Dave Ricks, CEO of Eli Lilly: How a 150 Year Old Company Keeps Winning

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 can be a very big number.

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.

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.

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.

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 2016 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.

I think in 2013 or 2014 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.

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.

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 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.

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.

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.

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.

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.

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.

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.