 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 great.

The first biotechnology product on planet earth, which was human insulin made in a, in a bacterial cell. Yeah. So in that case, that was the first recombinant biologic product, right? It was putting the genetic, the genetic code from human DNA that codes for human insulin into an E. coli bacteria.

And you put that E. coli 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 recombinant process. Right? Yeah, that's right. Still. And that was the first DNA based product, uh, made in, it solved the problem because we were actually, we had, we had per the obesity discussion, rising type two diabetes rates.

It used to be type one diabetes, which is the childhood form. That's really an 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 two diabetes, which is the adult form.

And we, we were 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, uh, meaning we put DNA and 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 GLP one at one point and let me try and explain it and you tell me if I get it right, but okay.

GLP one, 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 GLP one. 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, GLP one 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 GLP one 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 is going to come up later in the, when you're talking about the drugs, which we call incretins. And this was derived from a, even earlier on your chart here in the seventies, they observed that if you give someone nutrients intravenously, meaning it bypasses the GI system, that you have a higher spike in glucose than if you give it via the GI tract.

So that's a curiosity, right? Which is why is that the GI tract was doing something and they call that the Incretin 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 different hormones for different chores. And GLP-1 was the first one that was made into a drug.

And so in 1987, it was discovered that GLP-1 actually stimulates insulin production, insulin secretion, and then it was isolated. And ultimately, I mean, maybe you can tell us the history. I think there was a story about Nova Nordisk and Nova having some role in some of the early work with GLP-1 versus Lilly and tell us a little bit about the history and like what took so long for GLP-1s to go from, "Hey, it stimulates insulin secretion in 1987," to kind of getting these first drugs on market for GLP-1s?

Yeah, it's a great question. Both companies played around with this mechanism right after that paper was published in '87. And as I've said, back to the insulin story, it's not really an accident because we were two companies very focused on making peptides and diabetes. So this was a good thing to chase.

But GLP-1 in its native form is not usable as a drug. Peptides are a small molecule, a small protein, right? Smaller protein, yeah. Less amino acids in a chain, which is what we call GLP-1 really. It's smaller than a protein. It's a hormone, but also called a peptide. But when you give it in its native form as a medicine, it has a half-life of like minutes.

So you'd have to have continuous infusion in your life to use GLP-1s in the human form as it was designed. And of course, we can make it ourselves inside our bodies, but if you give it exogenously or from outside, you need a drug that lasts longer than a few minutes.

So both companies set to work on that problem. It was actually Lilly that launched the first GLP-1 drug called Exendetide, which was a strange story. Another sidebar of a company discovered that in the saliva of a Gila monster, so this is the lizard that lives in the desert. In their saliva is basically a mimic of the human GLP-1.

It's close but not identical. The amino acid change that it had made for its purposes in saliva actually prolonged its action in man to be more like six or seven hours. So this made for a twice-a-day injection and 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 2 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 Lilly made a once-a-week form called Duliglutide, which is now marketed as Trulicity.

And then Nova made a weekly one, which is called Ozempic, which we now all know the name of now. And actually, 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 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, we really reduce those symptoms. So it was really Nova'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, Terzepatide, which is known as Monjaro.

That's actually two hormones together. Yeah. - Well, so let me just take a step back 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 molecule, a 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 it 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 GLP-1 agonists, which are different than GLP-1 itself. They're different molecules, they're different proteins, but they can bind and have the same sort of activity. So there's this discovery process, this research process, as I understand it, to develop and identify new proteins that can have a similar, or perhaps even a more beneficial effect than GLP-1s in the body.

Is that kind of fair? - Yeah, that's right. And I think 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 analog to it. So it had a similar function, but with a different kinetics, different absorption rate.

And then Novo actually engineered that in lyriglutide. 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 the active warhead versus just one end.

- Right. So over time, in 1986, we kind of realized, hey, GLP-1s 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 GLP-1s maybe are regulating and affecting other organs in the human body. And I've got this chart up here that shows the effect of GLP-1 and GLP-1 analogs 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 GLP-1s and GLP-1 analogs 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, a hormone is basically a messenger, right? So as you said earlier, it's telling your body you're fed. And with that, because nutrient absorption is like a survival instinct, and we're pre-selected for that, we're good at then processing that signal and acting differently.

So that includes, you see like heart rate going up and lipid levels dropping in your cardiovascular system. And that's because you're responding to that food, the new nutrients entered into your body. Liver is a key part of metabolism, so there's tons of cross-signaling into the liver. And the pancreas is the source of insulin amongst other metabolic regulatory hormones.

So what we don't even fully understand yet though, David, which is interesting, is that there are primary effects of GLP-1, certainly we can reproduce like in 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 clearly happen when you overstimulate GLP-1 or give it exogenously as a medicine. And 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 du jour is, "Hey, we could use GLP-1s 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 there's two big stories. One is that, the other is that it turns out GLP-1 isn't the only hormone that matters.

And you're going to, I mean, we already have trizepatide, which is a whole nother hormone called GIP, glucagon insulinotropic peptide, which is a complicated name, but it 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, which is what your body does naturally as kind of a survival instinct.

And then we've combined that into trizepatide. Next up is there's amylin-based drugs, that's another gut hormone, and glucagon, another one. So 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 of 50 and you take trizepatide, our drug, and you lose on average 23% of your body weight, you're still obese, right? So we need more potency for those people.

But there's many people who have a BMI of 31 and heart risk. They can get their BMI to normal on trizepatide or semaglutide, but how do they keep it there more easily versus a weekly injection? So that's another problem being solved. Right. 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, in our studies, this category of medicine is undefeated. We've never had an unsuccessful study in measuring an outcome in a chronic disease.

And that's probably because we stack the ones that were most possible first or most confident in. But we're working down that list. Currently, literally, it's 105 studies going with trizepatide in these other diseases. Wow. So this is a massive, massive undertaking. You know, a clinical trial like that takes $100 or $200 million each.

So you can do the math. 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 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. Yeah. Trizepatide. Yeah. Manjaro. Yeah. Right. And then you see what the results are and if it works, then 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 there's a lot of people, 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-aged 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 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 diet and exercise, and it works.

So we replicated those results, and we just read that study out with Manjaro, 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 or obesity early in the life, we could potentially reduce diabetes downstream.

So 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 readout, a doctor can then prescribe that particular drug for that condition, and then what, insurance covers it?

I mean, just help us understand kind of how payment happens in this, and ultimately, and we'll talk a little bit about pricing in a second. Yeah. So now we move from clinical experiment and science to the messy part of healthcare. So in America, I think we have 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 Lilly's products in this category or Novo's is really broad acceptance 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 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 the evidence 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 if we can get people to lose a dramatic amount of weight safely, which is what these drugs do.

That's in the process of sort of getting that idea adopted. Why is that controversial? Because if I'm an actuary underwriting the long-term cost of a patient or an individual in a program, an insurance program, I'm going to look at that patient or that person, I'm going to 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 going to 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 have a financial incentive, an economic incentive to change that?" What's the controversy there? Yeah, I think that's in process. I was actually in a big investor of mine'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 for people who are on these drugs," which I was like, "Wow, you know you're making a difference 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 think it's a product of laziness." 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 less than 5% of people can reach a healthy body weight on diet and exercise once they're obese. So that's a very ineffective standard of care. So today, if I want to get trizepatide for weight loss, which I think you guys call ZepBound, right?

Yeah. So can I go to my health insurance company and have them pay for it or am I paying out of pocket? Depends on who you work for, Dave. So right now, about 50% of the employer-sponsored insurance plans cover it. Lilly covers it. We cover the Novo ones, too, because we think obesity is a disease.

Those skew toward companies with money, basically. I think health benefits are part of just attracting and retaining employees. So smaller businesses, businesses with lower margins like retailers, et cetera, really don't cover these meds yet. I think in five years, we'll look back and we'll say, "That was crazy." 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. The rule of the land in the U.S. is if you're in the federal benefit, you can't even accept savings cards from the manufacturer.

But for those that have a commercial benefit, like if you work at a large employer like a retailer that doesn't cover it, we can actually buy down your out-of-pocket costs, and we do that. Did I hear correctly that you guys are doing a direct-to-consumer model as well? Is that right?

Yeah, yeah. So to get at this very problem of both stigma and cost, back in January, we launched what we call Lilly Direct. So people can go to their doctor or use our telehealth platform. We have a bunch of partners who will see you as a physician and they're obesity specialists and they'll send the prescription to Lilly and we'll fulfill it directly via mail, DTC.

This solves two problems. One is people can go to a place where they're not stigmatized for being overweight, 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 $1,000 a month? Is that right, for curzapatam, curzapatam? List price. We have a savings card program that's about $600 per month. And then we also just launched in the lowest two doses, 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 $399, basically, and $550 for those two doses. So almost 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 what is the change that's needed over time for that not to be the case? Isn't there an economic incentive for Lilly to always be hoping that more people need the drug more frequently because that's how you guys make money? And how do we kind of talk about that change that's coming and whether you need to be on it forever?

Yeah, yeah. Well, I mean, our mission 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 physiology of GOP1 and GIP right now, that's not how it works.

If you don't have them on board, your body restores itself to its previous position. 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're not carrying as much weight as you normally would.

But we haven't had these drugs around long enough to prove that out. We also know that some people 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 probable outcome for most. So for now, we need to take the drugs long term.

But we are working on drugs in our pipeline that do seek to reset the metabolic switch. And using like the PYY as a mechanism, it's a brain mechanism that's thought that maybe you could have a treatment course, lose weight, and then reset your thermostat, if you will, of what your body's supposed to weigh.

We're working on this problem. Because my 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 normally healthy number of calories per day, 1,500, 2,000, 2,500, you start to gain weight again, because your metabolism has declined.

But what I've heard from a lot of friends, 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 crowd is to kind of go on and off. So people are trying lower doses, 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 on the typical regular cadence of the drug.

Is that something you guys are seeing more frequently 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's certainly in its under doctor supervision, we have no problem with that we need to do more studies in the space.

You know what you have one drug on here, or not on here, which is coming in, it may be the most important drug because of the scale ability, which is it's called or for glupon. It's a, it's a chemical drug. So here, not an amino acid, but a organic chemistry that mimics that mimics the activating part of the peptide.

And so it's a, it's an oral glp one, in our hands, it's about as good as as high dose as semaglutide. And we're doing phase three right now. So that will 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. 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 further prawn, which is this phase three project is super key in that we could both supply, you know, people who could get away with just the one hormone drug glp one.

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 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 high resistance starch fiber product that we're now selling and having a lot of success selling as a compliment to glp one. So you're on a glp one, or GIP 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, do you talk to CEOs of food companies?

Do they call you and like, what are you doing to our business? Yeah, I've got I've got a couple on my board, even. But so, you know, I, I think there are 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 need, you know, less diabetes products, for sure, they'll need less other medicines. We're doing even doing study in like OA pain in the knee, because a lot of knee replacements are in obese people. And they get painful early in life, 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 to be the next one you think about, I think you might know about the study. But last year, Walmart did this sort of what's in the cart study? Yeah, for people on ozempic or Manjaro, 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 interesting also, fewer salty snack foods. Yes, they're 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.

We're not happening in an economic scale that's really changing food companies, 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 quick serve restaurant. It was in California a few weeks back, and they actually had a like a GLP one side menu.

That's what it's called. Exactly. If you're on these drugs, use these. So you know, it is, it's having a big social footprint. Yeah. Well, I mean, here's your stock price. So Eli Lilly's stock, I think may outperform. I don't know, it's probably pretty close. With Nvidia, it's 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, you did 11 billion in revenue and generated 3 billion net profit. I think it's 3.7 of operating profit. One of the key criticisms, 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 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. As we talked about earlier, like we launched the first GLP-1 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 work that problem.

And that, you know, I think that timescale 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 on R&D, which is a meaningful, it's like a nation state scale, like it's more than the country of Germany.

So 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 need it 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 health plans or employers to find a way to get this medicine, which we think is amazing, there's appetite to so many people, and do it in a way that's sustainable.

Now, hopefully, we've created enough value that certainly the people who are getting the drug are benefiting, that the health plans are actually lowering costs in the long term, even though there may be an increase in the 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, Novo Nordisk, our competitor, was called 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 healthcare is. I mean, here's a medicine that could augment 100, 200 adult diseases in a meaningful way.

It's expensive, yes, probably net pricing for us, you know, is going to be something like $3,000, $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 biologic products, the molecules are advancing, and they're advancing in a pretty kind of steady way. The issue, I think, with insulin, 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 the old kind of pharmaceutical companies are 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 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 took over in early 17, as you mentioned, and like that, the insulin pricing scandal, which Novo and Lilly were also center of, right, was hot and heavy.

And 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 U S where a lot of our two thirds of actually our gross price goes to PBMs and insurance companies.

So of the gross price that's often quoted, the net for us is about a third of that. And 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 use to invest in the next generation of therapy, whether it be insulins, which we're still investing in new insulins or GLP one drugs, which of course we did.

And that is hard to articulate in the moment, but it actually produces good economic and social value later. Here though, we, we took those lessons. We launched at a 20% discount to Novo'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 a $5 billion investment in Indiana to build new facilities? Yeah, we're building the largest API site in the history of the United States in Indiana.

Yeah. So that's, I mean, that's got to feel good to the politicians too, that this isn't like, uh, optimizing for costs, but there's also infrastructure being built. So I've got a lot of numbers on forecast 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 your 20, 26 operating income numbers could grow to $32 billion.

I mean, it's just such an incredible rise. And that obviously is 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 Forex in three years at the scale of operating income, it's really incredible. I hope they're right.

Yeah. I mean, good for you. 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 terzapatide. 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 GLP one GIP drugs are the vast majority of the portfolio and expected 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. Yeah, I think, I mean, that's the key thing we'd 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, David, 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, Tulicity, our last, our GLP one only in semi-glutized GLP one only we'll 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 timescale 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 a 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 a company, affect human health and return capital to shareholders. At the same time, we, Lily's 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 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 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, our non-Incretin, our non-terzepatide business grew 17% on a pretty big base.

So that's a healthy business as well. More on the scale of a regular pharma company, not the supersized thing we've become. What science are you excited about? I don't know if you're a big science nerd, um, as much, but you had like, so the Incretin products are, um, you know, uh, it's peptide manufacturing, but obviously there's, uh, 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, permanent 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 and 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 interesting, you know, areas? Yeah. Well, let me talk about 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 palette of ways to make medicines, which are basically, you know, new molecular matter against, uh, a set of diseases.

We know something about that sort of, when those things converge, we do well. So what's in the palette, I think that's been expanding rapidly lately. And I think this whole new field of genetic medicine, which you talked about, um, like ex vivo gene therapy where you edit cells and they go do things like Cartes or, uh, gene edits themselves or gene inserts, which are exciting.

You know, we had a 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 Lazarus, 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, Carty 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 it. The so-called S I R N a, this is where we can knock down proteins that are aberrant 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 and sales and it works and just keeps knocking down this protein. So if that translates into outcomes, I think that makes for a 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 some scale matters, right? And then, well, that's our stress. I think that's what our 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 corporate venture group. So we have one of the most scaled corporate venture operations and all of corporate America, hundreds and hundreds of bets that are small in size.

Usually we go in 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 and a last year, you're both an LP in venture funds and you write checks direct. Is that right? Yeah. Both ways. Yeah. Okay. We also have a interesting project we're growing. I'm quite called catalyze three 60. And here are the ideas 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 we're 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, ag, 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 console. If you need to interpret a tax results, 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 and 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 $3 billion 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 de-risking event. When things get de-risked in our sector, there's a huge inflection in value. 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 Ohalo, uh, her name's 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 sorts of things that make it a great place to work. And she was really torn by the way and making a choice to go back to Lily or joining me. So I apologize that we, that we took her.

But, um, uh, but, um, maybe tell me a little bit about how you kind of think about culture, keeping people aligned, motivated, keep the performance culture strong as you're kind of trying to execute at this extraordinary 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? 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 a bit, quite a bit better. Um, and because of that, I think there's a lot of loyalty and social cohesion in a company. As you mentioned, like we'd like coming to work and being together. It's a friendly place, but also scientifically super rigorous. Um, and that's, uh, that's often not two things that fly well together.

So I think it's got 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 extent, 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 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 to just re benchmark internally. And when we were at 11 and it 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 pretty big campus for us.

We just built a huge building in Seaport, Boston that'll hold 500 genetic scientists. So for some domains, we need to go where the people are, um, and be a more of a kind of a mothership with 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 we're discovering in nature.

And is that a partnership for you at Lilly? Because you guys can operate at scale and manufacture and distribute and market, or is that a disruptive force that could really damage the 20 year out kind of horizon for Lilly'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, et cetera. 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, 5 billion with a B went into new venture backed tech bios, 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, which is people got a lot more, a 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 going to invent, we're going to run the whole process in silico. And I think that's really naive actually. Um, and what I think will end up in the medium term being very valuable is more of the tool builder approach.

Like we can take a process like add me. So that's where you're trying to optimize chemical properties of a drug. Like we're talking about GOP one. 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 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 think we're a long way from that day, but we'll, 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 copilot 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, cause you 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 their, their last idea the most, but also we have trouble seeing across all this field 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 or what are you most happy about? And what's the biggest disappointment? Last, last question here. Do we wrap up? Yeah, of course. I mean, what an honor to be in a company like this at this moment.

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 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've 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, 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 you come out to our lab sometime. I will. Yeah, no, I'm, uh, next time I'm in the Midwest, I will certainly take you up on that.

I'd love to come visit. It'd be awesome. Awesome. . . you