Dave Ricks, CEO of Eli Lilly, on GLP-1s and the business of pharma

Bullish:

• $LLY - Eli Lilly's market cap premium is driven by GLP-1 success and superior R&D productivity. The company maintains 20-25% R&D spending on growing revenues, creating a sustainable innovation engine. Their pricing model funds future innovation with a quarter of every dollar going to research.

  • “We're trading about 800 and that difference is the GLP-one phenomena. I think Wall Street also believes that our R and D productivity has been higher.”

    Dave·1:45:50

  • “If you're not generating double digit growth in the sector, you need to invest at 20% to 25% of sales in R&D. That's sort of a good positive return R&D stack.”

    Dave·1:53:54

  • “A quarter of every dollar you spend is going to a research lab or a clinical trial for a medicine you might not need or for someone you don't know. But that's the system by which we create new medicines.”

    Dave·1:57:33
• $DTC - Direct-to-consumer pharmaceutical platforms are disrupting traditional distribution. Lilly Direct has become the largest online prescription platform by revenue, annualizing in the billions of dollars.

  • “Today, we'll annualize in the billions of dollars. I think it's the largest prescription platform online in terms of revenue.”

    Dave·1:43:11
• $ORALGPL1 - Oral GLP-1 formulations are critical for scaling beyond injectable capacity constraints to reach hundreds of millions of users. They must be approved to meet massive market demand.

  • “The orals have to work. They have to be approved... I would guess by the time we go generic it will be a large proportion of adults.”

    Dave·1:34:57
• $INFLAM - GLP-1 drugs show promise beyond weight loss with anti-inflammatory effects. Clinical trials are combining GLP-1s with inflammatory disease treatments like psoriasis drugs.

  • “inflammation markers drop precipitously early... We're doing a study with our psoriasis drug Taltz and Zepbound that will read out this fall”

    Dave·1:28:39
• $BIOTECH - Biotechnology sector has potential for creating mega-markets through transformative therapies like Alzheimer's prevention, enabled by success in other areas like GLP-1s.

  • “We're doing this study now that I think will be quite interesting that it's going to potentially show you can slow Alzheimer's before it starts. That's the kind of thing that could be a mega market.”

    Dave·1:51:46
• $CHINABIO - Chinese biotech has dramatically increased its share of the global drug pipeline from single digits to nearly a third over the past decade.

  • “The share of the global drug pipeline that was Chinese ten years ago was, I think, in the small single digit... now I think it's high 20s approaching a third.”

    Patrick·1:06:35
• $NVDA - NVIDIA is becoming essential infrastructure for pharmaceutical R&D. Eli Lilly is building an on-premise supercomputer with NVIDIA's latest B300 chipset for drug discovery.

  • “Yeah. So today at the, what's it called, GTC conference they have, they unveiled, that we're well underway actually, should be done by the end of the year, by building a supercomputer on prem for us”

    Dave·0:42

  • “So the money goes to projects... clinical trials, new equipment, new laboratories, supercomputers from Nvidia. That's expensive.”

    Dave·2:03:26

Bearish:

• $COMPOUND - Compounding pharmacies face significant risks from IP theft violations and safety concerns, with reports of chronic kidney failure and permanent liver damage from their products.

  • “What I don't like is they're stealing my IP... there are people who have had chronic kidney failure and permanent liver damage, I wouldn't do it.”

    Dave·1:39:49
• $FOOD - Food companies face structural headwinds as GLP-1 drugs reduce caloric intake by 800 calories per day without causing hunger, directly threatening food industry volumes.

  • “And the trick is people lose the weight and they don't feel miserable... 800 calories a day.”

    Dave·27:46
• $PBMS - Pharmacy Benefit Managers built rent-seeking models on outdated technology that can now be easily disintermediated through direct-to-consumer channels.

  • “that's not so popular anymore and we can disintermediate them easily.”

    Dave·1:45:09
• $GENERICS - Generic drug manufacturing has completely moved offshore in pursuit of low costs, with no generics manufactured in the US, creating supply chain vulnerabilities.

  • “There are no generics manufactured in The US... These are basically chemical plants, and in the quest for low cost, it all moved offshore”

    Dave·1:21:30