All Episodes
Mike Rockefeller sits down with Dr. Leonard Schleifer, Co-Founder, President & CEO of Regeneron. Len reflects on building Regeneron alongside co-founder Dr. George Yancopoulos, and the company's deep pipeline. They explore the growth runway for Eyela and Dupixent, its late-stage pipeline spanning obesity, multiple myeloma, anticoagulation, and the C5 franchise, as well as the Regeneron Genetics Center, curing genetic deafness, AI in drug discovery, and the company's disciplined M&A philosophy.
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inSpired Podcast | Episode 03 | Transcript
Regeneron: Betting on Science and Saving a President
Mike Rockefeller and Leonard Schleifer
Recorded May 6, 2026
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inSpired WITH DR. LEONARD SCHLEIFER
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LEONARD SCHLEIFER:
Given what we know about his condition and the virus, etc., that he had a very high probability of dying. When you save any life, it's important when you save the President of the United States, it became quite the story.
MIKE ROCKEFELLER:
Regeneron is one of the oldest and largest founder-led companies in the S&P 500. It's up there with the giants like NVIDIA, Blackstone, Oracle, and Dell. It was founded in 1988 by Dr. Leonard Schleifer, its president and CEO, and Dr. George Yancopoulos, its president and chief scientific officer. Len and George have been in their same roles for 38 years.
LEONARD SCHLEIFER:
They thought we were going to sell maybe 100-something the first year, but we sold 800 million. And it seemed like, oh my God, this is the real deal now.
MIKE ROCKEFELLER:
Today, we sit down with Len to talk about Regeneron's history, its key products, and how its deep pipeline will position the company for success in the future.
LEONARD SCHLEIFER:
I don't think we get any credit for our pipeline because if we take your revenue projections for Dupixent, you get all your value back from Dupixent, not to mention the $18 billion we have in the bank.
MIKE ROCKEFELLER:
For investors, by an investor. Conversations with executives building tomorrow's great companies. You mentioned liver disease. And as I was going through your pipeline, and you have a couple phase two assets for MASH.
LEONARD SCHLEIFER:
Yeah.
MIKE ROCKEFELLER:
Which ones are you most excited about?
LEONARD SCHLEIFER:
Ones I haven't told you about. Stay tuned.
MIKE ROCKEFELLER:
I'm Mike Rockefeller, co-chief investment officer of Woodline Partners, and this is inSpired. Well, great to be here, Len.
LEONARD SCHLEIFER:
Good to have you here, Mike.
MIKE ROCKEFELLER:
Has it sunk in yet that you are coming up on 40 years since you founded the company?
LEONARD SCHLEIFER:
You know, it doesn't seem like 40 years on the one side. And on the other hand, sometimes it seems like a lot longer. But, you know, when you're doing something you love, time just passes.
MIKE ROCKEFELLER:
Take us back to 1988 when you started the company, what the vision was, and maybe how that has turned into what Regeneron is today.
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FOUNDING REGENERON IN 1988
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LEONARD SCHLEIFER:
Yeah. It's been a long time. And you mentioned Warren Buffett, by the way, before we get to 1988. So a couple of people in my family keep track of who's the longest continuous serving CEO of a large public company. And that was always Warren Buffett, Warren Buffett. I just ran into Warren at a conference and I thanked him for retiring because that moved me up in the longest serving CEO continuously of a public company. But back in 1988, you know, I completed a lot of training. If you think about it, after college, I did seven years of training as an MD-PhD with a fellow by the name of Al Gilman, great, great mentor of mine, Nobel Prize winner. Unfortunately, he passed away a few years ago from pancreatic cancer. But I had great training with Al, so I got both my MD and PhD. And then I decided that I still wanted to be a doctor, a real doctor, not just a paper doctor. So I spent four years in residency with internal medicine training for a year and then neurology training where I became a board-certified neurologist. I was on the faculty at Cornell. I was doing research. I had a lot of grants, startup grants, NIH, American Heart Association. But as I was reading the literature, all the exciting work seemed to be about molecular biology. And I had been trained as a molecular biochemist, not a molecular biologist. I didn't do gene cloning or any of that stuff. And then all the great papers seemed to be coming from this company, Genentech or Jane Tech and Genentech, of course, as they call themselves. I said, what the heck is that? And I said, well, that's interesting. there, a biotechnology company that are trying to come up with treatments for important diseases, taking advantage of the new science called molecular biology and molecular cloning. And so I had this notion about starting a company that would sort of try and imitate what Genentech was doing, but do it in the context of neurobiology, neuroscience, because I was a neurologist. And I thought that what were they working on? They were working on things like human growth hormone. And then this company Amgen was coming along. They were working on EPO and Neupogen. And I said, you know, maybe the nervous system is just as complicated as the hematopoietic system. Frankly, obviously, I thought it was more complicated. And there was only one nerve growth factor known at the time, NGF. And I said, you know, there had to be more. And if we could clone them and make them and spritz them on people whose neurons were dying, maybe we could treat degenerative neurologic diseases. And I started thinking about that. And my mentor had called, Al Gilman. I said, Al, what do you think about this? He said, it's the stupidest idea he's ever heard from me. And he says he's heard a lot of stupid ones over seven years of training. But when he realized that I wasn't going to be talked out of this, he said, all right, if you're going to do this, let's do it right. And he recruited a couple of Nobel Prize winners, Brown and Goldstein and Arthur Kornberg and Eric Shooter. We all got together and said, let's do this. And so I started this company called Regeneron for regenerating neurons. And the idea was to come up with new neurotrophic factors. The only problem was I wasn't a molecular biologist and therein was a big problem because the way to get this was through molecular biology. And so we had this meeting of a bunch of scientific advisors and I said, well, how can we get a molecular biologist? Who's the brightest, smartest molecular biologist? And they came up with some names and fortunately they came up with George Yancopoulos. Now at this time, the company was really nascent. George Sing, who at the time was at Merrill Lynch Venture Capital, bet on us by putting a million dollars into the company. It was a big bet for George. He got a big chunk of the company for his firm, but he got us started. And believe it or not, George is still with us today on our board of directors. He's a great guy. And so I thought we had all the money in the world, a million bucks, you know, back in 1988 to start a company seemed great. The advisors I was talking to identified Yancopoulos. All we had to do was talk George into joining, which wasn't the easiest thing to do. George wanted to do it, but I had to get past his dad, as it turns out. He was a child of very hard-driving Greek immigrants. And I remember George saying, you know, let's have one more interview between us. I said, okay. I'd already shown them we were going to build these labs how quickly, fast, and you could do an academia. Literally on this campus, we took 10,000 square feet. We now own this entire multi-million square feet campus. We had 10,000 square feet. It was from Union Carbide, who was shrinking immediately post-Bhopal. Anyway, the last interview I came up and George said we needed a restaurant and I couldn't see him in the restaurant. And I saw two people sitting and I realized there was George and his dad. So I had to get past an interview. I was actually being interviewed rather than the other way around. But at any rate, George joined and the rest, as they say, is history.
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WORKING WITH DR. GEORGE YANCOPOULOS
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MIKE ROCKEFELLER:
You know, that's interesting because looking at your company versus other founder-led companies, you actually have two founders who have been leading this company for 38 years. How has your relationship with George been so successful for so long?
LEONARD SCHLEIFER:
Yeah, it's a great question. I'm married for 51 years to my wife, Harriet. And she's my, I would say, my out-of-work wife. And I like to think of George as my in-work spouse. and the common theme is that in every relationship there has to be a saint. I guess I'm going to argue that I'm the saint in those two relationships that are very long-lasting. Look, from the very beginning, I realized that there were two aspects of building this enterprise. One is sort of the science, the guts of the business, the molecular biology, cloning these things, doing the science, and the other was building the business around the science, funding it, you know, beg borrowing and what have you, they say, to get the money. And I would say we've had a pretty healthy focus where each of us sort of know what we have to do, but we rely on each other for what we do. And so I interact greatly with George on the science. He's a genius, so it's hard for me to keep up, but he interacts a lot with me on the business side. And together, we've managed, because we've had a common purpose. I mean, common background. He's also an MD, PhD. And we knew what we wanted to do. We wanted to use science to make a difference in patients' lives.
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TOP MOMENTS AND THE EYLEA APPROVAL
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MIKE ROCKEFELLER:
Were there any key decisions along the way that really changed the direction of the business?
LEONARD SCHLEIFER:
Yeah, there were quite a few. Remember, this is hard to believe, but for the first 25 years of our existence, we lost money every single year. And I'm not talking nickels or dimes, I'm talking millions and billions. So for 25 years, we lost money. So the key decision we made is despite a lot of people, including the ilks of people like you in the investment community, not you in particular, but the analysts, the investment community, our shareholders, even our board, you know, pick something, focus, and let's get it across the finish line. And I think that the best decision that George and I made is we weren't going to do that. We weren't going to bet the entire company. It always sounds great, a Hollywood kind of a thing. You bet the entire company on something. Well, if we'd done that, we'd been out of business. We were going to bet on the science, build a foundation of lots of different technologies, and not fall into the trap of trying to bet everything on one molecule. Because we had NT3 and BDNF. George actually cloned the first novel neurotrophic factor since NGF. And we thought we were going to spritz it on patients with Lou Gehrig's disease. We'd cure them. we'd get box seats at Yankee Stadium behind first base and sail off into the sunset in a matter of years. But obviously that didn't happen. But we kept saying, we're going to survive. And when you meet up with a guy like George, it's pretty easy. You know it wasn't a matter of if, it was a matter of when. So I've just viewed my job as making sure we got to that when.
MIKE ROCKEFELLER:
What have been your top moments?
LEONARD SCHLEIFER:
At Regeneron?
MIKE ROCKEFELLER:
Yes.
LEONARD SCHLEIFER:
Yeah, my top moments at Regeneron. Well, you know, there were so many, it's hard to recount them. I mean, clearly, just opening up the labs and realizing we were in business was kind of amazing. The IPO in 1991, sort of a big moment. Doing this multimillion dollar deal to really get us going with Sumitomo Chemical, big moment. Treating our first patient with one of our neurotrophic factors, even though it didn't work out, that was sort of a big moment. But the defining moment from a business point of view probably came in 2011. We were sort of heading down the home stretch trying to get EYLEA approved, which we had already approved ARCALYST a few years before, but that was for a very rare disease, although though it's actually selling quite a bit right now. Kiniksa's taken it over and doing a pretty good job there. But we didn't have a significant product that could keep the company going. And, you know, 25 years, people were running out of patience, I think. But in 2011, we knew we had the data. We'd submitted it to the FDA. And sure enough, they gave us in the summertime a CRL. I can't even remember. We've had so many CRLs in recent years and past that it's hard to remember what they felt was missing at the time. I think it was something related to manufacturing again. But my dad at the time was 99 and a half. And he had been driving the car until he was 99 and was in great shape. But he started to go downhill in the fall of 2011. And we didn't get the drug approved. And he kept saying, "Len, when are you going to get that drug of yours approved?" And right around Thanksgiving, we got the FDA approval. And a few days later, my father passed away. It was almost as though he was hanging on to see that happen. But that was a great moment, a confluence. Not great, obviously, losing my dad, but seeing him, being able to see our success at that age and knowing that we knew we had something. I remember going to the J.P. Morgan, I think it was called the Hambrecht and Quist Conference at the time, in early January 2012. We had just launched the product, and people thought that we were going to sell, I don't know, $5 million. But we sold, like, in the first three months, something like $80 million. And then they thought we were going to sell maybe 100-something the first year, but we sold 800 million. And it seemed like, oh, my God, this is the real deal now. We're a real company. We're treating lots of patients. We're changing people's lives. That was pretty insurmountable times.
MIKE ROCKEFELLER:
It's funny. When I was flying out to interview you, I told my kids, I have four young kids, and I said, I'm interviewing the CEO of Regeneron. And they said, oh, you know, who's that? What are they? And I said, well, you know, EYLEA? And they said, no, we don't know EYLEA. Dupixent? No. I said, do you remember when the president got really sick and he got on TV and he said he was feeling better because he took the Regeneron? I said, that's Regeneron. They said, oh, yeah. So that might be their top moment, a small sample size. But that was definitely a top moment.
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TREATING PRESIDENT TRUMP FOR COVID
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LEONARD SCHLEIFER:
That was an interesting story. I got a call from, I think it was Mark Meadows who originally called, from the chief of staff at the time. And they said they wanted to know. We had just announced, I think on the Tuesday, this was like on a Thursday, just announced that we had some really interesting data that we kind of knew this was going to work. This was a monoclonal cocktail for COVID. And they said that somebody in the White House wanted to get treated. Could we give it to them? I said, it's not the way it works. You can't just give an unapproved drug to somebody, some random person in the White House. You've got to tell me more, and we got to see whether or not the person could qualify for a clinical trial because we were very strict. We just weren't giving it out. We had to participate in our trials. That was the ethical and, frankly, moral thing to do. And finally they admitted that it was the president. And that, of course, changed everything. And I said, look, we can't ask the president of the United States in the middle of a pandemic to participate in a clinical trial, come down to the site on Tuesday and we'll draw your blood and wait. It just didn't make sense. So we had to come up with a way that we could get him the drug. And I told him, the only way that could happen is if the FDA approved it. And we haven't even asked them about it. They said, don't worry about that. We'll take care of the FDA. I said, well, you say that, but I got to submit it. And they said, that'll all be done within a matter of hours. Seemed like that was done. And I remember them saying, well, when are we going to get the stuff? And I said, well, it was being packaged because it was manufactured in Rensselaer, New York. And we've chartered a plane. And we're going to send that plane down. Well, when's the plane going to get here? When is it going to get there? I said, well, they're going to fly to Dulles. and tell us you got to fly to Reagan. It's much closer. I said, you can't just fly a private jet into Reagan. You know, this is post 9/11. You need 48 hours. You tell your pilot, just head straight to Reagan. What's his tail number? We'll have the military sort of part the way. So I knew this was the serious stuff. And then I had to deal with this wonderful doctor, Sean Conley, who was the White House doctor. I mean, he wasn't equipped to deal with a president who was sick from a pandemic virus. Very nice guy. I had to tell him how you mix it, you hang the IV, you get it in there, blah, blah. And sure enough, we get it into him late Thursday night. At this point, it's been told publicly that given what we know about his condition and the virus, et cetera, that he had a very high probability of dying. And they moved him to Walter Reed shortly after they gave him the infusion in the White House. But it worked like a charm. Within 24 hours, he had turned the corner. And I'm very confident it was certainly not hydroxychloroquine or ivermectin or whatever else they might have or might not have given him. Certainly, it was this that changed it. And then, you know, sort of our lives changed a little bit because of sort of the publicity, you know, when you save any life, it's important when you save the president of the United States, it became quite the story. But it really did help because there's a real postscript to that. But the bottom line is we were able to save a lot of lives.
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EYLEA AND EYLEA HD TODAY
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MIKE ROCKEFELLER:
And you did it very quickly. You mobilized. It was very impressive.
LEONARD SCHLEIFER:
It was really amazing.
MIKE ROCKEFELLER:
Yeah. Maybe back in EYLEA. So 2011, it got approved. Most successful ophthalmology drug in history. You got an approval for the HD. And so for many years, it was an important growth driver for Regeneron. Recently, we've had biosimilars with the 2 milligram. So the franchise has been declining. As you think about the next couple of years, do you see this as sort of a stable business? Do you think there's a path back to growth?
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DUPIXENT AND THE TYPE 2 FRANCHISE
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LEONARD SCHLEIFER:
Yeah, I think there is. I think right now we're at about 50-50 in terms of our dollar sales and HD versus EYLEA itself. As that some of the EYLEA gets eaten up by biosimilars coming along, but some is getting transferred to HD. So I think HD will be able to be a growth in and of itself.
MIKE ROCKEFELLER:
And then maybe on Dupixent, your other blockbuster, your IL-4/13, more than a blockbuster, I think it's one of the biggest drugs in the world.
LEONARD SCHLEIFER:
It's one of the top drugs in the history of the business. It's the most prescribed drug by dermatologists, pulmonologists, allergists, gastroenterologists in terms of a biologic. It's really, you know, it's taken off because it's a great drug.
MIKE ROCKEFELLER:
When did you start working in this area of type 2 diseases?
LEONARD SCHLEIFER:
So that was a long time before. George recently showed me some slides. I can't remember how far back, but a long, long time ago. In some respects, before he even came to Regeneron, he had thought about the switch factor and IL-4. And he was an admirer of Bill Paul at the NIH, who had sort of popularized IL-4 as a very important switch factor changing IgG to IgE production. So it's probably a decade or two before that he started thinking about it. Even when it got first approved, we had slides saying all these different conditions we thought that it would get approved in. And then eventually the genetics sort of backed all this up that we had done this all right because you could predict now with our genetic database what indications would work.
MIKE ROCKEFELLER:
So you have nine indications.
LEONARD SCHLEIFER:
Yeah. I can't even keep track of them.
MIKE ROCKEFELLER:
It seems like there's still a lot of penetration left to go in each of the markets that you're in. And I'm sure you're hearing the sell side start to ask questions about the future of the drug. And some of them are saying that they think Dupixent could do over $30 billion in sales by the end of the decade. Do you think that's reasonable?
LEONARD SCHLEIFER:
Well, as polite and as friendly and as much as I admire you, Mike, you know that I don't succumb to making predictions about future sales. Because I don't like to make predictions about things that I don't have any more information than you do. You can look at all the same information I have and you can make your best guesses. But I will say this, it's continuing to grow. It's annualizing, I think, based on the last quarter, just the first quarter this year, just under $20 billion. It is not even highly penetrated. I think it's under 20% in atopic dermatitis and less elsewhere. With new entrants, with Lilly's product and other products, you're starting to actually expand a little bit. You're not fighting over the same market share. So we're actually still growing this market. And we're very under penetrated in so many of the indications. I can certainly say I think growth, being a growth driver is an easy bet.
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NEXT GENERATION IMMUNOLOGY
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MIKE ROCKEFELLER:
Yeah, I had to try. It does look like it's very possible. You also have some next generation antibodies in the same area. Which ones of those do you think will be most meaningful?
LEONARD SCHLEIFER:
Yeah, so once again, we don't try and make singular predictive bets because you start to fall in love with your own predictions. If you think the Mets are going to win or the Knicks are going to win the championship, you start to fall in love with that. And that's okay if you're a fan. But if you're running a business, you don't want to be a fan of your molecules. You want to make sure we bring all of them along and the best will rise. But so what do we have going as possibilities there? I mean, we have with Sanofi, they're looking at how to give more like with hyaluronidase and things like that, how to give more of Dupixent so you can get a greater spacing between doses. we have what we call Supi Dupi which is a long acting version that targets the IL-4 receptor, same target as Dupixent. that's not officially yet in the collaboration but the rules of the road if it's the exact same target we can't develop it on our own and neither could Sanofi so we basically have to discuss if and how and when we put this into the collaboration, but that's coming along, and I'm sure we'll be able to work something out where we bring that forward. We have long-acting IL-13, which we're moving along extremely rapidly, long-acting IL-4, and we have some bispecifics as well. So we have a whole pipeline of things. We also have new thoughts on, we think we can cure allergy now. That's a bold statement, but I think we can back it up when we get our next generation of molecules, which I hope will be around the end of the year or early next year, into the clinic as a way to knock out IgE cells specifically. I think we've sort of done some proof of principle there already. And so there's a lot for us to go in the type 2 immune space.
MIKE ROCKEFELLER:
You put up some interesting data with Lynozyfic and Dupixent in severe food allergy. How come you're not moving forward with that one?
LEONARD SCHLEIFER:
Well, we did get a proof of principle there, but we think we have a better one, a better way of doing this. So the idea there was, let's kill off the immunoglobulin-producing cells. and we used BCMA by CD3 and that killed off all the immunoglobulin-producing cells. The IgG went down, the IgM went down, the IgE went down. And the concept was, well, let's prevent any IgE from coming back by giving something like Dupixent, which it worked. We could get 90-something percent of the IgE gone and it wouldn't come back, but it does take a long time for the IgG to come back. George and the gang had something even better, which could destroy only the IgE-producing cells by some clever trick, which we haven't told the world about yet, which is not so obvious. So I think that rather than spending a whole development program on something where we think a year behind it is something even better, that's the luxury, by the way, of having a long-term perspective. The problem with this business, okay, is that number one, it's hard, and number two, it takes a long time, and number three, it's very expensive. So the very expensive part comes from people like you who pay for all this innovation, because we know the Europeans don't pay for the innovation. We can talk about that. But so if you're going to pay for it, the trouble is your time horizons, maybe not Mike, who's been around for 100 years, but others of your ilk, their timeframes are much shorter. And so the question is, how do you square a circle where the time to do really important things is measured in half decades and decades, yet the time that you guys work in are sometimes milliseconds occasionally or as long as you which some of you consider long term as a minute on the other hand there are some that have been with us since our IPO who really do take a long-term perspective we have we can't if you succumb to those time pressures this is why the you wind up doing wrong the bad things this is why you get so many failures in our industry. It takes time to do things right. And you can't just say, well, I got to have one. If you've got something better, you got to bring that along. So we have either the luxury, the wherewithal, or the foresight, whatever you want to call it, we're going to do things right. And if some take longer than others, that's okay.
MIKE ROCKEFELLER:
You have a very deep pipeline of over 50 things that you're trying to get right. So it's really exciting. Maybe to start on the late stage pipeline, because you have some big phase three programs in areas like anticoagulation, multiple myeloma, complement. Which one of those you think is most under appreciated in terms of Regeneron kind of changing the trajectory over the coming years?
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OBESITY: A GLP THAT LOWERS CHOLESTEROL
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LEONARD SCHLEIFER:
Well, and obesity, I think you've neglected. This is another big one. You know, once again, how I see the world may not be how you guys see the world. And I don't think we get any credit for our pipeline. Because if you look at what the, if we take your revenue projections for Dupixent, you get all your value back from Dupixent, not to mention the $18 billion we have in the bank. So there is a disconnect that people aren't paying enough attention to the pipeline. Let's start with obesity, just because I think that the way you asked the question, which ones are people ignoring? People are getting a little bit tired of hearing about the next obesity drug that has a little bit more weight loss, or maybe it can be taken a little less frequently, or maybe it's oral. The question is, how do you really change this? And does it make any sense for Regeneron to go in this game? Well, one of the ways to change it, we thought, was to invent a GLP that could actually lower cholesterol at the same time as you lose weight. If you lose 50 pounds on Zepbound or Mounjaro or Wegovy, whatever it is, you barely move the needle on your bad cholesterol. If your LDL was 150 when you started, maybe it's 145. It needs to go from 150 down to 50 or less. And so we wanted to invent a GLP that not only caused weight loss, but lowered cholesterol. And of course, we realized we had one, which was Praluent. And if we could overcome a very hard technical task of getting these together, co-formulated in a volume where you could just give it the same way, you wouldn't even know the Praluent is in there, then effectively we would have a drug that did both. And everybody misunderstands what we're trying to do here. We are not trying to sell more Praluent this way. We can talk about how we're going to sell more Praluent, and we can talk about how Amgen lost an antitrust jury case 400 million to us. We can talk about that market. But that's not what this is really all about. This is about selling a GLP. And because we have a GLP that now lowers your cholesterol. So you can take Lilly's GLP or you can take Novo's GLP or you can take somebody else's. But none of them are going to lower cholesterol. Why not take ours? And I think doctors will like that. And so we get zero credit for that, even though we're well on our way here. We licensed our GLP from Hansoh. So, by the way, in their study, they had much less GI toxicity than tirzepatide did in a similar Chinese study, yet had the same weight loss or more. So the question is, do we think we have at least as good a GLP? Maybe we've got a better one. But when we combine it with Praluent, we have a total new class of drugs. It's as though we invented a GLP that could also lower cholesterol. So you went to your doctor and you wanted to lose 50 pounds. And they said, by the way, if you lose 50 pounds, you still have to get your cholesterol down. But I have a GLP that does both. Why wouldn't you take that? especially if you could do it in the same injection and hopefully at the same or close to the same price.
MIKE ROCKEFELLER:
How hard of a technical challenge is it combining those two?
LEONARD SCHLEIFER:
It was not easy, but we've done it.
MIKE ROCKEFELLER:
And when can you be in the clinic with that?
LEONARD SCHLEIFER:
Well, so we're in the clinic with the GLP. We have to get, the way this works is that once you get that approved for obesity and for diabetes, then it's easy selling because we're just doing, talking about a combination product. We just have to show that the PK hasn't changed, and it won't. There's no reason. The hard part was doing the proprietary formulation and getting this to work together. That was difficult, and it really had unexpected solutions there. So we own Praluent in the U.S., and we have the proprietary patents on how to combine these things. So that loss is going to go very fast. We're enrolling these trials. They enroll like butter, obesity trials. So I think people are missing that completely.
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LYNOZYFIC IN MULTIPLE MYELOMA
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MIKE ROCKEFELLER:
What else are they missing?
LEONARD SCHLEIFER:
I think that many have ceded the myeloma space to J&J. They're formidable. We know them. They're really good at what they do. But at the end of the day in cancer, we think we have a better drug that's maybe more convenient, perhaps less toxicity. We like our data a lot. we're going to commit and this is a 30 or 40 billion dollar space um we're even thinking about monotherapy in frontline so we're very excited you're going to see a ton of work come from us making big commitment that we obviously just recently got approved in the last line we'll get some data next year in two plus I would think we'll call it then we'll get some data after that in earlier stage, and we've even got data in light-chain amyloidosis, in high-risk smoldering. This is a real big opportunity to simplify and change the paradigm. So that's a big one. I don't think we get much credit because everybody is seated at the J&J. These things can change pretty quickly.
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FACTOR XI ANTICOAGULATION
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LEONARD SCHLEIFER:
I don't think we're getting credit for our anticoagulants. Okay.
MIKE ROCKEFELLER:
That's a big market.
LEONARD SCHLEIFER:
That's another $30 or $40 or $50 billion opportunity, especially because the number of people who actually take the DOACs is much lower than who actually should because of the fear of bleeding. And we have two entries there, two antibodies. So like a 1 and 1A, if you will, if you're a horse racing person. You get two horses in the race, not just one with different characteristics. And so we're going to have, I don't know, between half a dozen and a dozen phase 3s going and all sorts of indications by this summer. Some are already underway, whether it's in post-knee replacement, whether it's in cancer, whether it's in DOAC ineligible for atrial fibrillation, DOAC eligible for peripheral disease. I mean, massive big bet there.
MIKE ROCKEFELLER:
How are they different from the oral factor 10s that are on the market and the oral factor 11s that are in development?
LEONARD SCHLEIFER:
Right. So if you look against the factor 10s, what we see from preclinical data is we can get the same or more anticoagulation, and the genetic supports that with a much lower bleeding risk. The non-catalytic site antibody has really a low propensity. We'll see if it even has an increase. And the other is very mild, but you get better anticoagulation. So once again, the DOACs, they're just not used because of this bleeding problem. In terms of the other factor 11s, if you look preclinically, you'll see that, once again, you know, we just don't make singular bets. We make really good antibodies. We have better anticoagulation and no reason to think we'd have any difference in bleeding than either the small molecules or other antibodies. So, maybe I should pause and point something out. I will say this. I have watched our industry evolve since I got into this business in 1988. You know, you got a lot of value back in 1988 if you had a group of smart people and a prestigious scientific advisory board and an idea. And then this, what I call this sliding lever, moved along in different places. sometimes you had to be you had to have preclinical data then you had to have phase one data say then you had to have proof of concept and and it kept sliding around and and then it's eventually what you got to have be in phase three to get value then of course people realize well maybe you got to have a successful phase three then oh my god you got to get past the FDA and then you got to get it to be commercial, and then you got to get past the payers who are really difficult and the Europeans who I call the non-payers. And then you got to worry about competition now from China and everywhere else. The world has changed. We had a massive head start on Dupixent compared to the rest of the world. EYLEA, people have been chasing EYLEA for 10 years. No one's been able to come up, 15 years. No one's been able to beat EYLEA. But I think those days are sort of numbered, numbered in the sense that you won't have the kind of lead that you might have had if you come up with something out of the box, because people catch up now so quickly. The tools are out there. So we like to do two things. One is we like to have a lot going on. So instead of one $20 billion product, maybe we have four, five, $5 billion products at a time where it's easy to be more predictive. And who can do that? Only people who can put 50 things in the clinic with another half a dozen or more every year going into the clinic. So we think that that strategy of doing as much as you can broadly and accepting the fact that you'll have competition sooner is probably the best strategy that works. Now, that's, of course, very self-serving, Mike, because nobody else does research like George and his team. So I think that we have a competitive advantage now in this new marketplace where building a company on one single blockbuster like a KEYTRUDA or Mounjaro or Dupixent is going to get harder.
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THE C5 FRANCHISE
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MIKE ROCKEFELLER:
Yeah. It does seem like you are getting more credit for your C5 franchise and MG and PNH, but you've also put up great data there.
LEONARD SCHLEIFER:
Yeah, I forgot to mention that. That's it. That's the beauty of having so many things. Our C5 franchise, I think, has got the best-in-class data. We've shown that for PNH, you really need to push the limits a little further than just the antibody alone. So the antibody plus the siRNA we've shown can really take people who are not fully controlled by looking at their LDH, for example, which is a measure of intravascular hemolysis. We've shown that you can do better. So we're waiting for the final data on that. But we've already shown in myasthenia gravis, you don't need all that. And just the siRNA alone, which can be given quarterly and get the same kind of data, that's going to be, I think, a very competitive in a marketplace that's really growing.
MIKE ROCKEFELLER:
The one area that we haven't seen data for that franchise is in geographic atrophy.
LEONARD SCHLEIFER:
Yep.
MIKE ROCKEFELLER:
Million patients in the U.S., so a lot of opportunity.
LEONARD SCHLEIFER:
Big opportunity there. That's more speculative, I would say, but we have to do the experiment because they've shown that you work intravitrally. we think most of the C5A comes from the liver. So you want to block this systemically. But we also have a plan to block it intravitrally as well with a better, cleaner antibody that's not pegylated and going to have some of these immune problems. So the reason these drugs haven't taken off is because they have these toxicities of these occlusive vasculitis. And they may cause wet AMD to boot. So it's not been a clean class or they would have done a lot better I think because even though it's only at 20, 25 slowing that's pretty important if you can do that safely because you just don't want to have your the retina to atrophy I mean it's a big issue so anything you can do to slow that down safely is a winner so we'll see there once again you know these are bets we'll make we don't bet companies on these things, but we have so many different ways to win. We have some really cool stuff we haven't talked about. I think we're going to turn the world a little bit upside down in some of fatty liver disease. Our genetics has given us approaches and ideas that are just, I think, going to sort of maybe revolutionize that space a little bit. We've got a genetics target that's given us a great leg up on glaucoma. We're looking at that. We've got another genetic based target, which we're starting very soon on Sjogren's disease and several other of these fibrotic type immunologic diseases. I mean, it just keeps going and going.
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THE REGENERON GENETICS CENTER
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LEONARD SCHLEIFER:
And we haven't even talked about our Regeneron Genetics Center, which has got the largest collection of data, which is extremely interesting. And we've been struggling, but we're trying to come up with an idea. We've been struggling how to take a real advantage outside. I mean, we use it every day for discovering and developing drugs, validating pathways, all that. But we think there's a health tech business there too that we can, because, you know, we have one of the largest databases in the world where you link genomics and soon proteomics. and with electronic medical records, and with all the AI companies. I think it's going to be very interesting how we can do this. Some cool stuff, by the way, you can do with proteomics. If we took your blood, we could tell you how old you are. Now, I could pick your pocket and look on your driver's license so that it's not that big of a deal, but we could do it from your blood. But we could also tell you not only how when you were born, we can tell you how you've aged. So you might be 40-something, but you might be 60-something because you haven't treated your body right or genetics are not so good. Or you could be 20-something. So you can find very interesting correlations between what's going on in your blood and what's going on in your genome. So, for example, you might be at very high risk for Alzheimer's disease. but we can tell you whether or not you are, despite this high genetic risk, whether you have a 100% chance or a 0% chance of actually getting the disease by looking at your blood. There's so many powerful things we're beginning to realize when we start to study genomics, proteomics, and electronic health medical records. So trying to figure that one out too. You know, we do a lot. We're ambitious, but there's so much to do, so it's exciting.
MIKE ROCKEFELLER:
Yeah. You mentioned liver disease, and as I was going through your pipeline, you have a couple phase two assets for MASH.
LEONARD SCHLEIFER:
Yeah.
MIKE ROCKEFELLER:
Which ones are you most excited about?
LEONARD SCHLEIFER:
The ones I haven't told you about. Stay tuned.
MIKE ROCKEFELLER:
The leading MASH company, Madrigal, just in-licensed a PNPLA-3 for MASH from Arrowhead. And you have one as well in phase two. Is this an interesting target?
LEONARD SCHLEIFER:
Yeah, it is an interesting target, particularly for those who have this fairly common mutation. We know Bill Sibold, by the way, quite well. We like Bill. We know him from his days at Sanofi where we work with him. And he seems to have done a good job. You know, nothing lasts forever, Bill. We're coming after you.
MIKE ROCKEFELLER:
You're known for pioneering human monoclonal antibodies. That's, you know, I mean, you do it better than anyone.
LEONARD SCHLEIFER:
I would say George is known for that.
MIKE ROCKEFELLER:
George is known for that.
LEONARD SCHLEIFER:
He does it better than anyone.
MIKE ROCKEFELLER:
Give you some credit also.
LEONARD SCHLEIFER:
Yeah.
MIKE ROCKEFELLER:
Interestingly, when you look at your pipeline now, a quarter of it is in siRNAs.
LEONARD SCHLEIFER:
Yes.
MIKE ROCKEFELLER:
What is special about that modality that is a quarter of the Regeneron pipeline?
LEONARD SCHLEIFER:
Yeah, there are just, you know, targets. Well, let me back up. First of all, we love platforms. Monoclonal antibodies is a platform. siRNA is a platform. Gene editing is a platform. And there were other platforms coming along that we're very interested in. The main attraction of siRNA is its ability to address targets that are not otherwise draggable easily, let's say, by a monoclonal antibody or even a small molecule. So that's what's particularly. I think people do tend to misuse technologies. You know, TTR is a good place to use it. Putting an siRNA in the eye to try and lower VEGF would be a dumb thing to do. But there are places where you really can't get to targets where siRNA can get you there. And we've been working with Alnylam on some CNS targets, which are very interesting. I can never remember which ones we've told you about, which ones we haven't, so I won't get myself in trouble. But that's the main advantage. You can quickly try and address targets. And, of course, they remarkably, and nobody would have believed it, have this incredible long half-life that they can work.
MIKE ROCKEFELLER:
Anything in the early pipeline that we should be asking you about?
LEONARD SCHLEIFER:
You know I won't get much credit so why bother to educate the rest of the world I think I threw one at you glaucoma the uh fibrotic immunologic diseases Sjogren's and others that's a very interesting one I told you that we got something really interesting in the the MASH world, we got a lot I mean we put half a dozen or more every year into the clinic and 50 in the clinic so.
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CURING GENETIC DEAFNESS
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By the way we haven't talked about what we're very proud of is our curing kids with profound deafness. There's a gene called otoferilin which was first discovered in the 1990s, just shows you how long science takes, by a woman whose name I forget at the Pasteur Institute. But there are about 50 kids a year born who are missing this protein. And if you don't have this protein in your hair cells and in your inner ear, you can put a jet engine next to these kids and they hear nothing. And our gang, we first got involved in, you know, we were working with Decibel. We brought Decibel inside. But, you know, and they've been great collaborators. But our team, together with them, we were able to figure out how to package a very complicated, very large gene and get it into children. And amazingly, amazingly, this is truly science fiction, okay? These kids can now hear. Almost half of them can hear a whisper and hear normally. And we made the decision we were giving it away for free because every once in a while you have to show the world that the biopharmaceutical industry really cares about what it does and cares about the people that it serves and we'll get a lot out of that in terms of we have learned how to maybe address bigger problems, more commercially viable, but we're very proud and I can't tell you how well we see that's been amongst our scientists, how it's increased people who want to come work for us. These are all sort of byproducts. But it was the right thing to do, and we're proud we did it. And I think it's a good statement.
MIKE ROCKEFELLER:
It was amazing seeing that child at the White House.
LEONARD SCHLEIFER:
Really amazing.
MIKE ROCKEFELLER:
Yeah.
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AI IN DRUG DISCOVERY
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MIKE ROCKEFELLER:
You had talked about Regeneron's Genetic Center, and you're a leader in technology and data. How are you using artificial intelligence right now in your R&D?
LEONARD SCHLEIFER:
Yeah, so two ways. One is the obvious way that any business could use. If you've got to write a protocol that's this thick, well, AI can write a first draft of that in a minute. Rather than have somebody prepare me for Rockefeller's hard questions, I can ask AI to do it. But that kind of what I call, quote, unquote, busy work is what AI is particularly good at. But if you know how AI works, and I've got a real lesson from this from George because he thinks about this stuff and he really, this all is intuitive to him. I have to think on it hard. But, you know, it's not really thinking. It's statistically putting things together just based on what it's trained on but and you know it might come up with a a new drug based on a small molecule scaffold or something but do we need it to design an antibody hell no we got our humanized mouse makes human molecule antibodies by the thousands and in fact the AI people all came to us wanting to get access to our collection of structures and antibodies so they can train. I mean, so we don't use it to discover the actual drugs, but we use AI in our genetics to find the right correlations, what's the right relationship, and it can do some of these big data tests faster and more powerfully than old methods could do that.
MIKE ROCKEFELLER:
Do you see that evolving over the next several months or years?
LEONARD SCHLEIFER:
Yeah, I think that we're looking about how to take advantage of AI and our data set, these millions of people, and see if we can't get more into the management of health care, not just by drugs.
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M&A PHILOSOPHY
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MIKE ROCKEFELLER:
Interesting. M&A. So you've taken, I would say, a different approach versus a lot of your peers, which is just focusing on technologies and platforms, as you mentioned, often early stage, smaller deals. Do you see that strategy evolving as the company continues to scale and grow over the coming years?
LEONARD SCHLEIFER:
Yeah, it's a good question, Mike. I don't think our strategy will evolve because I don't think it has devolved or it's never really changed. We are interested in any and all opportunities. We prefer things that are platforms. We prefer working with people who are like-minded and want to work with us where we can be additive together and one and one can literally make three. We want to make money and what we do um this notion that that this is free because you're taking it from your balance sheet and you can non-GAAP it or do something all that to us is so maybe a driving factor people talk about their M&A capacity you know, I don't think of that as a proven strategy destroy value you show me companies that have done that well. You know the one that's done it the best? Once, which is Sanofi with Dupixent. And they'll admit that. That was a great partnering kind of a thing. But competing for late stage or approved assets, there's not much to that because you're spending $10 to turn it into $6 frequently. And that's because people are so desperate. We literally have seen things that we thought were worth just to pick an arbitrary number, six, and people willing to pay 12. That's just crazy for us, especially because we have such a rich pipeline of our own. So if there was a great asset, I mean, we've got $17, $18 billion in the bank and we've got a lot of capacity. If there was a great asset that we saw value in that others didn't, Yeah, we would do it. We're not constrained by size. People don't really understand how all this works. We don't tell Nouhad Husseini, who is a great head of BD, hey, this is what you can spend this year, go out and spend it, and we're desperate for a phase three or something like that. We just look at the whole universe of things and what makes sense for us. And I just think it's a far more rational way of doing that. To me, you should view all this as one. That is, our goal as a company is to get products that make a difference to people, and that will help people and it will help our shareholders. If it comes to my research, which is most likely for us, that's more efficient, more predictable. But if we have to go outside, we have no problem with that.
MIKE ROCKEFELLER:
So could a large deal or even a merger ever make sense for a company like Regeneron?
LEONARD SCHLEIFER:
Sure, but it'd have to be value creating. And that's the hard part, why it's unlikely, but it'll have to be something that we see that's not visible to others at a price that makes sense compared to what others are willing to pay. And we've been involved in some of these mid-sized kind of discussions, but everybody pays these crazy numbers. It doesn't make any sense.
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SUCCESSION AND ADVICE FOR THE NEXT LEN
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MIKE ROCKEFELLER:
So you've been leading this company for almost 40 years. what does the next chapter look like for you personally and for the company whenever that time comes so that you can ensure that Regeneron and its culture endures?
LEONARD SCHLEIFER:
Yeah. You know, founder-led companies really, Mike, are different. George and I have been leading this company for a long time, and it is our life's professional work. We do this 24/7. We slightly keep different hours. So when I'm at home, George is maybe still in the lab or coming home. He's calling me or I'm calling him when he hasn't. And we're talking all the time and we're loving what we're doing because we were just so excited about the prospects of it's like living the dream of making a difference in people's lives and in doing that in a productive way with the appropriate financial rewards. I think it's great. But no man lived forever. And so we are developing talent on a constant basis. I want to do it. I know George wants to do it as long as we feel we can be the best people to be in the job that we're in. And when we're not, we have a deep bench of people that I think can take our place. But I like to think that there's a way about doing things, there's an ethical approach, there's a patient-first approach. I mean, I hear about some of these companies that, you know, I won't use names of people who the FDA wants to withdraw a drug because the data was manipulated according to the FDA and there's safety concerns. And they're still fighting whether or not to take it off the market. It's like they're in the widget business to me. I mean, they must have their own perspective on these things. But there are companies like that. That's not who we are. We like what we're doing. I think we're still doing it well. I don't think that people fully appreciate the difference the way a founder-led company is managed versus the, what I, you know, we're not renters, we're owners, so to speak. You know, you have a CEO or a CSO, they normally have, what, a five-year horizon or something like that. You know how many CEOs I've worked with at Sanofi, by the way?
MIKE ROCKEFELLER:
How many?
LEONARD SCHLEIFER:
Eight. Eight.
MIKE ROCKEFELLER:
Wow.
LEONARD SCHLEIFER:
So you know that's not who we are and so we like the what we do and we think we're good at it and we want to keep going but as I said we'll know when it's time to let the young bucks take over.
MIKE ROCKEFELLER:
You've done an incredible job. Before I let you go what advice would you give to the next Len who is thinking about leaving the lab and starting a company?
LEONARD SCHLEIFER:
Well I think the first thing I would do was find a George. That may be impossible because they probably broke that mold. But in terms of general advice, I would have to say you've got to have the right, the long-term perspective. Do not make singular bets. Ignore all the stuff that you hear from the analysts. I used to get in my early days, and sometimes I still do it because I can't resist a good fight, but some of the analysts who have these crazy views of Regeneron. You've just got to ignore all that noise. Even the shareholders, you can't ignore them, but you have to educate them that we're not here to make you money this quarter. You want to bet on whether or not when we turn over a trial, that's your business and that's okay, and you can make that wager with any ways that you guys can make those wagers. But I would say to somebody focus on the long term, focus on the science, focus on what you're really trying to do is make a difference to patients. You really are not in the widget business and have a really strong moral compass. There are going to be some down times where you've got to be willing to say this is not right I'm not going to do this and you've got to resist all those pressures.
MIKE ROCKEFELLER:
Great advice. Thank you for all you've done for patients and for shareholders, Len. Appreciate the time.
LEONARD SCHLEIFER:
Thank you, Mike. It's been a pleasure knowing you. You've been doing this for decades, but you don't look like you've changed. So kudos to you.
MIKE ROCKEFELLER:
Maybe we have a couple more years left in us.
LEONARD SCHLEIFER:
Yeah, I hope so. Great to see you.
MIKE ROCKEFELLER:
Thank you.
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.
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inSpired Podcast | Episode 01 | Transcript
Eli Lilly: Built to Last
Mike Rockefeller and Dave Ricks
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inSpired with Dave Ricks
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DAVE RICKS:
I like to win a lot. And I don't find a lot of satisfaction in coming in second.
MIKE ROCKEFELLER:
Over the last decade, Dave Ricks, led Lilly to become the most valuable healthcare company in the world. Is 100 million patients possible?
DAVE RICKS:
Today we have probably 20 million people in the world, probably going to like 30 this year. just 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.
MIKE ROCKEFELLER:
Conversations with executives building tomorrow's great companies. For investors, buy an investor,
DAVE RICKS:
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, or like really good questions where you're like, you know what? We need to be sharper on that.
MIKE ROCKEFELLER:
Few companies have stood the test of time like Eli Lilly. It is the epitome of durable. Which one of these layer stage assets do you think will be the biggest opportunity for Lilly?
DAVE RICKS:
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. So, you know, offer choice, basically. And if it says Lilly on it, we're good.
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Thriving for 150 years
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MIKE ROCKEFELLER:
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 as we think about you think it is about Lilly? How has the company been able to not just survive but thrive for this many years?
DAVE RICKS:
Yeah, it's a good, an important question actually. And I think, of course, there's no straight line, maybe like investing, you know? But if you, there's a couple of three points that have been pretty constant. And then I think the other thing is the adaptability. But what are those three points? I think we've always had a very strong scientific orientation. The company was founded on that idea. Colonel Eli Lilly was his purpose driven. And he saw in the civil war, as 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 that's a through line for us. We've invested in science probably more the most cumulatively over the years. And that's not gonna 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 gonna 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 we've been at our best. We've done that well. And when we bend down, we haven't done that well. So yeah, I think about those things.
MIKE ROCKEFELLER:
And you're coming up on your 10-year anniversary as CEO? 10-year, yeah. It's been a great run.
DAVE RICKS:
Yes, it's been exciting. A lot has changed. I was thinking about it the other day because I 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 first Trump administration. Like a lot of things were different. 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 expertise and sort of dug deep and kind of re-found our soul, which was like organic R&D. And I think what we've tried to do during my 10-year 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 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's 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 in 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.
MIKE ROCKEFELLER:
Where are you now in terms of R&D timelines versus industry?
DAVE RICKS:
I think in 2013 or 14, we started a project. So it was predated in my time as John, a 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 10. The industry has 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.
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Obesity market size
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MIKE ROCKEFELLER:
So you are now the largest healthcare 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.
DAVE RICKS:
Right. That's the placebo arm.
MIKE ROCKEFELLER:
Yeah, exactly. But just help us think about this from an investor lens. How many patients realistically could be on a Lilly product for obesity?
DAVE RICKS:
Yeah. That's, I mean, it's obviously a question we don't know the answer to, but we have some clues and I think some framing around that. So first, on the billion number, it's likely to grow. I agree with that. I think what drives overweight and obesity, it's 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 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 a homeostasis. One of them is, you know, incretins and GLP-1. 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 penetrational, 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 like 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 healthcare 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 gonna 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 will be dropouts and drop-ins.
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100 million patients possible?
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MIKE ROCKEFELLER:
Is 100 million patients possible? I mean, you're obviously building the company now for the next 10 years, you have to plan. So is that even a number that's possible?
DAVE RICKS:
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 in like chronic disease, you're getting into the 20s to 40s. So that's probably a high end to what we'll achieve, but against a bigger denominator. So that can be a very big number.
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Next generation weight loss therapies
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MIKE ROCKEFELLER:
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 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?
DAVE RICKS:
Yeah, yeah. And maybe just step back when this like, so 20 years ago we launched the first GLP-1 and Exendatide Byetta. And 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 Exendatide, 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 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 Allora Lintide addresses is another kind of one of these super family that has been around a while. Actually, there was a marketed drug for Amylin some time ago from a company called Amylin, which is interesting story. But, you know, it wasn't focused on weight loss and it certainly did similar story to Exendatide. 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. 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 hypothesize, oh, there'll be all these checkpoint inhibitors for cancer. Turns out, there's like maybe one other that works, right? CTLA-4 is okay, but 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 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 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.
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Retatrutide
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MIKE ROCKEFELLER:
One I wanted to drill in on is retatrutide. This is a unique situation. There is a lot of buzz in Silicon Valley. In the Bay Area,
DAVE RICKS:
Especially it's the episode or off-label retatrutide use.
MIKE ROCKEFELLER:
It reminds me of the buzz around tirzepatide, but even more so. And I wanted to just understand, what is all the excitement about? What is it about that profile, why people think this will be such an important product?
DAVE RICKS:
Well, more. I mean, it's a triple agonist and I think people are kind of probably mostly off-label ordering Chinese, so we don't recommend this by the way. But 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. 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 a really tirzepatide plus glucagon. Glucagon has a very central obesity role. It really depletes fat in the gut. And there's 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 gonna be a great medicine. But also people like flat stomachs and when they lose weight, they wanna feel lean. That's what this does. I suspect that's part of it too. This drug though is not for unassisted self-care. Like I think it's got more side effects that come with it and probably low doses are safer. But 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.
MIKE ROCKEFELLER:
So you've been positioning this as an over 35 BMI type product.
DAVE RICKS:
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 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 without making a single kind of chemical entity. That could be interesting too. I think there'll be needs for this in the future. And while, or forgopron is going to be a great maintenance medicine, some people will want different properties and that's what we can offer here.
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Orforglipron and eloralintide
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MIKE ROCKEFELLER:
Which one of these layer stage assets do you think will be the biggest opportunity for Lilly?
DAVE RICKS:
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, or orforglipron is gonna be a big drug, not because of the efficacy, but because of reach, you know, it's gonna 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 gonna 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 at an unusual situation where there's a first entrant market leader, tons of momentum. And then three years later, we wake up and that, 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? 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 GLP1 with amylin. That's interesting by itself. And 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. That could be a big problem. And not a bunch of titration because you don't need to titrate into the side effects. That could be a big product. 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 seems unlikely to have broad coverage in most markets for a while, just because they afford a billion in healthcare 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.
MIKE ROCKEFELLER:
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?
DAVE RICKS:
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, and if you make it inconvenient in 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 of them published the half-life. So, you know, by the time you get to day 30, you're down to like 20% of the original dose, and then you redose, and you're gonna get a little more weight loss, side effects again. And the key for the weeklies, semaglutide and dulaglutide, was flapped. 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, and 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 said, we've got ideas similar to the ones that you've seen. We 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, monthlies 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.
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Brain health, immunology, and cancer
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MIKE ROCKEFELLER:
One other area that is really interesting is these areas outside of obesity, immunology, brain health. Where are you most excited about? Where can incretins really play a really big role there?
DAVE RICKS:
I think those two are super fascinating. There's a third, which it's very hard to do studies. I'll touch on. So immunology is here now. We published data actually this last weekend at the dermatology conference of TOLTs, plus Zepbound, and that effect size, which by the way, you get the ACR 20 benefit on psoriatic arthritis.. You get the PASI 50 improvement way before the weight loss. 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 and OA pain. That had more than four point shift in this WOMAC score we use 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 gonna 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 the space and what's the right combinations? But 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 saw a couple of big studies from our competitor with the Evoke program and Alzheimer's and you did get movement of 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 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 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 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 neuropsych 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 ones 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 preventatives. 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 cohort matched groups that have OBC and those that don't and cancer rates are quite a bit higher in obese populations. So that would be great news as well.
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Lilly Direct
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MIKE ROCKEFELLER:
Let's talk about selling because this is getting really interesting with Lilly Direct. So you launched this in January of 2024 and it is now a big part of your obesity business.
DAVE RICKS:
Yeah, it's like a third of all obesity in the United States is Lilly Direct.
MIKE ROCKEFELLER:
I'd love to just understand where you see this going because it seems really fascinating and a real shift in how we are.
DAVE RICKS:
I think I sounded earlier, I think, this was one of these like perfect, I guess what in the Bay Area you'd call product market fit. Which we a little bit stumbled into, but we had some clues. 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. Literally, he said that to me. And it's like, why? Well, because you have all this apparatus you have to build to deal with the variety of complaints, knowledge levels, et cetera. 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, China internet world is different, but we have a couple partners in like a store within a store, Lily Direct, like on JD and Alli and pretty impressive start. So, 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, I think not being reliant on third parties as healthcare 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 up 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 healthcare 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, here's a diet sheet, why don't you follow the diet? 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 people roll their eyes. They don't like this, right? That's an unfortunate fact of our society, that people view obesity often as a personal failing, not a kind of a genetic predisposition in an environmental situation we find ourselves in. That's wrong. But I think those factors drive people to the platform, and again, those aren't just U.S. factors. We see really sort of geometric growth in many markets online.
MIKE ROCKEFELLER:
You have over 50% of your new prescriptions for Zepbound going through this channel in the U.S. Where do you see this business going? What percent of obesity scripts will go through this channel?
DAVE RICKS:
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, you'll see more switching. It'll act like consumer products. You'll see loyalty, yes, but also trial and error. I think it's gonna be a little bit different in the way 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 global thing. In fact, there are some markets where that medical channel is even more choked off, more broken, and we'll 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 don't want to jump to this, but in my time in the industry, in addition to 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, et cetera, 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 lineup. 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, some of these new modalities, people always think about orphan or specialty. I think the first big medicines using RNA silencing were like you had to inject into your spinal column for 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 gonna 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 a capability around obesity, it's sort of the perfect use case now, but I think there'll be other ones.
MIKE ROCKEFELLER:
What do you need to do to add to this Lilly Direct Program to make this an even more valuable asset for the company?
DAVE RICKS:
Yeah, automation, globalization. Right now, if you knew how we built this thing, you'd be like, "Wow, that's not really how software companies go to market e-commerce engines." It was very duct tape, baling wire, and the first instance, we're sort of in version two, I don't know, it's better, it's smoother. Like we have integrations into e-prescribing systems across the country, and it's, you don't 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 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 have one name outside the US, in all these other markets like Brazil or 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.
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Price stability through innovation
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MIKE ROCKEFELLER:
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. What would you say to that?
DAVE RICKS:
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 we're just 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, one to one. 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 a thousand a month to like 350 mostly positive for us. By the way, we were already launching in diabetes at about that net price anyway, so if you value the growth, if you look at gross to net appropriately, it's not really a price concession. It's like a volume expansion in a 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 10 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, Retatritide, or Forgopron, and post up higher starting points over the innovation that day, it 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 gonna happen to Semaglutide first, and 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 I think our competitors should take note of, which is if you have pipeline bets stacked against this, you don't want price erosion. That's not a great idea, because you have to compete with the thing you just did. So we'll see if they're paying attention to that, we pay attention to that.
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Innovators vs. compounders
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MIKE ROCKEFELLER:
The FDA recently came down pretty hard on Hims for attempting to come out with an Alorol version of Wegovy. Where are we in the battle between innovators, compounders, the FDA?
DAVE RICKS:
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 is put on the table, like, yeah, it's cannibalizing some of our business, not that much actually. But if we look at, maybe there's a couple hundred thousand people on compound at tirzepatide, maybe a few 10,000 on retatrutide, mostly in San Francisco. 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 it was 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 more than a hundred years ago, food, drug, and cosmetic, like why? Because the very reason Lilly was founded, there were too many fake snake oil things. 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. It's like tirzepatide-like. We 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. 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, tirzepatide is, I think, number 7,023, which means we made 7,022 other versions of tirzepatide we threw away.
MIKE ROCKEFELLER:
Amazing.
DAVE RICKS:
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 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 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 gonna be interesting to see what happens. There's $50. There's nobody using compounding who's gonna use compounding when they get $50 Zepbound. That's not gonna occur. So we'll see. That'll be an interesting experiment to measure. Okay, is it really just that? And I suspect that's gonna start the end along with hopefully some policy response from this administration.
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Neuroscience
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MIKE ROCKEFELLER:
Let's hope so. Yeah. Okay, maybe shifting from obesity. What's the next big opportunity for Eli Lilly?
DAVE RICKS:
We need to find it. Of course, we run a base business that is pretty similar to the company when you first started following us. You valued and then I took over. That's still going and growing mid teens, actually. That's a good drug business. In fact, if we peel it out ourselves, I think you'd put it in the top three out there. It just gets overshadowed by this 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 coming right now. And they're not against small things. You take 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. I think that's a giant opportunity. Duration of therapy is very long. A surprising fact is that the 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 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, it could be quite meaningful drugs in the industry. And so I think we have to be this in this like two mode 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. Lily's got a long history there. We've got some important studies going. We've got more to do. Actually, today we announced a deal with Centessa, looking at this Orexin pathway, which is very interesting for awake and sleep. Maybe in some ways, like a little bit of a corollary to GLP1, 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 GLP1 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. Other than like ketamine, I don't know of any real step up there. That's kind of sad. I guess ketamine is not a new idea really. Maybe that changes. If it does, we'd like to be a part of that and 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. 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 exciting one too. I put that in the neuroscience. Again, another thing that could get really big and help a lot of people.
MIKE ROCKEFELLER:
Yeah, that's an interesting study. So these are in patients, pre-symptomatic to Alzheimer's.
DAVE RICKS:
Yeah, p-tau 217 positive. We didn't even scan them. We're just blood tested. And so that's in the noise 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 preventative. It's walking well, people with a precursor to the disease, amyloids signature for Alzheimer's. But we do know people have high amyloid don't ever develop Alzheimer's, but can we reduce those that do? And if we can, that's a major breakthrough.
MIKE ROCKEFELLER:
Do you think the efficacy could be better than what you saw in Trailblazer 2 in your symptomatic patients?
DAVE RICKS:
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 Tauburn, which is the secondary protein of Alzheimer's or age or symptomatology. So people are 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 we have to do the study. And if it works, we would expect quite a bit of use. M&A;: opening the aperture
MIKE ROCKEFELLER:
You mentioned Centessa. How has your M&A strategy evolved now that you're scaling the business and we're gonna continue to scale the business?
DAVE RICKS:
Yeah, it needs to evolve. I think we've, you know, when I started, it was sort of nascent, I would say, occasionally. And 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 our organic engine. That's 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 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 tell her 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 when 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. Moving a forward there, we have different ideas there, but then 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 this phase of development where we really scrub things down.
MIKE ROCKEFELLER:
Yeah, it's unusual because you have in, I don't think you've done a transaction over 10 billion since you've been here.
DAVE RICKS:
Loxo is the biggest, it's eight.
MIKE ROCKEFELLER:
Eight. So size of deals could go up.
DAVE RICKS:
So that's as big for us as like six. Yeah. Yeah, I mean, look, as you know, in the drugs, 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, countercyclical, 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 have, there's only like 10 companies in the middle. It's less than the big ones. It's weird. So there aren't that many mergers where you'd say, "Okay, I'm getting a revenue line and a 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 gonna 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 we might have to look for more of those. And I think if we widen our therapeutic aperture, maybe we'll find more.
MIKE ROCKEFELLER:
Makes sense. Does the Lilly Direct channel change your view on what you may look at?
DAVE RICKS:
It does, yeah. I think, because if you say, "Okay, let's not use therapeutic space, but use like a different frame." 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 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 a 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. To get there, you'd really have to have one compelling idea. I think the kind of list of McKinsey decks that turned into real businesses is pretty low. I think you need a great drug and then you can enter. So we're open to that idea too.
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What inspires Dave Ricks?
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MIKE ROCKEFELLER:
On a personal level, true story, couple of weeks ago I was out at 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'd mentioned to him that you and I are gonna be talking and I asked him, I said, "What do you wanna 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, what makes you tick? What inspires you each day?
DAVE RICKS:
Yeah, it's a good question. I mean, I think there's like a couple 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 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 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 is like, if you gathered around like our kitchen table with our kids or adults now, but even now, okay, 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 this is where my kids, so we, you know, we have fun with that, cause you can kind of simulate that. And then the game gets put away and you're all, it's 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 purposes, 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 cause my wife was going to med school in Indianapolis and we were fiance at the time. I'm like, I need a job. So I'll go there and work for Lilly. Worked in the BDM&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. And then I went and launched in the US as the brain 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 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 drive. That was an turning point for you. That was like the lock-in point. I love the Lilly. I was surprised at what I found here. I was like, 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 can 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 we were just getting monoclonal antibodies and like waves of innovation were coming. And then the culture. 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 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. That's great. And then people come here and they try to live up to that obligation.
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Navigating a complex healthcare landscape
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MIKE ROCKEFELLER:
What's been the most difficult aspect of being CEO?
DAVE RICKS:
No, you know, I think actually the jobs change a lot, even with me in it, like in the 10 years. 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 because 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. 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 guide society in that way. I think that healthcare 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 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 healthcare system, I would guess more than any other thing in the healthcare 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 wait in, but 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, or like really good questions where you're like, you know what? We need to be sharper on that. Like it's a surface area to balance ideas off of, but most CEOs don't get a lot of. So I actually like that one, but yeah.
MIKE ROCKEFELLER:
Anything you would have done differently over these 10 years?
DAVE RICKS:
Sure. The longest list is like on the people side, like most of us probably. And our judgment, some people aren't perfect. Either moving faster on problems or who we brought in and then didn't work. And 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, you know, that stuff's emotional and sticky. And no matter what level you are, whether you're that employee sitting next to you, or mine, like that doesn't really change, you know. We've taken bets, it 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.
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10-year goals
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MIKE ROCKEFELLER:
This has been a great interview. Thank you so much. Maybe to end it, if we're sitting here 10 years from now, which would be great, I would love that. Sure this room will look exactly the same. In this way, 10 years ago, yeah, yeah. But you're 160. What do you want to have accomplished at that time?
DAVE RICKS:
I think there's like three big things. One is like make incretins, not like PD-1s, prove the case out that this is more like antibiotics. I often draw this analogy and people are like, 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. It 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-1 in 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. And 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 a 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 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 three or four year window to sort of try that. And we're certainly gonna 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 healthcare and not be so insulated. But 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, then you can be a great leader in this industry and hopefully in this company. And we just need more of those.
MIKE ROCKEFELLER:
Well, thank you. It's an honor. You've done such a great job for patients and for shareholders. So we really appreciate it. Thanks. Thanks. Great to be with you.
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Mike Rockefeller is joined by his colleague Neetu Dhaliwal to sit down with Joe Kudla, Founder & CEO of Vuori. Kudla traces Vuori's path from an Encinitas garage to a global brand, its fabric-first design philosophy, and the decision to build the company on free cash flow. They explore community as a growth engine, moving into women’s apparel, the plan to reach 300 stores by 2030, expansion into China, and how merchandising discipline protects full-price selling and best-in-class margins.
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inSpired Podcast | Episode 04 | Transcript
Joe Kudla, CEO of Vuori: The Discipline Behind a Decade of Growth
Mike Rockefeller, Neetu Dhaliwal, and Joe Kudla
Recorded July 17, 2026
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inSpired WITH JOE KUDLA
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JOE KUDLA:
The mandate at Vuori is we need to be innovating, we need to be consistently delivering exceptional fabrics to our designers so that we can be inspired to build great things.
MIKE ROCKEFELLER:
Today, I am here to sit down with Joe Kudla, the founder and CEO of the Performance Apparel Company, Vuori.
JOE KUDLA:
We built this company off of free cash flow. So, very unique, but you can only do that when you're very disciplined about your assortment and your merchandising strategy and how over-extended you get.
MIKE ROCKEFELLER:
Together with my colleague from Woodline, Neetu Dhaliwal, we will speak to Joe about Vuori, its history, and where he has taken the company in the years ahead.
JOE KUDLA:
You've got to have best-in-class margins if you want to invest in innovation. You lose focus in this business and margins can erode like that.
MIKE ROCKEFELLER:
For investors, by an investor. Conversations with executives building tomorrow's great companies.
JOE KUDLA:
I'm sure analysts that are potentially listening to this conversation would probably argue that maybe they should have been investing more in brand over the many years. It's hard to argue it because they've had so much success, but you see what's happening to their brand now, and now they're, you know, have to go through an evolution to catch back up. If I look out five years from now, of course, we're going to have, you know, 300 stores globally. The business will be much bigger. It will be much more global. But if I think about what will define our success, I want people to understand what The Rise, The Shine is all about. That you can balance both ambition and having big dreams while also enjoying the journey of life. Stay connected to ourselves, our friends, our community, to nature, to live a full life. If we can move the dial on that for humanity, I think that'll be a big success.
MIKE ROCKEFELLER:
I'm Mike Rockefeller, co-chief investment officer of Woodline Partners, and this is inSpired. Well, Joe, thanks for having us here.
JOE KUDLA:
Yeah, Mike, Neetu, thanks so much for being here.
MIKE ROCKEFELLER:
So it's only been a little over 10 years since you started Vuori, but you have accomplished a lot in that time. Maybe walk us through the history of the company and how it's evolved into what it is today.
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FROM AN ENCINITAS GARAGE TO PRODUCT-MARKET FIT
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JOE KUDLA:
Yeah. So we're sitting here in Carlsbad right now. We started the business about five miles south of here in a garage in Encinitas. And it came at a time in my life where I was practicing a lot of yoga to heal my back. I grew up, played a lot of physical sports. Lacrosse and football. I always joke that I pretty much spent my entire young years, like just running into people. And so I have a bad neck, a bad back. A friend suggested I try yoga. And I just really fell in love with the practice. I was going to class every day. And I was an observer of the market. And I don't know how much you've heard about our story, but I had started two other apparel brands before Vuori that never quite got out of the garage. But I was always very passionate about this space. And so I was always observing the marketplace for clothes. And what was really interesting about the marketplace for active wear was the dynamics were really changing. The way that people were wearing the clothes was really changing, especially here in Southern California. You had Lululemon that was really like taking a lot of share and growing incredibly fast with very minimal competition in women's. And they were starting to dabble in men's, but it always felt like it was our wives brand or it wasn't necessarily for us. And as we sat here in Southern California, people were wearing shorts that were designed for surfing or going to the beach to the gym because they identified with more of that laid back effortless aesthetic. You know, in Southern California, you never want to look like you're trying too hard. And I always thought that that was a really interesting duality, this idea of like high performance clothing built for movement and built for activity with this more laid-back effortless aesthetic that didn't necessarily look like it. And that was what people were looking for here. That's what my friends were looking for. That's what I was looking for. And it just didn't exist. And we felt so strongly about this, this idea of bringing a new perspective to the performance apparel market that was really rooted in the way that we lived here. And so yeah, we, you know, I had started another company and it was a great business. But after about seven years, I was ready for, you know, peeling the onion of life and trying something new and taking on a new challenge. And this one really was speaking to me. And so, yeah, I jumped in and we got going in a little garage. And it's been an incredible journey.
MIKE ROCKEFELLER:
Yeah. Amazing. At what point along that journey did you realize, hey, I got something that could actually work here?
JOE KUDLA:
Well, it was a bumpy start. And for a number of reasons. Number one, you know, we were a bootstrap company. And this was in the era of D2C startups like Warby Parker and Casper. And then the, you know, there was a whole tale on that story. Outdoor Voices. Roan was a brand on the East Coast. These were brands that were raising a lot of institutional money. I had raised $400,000. So, you know, we had to be really scrappy. And by nature, I had to figure out both like a business model that would work for the dynamics of where we were with our capital structure. And it turned out to be the best blessing when I look back. But we entered the wholesale market early. And when I say wholesale, the big wholesalers weren't interested in this category at the time. You know, they were still trying to address the female that was coming into their store wearing Lululemon. They hadn't even thought about men's. Because, by the way, if I hadn't mentioned, we started as a purely men's brand first. Like, we didn't offer women's today, the business. This is much different. And we can talk about that. But when we started, we were purely men's. Premium men's athleisure did not exist as a category at wholesale. Nordstrom wasn't thinking about it. REI wasn't thinking about it. The only brands that were interested in this space were yoga studios and gyms. You think Equinox and CorePower Yoga. So we got some early tests and distribution in a few of those stores, but we quickly learned there wasn't going to be the type of velocity that we would need to turn this into a business. And so turned out to be the best thing that ever happened to us. We pivoted solely to a direct-to-consumer strategy. We started speaking to our community directly and building a digital community. We started building an offline community through pop-up stores where we hosted all kinds of events and we learned the power of community. And we were starting to gain some traction digitally. And I was really starting to feel like, okay, there might be something here. And around that time, REI called us. And they had actually, the buyer of the menswear category saw somebody wearing a hoodie and a pair of shorts in the hallways at REI. And they asked them, what are you wearing? And they said, oh, this is a small startup, you know, down in San Diego where I'm from. And they asked for a phone call. So we went up, we went up to Seattle. We showed them what we were doing. And they were bringing in a very small subset of premium men's athleisure brands. They wanted to test to see if they could, if this could be a category that they expand into. So it was, it was all their major DMAs and, and it was a small test. So to answer your question, the moment that we knew that we were on to something was when we got our first selling report from REI in those 10 doors. And we had the highest sell through in the category sitting alongside brands like Nike and all the legacy that we aspired to and looked up to and had so much respect for. We had the highest performing product in the in the category. And they wanted to grow us from 10 doors based on the success of this test into 70 doors. And so we made that leap with them. It was a scary one because it could have put us out of business. But we had a lot of confidence. We were seeing a lot of great traction digitally. We were bringing so many new customers into the brand. And when we went to 70 doors and we saw that we maintained that performance across a broad kind of swath of the population and geography in the U.S. We knew we were on to something.
MIKE ROCKEFELLER:
Yeah. How far into the business, you know, did it take for that to happen?
JOE KUDLA:
This was probably about two and a half years in, two to two and a half years in when we got that data. And this is after a couple of moments where we nearly ran out of capital.
MIKE ROCKEFELLER:
Were there any key moments or decisions along the way that really changed the direction of the business?
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PIVOTING TO DIRECT-TO-CONSUMER AND BUILDING COMMUNITY
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JOE KUDLA:
Well, I think the decision to pivot to a direct-to-consumer strategy and put like the wholesale business, while we've still continued to focus on wholesale, it didn't become our primary focus. We really wanted to build that direct to consumer audience and what we learned was that by building a micro community, I shouldn't say a micro community, a large community of micro-influencers, people that were teaching classes, you know, the best CrossFit trainer in their community, the best yoga teacher in their community, people that were really bringing community together. We were partnering with them. And that content became the content engine for the brand. It became used in advertising. It became used in our channels. And so we didn't have a huge capital outlay for content creation. But I think that that was really kind of instrumental in those early days. So I think pivoting to that direct-to-consumer strategy where we could have that direct relationship. We could listen to the customer. That was really instrumental. And if I think back now, to those early days, it was not only the pivot to kind of e-commerce focused digital customer acquisition, but it was also a decision that we made very early to start our retail business. And our first space, I wouldn't even have called a store. It was really more of a community hub. We took a 3,000 square foot space down where we're from. It was close to the garage we started in. And, you know, it was a pretty funky space looking back. But it was actually perfect. It was low cost. We did a lot of the work ourselves. And we officed in it. We had about a third of the space for merchandise. And then a third of the space we converted into an art gallery. And we started hosting art shows. We started bringing in people from the community that were great photographers, painters, illustrators. And we started hosting these events. And we would come together. We would do a yoga class or we'd go for a run on the beach or we'd do a boot camp workout. And then we would have an art show. And like, we would have hundreds of people from the community at our store spilling out into the streets to celebrate this local artist or photographer that the community loved. And then we would bring in a DJ. We would invite other brands into our space. People that were starting breweries and food companies. And they would provide the drinks and the food. And we literally had no capital, no costs to host these events. And they became so popular in the community that we started hosting them monthly. And we became known for these events. And it was like when we first opened the doors of the pop up, we weren't even in the, we weren't on the 50 yard line of any high street. But we learned the power of community. And that was so empowering for us. And so when I think about where we're at today with north of a hundred stores, every single store has a community playbook. And we still live by those same values that we were taught in the early days at the pop-up. So very instrumental on the journey.
MIKE ROCKEFELLER:
Yeah. Your fabrics and fit are special. You talk to anyone who's worn your clothes and they'll say that. Talk about your unique fabrics and how you've been able to achieve that differentiation.
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A FABRIC-FIRST PHILOSOPHY
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JOE KUDLA:
Yeah, it's, there's a lot to unpack there. But Vuori has always been fabric-led. And so our number one value as a company is to make great product. I believe that it's not solely our moat, but it is a huge part of our moat is our commitment to product excellence. What I learned, having not been trained conventionally in this industry, is that the way that a lot of people approach product is they design the product, then they have a sourcing team that goes out and sources the fabric for that design. And then, you know, they make sure that that fabric cost works with the intended margin to bladder up to a to a consolidated gross margin. And then, you know, you bring it to market. I always felt like that was the backwards process because I was like, well, wait a minute. So you're saying that the designer isn't fully aware of the fabric? The fabric is every, you know, to the layman who had never been in the industry, I'm like, fabric is everything. Like, I don't want my designs to be like avant-garde and so loud. I want effortless and simplicity, which, by the way, is some of the hardest things to actually execute and design to because every little blemish can show. You have to be flawless in your needlework and your execution. But the fabric was the most important ingredient to delivering exceptional product. And so at Vuori, we do everything in reverse. And we call it our fabric-first design philosophy. Everything starts with fabric. So when we approach a season, we think about what is the fabric? And then what are we going to make? The fabric informs what we make. It's not reverse engineered, which it makes sure that we never compromise. And it ensures that we can maintain exceptional quality. So the mandate at Vuori is like, we need to be innovating. We need to be consistently delivering exceptional fabrics to our designers so that we can be inspired to build great things. So that's at the heart of who we are is the way we engineer our process to ensure that we never compromise and that fabric is at the heart of what we do. And then furthermore, to answer your question about fabric, we always look for fabrics that strike the balance between performance, versatility, and comfort. That trifecta is the Vuori recipe for bringing a product to market. So it's got to perform. It's got a wick moisture and manage sweat and move with your body and be breathable, all the things that we, that are just table stakes that you have to deliver in a performance product. But that's not enough. For us, it's got to have a tactile sensibility that doesn't identify you as somebody that's going to the gym or, you know, like living in workout clothes. Because our whole intention is, again, this West Coast proposition, this more effortless performance, product that kind of blurs the line between performance and everyday life. That versatility is at the heart of who we are. We call it built to move in, styled for life. And so the tactile sensibility of the fabric, the look and the feel, how it feels on your body is as important as the performance. So we're trying to check two boxes, whereas like a lot of brands we're really just aspiring to check one.
NEETU DHALIWAL:
Let's dive into that a little bit more. So are new materials or fabrics a big driver of how you stay ahead of competition going forward?
JOE KUDLA:
Yes. We are constantly bringing new fabrics into the collection. But I would say that one of the things that we've gotten a lot of, I would say productivity out of is building more of a franchise model. So that we aren't always chasing into new fashion, but we're building new products out of fabrics that our customers trust so that it keeps the rhythm of newness high, but in a container that a customer is already familiar with. And so, yes, we are introducing new fabrics, and it's important that we continue to innovate and bring new fabrics to market. It's also really important that we understand where we want to build a franchise and really establish trust with a consumer. So it's a blend of both.
NEETU DHALIWAL:
It takes time, right, to find these materials. What's the lead time of building a pipeline?
JOE KUDLA:
It's years. We have long lead time innovations where we might be five years away from bringing a fabric to market because there's a lot of testing, a lot of iteration. Some things are completely blue sky. They are literally like we are dreaming up something that does not exist. Those take a long time. There's other things where we might be inspired by something that a luxury brand is doing. We travel and we'll go to Italy and we'll go to Paris and we'll go to textile shows that are aimed towards a much different segment of the market. But we'll identify things that we love the look and feel of, but they may not have anything to do with performance. And then we'll come back and we'll work with our supply chain to identify ways of creating a version that will work for us.
NEETU DHALIWAL:
So you're a little bit farther down the funnel. You've actually identified the look and the feel and the construction of the fabric. Now you just need to interpret it in a performance way.
JOE KUDLA:
And then there's even farther down the funnel, which is much closer to market is you go to textile shows. You work with your vendors, they're working with you as your closest, and that's why building authentic great relationships with your supply chain is so incredibly important, which has been at the heart of our journey from day one, and we can talk more about that. But we might identify a fabric that they have developed and they're going to go bring to the open market. And we like it 80% of it, but we want to modify 20%. Oftentimes, that's for us modifying the materials to be more sustainable. So we convert most conventional synthetics into recycled or organic or bio-based. So that's one. Or we just might not like the brushing or we want to substitute one yarn for something that we think would behave differently. And then we'll get the fabric to a place that is ready to be built to move in style for life and we'll bring it to market.
NEETU DHALIWAL:
I like that. The premium active wear category isn't as nascent anymore. Obviously, you've helped build it. So I guess can you go more premium?
JOE KUDLA:
I think it's important that we know our customer, you know? And so Vuori does have an affluent customer. And so we haven't seen a tremendous amount of price resistance. I think that the customer is led primarily by quality. But we have to be mindful that we have big global aspirations. And so, you know, when you look at a collection of clothes, you know, you think about it in segments and chunks. And there is a segment of our collection where we work with the most premium best materials in the planet. And we might build an outerwear jacket that sells for $500. But then, like, the main line, the commercial business. We, you know, we have to be mindful of the competitive set.
NEETU DHALIWAL:
That makes sense. What about customer evolution? How's your customer today different versus before?
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KNOWING THE CUSTOMER, PROTECTING THE BRAND
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JOE KUDLA:
The customer is, it's a much broader customer than it was when we started. And if I just reflect on my own aging as I've built this company, I was 35 or 34 when we started. You know, I'm 48 today. And so while I like to think of myself as that same 35 year old man, you know, my preferences and choices have evolved. So we really try to institutionalize ourselves around that, that younger customer and try to understand them and make sure we're consistently taking them into consideration. But when you look at like the broad demo across our customer profile, what I would say is that they're not necessarily defined by an age and that they're more defined by the way they live. Active, health conscious. They're ambitious, but they balance that with wanting to live. They want to live a life that includes deep, meaningful experience. They want to learn and grow and they want to be inspired. They want to do multiple. They're not defined by one thing. They're not football players or basketball players or soccer players. They live a multi-dimensional active life where they might try surfing. They might be skiing in the winter. They like to run, but they also like strength training. They might attend the occasional yoga class. They just live a multi-dimensional life. They can't be defined by one thing. It's a value system and an ethos that I think our customers share beyond simply an age.
NEETU DHALIWAL:
So marrying that brand ethos of versatility with strong, great product and fit, how does that translate into customer retention, repeat rate relative to the industry?
JOE KUDLA:
We're on a journey. We don't have a loyalty program in place yet. But in spite of not having a loyalty program, we have best in class retention rates. And I think that ultimately, when you think about the flywheel that is a great consumer brand, you know, you want to start with product and make exceptional product and continue to innovate. That leads to loyalty. You've got to take incredible care of your customers. That also leads to great loyalty. Loyalty results in great margins. Margins results in a lot of more capital that you can reinvest into more innovation and continuing to bring great products to the market. And that's ultimately what we're trying to do. We're trying to exceed the expectations of our customer at every stage. But it always starts and ends with product is king in our business. Culture is queen. You've got to build a culture that's oriented around the customer. It's oriented around creating a thriving environment where great talent wants to be in the building. When you do those two things, you can really build a brand that has radical loyalty. And that results in something that can really grow and scale over time.
NEETU DHALIWAL:
Often in the past, we've seen that sometimes brands that scale quickly, they can become too accessible and it can risk brand dilution. What are you doing to make sure the brand stays authentic to its roots?
JOE KUDLA:
It's a great question. You know, what is the pace of growth that is healthy? Our business has gotten quite large. Yet what's interesting about Vuori is, you know, if you look at just the use of logos on our product. We aren't a brand that is like a one-trick pony. We're not one logo that is like a stamp that people are wearing or a symbol that people are wearing for status that could be a trend. Oftentimes people don't necessarily know what product you're wearing when you wear a Vuori. We work with multiple logo applications, which is people can criticize that because they'll say, oh, you know, you don't have one consistent identity of your product. But on the other hand, there's not one defining look that will go out of style and then all of a sudden people won't want to wear it. Like you see that happen in fashion a lot with brands that get too... their logo becomes the main thing. These brands that get so known for one identifiable look. Yeah. I mean, by definition, the people, the taste makers that are building that type of momentum, their whole, like, the reason they're popular is because they're identifying the new thing constantly.
NEETU DHALIWAL:
Well, it's not just the brand. It's the momentum, right? And so, like, if you stay true to the brand, obviously, margins in my view in consumer are an output of full price selling. And so if you stay true to the brand, full price selling should be the reason your margins are higher. Right. Yeah. It makes sense.
JOE KUDLA:
Yeah. And, you know, it's full price selling, which is a byproduct of like merchandising and planning discipline. You know, it's so, you lose focus in this business and margins can erode like that. And, you know, you buy a bunch of stuff that you can't market. And so it's all about alignment. Like, what are the products we buying? How are we going to go to market? How are we marketing them and how are we going to sell them through? And let's not get too greedy. Even if it comes at the cost of a little bit of upside on growth? Yeah. Like, maintaining full price selling is absolutely critical. When I think about durability and I think about, um, authenticity and scale, I just think about clarity. It always comes down. I don't think that staying small and authenticity have to be intrinsically connected. I think authenticity is about understanding who you are and what your values are and making sure that those scale with the distribution of your product. And that just comes down to being very intentional with how you run your company, the type of people that you bring into your company, the culture that you're building needs to be reinforced at every touch point. This has been an evolution for me as a CEO, as a founder that's had to learn how to become a CEO, is really trying to be intentional about how we scale our values with the business.
MIKE ROCKEFELLER:
Now, you started in men's active wear, but women's is a meaningful part of the business now, right?
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FROM MEN'S TO A DUAL-GENDER BRAND
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JOE KUDLA:
Yeah. That's one of the things that makes Vuori stand apart from some of the other competitors in our space is that we did launch with men's. Still today in our store, 50% of our store is devoted to men's. 50% of those style choices are devoted to women's. It's really a balanced approach. And it makes us very unique in our space where typically you have one gender that's very dominant. And I'd be lying if I didn't tell you that women's is like giving men's a run, because there's just a tremendous amount of opportunity in our women's business, and there is in men's as well. But the way that we speak to both genders is a little bit different. And so that's something we have to be mindful of as we want to intentionally continue to grow both at a relatively similar pace. But yeah, in 2018, after being in business for three years, we started seeing women show up and buying our men's product and really falling in love with this tactile sensibility of our fabrics. And that's when we knew that it was time. It was never a matter of if we would launch women's. It was more a matter of when. Because Vuori was always built for this community. Like, if you spend a little bit of time down south of where we sit today in Encinitas and you see, you know, the young people, the way they live their lives on the beach, in the yoga studio, running on the coast, raising young families, it's men and women living these active, multidimensional lives together. So we knew that this was a dual gender brand. We were intentional about that, choosing a name that would apply to both men and women. And so in 2018, we felt like we were ready. We started small. Everything in Vuori has been about very intentional building blocks to building this company. We never got out over our skis. You know, this business is one where we got profitable two years after we started and started generating free cash flow. And the business never put more money on the balance sheet to build the business that we have today. We built this company off of free cash flow. So very unique. But you can only do that when you're very disciplined about your assortment and your merchandising strategy and how overextended you get. So women started very thoughtfully with one pant and one hoodie. And then it just slowly grew from there.
MIKE ROCKEFELLER:
Yeah. That's impressive because not many companies have been able to transition from men's to women's. I mean, you know, maybe Nike, Ralph Lauren, or a couple, but not many. And you've done it. What do you think the key reason to the success there is?
JOE KUDLA:
Well, I think our fabric sensibility is at the top of that list. And I think that we've always had a recipe for design that always felt very effortless. It was about beautiful fabrics with very sophisticated, effortless design. And I think that that is a design language that speaks to both genders equally.
MIKE ROCKEFELLER:
So what's next in terms of new sport or new cohort?
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PARTNERSHIPS AND SCALING TO 300 STORES
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JOE KUDLA:
I mean, when we look at where we're going, it feels like there's opportunity everywhere. And I really believe that great businesses that are durable and have longevity are disciplined. When we think about the next chapter of Vuori, we're on a global journey today. So we have, gosh, about just over 10 stores outside of the U.S. now, I think we'll end the year closer to 20. And so we have a job to do now, which is different than the early days, which is to build global awareness. And so when we think about how we're going to do that, you know, we want to tell meaningful stories. And we want to work with great partners and build great relationships with great partners that can help do that for us. And so this is a new muscle that we're developing. And it's been incredible. If you just look over the past year, we've been working with a tennis athlete, Jack Draper, a world class athlete that ascended to number four in the world. And we've been working with Jack on tennis product. And it's been so exciting and energizing for our team. And we signed a partnership with Tom Holland. And we've been working with Tom and really sharing his love for the game of golf and his fitness regimen. And so partnerships are new and exciting, and it's really fun to think about how we can leverage these types of relationships to evoke our brand ideology, The Rise, The Shine, and really be a speaker for what we stand for. And they always speak to new audiences as well.
MIKE ROCKEFELLER:
Since I have you here, I do have to ask, are joggers going out of style?
JOE KUDLA:
Joggers are slowing down. And we're seeing a big transition from, you know, what was a very tapered leg in a jogger to a more kind of straight classic fit leg. So we're not seeing the customer vote for leaving the category, but we're seeing them just evolve their preferences for the leg shape. But what's ironic is like as soon as, you know, joggers have been downtrending now for probably three years. And now we're starting to see in women specifically, we're starting to see those joggers show up on runways and we're starting to see them come back. So it's going to be interesting to watch what happens.
NEETU DHALIWAL:
Like keep your joggers.
MIKE ROCKEFELLER:
I know. I have a whole closet of them. Maybe they'll come back sooner than I thought. Yeah, let's keep diving into the business.
NEETU DHALIWAL:
Let's talk about scaling growth. So you said you're at 105 stores now?
JOE KUDLA:
Just over 100 stores.
NEETU DHALIWAL:
Okay. You've laid out a plan to get to 300 stores by 2030. What's the expected mix of U.S. versus international as you think about that?
JOE KUDLA:
I would say it's probably a 75-25 split. There's a tremendous amount of growth in the U.S., but we're seeing a lot of signs that there's a big opportunity for our business internationally as well. And, you know, in the U.S., we have so much customer information. We understand where our customers live. We understand how they behave. And we have a really compelling recipe for how we open stores in the U.S. And our NPS scores in the U.S. I think are the highest in the category. Culture starts here at HQ, but it is diffused incredibly well into our stores. And we're incredibly proud of the level of service and the experience that people are having in our stores in the U.S. And there's a great opportunity ahead of us. But we're seeing really great signs in China. Europe is a smaller opportunity, but a very important opportunity, but we see a big opportunity for the brand in China, where, you know, today we have just shy of 10 stores, but we will continue to be focused on that market.
NEETU DHALIWAL:
What are the KPIs that gave you the conviction that now is the time to scale? You've been very methodical. So to go bigger now in China or abroad, what drives that?
JOE KUDLA:
Well, look, I think that there's people increasingly globally that are living the Vuori lifestyle. You know, if you look at China, it's a market that has, what, 1.4 billion people, and I think close to 40% of them are going to the gym regularly, that's like close to 500 million people that are exercising regularly. And it's a huge initiative for the government and for the people to see that number even increase even more. It's not just traditional sports that are inspiring people to move. It's yoga. It's hiking. It's cycling. It's tennis. It's, again, living this multi-dimensional active life. And so there's a big appetite for a product that can keep up with that lifestyle. So when we think about why now, it's a combination of the market being ready for Vuori and Vuori being ready for the market. You know, we are a brand that takes these decisions heavily. We want to make sure that if we enter a market, we're going to be able to deliver the level of service and care for the customer and have the tools and the institutional process in place to understand that customer so that we can continue to meet their needs. And that took time to build. You know, we spent seven years. We opened our first store in London three years ago. The first seven years were about institutionalizing our product mix, our quality, our fabrics, our process, our tech stack. The foundational brick laying to be able to meet the needs of a global consumer. And that's an ever-evolving journey. We haven't built the castle and now we're moving in. It's like we're still laying bricks as we move in, but we're much farther along in that journey. And as we see the lifestyle of people across Europe and Asia shifting to live a more active lifestyle, not just that, but balancing, you know, the ambition that maybe their parents' generation had with a commitment to want to have more deep, meaningful experiences, to find more balance in life, that's a value that we share with those communities. And so we feel like it's a great time to bring Vuori to the rest of the world.
NEETU DHALIWAL:
How much does localization matter across Asia, Europe, product fit? And I guess, what have the surprises been thus far, where the brand traveled really easily versus areas you've maybe had to adapt?
JOE KUDLA:
Yeah, I think in China, we largely share, you know, while the size curve of the product that we sell or that we allocate to the market is different, we have not necessarily had to build a specific fit block for that marketplace. And I would say that the way we've approached our international business today is really being thoughtful of approaching markets where we can leverage the global collection that's established here for those markets with little personalization. Again, we want to be mindful of making sure that the resources that we do deploy towards these initiatives are sufficient to make sure we deliver exceptional quality. We are being really thoughtful about those types of decisions and making sure that we don't stretch ourselves too thin. But, yeah, we've found that we have not had, from a product standpoint, to highly customize our approach. It's more about the products that they're choosing and making sure we're allocating the right products. And that tends to be the core offering that resonates in the U.S. has been resonating abroad as well. So that's been a really great sign. And then, of course, locally, how we approach the communities, how we tailor community events that are mindful of local cultures and the way that people live, we will always be highly sensitive to that.
NEETU DHALIWAL:
Do you seed the market with e-commerce to get a sense of where the brand's already starting to build some momentum before you build the store?
JOE KUDLA:
Yeah. I would say that, look, we have been very disciplined and focused on high-ceiling markets where we can execute our playbook that we understand. And that typically is a multi-channel strategy where we can reach customers direct through a digital strategy, where we can operate our own Vuori retail stores and build community around those stores, and that we can target select wholesale accounts, where we can do pop-ups and shop-in-shops and activate and reach consumers inherent in those stores. So it's a multi-channel playbook. It's one that has been very successful for us in the U.S. And it's a cluster strategy. So when we think about China, we're not thinking about all 1.4 billion people. We're thinking about Shanghai. What is our strategy for Shanghai? What is our strategy for Shenzhen? What is our strategy for Beijing? What is our strategy for Hong Kong? And making sure that we're building enough density in certain markets so we can build the infrastructure to service those markets. I think that that is a much more compelling strategy for a brand that prioritizes building community and being in great relationships with the consumer versus spreading ourselves too thin.
MIKE ROCKEFELLER:
Tariffs have been a pretty big theme in consumer. How have you adapted your business?
JOE KUDLA:
Look, tariffs have been something that every brand has had to navigate. We are not immune. I think what has been central to our approach is just continuing to nurture really strong relationships with our supply chain partners, our factories and the people that make our product. And it's not just the people that are cutting and sewing the product, but it's the yarn suppliers, the fabric suppliers, the finishing resources, all the way through the supply chain down to tier three, tier four, tier five. Everyone can come together. And we've been so fortunate to have the types of relationships where people want to work with us to navigate these together, so that we can take some of the burden from the tariffs. We can share it with our supply chain and pass a little bit, as minimal amount as possible, of it along to our consumers, as we have to. So that's been our approach. We have raised prices on a small subset of our products that we couldn't be as successful navigating. But for the most part, our team has done an incredible job of navigating it with the help of our partners.
NEETU DHALIWAL:
What about marketing investment? The landscape seems to be changing rapidly. So how are you evolving as a company?
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MARKETING, BRAND EQUITY, AND THE RETURN TO IN PERSON
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JOE KUDLA:
Well, when we started, the brand was really built around community. You know, with every store we opened, we activated locally around the store, combined with a digital marketing strategy. We were telling stories and reaching consumers digitally and building a digital community. You know, today, when I think about what is the driving force for new awareness, digital, the digital platforms have become quite competitive. And so you have to be thinking creatively and staying ahead of where the market is. And so for us, it's been a combination of things, but partnerships have really been leading that way. We're working with partners from tier one athletes that have global awareness all the way down to affiliates that are really great at sharing the stories of our products. So partnerships are really important. I think there's been a return to experiences in the physical world. And I think as we evolve and AI becomes more integrated into our everyday lives, I only see the trend of in-person picking up momentum. And so how are we creating experiences both around our stores, but also with partners, and creating larger scale activations for people to participate in the brand in meaningful ways? It's one thing for somebody to see a digital ad. It's another thing for somebody to come and have an interaction with the brand in the physical world. And that's something we're really proud of and we will continue doing. So yeah, I think in a lot of respects, I almost feel like what's old is becoming new again. I think the way that we build content is going to be changing with new resources available to us from a tech standpoint. The way that customers interact with brands is going to be changing a lot. But what will never change is having meaningful experiences with consumers in the real world. And so I think that you're going to see more and more budget become more balanced between performance marketing and tactics that are focused more at the bottom of the funnel, where customers are converting, and you're going to see a lot more investment up into the top of the funnel with brand storytelling and experiences and activations. And so we're on that journey just like everybody else.
NEETU DHALIWAL:
I do love that story of the risk you took with performance marketing early on. So it feels like the ambassador staying true to this brand ethos is a big driver going forward.
JOE KUDLA:
Absolutely. You know, not all awareness is built equally. Brand awareness is important, but brand equity is as important. You've got to scale brand equity with awareness. There's a lot of stunts you can do to get people, but to create affinity requires authenticity. And partnerships are a shining example of that. If you work with the wrong partner, just because they have a big audience, it's not going to be that impactful. It's not going to help you in a meaningful way. When you work with somebody like Tom Holland, where we already had an organic relationship, Tom loved the product. He would wear it as his brand of choice at a lot of the golf tournaments he played in. And we developed a relationship through his love for golf and his love of our apparel. It was only natural that we signed a partnership. Same thing with Cindy Crawford and Kaia Gerber and Rande Gerber. They were authentic fans of the brand. And we built an organic relationship with them over years. And so we crystallized it into a brand partnership where now they're more regular spokespeople for the brand. But I think when you have that type of authenticity and real connection with the partners you work with, it goes a lot farther. Co-labs, brand partnerships, the way that we integrate that into our go-to-market, we just have so much opportunity. Vuori has built this business off product affinity, not marketing. Bottom of the funnel marketing, yes, like, buy these shorts, they're green, you'll like them. But telling aspirational stories and thinking about the journey all the way through the funnel has not been a strength of ours. So that is a huge growth opportunity for us.
NEETU DHALIWAL:
Yeah. Last thing on this, as you guys scale, just hearing about the art exhibits, keeping that core in your stores, it's probably, it's a huge business, so I can imagine it's hard, but I feel like that could be huge.
JOE KUDLA:
I have a lot of conviction that we will get there. We just got to get the team in place.
MIKE ROCKEFELLER:
Joe, as you look across the industry and you look at the success of your peers, but also some of their missteps, what are the learnings there?
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INDUSTRY LESSONS, MARGINS, AND WHAT INSPIRES JOE
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JOE KUDLA:
You know, I think that it's really important in this business to always play the long game combined with having your foot on the gas at all times. So it's a bit of a duality at play, which is kind of inherent in the way we think here at Vuori. But you want to be pushing and making sure you're making forward progress while also being patient. And I think that you can never stop innovating. You can never rest on your laurels. You can build a lot of brand equity in this space, but if you don't continue to innovate and introduce new exciting products that exceed the expectations of your customers, eventually things will fizzle. You've got to know who you are and stay true to that. You know, our industry is very interesting because our space started out with a large brand that was very committed to mindfulness and elevating the product experience, building community, and elevating the product. And if you think about where brands are at now that are having success in our space, it's all about image. We've lost touch with the fact that at the end of the day, it's fabrics and quality that people want to wear to work out. But we are in a space now that has been bifurcated in so many ways, and there are brands that have stood up solely based on image and fashion alone. And that is a sign to me that it's time to really, really be grounded in the values that built this category, which is quality, quality, quality,. Product that's built to move in, and quality. And of course, you want outfitting to be compelling. You want to have great style. You want to look great. That's very important. But I think we can never lose sight of what ultimately drives this category, which is innovation and performance.
MIKE ROCKEFELLER:
You've laid out some 2030 goals with store count. What else do you hope to have accomplished by that time?
JOE KUDLA:
You know, I think we want to scale our product and distribution. We also want to scale our values and our brand message. If I look out five years from now, of course, we're going to have, you know, 300 stores globally. The business will be much bigger. It will be much more global. Our awareness will be a lot higher. So all of that stuff is easier said than done, we have to put a strategy in place. But if I think about what will define our success, I want people to understand what The Rise, The Shine is all about. It's a deeply personal journey that I've been on as an individual in my life. It's something that I wholeheartedly believe in, that you can balance both ambition and having big dreams while also enjoying the journey of life. So that we don't get to these destinations thinking it's going to shift something within us only to be disappointed. But we learn to live in harmony and stay connected to ourselves, our friends, our community, to nature, to live a full life. That, to me, is the ultimate wellness. And I think we can balance both ambition and also cultivating more inner resilience and more inner strength along the journey. And so that's a story that we really want to stand for. We really want to inspire within the world. And so if we can move the dial on that for humanity, I think that'll be a big success.
MIKE ROCKEFELLER:
It's unique that you've been profitable since early on in the company's history. As you scale, looking out a couple years and you're at scale, how important is it to have industry leading margins as you're investing the way you are?
JOE KUDLA:
I think it's a balance. I think that if you look at where Nike sits from a margin standpoint, it's a lot lower than, say, where Lulu has sat historically, but you see what's happening to Lulu. There's an argument, and I'm sure analysts that are potentially listening to this conversation would probably argue that maybe they should have been investing more in brand over the many years. It's hard to argue that, because they've had so much success, but you see what's happening to their brand now, and now they have to go through an evolution to catch back up. So I think it's a balance. I think you've got to have best in class margins if you want to invest in innovation and product, and build that moat that we were talking about, continue to deliver exceptional service and innovate so you can exceed the expectations of your customer. So I think margins are very important. Obviously margins will get challenged as you aspire to build globally. You have to invest in your business. But I do think it's very important that, you know, I'm a CPA by trade. I'm a very unique CEO of an apparel brand because I started my career as a public accountant, auditing companies. And so I always had a deep appreciation for financial discipline. And I think that's really important to create a durable brand.
MIKE ROCKEFELLER:
This has been a great conversation. Before we let you go, though, the name of this podcast is inSpired. So we have to ask, what inspires you every day?
JOE KUDLA:
Well, lately it's been my daughters, nine and six years old. They're in the prime years, we're having so much fun. We just went on a backpacking trip and got them out into nature. And they had so much apprehension about going miles into the woods and sleeping in a tent, and they thought they heard a bear outside all night. And then we got home and they were just beaming with joy. And I was thinking about it, thinking about the human spirit, and I'm like, that's what Vuori is all about, that's what The Rise, The Shine is all about. And so I'm inspired by watching them grow and having their life experiences. And just really anybody that is balancing wanting to get out into the world and dream big and do awesome stuff, but balancing that with an interest in learning and growing as a human.
MIKE ROCKEFELLER:
That's great. Well, thank you so much. Appreciate it.
JOE KUDLA:
Yeah. Thank you, Mike and Neetu. I really appreciate you guys having me on.