On this episode of inSpired, Mike Rockefeller, Co-Chief Investment Officer of Woodline, manager of the Woodline | Spire funds, sits down with Dave Ricks, Chair & CEO of Eli Lilly, at its headquarters in Indiana. Ricks dives into the market for GLP-1s, a wide range of potential future applications, and upcoming pipeline drugs like retatrutide and eloralintide. They explore obesity pricing dynamics, Lilly's direct to consumer strategy, drug compounding, and internal vs. external innovation. A sharp, insightful look at science, strategy, and leadership from the CEO who built Eli Lilly into the most valuable healthcare company in the world. This is inSpired. ___________________________________________________________________ Mike Rockefeller is the Co-CIO of Woodline® Partners LP ("Woodline"), manager of the Woodline | Spire funds. All opinions expressed by Mike and podcast guests are solely their own opinions and do not reflect the opinion of Woodline. Guests appearing on this podcast may maintain, or may have maintained, business relationships with Woodline or its affiliates. The views expressed by any guest do not constitute an endorsement or testimonial of Woodline. This podcast is for educational and informational purposes only, is not directed at any investors or potential investors in any Woodline fund and should not be relied upon as a basis for investment decisions. Funds managed by Woodline, including the Woodline Spire℠ funds, may maintain positions in the securities discussed in this podcast. Any discussion of the past performance of any investment, sector, or market is not indicative of any future results.
On this episode of inSpired, Mike Rockefeller, Co-Chief Investment Officer of Woodline, manager of the Woodline | Spire funds, sits down with Dave Ricks, Chair & CEO of Eli Lilly, at its headquarters in Indiana.
Ricks dives into the market for GLP-1s, a wide range of potential future applications, and upcoming pipeline drugs like retatrutide and eloralintide.
They explore obesity pricing dynamics, Lilly's direct to consumer strategy, drug compounding, and internal vs. external innovation.
A sharp, insightful look at science, strategy, and leadership from the CEO who built Eli Lilly into the most valuable healthcare company in the world.
This is inSpired.
__________________________________________________________________________
00:00:00 - inSpired with Dave Ricks
00:01:25 - Thriving for 150 years
00:06:50 - Obesity market size
00:10:45 - 100 million patients possible?
00:11:30 - Next generation weight loss therapies
00:15:08 - Retatrutide
00:18:28 - Orforglipron and eloralintide
00:23:48 - Brain health, immunology, and cancer
00:27:32 - Lilly Direct
00:35:55 - Price stability through innovation
00:38:45 - Innovators vs. compounders
00:42:13 - Neuroscience
00:47:38 - M&A: opening the aperture
00:53:04 - What inspires Dave Ricks?
00:57:28 - Navigating a complex healthcare landscape
01:00:39 - 10-year goals
________________________________________________________________________________________________________________________________
Mike Rockefeller is the Co-CIO of Woodline® Partners LP ("Woodline"), manager of the Woodline | Spire funds. All opinions expressed by Mike and podcast guests are solely their own opinions and do not reflect the opinion of Woodline.
Guests appearing on this podcast may maintain, or may have maintained, business relationships with Woodline or its affiliates. The views expressed by any guest do not constitute an endorsement or testimonial of Woodline.
This podcast is for educational and informational purposes only, is not directed at any investors or potential investors in any Woodline fund and should not be relied upon as a basis for investment decisions. Funds managed by Woodline, including the Woodline Spire℠ funds, may maintain positions in the securities discussed in this podcast. Any discussion of the past performance of any investment, sector, or market is not indicative of any future results.
I like to win a lot, and I don't find a lot of satisfaction in coming in second. Over the last decade, Dave Ricks led Lilly to become the most valuable health care company in the world. Is 100 million patients possible? Today, we have probably 20 million people in the world probably going to like 30 this year. We're just like scratching the surface on the volume side. I think we're seeing growth acceleration with price cuts. So that that can be a very big number. Conversations with executives building tomorrow's great companies. For investors, by an investor. I actually like investor interactions because I think the questions either teach you what the Street is talking about that makes no sense, which is frequent. Yeah. Or like really good questions where you're like, you know what? We need to be sharper on that. Very few companies have stood the test of time like Eli Lilly. It is the epitome of durable. Which one of these later stage assets you think will be the biggest opportunity for Lilly. There's a lot of buzz on retatrutide and I think there should be. I think that could be a very big drug. I like eloralintide, you get almost 20% weight loss and almost no GI side effects. That could be a big product. Yeah. Yeah. So, you know, offer choice basically and if it says Lilly on it, we're good. I'm Mike Rockefeller, Co-Chief Investment Officer of Woodline Partners, and this is inSpired.
It's great to be here. It's your 150 year anniversary. That is just remarkable. Eli Lilly is definitely the epitome of durable. Yeah. As we think about it, what do you think it is about Lilly? How has the company been able to not just survive, but thrive for this many years? Yeah, it's a good and important question, actually.
And I think, of course, there's no straight line. You know, maybe like investing, you know, but if there's a couple through-points that have been pretty constant. And then I think the other thing is the adaptability. But then what are those through-points? I think we've always had a very strong scientific orientation.
The company was founded on that idea. Colonel Eli Lilly was, he was purpose driven and he saw in the Civil War, he was a colonel there, you know how most medicines were, like, made up. You know, like there was no evidence. There was no quality. So he wanted to fix those problems and be based on science. His first hire was a chemist. Like, not in the small c, but like a real trained chemist to make medicines that actually do what they say. And that's, I think a, that's a through-line for us. We've invested in science probably more than most cumulatively over the years and that's not going to change going forward. I think the second thing is like the type of employer we are like, I think we tend to keep people a long time and in a business with pretty long cycles, I think that's an undervalued trait. To actually see a full, you know, cycle of a medicine, see failure and learn from it and iterate and improve. That's the core, I think, to success. Most things don't work the first time and if you're just chasing the next wave, I don't think you actually really understand how the business works. And then I think, you know, leadership and long-term focus kind of go together. We’ve only had I think I'm the 12th CEO in the history of the company.
That's one less than popes in that period of time. And that gives a lot of continuity. And it allows the company, I think, to think longer term, which is critical in our sector, because, you know, if you're chasing trends or worried about financial management as a primary outcome, you're kind of missing the point.
It's an innovation business and sometimes you have to weather out storms. We've certainly done that. And like now things are going great, you've got to have the humility to say that's not going to last forever. We'll be a little bit paranoid and think about the next decade. So those have been consistent.
But then, you know, adapting to the times, the science, to the methods, technologies, like that's important. And when we've been at our best, we've done that well. And when we've been down, we haven't done that well. So yeah, I think about those things. And you're coming up on your ten-year anniversary of CEO. Ten-year, yeah. It's been a great run. Yes. It's been exciting. A lot has changed. I was thinking about it the other day because it was like July of ‘16 I was named in the job. And where was the company? And like, where was the world that was like before the, you know, the first Trump administration, you know, like a lot of things were different. Yeah. But you know, the, company was in stable shape. We had gone through a pretty rough time before I was on the lead team during that with our patent expiries and sort of dug deep and kind of refound our soul, which was like organic R&D. And I think what we've tried to do during my tenure is like, take like good and go to great, you know, and that's about tuning up the science engine, being super competitive with people, projects, thinking about being at the edge of things versus a laggard, speeding up R&D. Like, that's a kind of an old story for us now, but it's still pretty sticky and true. We can run the drill faster than any scaled competitor and faster than most biotechs.
China is a new vector we can talk about. They're quite fast, so that's giving us more motivation to go quickly. You know, turning like the teamwork and like common good feeling in the company into like competitive edge. That's something I try to focus on. And then, you know, external innovation has been a theme as well. Like going outside, making smart bets and allocating capital a little more aggressively. Where are you now in terms of R&D timelines versus industry? I think in 2013 or ‘14 we started a project, so it pre-dated my time, this is when John was CEO, to cut the time in half and at the time we were like 11 years in clinic. That's from IND to FDA approval on average and the industry was like ten. The industry's come down to like eight, eight or nine and we're six and change. So we haven't quite halved it, but pretty substantial step up. And we do look at like, is that stable across TAs, did you just shift to faster moving things. Like if you just do virology you can go faster. And the answer is no. Actually we materially sped up our cardiometabolic stuff, our oncology stuff as well. And I think those have made the biggest differences. So you're now the largest health care company in the world. And as we both know, a lot of that value is in your incretin and obesity portfolio. Yeah. There are a billion people in the world, globally with obesity. I read a report recently that said that there would be 4 billion people by 2035, which is just a staggering number. Probably doesn't include Lilly obesity medicines. Right. Right. That's the placebo arm. Yeah. So. Exactly. But just help us think about this from an investor lens. How many patients realistically could be on a Lilly product for obesity.
Yeah. That's I mean it's obviously a question we don't know the answer to. But you know, we have some clues and I think some framing around that. So first you know on the billion number it's likely to grow. I agree with that. I think what drives overweight and obesity, its abundance of food, and that's a wealth effect.
But it is objectively true there's a lot less starvation in the world than in the past, and there's a lot more wealth even over the last 50 years. Both of those things have changed very dramatically, and unfortunately, we evolved as organisms. Our evolution is much slower than the speed of the world and we evolved in a world of scarcity. We don't really have that many defenses against abundant food to kind of keep us in homeostasis. One of them is, you know, incretins and GLP-1s. So that's what we've harnessed, and that's why these have turned out to be, I think, such good medicines. I think that the tailwinds here are, you know, the technology itself. So like our oral medicine, the ability to produce at scale, safety data at scale. Of course, price points is important. If we had a billion people times the current prices in the US that doesn't really work for the world. So they'll come down. We should expect that. But penetration will, I think, far exceed the price points. And then, you know, the medicines will get better and more customized to different things, whether it be convenience things like oral or monthly, people like to talk about that. Or what your weight is to begin with and your probability of getting to a healthy body weight or maybe indications, because although there's a big opening aperture on sort of this preventative self-care kind of thing, and we should come back to that because I think this is really the first use case that's really kind of shown that. I think there are other use cases, by the way. But, you know, a lot of people get to medicine through the normal health care system, which is like, I have a symptom and I see a doctor, and then I am prescribed a medicine to address that - and of course, incretins do that too. And that list will expand to, you know, inflammatory conditions, mental health. Other things that will grow it. So I think, you know, we should think of it approximating on the one hand maybe some big consumer markets, on another, maybe the biggest medicine market. Look at those together and say, okay, are they, is that close? One important note which I always run into with investors is: generalist investors always are like, well, what's the persistence? As if we're going to get like the billion people forever.
That's not a reality, right? I think people use medicine episodically, and that's a normal thing we model in other disease states. People miss that. So there's a question behind your question is what's like the prevalent number of people taking the medicine versus the possible and I think that's the way to look at the TAM here is there we'll be drop outs and drop ins, you know. Is 100 million patients possible? I mean, you're obviously building the company now for the next ten years. You'll have to plan. So is that is that even a number that's possible. Yeah. Today we have probably 20 million people in the world probably going to like 30 this year. So that's certainly achievable.
I think that in the developed markets, the kind of theoretical use versus total is still in the low single digits. So but if you look at something like statins or beta blockers or ARBs and like chronic disease, you're getting into the 20s to 40s. So that's a probably a high end to what we'll achieve but it's against a bigger denominator. So that that can be a very big number. Yeah. So there's a lot of focus on Zepbound and Mounjaro, the key value drivers now, but you have a whole wave of assets that are that are coming on here: Orforglipron you mentioned, retatrutide, eloralintide. Can you maybe just frame how you see each one of those assets fitting into this therapeutic paradigm? Yeah and maybe just to step back, so 20 years ago, we launched the first GLP-1 exenatide Byetta. And you know, I think if you asked us then like, okay, was this, like the master plan? Of course it wasn't. I think we had two insights that kind of caused breakthrough. One of them was the idea that you could give more drugs. So here's a natural pathway. There aren't too many things like that where if you just give more, you get a beneficial effect without a lot of detrimental effect. But this is one of them. And we only could discover that when we got flat peak to trough medicines, you could dose up because there's a tolerability for the side effects. If we just kept dosing up exenatide people would vomit more like they wouldn't get the weight loss effects. So you know, Trulicity and semaglutide explored that. The second big one was that it's more than one receptor, that GLP-1 is important, but there's a super family here and they tend to be synergistic and they also have different like pharmacologic properties when you drug them. So GIP of course plus GLP equals tirzepatide. GIP actually tolerizes the GI effects and it has its own independent weight loss effect not as potent as GLP but does something. And so you get this, you know increase in efficacy and actually decreasing in side effects. That makes for a great blockbuster. That's what Zepbound and Mounjaro is. But you know, amylin, which is what eloralintide addresses, is another kind of one of these super family that has been around a while. Actually there was a marketed drug for amylin sometime ago from a company called Amylin, which is an interesting story. But, you know, it wasn't focused on weight loss and it certainly didn't, similar story to exenatide, it had peak trough effects and other problems. Glucagon we've known about for a while.
We have marketed glucagon for decades for, in an acute sense, what about chronic dosing? Now we can get a lot of weight loss when we add that. And there'll be others too. So I think this story will keep playing out. I, we made that bet, you know, in the middle part of the last decade, right around when I started that this probably isn't like a Keytruda situation where people hypothesized, oh, there'd be all these checkpoint inhibitors for cancer. Turns out there's like maybe one other that works, right? CTLA-4 is okay, but it was PD-1. Here it isn't just GLP-1. And I think that's pretty clear at this point. That's a happy fact for us because a while back we started building medicines against all these. And our strategy was look, if that is the if that is the hypothesis, we best cover every square and we should use our skill in engineering the best drug-like properties for these medicines to do that. And I think we can now look at it and say, okay, pretty much every one of these ideas that's working, we have a medicine for and with maybe one exception, we have the first one.
So that's that's exciting. We'll see how adding those together, whether it be physically in one medicine or kind of stacking them for different effects, what that does. But I suspect there'll be a fair amount of appetite for them. One I wanted to drill in on is retatrutide. Yeah. This is a unique situation. Coming soon. Yeah. There is a lot of buzz in Silicon Valley. In the Bay Area. It's the epicenter of off label retatrutide use. It reminds me of the buzz around tirzepatide but even more so and I wanted to just understand, you know what is all the excitement about? What is it about that profile, why people think this will be such an important product? Well, more.
I mean, if you, it's a triple agonist and I think people are, you know, kind of probably mostly off-label ordering Chinese. So we don't recommend this, by the way. But, you know, you can see in our studies people lose a profound amount of weight really easily. In fact, the number one dropout problem we have is people lost too much weight. So they started obese. So I think you can now see sort of the end of the efficacy curve in a way like we probably don't need drugs that have more weight loss than this. If we have dropouts for too much weight loss, we probably need strategies to taper and tailor. The second thing is like the third ingredient, it's really tirzepatide plus glucagon. Glucagon has a very central obesity role. It really depletes fat in the gut. And people like that. It's actually there's a lot of data that visceral fat is kind of the worst fat you can have, and that's the fat under your stomach wall. So that's quite good for health reasons. Liver, kidney, heart failure probably is going to be a great medicine. But also people like flat stomachs. And when they lose weight they, you know, want to feel lean. That's what this does. I suspect that's part of it, too. This drug, though, is not for, you know, unassisted self-care. Like, I think it's got more side effects that come with it. And probably low doses are safer. But, you know, I would recommend most people talk to their doctor.
And the good news is the phase three studies will all be in hand within the next few months. We'll submit to the FDA, and maybe this time in a year we'll have that approved and then people can get it, get the real thing, number one, and get it under supervision, which would be a little safer. So you've been positioning this as an over 35 BMI type product. Seems like it. Yeah. Now there's theories about a category that doesn't really exist now, but people are sort of experimenting with, which is the category of like, okay, either my starting body weight is lower or it was higher, but now it's low and what do I do to kind of keep that situation or, you know, have more slower. So we're thinking about low dose regimens of different multi acting incretins. That's one of them. There's also studies on clinicaltrials.gov of tirzepatide plus eloralintide which is like a triple agonist and without making a single kind of chemical entity. That could be interesting too. I think there will be needs for this in the future. And while, Orforglipron is going to be a great maintenance medicine, some people will want different properties, and that's what we can offer here. Which one of these later stage assets do you think will be the biggest opportunity for Lilly? Well, there's a lot of buzz on retatrutide and I think there should be. I think that could be a very big drug. But if you look at the injectable space and I think, you know, Orforglipron is going to be a big drug, not because of the efficacy but because of reach. You know, it's going to be less expensive. We can market it to every corner of the world. It's pretty effective. You know, if people, you know want to lose 30 pounds, that's going to be a great solution. And that's most people who want to lose weight. But you know, the frontier of why did tirzepatide do so well against semaglutide? So it's an unusual situation where there's a first entrant, market leader, tons of momentum, and then three years later we wake up and, you know, we have a 70 share, they have a 30 share. And probably if you subtract out the payer stuff they did, it'd be probably 80-20. Why? Well, because the drug dominates that drug. We did a head-to-head. You can look at the data. It's both easier to take, less side effects, and markedly more effective. So I think if we can move both of those lines, you'll get better drugs and better selling drugs. So retatrutide more effective, probably giving up a little bit on tolerability because glucagon has that property. I like eloralintide because I think it approximates. I mean, the data we showed is a little better than GLP-1 with amylin and that's interesting by itself. An important note is eloralintide is not like the other amylins which are kind of this, there's a receptor in that family that they all hit that also is shared with another protein and that causes some GI that's the calcitonin receptor. We pushed that out. We dialed that out. So you just get sort of like a pure selective amylin inhibitor and you get almost 20% weight loss and almost no GI side effects. That feels like a very appealing value proposition and not a bunch of titration, because there's you don't need to titrate into the side effects. That can be a big product. Yeah. Yeah. So, you know, the good news is we don't have to care which one gets really big. I think our focus is really about, okay, get more choices out there. Deepen the depth chart on indication use because still medical use is a primary way into this market. Build out our consumer capability because self care and prevention is a real thing, and it seems unlikely to have broad coverage in most markets for a while, just because of the affordability in health care. And people are animated to do it anyway, so that's fine. And then, you know, offer choice basically. And if it says Lilly on it, we're good. Speaking of choice, some of your competitors are developing a once monthly. Some are trying to go longer. Where are you with a once monthly. And how important is that to have? I think our strategy is, you know, something on every square. So we definitely have that idea. Sometimes the standards are different, you know? So like I get the question of like, well, why didn't you develop tirzepatide in a SNAC formulation? That's the technology Novo uses for the Wegovy pill. And it's because for us, like the profile wasn't good enough. I think the convenience factors, if the oral is really about convenience, then if you make it inconvenient oral, what are we doing? So we took a different strategy. That doesn't mean we won't try that at some point for oral, but I think for us that technology needed to improve a little bit. Same for monthly. I think if we have yet to see a day by day PK curve from any of these monthlies, and I suspect there's a reason, is they’re not monthly, that you can lose weight during a month, but in effect, you're sort of going two and a half weeks, or your half life might be 10 or 12 days. I mean, some have published the half-life. So, you know, by the time you get to day 30 or down to like 20% of the original dose, and then you re-dose and you're going to get a little more weight loss, side effects again. And the key for the weeklies semaglutide and dulaglutide was flat like because then you can actually tolerize and titrate if you're reliving that curve every time, I think you get more GI and then you're back to that efficacy tolerability curve, you're sacrificing some efficacy because you're not really effectively dosing therapeutically the whole month. You're restarting tolerability every first of the month.
So not ideal. So we'd like a flatter profile that could last a month. That's it. You know we've got ideas similar to the ones that you've seen. We just don't choose to disclose everything. And we're working on other solutions that would be flatter. You have to ask like okay, you said longer like what are the benefits of like spreading out dosing. And I think there is a diminishing return anyway. Certainly monthly is probably better than weekly. Is two months better than one month? I mean, not really. If you look at other markets, is three months better than one, maybe marginally; six months better than three? I think you're starting to get where the other properties will dominate that sort of increment of convenience. One other area that is really interesting is these areas outside of obesity - immunology and brain health. Yeah. What are you most excited about? Where can incretins really play a really big role there? I think those two are super fascinating. There's a third which, you know, it's very hard to do studies on but I'll touch on. So you know, immunology is here now. We published data actually this last weekend at the dermatology conference of Taltz plus Zepbound. And you know that effect size, which, by the way, you get the ACR20 benefit on psoriatic arthritis, you get the PASI 50 improvement way before the weight loss. So and you can see this with like CRP which dives within a week or so. So there is this like other mechanism happening. It definitely is an anti-inflammatory and it's a pretty good one. Look at retatrutide in OA pain that had more than four point shift in this WOMAC score we used to measure pain. That's the biggest shift ever recorded in OA pain. So these are really good anti-inflammatories. I think that story is going to continue to play out. What people haven't figured out is like branded inflammation drugs are super expensive. So how do you value capture in this space and what's the right combinations? But you know, that'll get figured out. And hopefully we're the ones who figure that out. And then brain health is even more fascinating. We don't actually know all the mechanisms as well. There's theories on like brain metabolism. Right. So that's a real thing. But, you know, you saw a couple big studies from our competitor with the EVOKE program in Alzheimer's, and you did get movement in biomarkers, but no change in outcomes. Was that the wrong setting, the wrong time point in that disease process, the wrong disease? We don't know. But, you know, there's more risk here for sure, is what I'd flag. But the promise of changing dementia. We're more bullish on vascular dementia, which is more of a pure cardiovascular disease, causes a lot of dementia, compounds other dementias. You know, you look at kind of hedonic behavior, things like smoking and drug abuse, even gambling and online shopping. There's these like anecdotal reports. Those are all, you know, opportunities to look here. And we've got some studies going in these spaces already. Phase two primarily. And then to me, the one that would be what would really be a home run, not just economically, but like moving human health pretty dramatically forward are these NeuroSci conditions. We have really no good explanation for this. But when you look at large databases in retrospect. You see big shifts, big. Like the VA study was the biggest one. But in schizophrenia, bipolar and major depressive disorder, very big shifts in outcomes for people who happen to be on GLP-1s and have these conditions. That’s worth noting and we better figure that out. So we're looking at that as well. Cancer is the one just the teaser at the end. And it's just hard to study cancer prevention. But probably these are not treatments but preventative. There's a lot of use in breast cancer already, mostly because estrogen blockers cause weight gain.
So it's more like a symptom management tool oncologists are using. But I'd be personally surprised if we don't wake up in five years and see cancer surveillance rates dropping in a number of cancer types because of uses. Now, proving that and getting an indication that's a tough proposition. But the studies have been done the other way where you look at, you know, cohort match groups that have obesity and those that don't, and cancer rates are quite a bit higher in obese populations, so that would be great news as well.
Let's talk about selling because this is getting really interesting with Lilly Direct. Yeah. So you launched this in January of 2024. Yeah. And it is now a big part of your obesity business. Yeah. It's like a third of all obesity in the United States is Lilly Direct. I'd love to just understand where you see this going because it seems, you know, really fascinating, a real shift in how we are distributing. I think, you know, this was one of these like perfect I guess what in in the Bay Area you'd call a product-market fit, right. That's like which we a little bit stumbled into. But we had some clues. You know, I think though five years ago there weren't many large manufacturers talking about, like, selling directly to consumers. In fact, like, funny story, my predecessor, we had, like, a series of meetings in this room. In that period before he left and I officially started, but I was named and he's like, I have like a list of lessons and one of them was like, never be in retail. He literally said that to me. And it's like, why? Well, because, you know, you have all this like apparatus you have to build to deal with the variety of complaints and, you know, knowledge levels, etc. but I disagree with that conclusion. Actually, I think there's been huge benefits for us.
So of course we've reached more people and sold more. That's great. That will continue and will grow. We've launched, by the way, in the UK. That's off to a commanding start, I'd say. We'll introduce, I was just in China here. You know China internet world is different but we have a couple partners and like a store within a store Lilly Direct like on JD and Ali and pretty impressive start. So you know, I think this is a universal thing. It's not just a US shopping phenomenon. And we've gotten so much better at understanding consumers because you have this first party real time interactions. What are people buying?
What are they complaining about? How do we learn about how to use our medicines better? Inform consumers? I think that's so good for the company's competitiveness long term. I think investors are intrigued by stickiness. If you have that information, if you have a relationship with someone one on one, do they stick around longer?
Of course, that needs to be proven, but the theory is there and it's worked in other industries. And then, you know, I think not being reliant on third parties as health care kind of rearranges itself has proven useful. At a minimum, having your own channel creates price discipline, right? So you don't get excessive markups. You set a kind of a benchmark price in the market that payers like insurers can expect, but so can consumers.
And it just sort of controls that critical variable here. But also you have a route to market and I think that's strategically pretty important. I think also on the consumer side, discretion and sort of not my regular health care system have not been a bug, but a feature. Most people with obesity have doctor shopped to get someone to help them.
So that means they've been told no or just, you know, here's a diet sheet. Why don't you follow the diet? You know, and they have followed the diet and it doesn't work. I think that's the consumer perception. So getting out of that is actually a benefit. And then of course discretion because people report stigma when they go to the pharmacy counter and they're waiting and then their dispensed Zepbound and, you know, people roll their eyes, they don't like this. Right. And that's an unfortunate fact of our society, that people view obesity often as a personal failing, not a kind of a genetic predisposition and an environmental situation we find ourselves in. That's wrong. But I think those factors drive people to the platform. And that, again, those aren't just US factors we see, you know, really sort of geometric growth in many markets online. You have over 50% of your new prescriptions for Zepbound going through this channel in the US. Yeah. Where do you see this business going? What percent of obesity scripts will go through this channel? I think in the end state it'll be meaningful. I don't know if it'll be stable at that rate. I'm hopeful, actually, that insurance coverage in this sort of medical route will grow more. And probably the consumer piece is going to be, you'll see more switching. It will act like consumer products.
You'll see loyalty, yes, but also trial and error. You know, I think it's going to be a little bit different than what we're used to in sort of like a chronic med that sort of takes seven years to get to peak. And then there's lots of carryover. We can value that. We understand that I think this will be a little bit different, but not worse different. Just different. I think we can also drive early adoption in a very significant way in this channel. And I suspect that's a that's a global thing. In fact, there are some markets where that medical chain is even more choked off, more broken, and will probably have a higher proportion online. I would expect outside the US, you'll see more business than in the US, in terms of self-pay. And that's a good diversification thing for us. And it's good for those consumers who like, if they went to their doctor, they wouldn't get the medicine. They can use telehealth, they can buy it online, they can make decisions about their own health. I do think I alluded to this earlier, that this is a capability that can serve us well in the future.
I'm going to jump to this. But like in my time in the industry, in addition to like working on more preventative interventions, which the industry is shifting that way, the drug technology has improved a lot to do it. So if you don't have a doctor around to monitor side effects and carefully titrate doses, etc., it's difficult to think about this, but if you had therapies that were very infrequent, that were really preventing disease, and yet the person had no symptoms.
That's like a perfect line up. And you think about technologies like siRNA, which are like so pristinely targeted and very infrequent and often being developed for chronic diseases in a preventative setting. That's a great use case for this as well. And if you have enough volume, I mean, some of these, these new modalities, people are always thinking about orphan or specialty.
You know, I think the first big medicines using RNA silencing were like you had to inject into your spinal column for, you know, very rare congenital conditions. But if you think of something common like Lp(a) reduction, which is like probably a third of all adults on the planet. Are you really going to get a high price point, even if you have only maybe 10% penetration. Is that the right model?
Or should you try to reach the vast majority of those and lower the price points? COGS isn't really an issue here, and do it in a direct way, kind of outside of the health system payment. And that seems like a pretty viable idea to us. So we're looking at that in a serious way and building the capability around obesity It's sort of the perfect use case now, but I think there'll be other ones. What do you need to do to add to this Lilly Direct program to make this an even more valuable asset for the company? Yeah, automation, globalization. You know, right now it's if you knew how we built this thing, you'd be like, wow, that's not really how software companies like will go to market e-commerce engines. It was very, you know, duct tape, baling wire. And the first instance, we're sort of in version 2.0 now, it's better. It's smoother. Like we have integrations into e-prescribing systems across the country. And it's, you know, need like a lot of paper or phone calls. We've auto renewal, which is like an SMS message consumers get. They click like three buttons and the box shows up in two days. So we've really worked on that but it's not Amazon. You know, it's not best in breed e-commerce, but it can be. So we need to continue to invest in that and we'll get there. We're making some moves this year to kind of up that game. And then as I said, you know, we sort of relearned this lesson when we launched Mounjaro, which is the name for Zepbound. We just had one name outside the US in all these other markets like Brazil or, you know, Germany, and they have their own telehealth environments and those players aren't as sophisticated or organized. So we need to get in those markets and kind of upgrade that and we'll do that. One topic of concern from investors is price these GLPs and I think there's a concern that the prices will just keep falling and there's no floor. Yeah. What would you say to that. Yeah I think there are competitive effects, right, that's for sure. I think there's like two potential bets we're making and people can bet against that. That’s what investors do.
One is that, you know, we're just like scratching the surface on the volume side. And unlike other drug markets, which you and I have valued, you don't really have elasticity in pricing. So price down equals cash flow down 1 to 1. That is not what happens here. Actually I think we're seeing growth acceleration with price cuts.
So that's acting more like a consumer market. Now is there a logical point where you should not be doing that? Yes. We're a pretty disciplined actor I think we've studied this and we understand consumer choices and preferences. But so far, I think the move from like 1,000 a month to about 350, mostly positive for us. By the way, we were already launching in diabetes at about that net price anyway. So, you know, if you value the if you look the gross to net appropriately, it's not really a price concession. It's like a volume expansion in the cash channel, which is probably good. Can it go too low? Yes. But I think what prevents that is innovation. On the one hand, newer things typically get priced higher. If you look at unit pricing in drugs, there's like a minus seven on every chronic drug for the ten years I've been doing this job. But prices on average are going up. Why? Because you have innovation launching at premiums and then it gets on that decay curve. So if we can keep innovating eloralintide, retatrutide, Orforglipron and post up higher starting points over the innovation, that data has to be justified. I think you can see a price, more of a price stable picture as the mix grows and options are presented. Will there be like a generic segment? Sure. That's going to happen to semaglutide first. We'll learn about that in some overseas markets in the next couple of years and eventually in the US.
And we'll have to have enough difference versus that to justify the price. Sure. That's not a new factor in our industry. What is new is that elasticity and the rate of innovation. There's one other constraint which, you know, I think our competitors should take note of, which is if you have pipeline bets stacked against this, like you don't want price erosion, that's not a great idea, right? Because you have to compete with the thing you just you just did. So, you know, we'll see if they're paying attention to that. We pay attention to that. The FDA recently came down pretty hard on Hims for attempting to come out with an oral version of Wegovy. Yeah. Where are we in the battle between innovators, compounders, the FDA? I don't know, honestly, I'm honestly shocked this has gone on this long. It really makes zero sense. And of course, there's an industry point of view. Let's put it on the table. Like, yeah, it's cannibalizing some of our business. Not that much, actually. But if we look at, you know, maybe there's a couple hundred thousand people on compound tirzepatide, maybe a few 10,000 on retatrutide mostly in San Francisco. You know, you know, that's not changing our EPS number on a quarter to quarter basis but it does open a policy door that's kind of frightening and frightening for our business model, of course. Like if you don't have an incentive to invest in R&D, if someone can just copy what you made without paying a royalty, a license, or having to do the work themselves, that's not fair. Number one. Number two, it'll just destroy the incentive to invest in innovation. I think that's a terrible outcome for our country and for the world, actually. But even for, like, for consumer, like, why do we have an FDA? It was, you know, more than 100 years ago, Food, Drug and Cosmetic Act. Why? Because the very reason Lilly was founded. There were too many fake snake oil things that, we're back there now. And when we test stuff which we buy online, which we do, a meaningful percentage of the stuff does not contain tirzepatide. Okay. And then those that do often there's mistakes in the amino acid sequence. So it's not. It's like tirzepatide like. We've recently published a study that if you commingle it with vitamin B12, which is a very common thing to do to skirt around the legalities of compounding, it actually forms a new complex molecule that's not tirzepatide. Never been tested in man, although except for the people taking it today, they're testing it. Yeah. This is actually crazy. And it's not what we should be doing. And you understand well what we have to do to get a medicine that's safe and effective. Most public does not. I mean, we, the tirzepatide is, I think, series number 7,023, which means we made 7,022 other versions of tirzepatide we threw away.
Amazing. To get the one with these properties. Do you really want to mess with that? Like that seems like a nutty proposition. Now there's noises that this will be closed off, at the same time, we hear noises that, like peptides that are not proven to do anything, may be unleashed through this channel. Let's see what plays out. I think we just have to keep communicating.
And honestly, the only reason this exists is pricing. And, you know, I feel sorry for those consumers who think they're getting the same thing at half the price. They're not. But as our offerings get better, as coverage gets better, I think this this gets reduced. There is a big expansion in access this year on the federal side, which is part of our MFN deal with the Trump administration. I think that's going to be interesting to see what happens there. $50. There's nobody using compounding who's going to use compounding when they get $50 Zepbound. That's not going to occur. So we'll, we'll see. That'll be interesting experiment to measure. Okay. Is it really just that and, and, I suspect that's going to start the end along with hopefully some policy response from this administration. Let's hope so. Yeah. Okay. Maybe shifting from obesity. What's the next big opportunity for Eli Lilly? Yeah we need to find it. Of course we run a base business that is like pretty similar to the company like when you first started following us, you know, we valued, and then I took over. That's still going and growing you know, mid-teens actually. That's a good drug business. In fact, if we peel it out ourselves, you know, I think you'd put it in the top three out there. It just gets overshadowed by this, you know, sort of generational opportunity - and that makes sense. But our job is to keep that going and grow it faster if we can. The most mature part of that franchise is oncology. We've got, I think, more substrate in phase three now than ever. I think we have four phase three projects going right now, and they're not against small things. You take, like, our oral SERD program, we've got a really key study reading out in the next year in the adjuvant settings. EMBER-4 study for imlunestrant. And I think that's a giant opportunity. Duration of therapy is very long. A surprising fact is that degraders seem to be more effective than other modes of blocking estrogen. If that's true for imlunestrant, that's a big opportunity. We're building out some other capabilities. Of course, everyone's working on, um, the ADC platform as we are, but also, you know, radioligands, other things, I'm optimistic. None of those are going to be drugs, anything like the ones we just spoke about in terms of size, but by historic standards could be quite meaningful drugs in the industry. And so I think we have to be this in this like two mode method of like in that category, be the winner, even though that may mean it's still a lot smaller than our leading category. I think brain health and neuroscience has the most, like, upside potential in it, both because the amount of human suffering and the lower competitive density. Lilly's got a long history there. We've got some important studies going. We've got more to do. Actually, today we announced the deal with Centessa. Looking at this orexin pathway, which is very interesting for wake and sleep, maybe in some ways like a little bit of a corollary to GLP-1 because here you have like this nodal pathway that has a lot of other disease impacts. Could be interesting if the drugs are safe enough. If it turns out that overstimulating a natural pathway like GLP-1 turns out to be useful and safe, but, you know, we need to look for those opportunities. Of course, you know, neuropsych is huge on mandate still. And I've been saying that for like a decade. And we sort of retreated from that like 15 years ago. But other than like ketamine, I don't know of any real step up there. That's kind of sad because ketamine is not a new idea. Really? Um, maybe that changes. If it does, we'd like to be a part of that. And those that can make for a very big category. So that one's probably has the best chance of competing with our cardiometabolic franchise, at least in my tenure. How about Alzheimer's?
Yeah. I put that in that one. So dementia that's here now. I mean, we're treating people. That's pretty linear uptake. I'm encouraged by that. Kind of like diagnostic drives use. So that's our focus now. And of course we have a prevention study running that has people with amyloid positive but symptom negative to see if we can reduce conversion to symptom positive.
Uh, I think that's a seminal study for the industry actually, because if that turns out to be true in this neurodegenerative condition, there's a lot of parallels in Parkinson's and other things that could be a big category of drugs for the industry. And hopefully we'd be a part of that growth as well.
So we need that data, but that's an exciting one too. I'd put that in the neuroscience. Again, another, another thing that could get really big and help a lot of people. Yeah, that's an interesting study. So these are in patients pre-symptomatic to Alzheimer's. Yeah p-tau217 positive. We didn't even scan them. We just blood tested. And so that's in the in the noise of the, of the signal. And then the question is after a period of time can you reduce the odds ratio of converting to symptomatic. I think it’s a very compelling value proposition for consumers. Here again, maybe like a more consumer thing. It's a preventative. It's a, you know, walking well, people with a precursor to the disease, amyloid signature for Alzheimer's.
But we do know people have high amyloid and don't ever develop Alzheimer's, but can we reduce those that do? And if we can, that's a major breakthrough. Do you think the efficacy could be better than what you saw in TRAILBLAZER 2 in your symptomatic patients. That's our hope, I think, because if you look at the TRAILBLAZER 2 study, no matter how you slice severity, whether you look at like tau burden, which is the secondary protein of Alzheimer's or age or symptomatic symptomatology, so people with more, more advanced symptoms. If you go earlier and earlier in that slice, the effect size gets bigger and bigger. And it sort of flies with the theory of amyloid that it is sort of the triggering pathway and that it's not actually doing the direct damage like tau is, but without amyloid you don't get the tau accumulation. So it kind of makes sense with the cartoons and the textbooks that we've read about. But you got to prove it in the real world, that's different than the compounding world. Like you have, we have to do the study, and if it works, we would expect quite a bit of use. You mentioned Centessa. How has your M&A strategy evolved now that you're scaling the business and we're going to continue to scale the business? Yeah, it needs to evolve. I think we've you know, when I started it was sort of nascent, I would say occasionally when we looked at stuff, the bias internally was internal over external. There wasn't like a stood up motion to do this continuously. And part of that is, you know, I think what John tried to do is really sort of reinvigorate the organic engine. That's a necessary actually to be a smart buyer externally. So maybe this had to go in steps. What we did was create a systemic motion. So we're every week huddled up on every data room, every deal in play, many deals not in play.
So we, we instigate deals. We like to trade in front of data. We have ideas about what we're interested in that is not in our labs. So we made that a very proactive motion. And it's constant. But by definition it's become more of a string of pearls kind of approach. You can tolerate more failure that way. That's good because we can take risk. We do a lot of deals. We did like 40 deals last year. That's a lot, way more than anyone else. But we deployed like the 10th most amount of capital. So cheaper deals, but many of them. Probably that cheaper part will change. Purely if we have a growth ambition, which we do, I think we want to be priced like a growth stock. We don't want to get to some terminal state on GLP-1. Which will happen at some point where the inflow of new patients equals the outflow and we stop growing so aggressively and not have a path to growth that feels - it's not defeat. We did a lot of good, but that's not what we're going for. We're going for finding the next big things, or a whole series of bigger things that amount to more growth on top of that and that's going to require external innovation and internal.
We just need more ideas. Internal probably scales a bit, but there's a lot of data in our industry that scale drives inefficiency, not creativity, and so I worry a lot about that. We'll moving it forward there. We have different ideas there. But then, you know, we need to get smarter about buying. So we'll open up the aperture therapeutically. That's one way without changing the strategy, but probably lift up a little bit the price number and by definition then the phase of development where we really scrub things down. Yeah, it's unusual because you haven't, I don't think you've done a transaction over 10 billion since you've. Loxo was the biggest. It was eight. Eight. So size of deals could go up? Centessa is big for us. It's like six. Yeah. Yeah. I mean, look, as you know, in the in the drug space, it's a weird industry in a way, because you have maybe 20 pretty scaled legacy companies. Lilly's one of those. 150 years. The names we all know. And those are almost, well, except for Lilly, they all trade like, you know, countercyclical, you know, stable stocks, basically. And then you have a pretty big gap in the middle, and then you have like 500 biotechs, probably 200 of them shouldn't be public, but you know, you have that. But there's only like ten companies in the middle. It's less than the big ones. It's weird. So there aren't that many, like, mergers where you'd say, okay, I'm getting a revenue line and marketed products that are that interesting to me. I think it's more like at the top of that biotech thing, where in the past we did have a belief that if something's mature enough that everyone can see it, it's probably hard to get some sort of value out of that transaction. You're going to pay the prior investors. They like that, Woodline probably likes that when we do that. But it's hard to create value for your shareholders that way. It's just tighter. Unless you have some big like commercial unlock or some other thing, they screwed up and you can fix. But you know, we might have to look for more of those and I think if we widen our therapeutic aperture, maybe, maybe we'll find more. Makes sense. Does the Lilly Direct channel change your view on what you may look at? It does. Yeah. I think because if you say okay, let's not use therapeutic space, but use like, a different frame. Like we have common medical conditions where people use their primary care doctor, you have referred to medical conditions like Alzheimer's today or oncology where your primary care doctor to a referral. Those markets behave pretty differently. Higher price points, a much lower volume. And then you might have this like self-care prevention segment. Okay. So we looked at our business that way. We're kind of a leader in that middle one now because of obesity.
We're trying to make headway here. We're also leader over here. But it's growing. And so what else could grow it? There's a whole list of preventative things that are interesting that need to get drugged. And if they get drugged safely, that could be great kind of portfolio items for us. There's also kind of non-medical, not medically covered, but medically proven things like in cosmetics that could be interesting where people are self activating as well.
So we to get there you'd really have to have like one compelling idea. I think the kind of list of like McKinsey decks that turned into real businesses is pretty low. I think you need like a great drug and then you can enter. So we're open to that idea too.
On a personal level, true story. A couple of weeks ago, I was having a dinner with a bunch of different investors, and I sat next to a Lilly employee who I had never met before and so I mentioned to him that you and I were going to be talking. And I asked him, I said, what do you want to know from Dave? Oh, great, here we go. And he said, I'd really love to understand what makes him tick, what inspires him?
And I said, well, awesome, because that's the name of this podcast actually. So I have to ask you, you know what? What makes you tick? What inspires you each day? Yeah. It's a good question. I mean, I think there's like a couple of layers to it. I'm someone who probably I would be accused of being, like, loyal to a fault. I have a, for whatever reason, like a, I like the things I participate in. I tend to stick with them a long time. And, I definitely feel that about Lilly. I've been here for 30 years, and that's something that I'm really adhered to. Making sure, Lilly, you know, carves out its place in the world and keeps it because I care a lot about the place.
Another thing, it's like if you gathered around, like, our kitchen table with our, our kids are adults now, but even now, okay, it is even worse now. You know, on a Saturday night and we broke out a board game, you would have sworn, like we hated each other and we were, this was war. I'm a very competitive person and so are my kids. We, you know, we have fun with that because you can kind of simulate that and then the game gets put away and you're all happy. But I like to win a lot. And I don't find a lot of satisfaction in coming in second. And that's a big like inspiration for me is it's a competitive industry, but the competition doesn't just reward us. It actually has a much bigger effect on our purpose. This is what we do.
And that's the last piece is I kind of stumbled into Lilly. I don't know if you know this story, but you know, I only worked here because my wife was going to med school in Indianapolis and we were fiancée at the time, and I'm like, I need a job, so I'll go there and work for Lilly. I worked in the BD M&A group for a couple of years, and I thought when she, two years, she was going to graduate med school and then go to a residency somewhere, and I'd leave. She ended up matching here in Indianapolis. So I stayed, which was like a pretty prophetic thing. And then it was five years here, and then that loyalty thing kicked in and Lilly was great to me. But early in my career, I worked on a business development deal and the medicine that I brought into the company, we completed phase three. Then I went and launched in the US as the brand manager and shortly after that, my own mother called me and said I was diagnosed with the disease and I got this medicine and it has Lilly on it. And I think if you work in this industry and you have those like personal moments where it's, I mean, you know, objectively, yeah, we're improving health conditions, but when it actually helps someone in a profound way that you care a lot about, like your mother, it's like, that's why we're here. That's a pretty good way to go through life is like doing that over and over again, and you just want more of it. Like when you succeed at that, it's like, I want to do that more. So that's a big driver. That was a turning point for you. That that was like the lock in point. I loved Lilly. I was surprised at what I found here. I was like, but the industry seemed kind of underdeveloped, like sleepy and Lilly, too. So it seemed like a place where if you were good at business, you could make a difference. And I started in business development, so I always had this, like, external focus. And it was a great way to learn the industry and I was excited by biotechnology at the time. This was like 1996. So, you know, we were just getting monoclonal antibodies and like waves of innovation were coming. And then the culture, you know, I thought the people were smart and wanted to work hard.
We were talking about the Midwest earlier. And there was a lot to like about running a company in the Midwest. Kind of no fuss, no mess. People just come to like you've come to, it's still true, you come here like, I don't know how many corporate America cafeterias serve breakfast at scale, but we serve breakfast at scale.
People come here early and eat breakfast. I think that's an interesting thing. That's not that common in my estimation. So people like to work here. They're proud of being part of Lilly. There's obviously a big halo in the community of what this company's meant to the state and the city. And you tell your neighbors, yeah, I work at Lilly. Oh, that's great. And then people come here and they try to live up to that obligation. What's been the most difficult aspect of being CEO? Well, you know, I think actually the job’s changed a lot, even with me in it, like in the ten years that we've become companies, big companies especially have become this sort of place people want to turn to for like truth and connection. And it's a little bit of a weird, there's a guy who does a podcast like this, and he writes for The Atlantic and he talks about this workism. I think it's an interesting turn of phrase. It's like it kind of replaces your sense of community outside of work. That's true. And so your employees demand you take positions on lots of stuff and I don't like that. Like I actually think a company has massive positive spillover effects. I don't think intervening in like public policy per se is one of them. I think that's actually a problem. People should vote and they should, you know, guide society in that way. I think that health care and like, drug pricing and all this is a mess. And it's hard to be in the middle of that mess and sort of go forward. You can come off and hurt your company's brand. You know, by being a jerk about it. You can also be so uncentered on it that like it is, we do deserve reward for what we do, and what we do creates a huge amount of value in the health care system. I'd guess more than any other thing in the health care system. So, maybe combined. So we shouldn't apologize either. And yet a lot of the problems we have aren't even our fault. It's like government rules and so forth. So you got to wade in. But it's, boy it's painful. That's just tough going. And it gets personal because you're the face of the company. Those aren't fun things. Some people say like investor interactions, but I actually like investor interactions because I think the questions either teach you what the Street is talking about that makes no sense, which is frequent. Yeah. Or like really good questions where you're like, you know what? We need to be sharper on that. Like it's a, it's a surface area to bounce ideas off of. But you know, most CEOs don't get a lot of. So I actually like that one. But yeah. Anything you would have done differently over these ten years?
Sure. The longest list is like on the people side. Like most of us, probably, in our judgment, some people aren't perfect. Either moving faster on problems or who we brought in and then didn't work. And, you know, that's probably for managers, like we all can relate to that. That's probably one of the hardest things is like admitting you're wrong and you're kind of the last to admit it when you have someone that's just not working out. Yeah. Those are. And then, you know, there were some other tough situations that I won't go into here, but it's just like, ugh, you know, that stuff's emotional and sticky and no matter what level you are, whether you're that employee sitting next to you at dinner or mine like that doesn't really change. You know? We've taken bets that didn't work. I don't regret any of those. That's part of the business. You got to take swings and you don't get home runs unless you swing. And, you know, I think how we've run the business. I'm proud of that. I don't have too many regrets in terms of the discipline and choices we've made. This has been a great interview. Thank you so much. Maybe to end it. If we're sitting here ten years from now, which would be great, I would love that. I'm sure this room will look exactly the same. It was this way ten years ago. Yeah, yeah. But you're 160. What do you want to have accomplished at that time? I think there's like three big things. One is like, make incretins not like, like PD-1s. Prove the case out that this is more like antibiotics. I often draw this analogy, and people like what? But, you know, antibiotics made modern medicine. It took the focus of modern medicine really on treating acute disease poorly, and shifted the focus to chronic disease and made chronic disease possible. You can't even do surgery without antibiotics. And Lilly was at the forefront of that. We marketed penicillin and vancomycin, still the backbone of hospital care was the Lilly invention, and I think GLP-1s and this category, this is like for chronic disease, the same thing. We can afford to talk about longevity because we're going to be able to solve obesity. I think that's a vision we have to have.
But we need the runway to do it. If you know generics come and wipes out the economic incentives, we won't see that. So, you know, we've got to innovate faster so that we can keep the replacement cycle going and keep improving the standard of care. The second thing is like build the rest of the business, we have kind of a gift here if we think the best capital is the Lilly R&D value in the industry, I think that has been the best capital.
Can we keep that going and can we make other diseases obsolete? And I think we have to try. We also have to not have hubris. We need to have the courage to say, okay, we tried and failed, and then we'll be buying back a ton of stock for a while. But that's less satisfying. But the truth. But I think we've got a 3 or 4 year window to sort of try that. And we're certainly going to flex, flex into that. The final thing is like the way Lilly works. We talked a lot about consumer. I think that's been such a gift to us to like, really learn about health care and not be so insulated. But I, I wish for a company with like leaders and people that will take over when I'm gone, that really own the customer and love innovation. I think at the end of the day, that's what we do.
We connect science to people with problems, and if you can see both sides clearly and know both and make good decisions, you know, then you can be a great leader in this, in this industry and hopefully in this company and we just need more of those.
Well thank you. It's been an honor. You've done such a great job for patients and for shareholders, so we really appreciate it. Thanks. Thanks. Good to be with you.