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