voice2text-logo

Novo Nordisk (Ozempic)

2024-01-22 03:45:26

Every company has a story. Learn the playbooks that built the world’s greatest companies — and how you can apply them as a founder, operator, or investor.

NaN
[00:00:00.00 - 00:00:03.32]

All right, first episode back. Let's see if I can do this sleep deprived.

[00:00:08.44 - 00:00:17.44]

Who got the truth? Is it you? Is it you? Is it you? Who got the truth now? Is it you?

[00:00:17.60 - 00:00:24.62]

Is it you? Is it you? Sit me down. Say it straight. Another story on the way. Who got

[00:00:24.62 - 00:00:25.04]

the truth?

[00:00:25.64 - 00:00:30.72]

Welcome to season 14, episode one of Acquired, the podcast about great companies and the

[00:00:30.72 - 00:00:33.18]

stories and playbooks behind them. I'm Ben Gilbert.

[00:00:33.52 - 00:00:34.52]

I'm David Rosenthal.

[00:00:34.88 - 00:00:40.50]

And we are your hosts. Today's episode is on the company behind these sensational diabetes

[00:00:40.50 - 00:00:47.26]

and weight loss drugs, Ozempic and WeGoVie. The company is Novo Nordisk. Now, when I first

[00:00:47.26 - 00:00:51.34]

learned about Ozempic a few years ago, I thought, of course, this is going to be amazing for

[00:00:51.34 - 00:00:56.36]

a lot of people and could also completely destroy the market for insulin. Those insulin

[00:00:56.36 - 00:00:58.00]

companies better watch out.

[00:00:58.50 - 00:01:03.88]

But here is the fascinating thing, listeners. Novo Nordisk is the company behind insulin,

[00:01:04.14 - 00:01:08.58]

or at least one of the few big ones. Now, you might say, well, that's OK, because they're

[00:01:08.58 - 00:01:13.94]

probably a big pharmaceutical company that's, you know, very diversified with lots of different

[00:01:13.94 - 00:01:20.64]

drugs. Nope. No. Novo Nordisk is unique in that the vast majority of their revenue is

[00:01:20.64 - 00:01:25.52]

concentrated in the category of metabolic health. They have been the insulin and diabetes

[00:01:25.52 - 00:01:32.16]

company for the last 100 years. And perhaps even more surprising, this pharma giant is

[00:01:32.16 - 00:01:37.96]

unique in that they are owned and controlled by a nonprofit foundation. The stats around

[00:01:37.96 - 00:01:42.96]

weight diabetes and its impact on our society are staggering. There are 38 million Americans

[00:01:42.96 - 00:01:49.42]

with diabetes. That's one in 10 people. Globally, that number is over 500 million with the disease.

[00:01:49.42 - 00:01:56.00]

Diabetes costs the U.S. alone more than $327 billion a year. And on the other side of things,

[00:01:56.10 - 00:02:01.70]

in the weight category, around a billion people suffer from obesity worldwide. A billion,

[00:02:02.20 - 00:02:07.00]

including 40 percent of the U.S. population. If you expand that from obesity to overweight,

[00:02:07.34 - 00:02:13.68]

75 percent of Americans are technically overweight. It is really hard to imagine a bigger market

[00:02:13.68 - 00:02:18.92]

to go after, which is why Novo Nordisk has become Europe's largest company, surpassing

[00:02:18.92 - 00:02:24.18]

even LVMH last year, David. Yeah, it's wild. I mean, there are no other

[00:02:24.18 - 00:02:30.06]

disease and drug categories besides diabetes and obesity that this could be possible to

[00:02:30.06 - 00:02:34.98]

have a company of this size to have a pharma giant pretty much just focused on this one

[00:02:34.98 - 00:02:41.08]

area like this is the Hermes of the pharma industry. Yeah. So why is today in the early

[00:02:41.08 - 00:02:46.70]

2020s the moment in human history for these new GLP-1 drugs? Well, the crazy thing is

[00:02:47.26 - 00:02:52.36]

semaglutide, the molecule in Ozempic and Wegovy, was pioneered back by Novo Nordisk with the first

[00:02:52.36 - 00:02:58.42]

trial in 2008 for type 2 diabetes treatment. And it was built on research started in the early

[00:02:58.42 - 00:03:04.96]

90s. But here we are in 2023, almost three decades later, talking about it as a weight loss drug

[00:03:04.96 - 00:03:09.58]

that sort of magically appeared out of nowhere, or that's at least the public perception of it.

[00:03:10.06 - 00:03:15.96]

Incredibly, the fact that GLP-1 drugs could be used to reduce food intake was actually

[00:03:15.96 - 00:03:21.26]

discovered way back in the mid-90s in the first sort of scientific publication about it,

[00:03:21.48 - 00:03:27.38]

but only in 2021 did we finish the clinical trials that truly show how effective it can be.

[00:03:28.06 - 00:03:32.12]

And as we'll see, that's just the tip of the iceberg. I mean, this company is 100 years old.

[00:03:32.30 - 00:03:37.16]

The history goes way back and is way more interesting than I think just about anybody

[00:03:37.16 - 00:03:43.10]

knows. Yep. Pharmaceuticals is without a doubt the most complex industry that we have ever studied.

[00:03:43.10 - 00:03:46.72]

So to fully understand Novo Nordisk, we need to go back to a simpler time,

[00:03:46.90 - 00:03:51.46]

before the Food and Drug Administration, before all this industry consolidation and healthcare

[00:03:51.46 - 00:03:55.58]

oligopolies, before there were treatments for everything we take for granted today,

[00:03:56.00 - 00:03:59.84]

antibiotics, vaccines for polio, tetanus, measles, mumps, you name it.

[00:04:00.20 - 00:04:04.64]

That is where we will start our story. If you want to know every time an episode drops,

[00:04:04.76 - 00:04:10.72]

you can sign up at acquired.fm slash email. These will also contain hints at what the next episode

[00:04:10.72 - 00:04:14.94]

will be and follow-up facts from previous episodes when we learn new information.

[00:04:15.52 - 00:04:20.84]

Come talk about this episode with us after listening at acquired.fm slash slack. And if

[00:04:20.84 - 00:04:24.76]

you want more from David and I, you should check out our second show, ACQ2, where we interview

[00:04:24.76 - 00:04:29.46]

founders, investors, and experts, often as follow-ups to the topics on these episodes.

[00:04:29.98 - 00:04:33.32]

Before we dive in, we want to briefly share that our presenting sponsor this season,

[00:04:33.54 - 00:04:38.80]

which we are so pumped about, is JP Morgan, specifically their incredible payments business.

[00:04:38.80 - 00:04:43.40]

Yeah, we'll be talking about them in depth later in the episode, but we've known JP Morgan for a

[00:04:43.40 - 00:04:48.88]

long time. We both personally bank with them, as does Acquired, but we really uncovered the

[00:04:48.88 - 00:04:53.64]

breadth of JP Morgan Payments as we went deep into our industry research for our Visa episode last

[00:04:53.64 - 00:04:58.34]

year. Just like how we say here on Acquired that every company has a story, every company's story

[00:04:58.34 - 00:05:03.54]

is powered by payments, and JP Morgan Payments turns out to be a part of so many of our Acquired

[00:05:03.54 - 00:05:07.46]

companies' journeys. And it's not just the Fortune 500. They're also helping companies

[00:05:07.46 - 00:05:12.30]

grow from seed to IPO and beyond. Yep. We're pumped to explore payments through all these

[00:05:12.30 - 00:05:16.84]

different industries this season through both a technology innovation lens, but also a business

[00:05:16.84 - 00:05:21.48]

model innovation lens. Much more ahead. So with that, this show is not investment advice. David

[00:05:21.48 - 00:05:25.80]

and I may have investments in the companies we discuss, and this show is for informational and

[00:05:25.80 - 00:05:32.34]

entertainment purposes only. David, where are we starting our story? Well, we start in 1921,

[00:05:32.90 - 00:05:39.34]

over a hundred years ago, in Toronto, Canada, with the discovery and extraction of the pancreatic

[00:05:39.34 - 00:05:44.04]

hormone insulin by a laboratory group at the University of Toronto Medical School.

[00:05:44.80 - 00:05:50.52]

Insulin, of course, as most of you know, regulates the absorption of glucose from the blood into the

[00:05:50.52 - 00:05:57.66]

body, and it's the main anabolic hormone in most, if not all, animals in the world. Insufficient

[00:05:57.66 - 00:06:05.12]

insulin production in the body, of course, leads to the disease diabetes. So this group, if you

[00:06:05.12 - 00:06:10.50]

could call it that, at the University of Toronto, is comprised of the physician Frederick Banting

[00:06:10.50 - 00:06:18.08]

and the medical student, his assistant, Charles Best, along with a chemist and the head of the

[00:06:18.08 - 00:06:24.96]

laboratory there, and assistant medical school dean, John MacLeod. Now, there's a whole bunch

[00:06:24.96 - 00:06:30.96]

of controversy around who actually deserves credit for the discovery of insulin. The historical

[00:06:30.96 - 00:06:37.36]

consensus at this point, now being that it really was Banting and Best who did all the work, but

[00:06:37.36 - 00:06:45.36]

nonetheless, two years later, when the Nobel Committee awards them the 1923 Nobel Prize in

[00:06:45.36 - 00:06:52.50]

Physiology or Medicine for the Discovery of Insulin, it is Banting and MacLeod who get the award,

[00:06:52.50 - 00:06:59.14]

not Best. This will come back up in a minute. Yeah, and to set some context for the time period

[00:06:59.14 - 00:07:07.42]

here, 1921, the public is not aware of what insulin is. The public is, however, aware of what type 1

[00:07:07.42 - 00:07:14.24]

diabetes is. This is the juvenile form of diabetes. Only 5% of diabetes sufferers have type 1 today,

[00:07:14.52 - 00:07:20.90]

but back then, this was the dominant form of diabetes, and it was families whose kids had a

[00:07:20.90 - 00:07:26.46]

death sentence, and there was basically nothing that could be done. There were lots of rumors of

[00:07:26.46 - 00:07:33.32]

people trying to figure out what substances you could inject or eat or anything to cure this

[00:07:33.32 - 00:07:40.36]

sort of mysterious, horrible way to die. People were so convinced in the late teens and early

[00:07:40.36 - 00:07:46.38]

20s that scientists were on the verge of a breakthrough that the common wisdom was to

[00:07:46.38 - 00:07:52.30]

go on a diet of like 200 to 500 calories a day and starve yourself so that you could

[00:07:52.30 - 00:07:57.12]

live long enough, even though you had a terrible quality of life, you could live the months or a

[00:07:57.12 - 00:08:02.36]

couple of years long enough when the treatment did arrive to finally get it. I mean, we can't

[00:08:02.36 - 00:08:10.14]

overstate how important this was and how terrible, awful diabetes was. I mean, it was truly a death

[00:08:10.14 - 00:08:15.50]

sentence. That treatment that you were referring to, that was the official American and globally

[00:08:15.50 - 00:08:21.18]

accepted treatment for diabetes, it was literally called the starvation diet, and it was just an

[00:08:21.18 - 00:08:26.18]

attempt to prolong your life as long as possible, but you are going to die unless a treatment

[00:08:26.18 - 00:08:34.06]

is found. So when we say that this group won the Nobel Prize in 1923, this isn't just like a Nobel

[00:08:34.06 - 00:08:40.60]

Prize. This is one of, if not the most important advance in all of modern medicine that they're

[00:08:40.60 - 00:08:46.56]

discovering here. I mean, we're just not that many decades after snake oil salesmen, patent

[00:08:46.56 - 00:08:51.18]

medicine. We talked on the Standard Oil episode about John D. Rockefeller's father literally

[00:08:51.18 - 00:08:56.00]

selling snake oil, and that's just barely in the rear view mirror. This is one of the earliest

[00:08:56.00 - 00:09:01.68]

breakthroughs in modern science. We were still years away from antibiotics and certainly decades

[00:09:01.68 - 00:09:07.00]

away from the popularization of antibiotics as a treatment. So this was the big breakthrough.

[00:09:07.00 - 00:09:13.16]

Yep. All right. So what did Banting and Best do? So scientists had known, even going back to the

[00:09:13.16 - 00:09:20.70]

1800s, that diabetes was caused by the misfunctioning of some type of hormone that was created in the

[00:09:20.70 - 00:09:27.44]

pancreas. But until Toronto, nobody had been able to actually isolate what that hormone was, let

[00:09:27.44 - 00:09:33.20]

alone extract it. And to put a finer point on it, Banting and Best didn't even know what the hormone

[00:09:33.20 - 00:09:37.34]

was. Even when they did figure out what to extract, they thought it was sort of this soup of

[00:09:37.34 - 00:09:41.06]

a bunch of different chemicals mixed together. They wouldn't figure out for years and years and

[00:09:41.06 - 00:09:45.94]

years, oh, this is like one very pure specific hormone that we are isolating here. So by

[00:09:45.94 - 00:09:53.28]

experimenting with dogs and dog pancreases, they're able to extract something that comes to be known

[00:09:53.28 - 00:10:00.42]

as insulin. And not only extract it, they then experiment with it and inject it into human

[00:10:00.42 - 00:10:08.56]

diabetes patients who are at severe end-of-life stages. And miracle, the human body is able to

[00:10:08.56 - 00:10:15.68]

use this extract from dog pancreases, and these patients have miraculous recoveries.

[00:10:16.36 - 00:10:20.54]

Yeah. I spent a bunch of time reading this book, Breakthrough, by Thea Cooper and Arthur

[00:10:20.54 - 00:10:25.30]

Ainsbourg, and they go way into this. Basically, this team was the first one to figure out you

[00:10:25.30 - 00:10:32.24]

could target the pancreatic islets and isolate the extracts in a relatively pure form, and pure

[00:10:32.24 - 00:10:36.46]

by their standards, not certainly by today's standards. But you're right, totally crazy

[00:10:36.46 - 00:10:41.02]

extracting from these dogs and injecting in humans in extremely limited quantities.

[00:10:41.66 - 00:10:46.08]

Once they figured it out, it was still hard to then go from there to getting it to people

[00:10:46.08 - 00:10:50.00]

because they're like, well, okay, we did this thing that kind of worked once from one dog

[00:10:50.00 - 00:10:57.30]

into one person. So where do we go from here? And importantly, this new insulin substance,

[00:10:57.48 - 00:11:04.88]

while it is a miracle, it's not a cure. Injecting patients with it doesn't magically restart

[00:11:04.88 - 00:11:10.80]

production of insulin in their own pancreases or cure the disease. It only works until your

[00:11:10.80 - 00:11:17.48]

body uses it all up, which is pretty quickly. So these diabetes patients, they finally have a new

[00:11:17.48 - 00:11:23.66]

lease on life, but it's kind of also just that, like a lease. In order for them to survive, they

[00:11:23.66 - 00:11:30.44]

need to regularly inject an appropriate amount of insulin. And by regular basis, especially in

[00:11:30.44 - 00:11:36.42]

these early days, that's like every couple hours. And you can imagine the incredible high wire act

[00:11:36.42 - 00:11:41.40]

in the early days where they've extracted from literally one dog. They've kind of written down

[00:11:41.40 - 00:11:46.96]

the process. Strangely enough, somewhere along the way, the process was forgotten. Someone else had

[00:11:46.96 - 00:11:51.22]

to replicate it. And then they took his notes, combined them with the original researchers,

[00:11:51.68 - 00:11:56.08]

and then figured out a path forward. I mean, we discovered the process for refining insulin

[00:11:56.08 - 00:12:01.06]

enough to put it into humans and then lost it and then found it again. This was the state of medical

[00:12:01.06 - 00:12:05.12]

science. And so you have people ringing off the hook, newspapers reporting, the breakthrough is

[00:12:05.12 - 00:12:09.84]

here, the breakthrough is here. And they've got like single digits or dozens of vials of usable

[00:12:09.84 - 00:12:15.42]

insulin, each of which need to be injected into a single patient every few hours in Toronto. So

[00:12:15.42 - 00:12:20.78]

there's not enough to go around. The path forward is super unclear. And this is foreshadowing a

[00:12:20.78 - 00:12:28.12]

little bit, but the era that we're in here in 1921, there is a firewall between industry and

[00:12:28.12 - 00:12:34.46]

medical science. And it was perceived to be unethical to make money on taking your medical

[00:12:34.46 - 00:12:38.98]

breakthroughs and sort of turning them into companies. And so there's this extreme culture

[00:12:38.98 - 00:12:44.76]

at the University of Toronto around we have to protect anyone from making too much money off

[00:12:44.76 - 00:12:49.96]

this thing. So we got to be really careful and potentially even slow down its development and be

[00:12:49.96 - 00:12:54.60]

really thoughtful about how we distribute it to the world so that nobody takes it and makes too

[00:12:54.60 - 00:12:58.60]

much money. Yeah. Banting and Best and McLeod aren't going to go, you know, today they would

[00:12:58.60 - 00:13:02.74]

go like start a company, you know, around this, like that's not going to happen back then. But

[00:13:02.74 - 00:13:09.42]

all of a sudden the world needs a lot of this animal insulin and in a supply chain that can't

[00:13:09.42 - 00:13:14.70]

go down because once you start patients on this, they need it forever. So what the University of

[00:13:14.70 - 00:13:23.24]

Toronto does do is they license production and development rights to a large American drug

[00:13:23.24 - 00:13:31.14]

company based in Indiana, Eli Lilly. And they give Eli Lilly a one year exclusive development license

[00:13:31.14 - 00:13:38.44]

to try and mass produce this substance. And again, like you said, this is like a big step for the

[00:13:38.44 - 00:13:42.82]

University of Toronto to do this, but the need in the world is so great that they're willing to work

[00:13:42.82 - 00:13:48.00]

with industry here. You literally have presidents and secretaries of state trying to call in favors

[00:13:48.00 - 00:13:53.60]

and successfully calling in favors to get access to the limited vials that the University of Toronto

[00:13:53.60 - 00:13:57.90]

has. Yeah. Wasn't Elizabeth Hughes, one of these famous first patients, the daughter of the

[00:13:57.90 - 00:14:05.20]

secretary of state of the U.S. Right. Charles Evans Hughes. Yeah. Yeah. Wow. So it's obviously

[00:14:05.20 - 00:14:11.06]

not practical or maybe not ethical. That's beyond the scope of this podcast to use dog

[00:14:11.06 - 00:14:18.00]

pancreases for scaling mass production here. But it turns out there actually is an abundant

[00:14:18.00 - 00:14:23.14]

ready supply of animal pancreases that happen to be just sort of lying around in the American

[00:14:23.14 - 00:14:28.16]

heartland and just about every human food production center in the world. And that is cow

[00:14:28.16 - 00:14:34.66]

and pig pancreases from, you know, all the meat that we eat. Indiana's got a lot of cow farmers.

[00:14:34.94 - 00:14:40.10]

And so the clever really start up Eli Lilly. I mean, the company had been around for a while,

[00:14:40.10 - 00:14:45.84]

but this idea of taking on real R&D risk was sort of a new concept. So they sort of start up. Eli

[00:14:45.84 - 00:14:52.48]

Lilly is going around hiring salespeople to bang down the door of slaughterhouses all over Indiana

[00:14:52.48 - 00:14:59.58]

and say, hey, I know your waste product includes pancreases. Do you think you could ship those to

[00:14:59.58 - 00:15:04.18]

us? We'll pay you for those. Yeah. And it's actually not an easy sale because those farmers

[00:15:04.18 - 00:15:08.00]

are like, it's going to slow down my process if I have to figure out how to separate the pancreases.

[00:15:08.00 - 00:15:13.86]

And this is already a real tight ship. So there's a real entrepreneurial tale of Eli Lilly sort of

[00:15:13.86 - 00:15:18.58]

convincing large, large numbers of slaughterhouses to do this. The other interesting thing to note

[00:15:18.58 - 00:15:23.16]

about the Eli Lilly license, David, which I thought was really clever is it's a one year

[00:15:23.16 - 00:15:28.94]

exclusive license where there's two conditions and the conditions are a trade. One, Eli Lilly

[00:15:28.94 - 00:15:34.66]

has to report back any advances that they make to the University of Toronto. It's almost like

[00:15:34.66 - 00:15:39.88]

Operation Warp Speed going on, kind of analogous to COVID. As they figure stuff out, they have to

[00:15:39.88 - 00:15:44.86]

share it back with the University of Toronto to improve the manufacturing yields of whoever else

[00:15:44.86 - 00:15:50.72]

will be developing the drug. In exchange, the thing that Eli Lilly does get to retain and protect on

[00:15:50.72 - 00:15:56.64]

their own is a brand. Eli Lilly saw it really important early to say, hey, we want to build

[00:15:56.64 - 00:16:00.96]

a brand around insulin so that people know it's coming from us, that it's of a certain quality.

[00:16:00.96 - 00:16:04.86]

And even when we lose our one year exclusive license, and even when we stop contributing

[00:16:04.86 - 00:16:09.06]

the manufacturing IP back to you, the brand actually stays ours.

[00:16:09.54 - 00:16:14.36]

Yeah. We're going to talk a bunch more about Eli Lilly here as we go, but this moment,

[00:16:14.44 - 00:16:19.28]

this insulin moment, this is what really turbocharges them and makes them into one of,

[00:16:19.36 - 00:16:24.12]

if not the first kind of leading American and international pharmaceutical company,

[00:16:24.16 - 00:16:29.02]

which it still is to this day, still bigger than Nova Nordisk. Although not by too much.

[00:16:29.02 - 00:16:32.80]

Well, much more diverse, but not too much larger by market cap.

[00:16:33.30 - 00:16:37.34]

Okay. So back to this whole Nobel prize thing, which as we said,

[00:16:37.64 - 00:16:43.36]

was awarded to Banting and assistant medical school Dean John McLeod. Now,

[00:16:43.86 - 00:16:49.92]

how did McLeod end up being the guy who shares the award with Banting and not Best? And years later,

[00:16:49.98 - 00:16:54.36]

actually, the Nobel committee would basically admit that they messed that up. It turns out

[00:16:54.36 - 00:17:00.38]

that the answer to that is the key to the first chapter of our story today,

[00:17:00.92 - 00:17:04.54]

because the actual nomination, I don't know if you knew this, Ben, the actual nomination

[00:17:05.30 - 00:17:12.74]

for that prize was put forth by a previous Nobel prize winner in physiology or medicine,

[00:17:13.18 - 00:17:22.88]

the 1920 Nobel prize winner from Copenhagen, Denmark, a animal biologist named August

[00:17:22.88 - 00:17:28.08]

Crow, who also happens to be the founder of Nova Nordisk.

[00:17:28.62 - 00:17:34.40]

Is that how Nobel prizes work? A previous winner nominates the current nominees, or is it just like

[00:17:34.40 - 00:17:37.58]

it certainly helps their case if a previous winner?

[00:17:38.18 - 00:17:43.66]

Yeah, I do not think it is a requirement, but certainly a previous winner and a recent

[00:17:43.66 - 00:17:46.82]

previous winner in the same category you would imagine carries a lot of weight.

[00:17:47.02 - 00:17:50.90]

So the guy who would go on to found Novo Nordisk is the one that nominated

[00:17:50.90 - 00:17:54.68]

Banting and McLeod for the Nobel prize before starting the company.

[00:17:55.22 - 00:18:00.66]

Yeah. Now here's the wild thing about August Crow, founder of Novo Nordisk,

[00:18:00.94 - 00:18:05.48]

the world's premier insulin company focused on insulin and diabetes for 100 years now,

[00:18:05.96 - 00:18:11.86]

world's premier GLP-1 company. He's not a physician. He's not even a human biologist.

[00:18:12.30 - 00:18:14.08]

Yeah, he was an animal biologist, right?

[00:18:14.10 - 00:18:18.72]

Yeah, he was an animal biologist. Fun fact, though, this is maybe my favorite sidebar in

[00:18:18.72 - 00:18:25.40]

the episode. He studied at the University of Copenhagen. His advisor was a guy named Christian

[00:18:25.40 - 00:18:29.68]

Bohr, B-O-H-R. That name might sound familiar to some people.

[00:18:29.94 - 00:18:30.82]

Descendant of Niels Bohr?

[00:18:31.96 - 00:18:39.26]

Father of Niels Bohr. That Niels Bohr, father of atomic physics, also winner of the Nobel prize,

[00:18:39.42 - 00:18:45.90]

major contributor to the Manhattan Project. So yeah, his August's PhD advisor was the father

[00:18:45.90 - 00:18:50.12]

of Niels Bohr. Everybody's winning Nobel prizes. There must have been something in the water in

[00:18:50.12 - 00:18:51.20]

Copenhagen at that time.

[00:18:51.56 - 00:18:55.30]

Also, that tells you how long ago this was, that in my head, Niels Bohr is like someone

[00:18:55.30 - 00:18:58.40]

from a long time ago, so it would be a descendant, but actually this is his father.

[00:18:58.78 - 00:19:03.72]

Yeah, right, right, right. Okay, so back to August Crow. How the hell does he end up

[00:19:03.72 - 00:19:07.56]

going to Toronto, getting involved in all of this, starting, you know, Novo Nordisk?

[00:19:08.20 - 00:19:17.16]

Well, in 1920, the same summer that he wins the Nobel prize, his wife, Marie Crow, is

[00:19:17.16 - 00:19:22.54]

diagnosed with diabetes. And this starts weaving together this whole crazy chain of events

[00:19:22.54 - 00:19:29.32]

that leads to, well, Nordisk. Novo comes a little later. Marie herself is actually a

[00:19:29.32 - 00:19:35.76]

pretty incredible person. She is a physician. So she's the first woman in Denmark to earn

[00:19:35.76 - 00:19:41.08]

a doctorate in medicine. And Denmark, I kind of suspect, has always been pretty progressive

[00:19:41.08 - 00:19:46.00]

relative to the U.S., but even still, like we're talking about like the 19-teens, a woman

[00:19:46.00 - 00:19:51.06]

to earn a doctorate in medicine and then be a practicing physician was obviously unique.

[00:19:51.60 - 00:19:51.62]

Yes.

[00:19:51.78 - 00:19:56.98]

So when she's diagnosed in 1920 and, you know, she basically self-diagnoses, she knows

[00:19:56.98 - 00:20:01.28]

what's going on. Like she and August, like she knows exactly what this means. Like she's

[00:20:01.28 - 00:20:08.46]

to die. This is horrible. But given that they're both very, very active in the scientific and

[00:20:08.46 - 00:20:13.36]

medical community in Europe, they are able to get her the best care possible, which at

[00:20:13.36 - 00:20:19.98]

this point in time in Denmark is a young Copenhagen based physician named Hans Christian Hagedorn,

[00:20:20.22 - 00:20:24.98]

who is widely respected as sort of the best endocrinologist in town, even though he's

[00:20:24.98 - 00:20:30.84]

very young and he's up to date on all the latest workings of the starvation diet and

[00:20:30.84 - 00:20:36.74]

how to maximize quality of life and prolong life as long as possible. Fortunately, Marie

[00:20:36.74 - 00:20:42.38]

diagnoses herself very early. He puts her on a closely monitored starvation diet and

[00:20:42.38 - 00:20:49.66]

they stabilize it enough, enough after a year or so. Now, back to August. Ordinarily, you

[00:20:49.66 - 00:20:54.22]

know, after you win the Nobel Prize, you go on a major international lecture tour. And

[00:20:54.22 - 00:20:58.22]

of course, he's invited all over the world, particularly to the elite universities in

[00:20:58.22 - 00:21:03.42]

America, to come give speeches on his Nobel Prize winning research. But because Marie

[00:21:04.06 - 00:21:12.00]

fell ill at the same time, he had to delay his trip until 1922. So in 1922, August and

[00:21:12.00 - 00:21:16.92]

Marie set sail for Boston, which is, by the way, amazing that a type one diabetic has

[00:21:16.92 - 00:21:22.84]

made it sort of this far in life and is in the early 20s doing transatlantic travel.

[00:21:22.84 - 00:21:28.72]

Totally amazing. So August is going to give a delayed series of lectures here at both

[00:21:28.72 - 00:21:34.46]

Harvard and Yale. While they're in Boston at Harvard, they meet with a guy named Elliot

[00:21:34.46 - 00:21:39.56]

Joslin, who he's actually the inventor of the starvation diet. He is like the world's

[00:21:39.56 - 00:21:46.60]

foremost diabetes physician and researcher at this point in time. And Elliot tells them

[00:21:46.60 - 00:21:51.92]

about what's going on in Toronto. This is the world that we're living in back then.

[00:21:52.56 - 00:21:58.68]

News of the discovery of insulin hadn't really yet reached Europe and certainly hadn't

[00:21:58.68 - 00:22:03.76]

reached Denmark at this point in time. So it was like a competitive advantage to be

[00:22:03.76 - 00:22:08.42]

a Nobel Prize winner on an international lecture circuit because you got better,

[00:22:08.60 - 00:22:13.46]

faster information about brand new medical advances. Yes. Well, and particularly competitive

[00:22:13.46 - 00:22:19.38]

advantage, like life advantage. They're just concerned about Marie's life at this point

[00:22:19.38 - 00:22:27.02]

in time. So Elliot says, you know, I know the guy who runs the lab up there, John McLeod,

[00:22:27.22 - 00:22:34.24]

let's write him a letter and see if while you're in America, you can go up and see them and see

[00:22:34.24 - 00:22:40.08]

the lab, see what's happening and maybe get some of this insulin. So August and Marie write to

[00:22:40.08 - 00:22:46.14]

McLeod. Marie also writes back home to Denmark, to Hagedorn and tells him about what's going on

[00:22:46.14 - 00:22:51.72]

and about this discovery of insulin. She suggests in that letter that since Hagedorn is kind of the

[00:22:51.72 - 00:22:59.24]

leading diabetes physician in Denmark, maybe while they're in Toronto, they might be able to secure

[00:22:59.24 - 00:23:05.46]

some rights or ability to bring insulin back to Denmark. McLeod in Toronto, he gets the letter.

[00:23:05.56 - 00:23:11.16]

He's like, of course, come on up. You and Marie both come stay in my personal home. Sadly,

[00:23:11.16 - 00:23:16.78]

unfortunately, Marie falls ill and she can't make the trip up to Toronto. So August goes alone,

[00:23:16.86 - 00:23:22.10]

but he stays with McLeod, observes the insulin production process, sees everything that's

[00:23:22.10 - 00:23:31.56]

happening. They become close and friendly. Most importantly, McLeod takes August to go meet with

[00:23:31.56 - 00:23:37.82]

the insulin committee and talk about what Marie had suggested to Hagedorn of like, hey, maybe

[00:23:37.82 - 00:23:44.62]

these are the right people to bring insulin to Europe, essentially, but at least to Denmark.

[00:23:45.40 - 00:23:52.92]

Now, funnily enough, at this particular point in time, it turns out you actually can't patent drugs

[00:23:52.92 - 00:24:00.22]

in Denmark. So any blessing or patent licensing from the insulin committee to the Crows and

[00:24:00.22 - 00:24:04.96]

Hagedorn for Denmark is sort of pointless because it's not legally binding in Denmark anyway.

[00:24:04.96 - 00:24:09.38]

But the insulin committee says, well, you're really the right people to do this.

[00:24:10.04 - 00:24:15.18]

How about we give you rights for all of Scandinavia, Norway, Sweden, Denmark? You

[00:24:15.18 - 00:24:19.70]

have our official blessing and any rights that you need. And this is pretty similar deal that

[00:24:19.70 - 00:24:24.64]

they cut with Eli Lilly. That was for North America. They basically gave him the same

[00:24:24.64 - 00:24:30.80]

thing for Scandinavia. Yes. So August and Marie set sail back for Europe. They arrive in Copenhagen.

[00:24:30.80 - 00:24:35.22]

They go tell Hagedorn the news. Immediately, they all go get to work. And by get to work,

[00:24:35.70 - 00:24:40.72]

they go buy cow pancreases at the local livestock market in Copenhagen.

[00:24:41.36 - 00:24:44.32]

This is something. So you read more about the Novo Nordisk history than I did.

[00:24:44.92 - 00:24:49.74]

Was it cows or was it pigs? Because I know that Denmark has an abundance of pigs,

[00:24:49.74 - 00:24:53.32]

which actually made it pretty well suited to be an early insulin manufacturer.

[00:24:54.50 - 00:24:59.94]

Interesting. It was both. I think pigs may have come later, but certainly it was both cows and

[00:24:59.94 - 00:25:03.84]

pigs that Nordisk and then Novo were using both of them. They were just basically trying to get

[00:25:03.84 - 00:25:07.88]

their hands on any animal pancreases that they could. Right. If it's got islets, we want it.

[00:25:08.22 - 00:25:17.80]

Yep. So using the Toronto method, they get a bunch of pancreases. They go to August Crowe's lab at

[00:25:17.80 - 00:25:23.68]

the University of Copenhagen, run them through a meat grinder, pour hydrochloric acid over them,

[00:25:23.68 - 00:25:28.48]

they extract insulin, and then they test it on rabbits and mice and they confirm,

[00:25:29.10 - 00:25:35.46]

yeah, we've got it. This is insulin. Certainly for the first time in Scandinavia. I think maybe

[00:25:35.46 - 00:25:42.06]

also for the first time in continental Europe, at least insulin is extracted here in Denmark.

[00:25:43.36 - 00:25:50.20]

So this leaves just one obvious problem, just like insulin in Toronto. This is not going to scale.

[00:25:50.20 - 00:25:55.56]

Maybe you could do this to treat Marie, but they want to treat the whole country, the whole region.

[00:25:55.70 - 00:26:02.40]

Right. This is like a very real problem for insulin all the way up until like the 1980s,

[00:26:02.44 - 00:26:09.78]

which is you are scale constrained by the number of dead animal pancreases you can get your hands

[00:26:09.78 - 00:26:19.32]

on. I found this wild stat. It takes 8,000 pounds of pancreatic glands from 23,500 animals

[00:26:19.32 - 00:26:26.26]

to make a single pound of human insulin. Yeah, that's wild. To put that in more real numbers,

[00:26:26.80 - 00:26:34.08]

that means that even by 1980, with all the advances, it took 1 million animals annually

[00:26:34.68 - 00:26:40.42]

for 30,000 diabetes patients. And there are a lot more than 30,000 diabetes patients in the

[00:26:40.42 - 00:26:45.40]

world in 1980. And we'll talk about who the pioneers were and how we eventually got out of

[00:26:45.40 - 00:26:51.26]

using animals to create insulin in the 80s. But that was also the moment in time where type two

[00:26:51.26 - 00:26:57.82]

diabetes really took off. Yes, you're foreshadowing. It's been a 45 year massive issue. But like,

[00:26:58.00 - 00:27:06.24]

we basically could not have continued to use animal based medicine to treat diabetes once

[00:27:06.24 - 00:27:10.78]

it really exploded. Then we're going to get to this in like two hours. Sorry. All good.

[00:27:11.52 - 00:27:20.24]

So back to the crows and Hagedorn in 1922-23 in Copenhagen, they need to scale production. So

[00:27:20.24 - 00:27:28.06]

they go to the Löwens Chemiske Fabrik. And I need to like, majorly apologize to all

[00:27:28.06 - 00:27:30.10]

Yeah, your Danish is amazing. Danish people out there.

[00:27:31.64 - 00:27:36.52]

I talked to some Danish folks in research for this episode. And thank you very much. And I just,

[00:27:38.24 - 00:27:42.16]

I need to give up on trying to pronounce things correctly. Stick to French.

[00:27:42.80 - 00:27:48.88]

We'll stick to French. Yes. But that translates to English as the Lion Chemical Factory. And it is

[00:27:48.88 - 00:27:58.20]

owned and run by another man named August. August Kongsted. K-O-N-G-S-T-E-D. And so they partner

[00:27:58.20 - 00:28:05.02]

together. And by the summer of 1923, the very same summer that the Nobel Committee is debating

[00:28:05.02 - 00:28:11.52]

on the award for that year. And of course, Crow at this point has nominated his buddy McLeod,

[00:28:11.82 - 00:28:18.32]

along with Banting. By that summer of 1923, the combo of the crows and Hagedorn and the Lion

[00:28:18.32 - 00:28:24.04]

Chemical Factory have produced enough insulin that they can complete trials with eight human

[00:28:24.04 - 00:28:30.44]

patients with great success there in Copenhagen. And at this point, H.C. Hagedorn, who remember

[00:28:30.44 - 00:28:36.18]

was originally Marie's physician to help treat her diabetes, he resigns his medical post and

[00:28:36.18 - 00:28:42.60]

decides that he's going to focus full time on this project. So the founders are Hagedorn and

[00:28:42.60 - 00:28:49.08]

August and Marie Crow. And Kongsted from the Lion Chemical Factory. These are the founders of the

[00:28:49.08 - 00:28:53.26]

project, but there's no Novo Nordisk yet. And we should say around this time, I believe

[00:28:53.80 - 00:28:58.74]

Eli Lilly was further along in terms of the volume that they had developed. I think they

[00:28:58.74 - 00:29:05.86]

were making like hundreds of vials a week of usable insulin. Absolutely. Eli Lilly had insulin

[00:29:05.86 - 00:29:11.72]

on the American market available to patients at this point in time. Yep. All right. So how does

[00:29:11.72 - 00:29:16.82]

this actually turn into Nordisk? But before we do that, I want to pick up the thread that we left

[00:29:16.82 - 00:29:22.02]

earlier with our new friends at J.P. Morgan Payments. Yes, we are excited to partner with

[00:29:22.02 - 00:29:26.48]

J.P. Morgan Payments this season and discuss all the ways they are helping businesses grow and

[00:29:26.48 - 00:29:31.40]

innovate across a broad industry landscape. So whether it's a startup that needs merchant

[00:29:31.40 - 00:29:36.40]

acquiring, which you now know what that is from our Visa episode, or a company building a new

[00:29:36.40 - 00:29:41.00]

multi-sided marketplace, or even a business expanding across borders and having to manage

[00:29:41.00 - 00:29:46.24]

the complications of cross-border treasury and FX, the more we dug into the industry and the more we

[00:29:46.24 - 00:29:50.62]

got to know J.P. Morgan Payments, the more we realized how relevant it is for founders, CEOs,

[00:29:50.80 - 00:29:54.84]

and operators to be thinking about how to leverage payments as a source of revenue.

[00:29:54.84 - 00:29:59.32]

Yep. If you think about it, there are whole companies and industries that couldn't exist

[00:29:59.32 - 00:30:04.14]

a decade ago without today's modern payment infrastructure. It's become central to businesses

[00:30:04.14 - 00:30:09.94]

with modern product experiences like ride-sharing, the creator economy, or B2B use cases like SaaS

[00:30:09.94 - 00:30:15.08]

marketplaces or managing supplier relationships. For those types of companies, payments literally

[00:30:15.08 - 00:30:20.66]

is their business. Yet, thankfully, they don't need to go it alone. J.P. Morgan Payments has

[00:30:20.66 - 00:30:27.08]

been pioneering in this industry for decades. I mean, they're J.P. Morgan. They move $10 trillion

[00:30:27.66 - 00:30:33.72]

a day. Yes, that is trillion with a T, and you can literally never outgrow their capabilities.

[00:30:34.32 - 00:30:38.36]

Like we said for us at Acquired, the peace of mind of having a single innovative banking and

[00:30:38.36 - 00:30:42.84]

payments partner for the long-term is pretty powerful. Yep. So let's look at the healthcare

[00:30:42.84 - 00:30:47.62]

industry through the lens of payments. There are multiple ways of innovation on the horizon with

[00:30:47.62 - 00:30:52.36]

telehealth, preventative treatment, and new clinical trial processes. Seamless and secure

[00:30:52.36 - 00:30:56.56]

payments are critical to the improvement of patient experience in unlocking innovation

[00:30:56.56 - 00:31:01.26]

for businesses and providers. When you zoom out this complicated ecosystem of payments,

[00:31:01.58 - 00:31:04.58]

healthcare providers, insurance networks, specialists, health monitoring services,

[00:31:04.64 - 00:31:10.32]

and more, it creates a complex and friction-filled payment experience. Who's paying who, when,

[00:31:10.36 - 00:31:15.10]

under what terms, and then you layer data privacy requirements on top. You can understand why there

[00:31:15.10 - 00:31:19.92]

are a lot of forces impeding change in this industry. So if you're a company or a provider

[00:31:19.92 - 00:31:24.26]

trying to innovate in this space, getting the payments piece right is paramount, which is

[00:31:24.26 - 00:31:28.42]

why J.P. Morgan Payments' array of products, including their healthcare solutions and

[00:31:28.42 - 00:31:34.06]

Instamed offering, provides a patented cloud-based technology to securely transform healthcare

[00:31:34.06 - 00:31:39.10]

payments by driving electronic transactions, processing payments, and moving healthcare data

[00:31:39.10 - 00:31:43.64]

seamlessly. J.P. Morgan Payments believes that no matter where your business falls on the care

[00:31:43.64 - 00:31:48.90]

continuum, better payments can help healthcare companies deliver better care. Yep. Some of our

[00:31:48.90 - 00:31:52.88]

listeners may have attended J.P. Morgan's healthcare conference earlier this month in San Francisco,

[00:31:53.12 - 00:31:57.58]

so if you did, let us know in the acquired Slack. Dave and I are curious what your takeaways were

[00:31:57.58 - 00:32:01.72]

from the state of the ecosystem. To learn more about J.P. Morgan's end-to-end payment solution

[00:32:01.72 - 00:32:06.50]

and how they could be used in your business today, head on over to jpmorgan.com slash acquired,

[00:32:06.66 - 00:32:12.10]

which just feels good to say. I know. Stay tuned to discover how they're accelerating innovation

[00:32:12.10 - 00:32:18.78]

across all the industries we are covering this season. Okay, so David, the founding of Nordisk.

[00:32:19.14 - 00:32:24.96]

How does it happen? So the Lion Chemical Factory at this point has established a new production

[00:32:24.96 - 00:32:31.70]

line for insulin, but it's unclear do they own this production line? Did the Crows? Does Hagedorn?

[00:32:32.20 - 00:32:38.54]

Is the University of Toronto involved? Crow and Hagedorn are sort of consulting on it. When Hagedorn

[00:32:38.54 - 00:32:45.62]

makes this decision to go full-time, what actually happens is he becomes an employee of Lion Chemical,

[00:32:45.94 - 00:32:51.08]

which isn't really what he wants. August Crow steps back and he returns to his other research

[00:32:51.08 - 00:32:56.70]

at the University of Copenhagen. But once insulin starts rolling off the line later that summer,

[00:32:57.16 - 00:33:02.52]

under the brand name Insulin Leo, like, you know, Lion Chemical Factory, they use the brand name,

[00:33:02.52 - 00:33:09.80]

and that would continue to be Nordisk's insulin brand name for the next 60 years, I think. Wow.

[00:33:09.98 - 00:33:17.50]

Pretty quickly, demand is just off the charts. And they are, like we talked about, essentially

[00:33:17.50 - 00:33:22.44]

the first mover in continental Europe. So there's a pretty enormous opportunity here.

[00:33:22.88 - 00:33:29.68]

So in 1924, Crow, Hagedorn, and Kongstad, who owns Lion Chemical, they all come to an agreement.

[00:33:30.24 - 00:33:38.20]

They're going to set up a new, independent, and self-owning institution to produce and distribute

[00:33:38.20 - 00:33:44.22]

this insulin throughout Europe. Yeah, what does that mean? Still not a company. Because other than

[00:33:44.22 - 00:33:49.70]

Kongstad from Lion Chemical, Crow and even Hagedorn at this point, they're not particularly

[00:33:49.70 - 00:33:58.16]

commercially minded. No, it's a biologist and a physician. Yes. So what they do is they set it up

[00:33:58.16 - 00:34:03.72]

as an operating company, because that's what they have to do to have employees and make sales and

[00:34:03.72 - 00:34:12.30]

whatnot. But this operating company is 100% owned and controlled by a foundation that they also set

[00:34:12.30 - 00:34:17.28]

up. And the three of them are going to be board members of this foundation, and Hagedorn is going

[00:34:17.28 - 00:34:23.58]

to run it day to day. This is really important to know and really crazy how much this impacts

[00:34:23.58 - 00:34:30.00]

the future. This is still the corporate structure of the largest company in Europe, and we're going

[00:34:30.00 - 00:34:37.06]

to get to this hours from now in Playbook, but this governance structure massively affects the

[00:34:37.06 - 00:34:42.46]

incentives and the way that this company ends up developing products going to market with them.

[00:34:42.84 - 00:34:46.92]

The future blueprint of the next 100 years is laid right here in this corporate structure.

[00:34:46.92 - 00:34:54.52]

And foreshadowing, there is a moment much later in history where, absent the control of this

[00:34:54.52 - 00:35:00.02]

foundation, Novo Nordisk would have ceased to exist. It is only because of this structure

[00:35:00.76 - 00:35:05.60]

that Novo Nordisk survived and that we have GLP-1s in everything we have today.

[00:35:05.96 - 00:35:12.04]

It's fascinating. By the way, this is not that uncommon in Danish companies. Lego, same structure.

[00:35:12.04 - 00:35:19.18]

Maersk, the shipping company, same structure. Well, I dug into this a little bit. Yes, this is a very

[00:35:19.18 - 00:35:25.02]

common structure in Denmark, mostly for tax reasons, because Denmark has very, very high

[00:35:25.02 - 00:35:31.82]

taxes. This is a common generational transfer mechanism. Later, we'll talk about Novo in a sec.

[00:35:32.30 - 00:35:37.66]

Novo actually has this type of structure that you're talking about. The Nordisk foundation is

[00:35:37.66 - 00:35:44.54]

not just a foundation of convenience. It really is a charitable foundation with a dual mission.

[00:35:44.70 - 00:35:54.04]

They give it two missions. The first mission is to produce insulin and sell it, A, at cost

[00:35:54.70 - 00:36:00.92]

in Scandinavia, in the original territory mandate, in order to maximize access and

[00:36:00.92 - 00:36:08.80]

humanitarian and public health benefit. B, though, export it elsewhere in Europe and around the world

[00:36:08.80 - 00:36:17.98]

at market prices and use the profit from those exports to fund further diabetes research and

[00:36:17.98 - 00:36:26.16]

development. No profits allowed in Scandinavia. Profits are allowed from export activities,

[00:36:26.16 - 00:36:32.90]

and then all of those profits, literally by contract, get shipped 100% to the foundation

[00:36:33.50 - 00:36:39.82]

to then be used for grants and research about diabetes and supporting diabetes patients in

[00:36:39.82 - 00:36:45.26]

Scandinavia. Fascinating. I did not know that. Totally fascinating. More or less, as you said,

[00:36:45.30 - 00:36:49.04]

that is the same mission and structure that is still in place today. It's obviously changed

[00:36:49.04 - 00:36:52.44]

a little bit. Yeah, there's some caveats that I'll get to when we get to today.

[00:36:52.44 - 00:36:59.46]

Yes, the operating company is now publicly traded, but still that foundation controls 77%

[00:36:59.46 - 00:37:05.52]

of the voting shares of Novo Nordisk and 28% of the economic shares. Yeah, so no shareholder

[00:37:05.52 - 00:37:11.42]

activism in this company, or at least no one's effective in doing so. Yes. So the name that they

[00:37:11.42 - 00:37:18.94]

choose for this new institution or really dual institution is, fittingly, Nordisk Insulin,

[00:37:18.94 - 00:37:26.08]

which Nordisk in Danish means Nordic Insulin. It's the insulin manufacturer for the Nordics.

[00:37:26.52 - 00:37:30.24]

Very creative. Very creative. So you're listening here, you're probably like,

[00:37:30.32 - 00:37:35.58]

okay, that's Nordisk. What's the Novo piece of this? Well, it turns out that that is quite the

[00:37:35.58 - 00:37:41.92]

story too, because among the very first employees of the insulin project, even before Nordisk gets

[00:37:41.92 - 00:37:49.74]

created, are two brothers, Harald and Torvald Pedersen. And the Pedersens, you got to remember

[00:37:49.74 - 00:37:55.12]

the time we're in, they're sort of like prototypical 19-teens, 1920s kind of engineers

[00:37:55.12 - 00:38:00.90]

and tinkerers. We're not that far removed from like the Wright brothers and Henry Ford and that

[00:38:00.90 - 00:38:06.06]

kind of stuff here. They're like kind of cast from that mold. So the older brother, Harald,

[00:38:06.70 - 00:38:14.36]

he had been working in August Crowe's lab, doing all the mechanical engineering stuff to carry out

[00:38:14.36 - 00:38:21.26]

the experiments. Like you need to build devices and contraptions and set up experiments. And so

[00:38:21.26 - 00:38:26.48]

Harald was in charge of doing that. Once the insulin project gets going, Harald naturally

[00:38:26.48 - 00:38:31.86]

sort of shifts over and he's the one going out and building and buying and modifying like the

[00:38:31.86 - 00:38:37.10]

meat grinders and figuring out how to pour hydrochloric acid over it in the right way and

[00:38:37.10 - 00:38:42.50]

all that sort of stuff. When Lion Chemical gets involved in their spinning up mass production,

[00:38:43.36 - 00:38:50.16]

Harald goes to Hagedorn and August and Kongstad and says, hey, you're setting up an actual

[00:38:50.16 - 00:38:55.80]

production line. I've got just the guy to help you set it up and run it, my brother Torvald.

[00:38:56.18 - 00:39:01.48]

Because not only is Torvald a seasoned factory operations manager who's currently running a

[00:39:01.48 - 00:39:08.68]

soy factory, he is also trained as a pharmacist and studied chemistry. He's like the perfectly

[00:39:08.68 - 00:39:14.56]

qualified person to be like an early employee of this new operation. Except it turns out

[00:39:14.56 - 00:39:20.80]

there's just one problem. Hagedorn thinks he's in charge and Torvald, who's just been hired,

[00:39:20.98 - 00:39:25.70]

thinks, hey, I know what I'm doing here. I'm in charge. Like Hagedorn, you're this pompous

[00:39:25.70 - 00:39:32.22]

physician. Like what do you know about running a factory? So this schism happens like in the first

[00:39:32.22 - 00:39:40.34]

year of Nordisk's existence? Yes. In the first six months after Torvald is hired, he and Hagedorn,

[00:39:40.62 - 00:39:45.66]

they're constantly fighting. One day they get into a huge, huge argument and Hagedorn fires him.

[00:39:46.02 - 00:39:50.88]

Six months in. Guess we know who's in charge. Yeah. When that happens, Harald, the older brother,

[00:39:50.88 - 00:39:57.30]

resigns in solidarity and they're super pissed. They go to see Crow and they're like, hey,

[00:39:57.66 - 00:40:01.38]

you know, August, I've been working for you for a while. Like clearly we know what we're doing here.

[00:40:01.80 - 00:40:07.56]

Why is this happening? And Crow sides with Hagedorn. He's like, no, no, he's my guy. He's

[00:40:07.56 - 00:40:13.84]

Marie's physician. He's going to run this thing. So they say, well, all right, fine. You know,

[00:40:14.24 - 00:40:19.74]

as you know, here in Denmark, you can't patent drugs. Oh, that's why this is important.

[00:40:19.74 - 00:40:25.14]

We're just going to go down the street and make insulin too. And the legend has it

[00:40:25.14 - 00:40:30.28]

that supposedly August looks at them and replies, but you're not capable of that.

[00:40:31.42 - 00:40:38.86]

To which Torvald yells at him, we will show you. And they storm out of the building and go down

[00:40:38.86 - 00:40:47.44]

the street and they found a new insulin company, a Novo insulin company there in Copenhagen,

[00:40:47.44 - 00:40:56.24]

insulin Novo. And that is the beginning of Novo. And for the next 65 years, these two companies

[00:40:56.24 - 00:41:03.24]

would compete in blood sport, head to head, hated each other, absolutely hated each other

[00:41:03.24 - 00:41:11.12]

until they finally merged in 1989. Crazy. Yep. Now this is such a key part of the Novo story

[00:41:11.12 - 00:41:16.64]

that certainly, you know, Crow, but then Hagedorn develops into this amazing scientist,

[00:41:16.64 - 00:41:22.66]

as we'll talk about the advances that Nordisk is able to bring to market in the science of

[00:41:22.66 - 00:41:28.14]

insulin and diabetes is huge, but certainly without the like bitter competitive motivation

[00:41:28.14 - 00:41:32.16]

from down the street, I don't know that they would have moved as fast. And, you know, Novo

[00:41:32.16 - 00:41:37.94]

ends up building its own scientific research capabilities. And like these two companies in

[00:41:37.94 - 00:41:44.60]

this unlikely small country in Northern Europe end up leading maybe the most important drug

[00:41:44.60 - 00:41:50.68]

development of the 20th century. It's amazing. I mean, it's the local and bitter competition.

[00:41:50.98 - 00:41:57.18]

It's Ferrari and Lamborghini. It's Aldi and Trader Joe's. It's Adidas and Puma. You sort of create

[00:41:57.18 - 00:42:02.30]

the seeds of competition early and you can really infuse that into a company's DNA for decades.

[00:42:03.14 - 00:42:06.72]

So I think it's worth a quick pause here. We've already talked about some of this,

[00:42:06.80 - 00:42:13.14]

but just to clarify why diabetes and insulin is such a interesting market and large market

[00:42:13.14 - 00:42:18.78]

potential, you know, one, even with just type one at this point in time, it's still a very

[00:42:19.38 - 00:42:25.62]

large and widespread disease in the world. So it's kind of a large patient and potential

[00:42:25.62 - 00:42:32.22]

patient market size, but two, unlike many other diseases and drugs for those diseases,

[00:42:32.62 - 00:42:38.10]

you know, it's chronic, you don't cure it. So what insulin is doing is it is enabling

[00:42:38.74 - 00:42:46.54]

these diabetes patients who often are diagnosed as children to live essentially normal long lives.

[00:42:46.64 - 00:42:54.36]

So you're talking about decades, 40, 50, 60, 70, 80 years of patient lifespan here,

[00:42:54.38 - 00:43:01.82]

where they are injecting insulin daily, if not, you know, in most cases, multiple times daily.

[00:43:02.34 - 00:43:06.44]

There's basically nothing other than food that you can sell someone for their entire life.

[00:43:06.44 - 00:43:10.68]

But for diabetics, insulin absolutely has that scenario with a customer.

[00:43:11.24 - 00:43:16.42]

Yep. And there's also kind of another aspect that makes it particularly interesting commercially,

[00:43:16.70 - 00:43:24.08]

which is there's also a motivation to constantly improve the insulin product. It's not like

[00:43:24.08 - 00:43:29.12]

insulin is insulin is insulin. There are so many new products and improvements,

[00:43:29.46 - 00:43:32.68]

both in the drug itself, but also in the delivery systems. I mean,

[00:43:32.68 - 00:43:39.46]

this early insulin, as we've alluded to a little bit, it was barbaric by modern standards. Like,

[00:43:39.56 - 00:43:45.02]

yes, it saved the lives, but it didn't last very long. So you had to inject a lot of it

[00:43:45.02 - 00:43:51.24]

very frequently. It wasn't super clean. There are tons of impurities in it. So there's swelling,

[00:43:51.40 - 00:43:54.38]

there's infections. There's allergic reactions to all the impurities.

[00:43:55.00 - 00:44:01.52]

Totally. It wasn't shelf stable in liquid injectable form. This is wild. I don't know

[00:44:01.52 - 00:44:06.02]

if you knew this, Ben. No. So everything we're talking about in these days and what Nordisk was

[00:44:06.02 - 00:44:13.18]

originally producing were insulin tablets, solid insulin tablets. Now, until recent times,

[00:44:13.18 - 00:44:18.50]

you can't take insulin in tablet form. It doesn't get absorbed by the gut. You have to inject it.

[00:44:18.90 - 00:44:25.10]

So what patients had to do was take these solid tablets, dissolve them in sterilized,

[00:44:25.10 - 00:44:30.58]

boiled water, measure and draw that solution into a syringe themselves.

[00:44:31.04 - 00:44:35.10]

Like a glass syringe with a big needle. No pens. None of this fancy stuff we have today.

[00:44:35.48 - 00:44:40.50]

Yeah. Big-ass needle. So now you've got patients doing this multiple times a day,

[00:44:40.82 - 00:44:45.18]

and it's really important that they get the right amount of insulin for them.

[00:44:45.70 - 00:44:49.36]

This makes it really hard. Yep. And there's no measurement. I mean,

[00:44:49.38 - 00:44:54.48]

there's no one-touch pinprick. We get to see what your blood sugar content is right now.

[00:44:54.48 - 00:44:58.08]

We're so far from that existing that you are guessing. You're throwing darts.

[00:44:58.66 - 00:45:01.46]

Totally. And actually, it's kind of a side note to the story, but

[00:45:01.46 - 00:45:05.32]

it's Novo in the 1980s that invents the insulin pen.

[00:45:05.92 - 00:45:07.82]

Oh, I didn't realize that wasn't Nordisk, but Novo.

[00:45:08.10 - 00:45:13.78]

Yeah. Novo invented the pen and Nordisk focused on pumps, and they were one of several companies,

[00:45:13.84 - 00:45:15.96]

but one of the leading companies innovating in pumps.

[00:45:16.70 - 00:45:21.02]

I see. We should say, listeners, and David, you know this, this is a topic that is super

[00:45:21.02 - 00:45:26.06]

personal to me. A huge number of my family members are diabetic and actively suffer from

[00:45:26.06 - 00:45:30.32]

the complications and actively benefit from all the advancements in it. And so this is something

[00:45:30.32 - 00:45:35.40]

I've just had present around me my entire life with family members, as I'm sure many of you have,

[00:45:35.52 - 00:45:41.18]

too. I'm quite certain that almost everybody listening right now either is diabetic themselves

[00:45:41.18 - 00:45:46.34]

or has a close family member who is- Or is pre-diabetic. When I was doing research

[00:45:46.34 - 00:45:49.90]

for this episode, one of the people I talked to, and we'll thank a bunch of folks at the end,

[00:45:49.90 - 00:45:55.34]

but pointed out, we're all pre-diabetic in some way. And it's basically like the idea that, look,

[00:45:55.62 - 00:46:00.22]

your A1C levels, if you live long enough, will eventually enter diabetes territory,

[00:46:00.46 - 00:46:06.18]

especially with the food system today and all these foods engineered to leave us very unsatiated.

[00:46:06.34 - 00:46:11.90]

All of our natural inclinations that we had as hunter-gatherers and farmers and, you know,

[00:46:12.08 - 00:46:17.32]

imagine the paleo life long ago. All the things that served us evolutionarily to stay alive

[00:46:17.32 - 00:46:22.34]

are now the very things that are killing us. So everyone's on the path. It just depends how

[00:46:22.34 - 00:46:27.54]

long you live. We also weren't really designed to, you know, live this long either. Well,

[00:46:27.92 - 00:46:35.86]

careful with the word design, David. So when NOVO gets established, this starts the competitive

[00:46:35.86 - 00:46:42.76]

race that really leads to 100 years of R&D pipeline that changes all this. So the Peterson

[00:46:42.76 - 00:46:49.46]

brothers, they know right off the bat, they can't really just go clone what Nordisk is doing. I mean,

[00:46:49.52 - 00:46:54.10]

technically, legally, they can in Denmark, but what physician and what patients are going to buy

[00:46:54.10 - 00:46:59.10]

NOVO insulin when right down the street, you've got Nordisk, which has a Nobel prize-winning

[00:46:59.10 - 00:47:07.64]

scientist, the best diabetes endocrinologist in Denmark running it, and the explicit blessing

[00:47:07.64 - 00:47:12.56]

of Toronto and the insulin committee. If NOVO just sells the same thing, like nobody's going

[00:47:12.56 - 00:47:19.28]

buy that. But they do have a pretty significant advantage that Nordisk doesn't have, which is

[00:47:19.28 - 00:47:24.96]

they've got their engineering and tinkering skills. So they go to work and pretty quickly, actually,

[00:47:25.18 - 00:47:31.86]

they come up with shelf-stable liquid insulin. So what I was just talking about, about how Nordisk

[00:47:31.86 - 00:47:37.44]

produced these tablets, you had to boil them, NOVO comes out with liquid insulin. You don't have to

[00:47:37.44 - 00:47:45.78]

do that. Not only that, because the process for producing liquid insulin that they come up with

[00:47:45.78 - 00:47:53.08]

is so much more efficient, they can sell it effectively cheaper per dose than what Nordisk

[00:47:53.08 - 00:47:58.42]

is selling their solid form as. So they go to market, NOVO goes to market with their NOVO

[00:47:58.42 - 00:48:04.90]

insulin as insulin at half price, because it's so much more efficient. Now this is so antithetical

[00:48:04.90 - 00:48:10.56]

to the ivory tower scientists over at Nordisk. You're marketing insulin at half price. Does

[00:48:10.56 - 00:48:14.98]

this liquid stuff work? Is this safe and all this stuff? The Peterson brothers are like,

[00:48:15.40 - 00:48:20.10]

yeah, whatever. We're going to crush you. All right. So NOVO, scrappy upstart,

[00:48:20.26 - 00:48:24.40]

counter-positioned, and competition drives innovation. So they create better product.

[00:48:24.94 - 00:48:32.44]

Yes. So then Nordisk strikes back with a new, longer-lasting form of insulin called protamine

[00:48:32.44 - 00:48:39.82]

insulin, or NPH as it is patented and come to be known around the world, which stands for neutral

[00:48:39.82 - 00:48:46.70]

protamine haggadorn. Really? Haggadorn is in the name? Because H.C. Haggadorn, he himself led the

[00:48:46.70 - 00:48:51.04]

research developing this and he puts his own name on it. Kind of tells you what you need to know

[00:48:51.04 - 00:48:57.52]

about him. This is much more stable and needs to be injected fewer times per day, which is a huge

[00:48:57.52 - 00:49:04.56]

benefit for patients. So Nordisk, rather than building up production facilities around the

[00:49:04.56 - 00:49:11.64]

world, what they decide to do is license it back to basically any interested pharma company. So

[00:49:11.64 - 00:49:17.26]

like Eli Lilly back in the States, other companies in continental Europe. It's the new, widely

[00:49:17.26 - 00:49:23.72]

accepted, most advanced treatment for patients. Except there's one company that they refuse to

[00:49:23.72 - 00:49:31.66]

license it to, and that is Novo. Amazing. So Novo, undeterred, they go and they work around

[00:49:31.66 - 00:49:36.08]

Nordisk's patents on this. You know, and again, I'm not sure at this point if the laws have changed

[00:49:36.08 - 00:49:40.62]

and you can patent drugs in Denmark, but it kind of doesn't matter because it's clear, you know,

[00:49:40.68 - 00:49:46.14]

Denmark is not a very large country. By far, the bulk of the market is in exports at this point.

[00:49:46.32 - 00:49:52.76]

And certainly in other countries you can patent drugs. So Novo works around Nordisk's patents

[00:49:52.76 - 00:50:00.04]

and they come out with an improved version of protamine insulin that they claim is both better

[00:50:00.04 - 00:50:05.78]

and doesn't infringe on the patents. Which the pharma industry has a rich history of figuring out

[00:50:05.78 - 00:50:11.12]

exactly how to do this. Because the thing about pharma patents, which is interesting, is they're

[00:50:11.12 - 00:50:16.62]

fairly narrow. You can patent a molecule. I don't think this is quite true at the time, but the way

[00:50:16.62 - 00:50:21.86]

it sort of works today is you patent a molecule, which is extremely specific. It's different than

[00:50:21.86 - 00:50:25.94]

other industries where it's a system and a method for blah, blah, blah. And you can be very broad

[00:50:25.94 - 00:50:31.96]

with it. So if you can accomplish a similar biological or chemical reaction in the body

[00:50:31.96 - 00:50:38.56]

with a different molecule in basically any way, then unpatented. And so there's a rich history

[00:50:38.56 - 00:50:43.12]

in pharma of doing exactly this. What is slightly next to the patent, but does basically the same

[00:50:43.12 - 00:50:47.74]

thing. Yes. To your point, though, it is still quite scientifically difficult. It's not like

[00:50:47.74 - 00:50:51.10]

software here. We're like, yeah, yeah, yeah. I write some code and it's like, no, no, you still

[00:50:51.10 - 00:50:59.34]

got to find a molecule that does what you say it does. Yep. So this leads to a whole bunch of

[00:50:59.34 - 00:51:07.44]

lawsuits. It actually ends up going to the Danish Supreme Court, where Hagedorn represents Nordisk

[00:51:07.44 - 00:51:12.96]

himself. In the lower courts, they had lawyers, and I think they lost the case in the lower courts

[00:51:12.96 - 00:51:21.08]

and Hagedorn's like, screw this. I'm going to be my own lawyer. At the Supreme Court. At the

[00:51:21.08 - 00:51:25.82]

they win. Nordisk has won here. This is like a huge, huge blow for Novo, you would think.

[00:51:26.94 - 00:51:36.04]

But then literally right at the same time, World War II starts and Denmark is invaded by the Nazis

[00:51:36.04 - 00:51:42.10]

shortly after they invade Poland. And in April 1940, the Nazis now occupy Denmark.

[00:51:42.64 - 00:51:48.32]

So this sort of like infighting between these two Danish drug companies, much less relevant,

[00:51:48.32 - 00:51:55.66]

much, much less relevant. But what is still super relevant is how is Europe going to get insulin

[00:51:56.24 - 00:52:04.72]

in the middle of World War II? And this is a major, major turning point, both for the two

[00:52:04.72 - 00:52:11.94]

companies vis-a-vis each other, but also I think really what sets Novo on the path to becoming

[00:52:11.94 - 00:52:17.44]

Europe's dominant producer of insulin and then ultimately the dominant producer of insulin in

[00:52:17.44 - 00:52:23.68]

the world. So Novo, not Nordisk, became the globally dominant. Really? I did not know that.

[00:52:24.14 - 00:52:27.96]

I actually don't know the terms of the 89 merger. So I'm excited to listen just like everyone else,

[00:52:28.04 - 00:52:34.78]

David. Well, so what happens is Denmark is relatively unscathed during World War II.

[00:52:35.26 - 00:52:40.14]

It's a small country. The Danish army was quite small. And so when the invasion happens in April

[00:52:40.14 - 00:52:44.74]

1940, there's basically no fighting. Germany just takes over the country. I mean, there's no

[00:52:44.74 - 00:52:51.64]

destruction, which means that insulin production continues unabated in Denmark. Now, Nordisk,

[00:52:51.80 - 00:52:59.42]

remember, like I just said, once NPH comes out, their strategy becomes really like we produce

[00:52:59.42 - 00:53:06.58]

domestically and then we make our revenue and our profits internationally by licensing,

[00:53:06.94 - 00:53:14.00]

not by production. And with World War II, you know, most of the dollars for their licensing

[00:53:14.00 - 00:53:19.56]

revenue is coming from allied countries. Well, Germany just took over Denmark. So all of that

[00:53:19.56 - 00:53:26.30]

revenue, all of those profits go to zero overnight. And Nordisk, for the duration of the war,

[00:53:26.66 - 00:53:31.86]

basically just gets put into hibernation mode. They're still producing a little bit to help

[00:53:31.86 - 00:53:38.08]

supply Denmark, but there's really nothing going on there. They basically cannot address the market

[00:53:38.08 - 00:53:44.52]

of any allied countries anymore. Yeah. Wow. Novo is the complete opposite story. They had been

[00:53:44.52 - 00:53:50.34]

scaling production all throughout Scandinavia, all throughout Europe. And when Germany takes over

[00:53:50.34 - 00:53:56.56]

Denmark, insulin Novo is now, you know, the ethics of this are really complicated.

[00:53:57.00 - 00:54:00.54]

Because it's Danish owned, which is Nazi occupied at the time.

[00:54:00.54 - 00:54:08.38]

Yeah, they are now essentially the official Nazi sanctioned insulin provider for all of

[00:54:08.38 - 00:54:16.08]

Nazi occupied Europe. So the German government basically directs Novo to massively expand

[00:54:16.08 - 00:54:22.04]

production and supply insulin, you know, not only to Germany, but to France, to Poland, to Austria,

[00:54:22.18 - 00:54:27.34]

to all everywhere in continental Europe, basically. So just to make sure I have it right, it sounds

[00:54:27.34 - 00:54:34.60]

like Nordisk is only making a small supply for Denmark. Novo is supplying all of Nazi occupied

[00:54:34.60 - 00:54:39.54]

Europe, and the allied countries no longer have access to anything Novo or Nordisk makes. And so

[00:54:39.54 - 00:54:44.96]

they're relying on their own suppliers like Eli Lilly. Yes. Now, they're fine. They can get insulin,

[00:54:45.06 - 00:54:50.46]

no problem, because Nordisk has licensed all the technology and production to them. They just keep

[00:54:50.46 - 00:54:55.78]

doing that. The only problem is for Nordisk that Nordisk can no longer get the payments from them,

[00:54:55.78 - 00:54:59.54]

because obviously, you know, transfer payments from allied countries are now blocked.

[00:55:00.02 - 00:55:01.00]

Right. Fascinating.

[00:55:01.50 - 00:55:05.22]

Totally fascinating. So again, we said the ethics of this are quite complicated.

[00:55:05.60 - 00:55:13.92]

There is no doubt that Novo's fortunes massively changed and expanded by the German occupation and

[00:55:13.92 - 00:55:20.64]

the Nazis during the war. On the other hand, literally the Nazis ordered them to expand

[00:55:20.64 - 00:55:27.34]

production and provide insulin for Europe. And like if they hadn't done it, all the diabetics

[00:55:27.34 - 00:55:31.40]

in Europe would have died. Oh, it's unquestionably a good thing. Again,

[00:55:31.42 - 00:55:35.58]

I'm learning about this from the first time from you, but like an evil person commanding me to make

[00:55:35.58 - 00:55:40.58]

more life saving drugs and distribute it to more people is fine. It's the other things they

[00:55:40.58 - 00:55:44.86]

commanded you to do that are not fine. Right, right. I definitely agree. It is

[00:55:44.86 - 00:55:50.76]

important to note, though, after the war, the Danish state did require both Novo and the

[00:55:50.76 - 00:55:57.78]

Peterson brothers personally to repay most of the profits that they made during the war back to the

[00:55:57.78 - 00:56:04.62]

Danish state. Fascinating. Again, like the ethics are complicated here. Very. Yeah. Wow. So regardless,

[00:56:05.22 - 00:56:12.06]

after the war, Novo emerges as now both a scaled pharmaceutical company, generally,

[00:56:12.62 - 00:56:18.22]

and the largest producer of insulin in Europe. And as part of that, now they have the resources

[00:56:18.22 - 00:56:26.02]

to really build up their own scientific and R&D divisions and become a real powerhouse to rival

[00:56:26.02 - 00:56:32.42]

what Nordisk was before the war. Shortly after the war ends, they develop a new product called

[00:56:32.42 - 00:56:40.78]

Lente insulin, L-E-N-T-E, which is slower acting insulin, which means it's thus longer lasting.

[00:56:40.78 - 00:56:48.98]

And this can now be used for diabetics as a basal or background insulin. So they'll still take

[00:56:48.98 - 00:56:55.62]

fast acting insulin around meals to help process blood sugar from meals. But a normal human

[00:56:55.62 - 00:57:02.06]

pancreas is also producing insulin 24-7 throughout the day. This now is a new background insulin that

[00:57:02.06 - 00:57:08.52]

diabetics can take to help stabilize when you're sleeping or not eating. So this is a pretty big

[00:57:08.52 - 00:57:13.30]

breakthrough. And what you're seeing here is Novo and Nordisk having decades of experience

[00:57:13.30 - 00:57:23.56]

researching mechanisms to slow the absorption or lengthen the effects of their drugs in the

[00:57:23.56 - 00:57:29.72]

human body and really developing this incredible competency around how do we sort of finely tune

[00:57:29.72 - 00:57:36.78]

how we want injections to react in your body over a long period of time in a very complex

[00:57:36.78 - 00:57:41.66]

environment. You've got the human immune system wanting to react to anything foreign you put into

[00:57:41.66 - 00:57:46.20]

it. You've just got a lot of systems that you sort of have to make sure that you're interacting well

[00:57:46.20 - 00:57:50.26]

with to achieve something simple like we'll make it dissolve slower. And I know that's not

[00:57:50.26 - 00:57:54.66]

technically right, but that is kind of the blunt way to think about it. Yeah, hopefully it's obvious,

[00:57:54.80 - 00:57:59.24]

but this isn't quite like software. It's like, oh, just you add some new code and you ship a

[00:57:59.24 - 00:58:05.60]

new feature. It's like, no, this is very complicated stuff. And you got to make sure that the side

[00:58:05.60 - 00:58:13.24]

effects are not going to kill people. So this is really the first major scientific advance that

[00:58:13.24 - 00:58:21.14]

comes out of Novo. And Eli Lilly licenses this Lenta insulin from Novo and kind of rebrands it.

[00:58:21.24 - 00:58:26.62]

It makes it part of their flagship insulin offerings in the US. They were doing this with NPH

[00:58:26.62 - 00:58:31.86]

insulin before the war from Nordisk. And now, you know, it's kind of Novo that's taking up this

[00:58:31.86 - 00:58:38.00]

mantle. You know, this will come back up later in the episode. But Eli Lilly, although insulin

[00:58:38.00 - 00:58:43.58]

was and still is a huge part of the business, what they basically decided is to be a kind of

[00:58:43.58 - 00:58:48.94]

technology follower and license from all the innovation coming out of Novo and Nordisk,

[00:58:49.38 - 00:58:54.92]

license that into their sales and distribution channels in the US. I'm really curious if the

[00:58:54.92 - 00:58:58.64]

Eli Lilly folks would agree with that characterization. I know you read that great

[00:58:58.64 - 00:59:02.42]

history of Novo Nordisk book, and I'm sure that's the way it paints it. But at some point,

[00:59:02.48 - 00:59:05.36]

we should dig into Eli Lilly a little more and see if that's how they think about it, too.

[00:59:05.90 - 00:59:11.44]

Yeah. Well, that is going to change in a big way in the 1980s. But during this post-war period,

[00:59:12.06 - 00:59:17.20]

at least that's how Kurt Jacobson's book makes it sound. And we got to give Kurt a big shout out.

[00:59:17.36 - 00:59:21.92]

And he wrote this great history of Novo Nordisk that just came out last year for the company's

[00:59:21.92 - 00:59:28.76]

100th anniversary. Unfortunately, you can't buy it in America. So I emailed him a couple months

[00:59:28.76 - 00:59:34.08]

ago and I said, Kurt, is there any way we could buy a copy of your book? And very, very graciously,

[00:59:34.34 - 00:59:41.18]

he just sent it to us. So very, very kind. Thank you, Kurt. Yep. So this is basically

[00:59:41.90 - 00:59:48.76]

the way things stay for the post-war era up until the 1980s. Novo follows up Lenta Insulin

[00:59:48.76 - 00:59:54.36]

in the 1970s with MC Insulin, or Non-Immunogen Monocomponent Insulin,

[00:59:54.82 - 01:00:02.88]

which is the first 100% pure zero antibody potential insulin that also becomes the

[01:00:02.88 - 01:00:09.56]

kind of new widely accepted best product in the market internationally. So this is the general

[01:00:09.56 - 01:00:16.60]

state of play after the war. Novo is now a scaled pharmaceutical company. Nordisk

[01:00:17.40 - 01:00:24.26]

is mostly in rough shape. Production capacity has gone down to basically zero,

[01:00:24.32 - 01:00:30.28]

minimal at this point in time. They have resumed the licensing business. And eventually,

[01:00:30.48 - 01:00:35.64]

they do get back payments from all the allied countries that they were owed during the war.

[01:00:36.16 - 01:00:41.42]

So they're not insolvent or anything, but they're the much, much smaller company.

[01:00:42.14 - 01:00:48.82]

Now, Novo, interestingly, they're now a large pharmaceutical company. They want to add a

[01:00:48.82 - 01:00:54.50]

second leg of the stool, a new business line. So they get into the enzymes business.

[01:00:54.72 - 01:01:03.44]

This is like laundry detergent enzymes and other industrial uses. They add that on alongside the

[01:01:03.44 - 01:01:11.22]

insulin and diabetes business. And that's all well and good to be a diversified industrial

[01:01:11.22 - 01:01:18.34]

conglomerate, except the enzyme business is both capital intensive and not that profitable.

[01:01:19.08 - 01:01:19.76]

Those don't mix well.

[01:01:19.94 - 01:01:24.38]

Yeah, those don't tend to mix well. Now, it's still a viable business. It actually stays part

[01:01:24.38 - 01:01:29.48]

of Novo and then Novo Nordisk all the way until the year 2000, when it gets spun out.

[01:01:29.78 - 01:01:31.64]

Oh, is this Novozymes?

[01:01:31.80 - 01:01:36.16]

This is Novozymes. Yes. It is still majority controlled by Novo Holdings,

[01:01:36.24 - 01:01:39.52]

which is the holding company of the Novo Nordisk Foundation.

[01:01:40.24 - 01:01:43.76]

Interesting. So just like Novo Nordisk is majority controlled by the

[01:01:43.76 - 01:01:46.70]

foundation's holding company, Novozymes still is also.

[01:01:46.96 - 01:01:54.78]

Novozymes as well. But when we get to the 1970s, right as MC insulin is coming online

[01:01:54.78 - 01:02:01.78]

and Novo needs to undertake a huge amount of CapEx to redo its production lines and expand

[01:02:01.78 - 01:02:10.00]

them around the world, the enzyme market crashes. And so this enzyme business that they tried to add

[01:02:10.00 - 01:02:16.86]

as like a diversification and hedge to the company and expansion, all of a sudden it's bleeding cash

[01:02:16.86 - 01:02:20.96]

and they don't have enough capital resources to do the CapEx upgrades

[01:02:20.96 - 01:02:23.46]

that they need for the main business in insulin.

[01:02:24.30 - 01:02:30.30]

Oh, interesting. If only they had a cash rich partner without a lot of CapEx needs.

[01:02:30.30 - 01:02:38.52]

Goodness. If only there were such a natural partner right down the street that, you know,

[01:02:38.56 - 01:02:45.58]

it might make sense maybe they could merge with. So here we are in the early 1970s.

[01:02:46.22 - 01:02:53.18]

Novo approaches the old bitter rival Nordisk and here's the situation. You know, this is a perfect

[01:02:53.18 - 01:02:59.12]

marriage. Let's get the band back together. You know, everybody's basically dead at this point

[01:02:59.12 - 01:03:05.86]

from the original days. Let's let bygones be bygones. And Nordisk, they've just gone through a

[01:03:05.86 - 01:03:11.66]

pretty rocky succession period after Hagedorn retired. They're now on their third CEO in seven

[01:03:11.66 - 01:03:17.76]

years. And the new CEO, Henry Brenham, he isn't from the pharma industry at all. He's not a

[01:03:17.76 - 01:03:24.06]

scientist. He was previously the head of a lumber company. So this merger makes perfect sense.

[01:03:24.06 - 01:03:29.20]

Huh. But they don't merge for another decade and a half. So what went wrong?

[01:03:29.40 - 01:03:36.18]

It's not what happens. So instead, contrary to all sort of what you would think on paper,

[01:03:36.80 - 01:03:43.94]

the new CEO, Brenham, actually turns out to be like an amazing leader and CEO.

[01:03:44.08 - 01:03:44.54]

The lumber guy.

[01:03:44.66 - 01:03:51.16]

For Nordisk. The lumber guy. He is like the wartime CEO for Nordisk. He rejects

[01:03:51.16 - 01:03:57.72]

Novo's overtures to merge. And then he goes and convinces the board, both of the operating company,

[01:03:57.78 - 01:04:04.40]

Nordisk, and the foundation, that this new MC insulin generation, which remember Novo

[01:04:04.40 - 01:04:12.68]

innovated, that this actually represents a golden opportunity for Nordisk to get back in the game.

[01:04:13.50 - 01:04:18.84]

Because it's going to be a complete reset of all the insulins on the market, whether they're fast

[01:04:18.84 - 01:04:25.20]

acting or long lasting insulins, they're all going to move over to this MC highly purified

[01:04:25.72 - 01:04:33.78]

method and type of insulin. But Novo's in this spot where they're going to be delayed for several

[01:04:33.78 - 01:04:38.56]

years in making the transition in their actual factories because they don't have the capex.

[01:04:38.94 - 01:04:43.20]

So it's like they're coming to us hat in hand. Why don't we just put the pedal down now that

[01:04:43.20 - 01:04:49.16]

we realize we have the advantage and press? So Branham convinces the board that rather

[01:04:49.16 - 01:04:56.08]

than merging, they should use their capital reserves to rebuild up Nordisk's own production

[01:04:56.08 - 01:05:03.38]

capacity, go hire a global sales force. Branham's, he's really ambitious. He says,

[01:05:03.50 - 01:05:11.54]

we're going to go enter America directly as this forgotten Nordisk company. So he goes and hires

[01:05:11.54 - 01:05:19.72]

a global sales force because he knows Eli Lilly is going to have the same dynamics as Novo.

[01:05:19.90 - 01:05:27.12]

Everything's going to have to shift over to MC and Eli Lilly's this big, large, diversified giant.

[01:05:27.28 - 01:05:33.38]

They're not going to move as fast as he thinks Nordisk can. And even though it's unrealistic

[01:05:33.38 - 01:05:39.28]

that Nordisk is going to overtake Eli Lilly in America, if they can get even a small percentage

[01:05:39.28 - 01:05:46.16]

of the American market, that's huge. Nordisk is a small company and America is by far the largest

[01:05:46.16 - 01:05:50.48]

market for diabetes in the world. Well, and you got to remember too, in the seventies,

[01:05:50.62 - 01:05:55.88]

there was still kind of a functioning healthcare market. There wasn't massive consolidation yet.

[01:05:56.20 - 01:06:00.34]

And so every level was super fragmented. Manufacturers were fragmented. Insurance

[01:06:00.34 - 01:06:04.86]

companies were smaller. Little doctor's offices existed everywhere. Neighborhood pharmacies were

[01:06:04.86 - 01:06:11.08]

there. And so entering the American market, you didn't necessarily need huge scale to do it.

[01:06:11.46 - 01:06:17.68]

And the other thing to note is it wasn't yet the heyday of drugs, like of pharma. There weren't

[01:06:17.68 - 01:06:23.48]

that many drugs that people had high demand for. It wasn't like today where everywhere you look,

[01:06:23.54 - 01:06:27.92]

there's some amazing drug that could save your life depending on what conditions you have that

[01:06:27.92 - 01:06:32.68]

are on TV commercials. The federal government, and we'll get into this later, but Medicare Part D

[01:06:32.68 - 01:06:37.96]

wasn't even a thing yet. Drugs were not plentiful enough and good enough yet

[01:06:37.96 - 01:06:45.26]

for the government to cover them as an insurance benefit for people over 65. That's the era we're

[01:06:45.26 - 01:06:51.26]

in where if Nordisk wants to enter the American market, they kind of can without too many barriers.

[01:06:51.84 - 01:06:58.90]

Yeah. This is the right window. So I don't know how Brenham convinced both boards to do this,

[01:06:58.90 - 01:07:07.86]

but he does. And by God, he's right. It works. So for the entire decade of the 1970s,

[01:07:08.80 - 01:07:18.02]

Nordisk's sales grow at 30% compounded annually, which is amazing. Now they're still small. So

[01:07:18.58 - 01:07:27.18]

by 1980, Nordisk is still only about one-tenth the size of Novo overall, but they're a third

[01:07:27.18 - 01:07:33.56]

the size of Novo's insulin business. And they've moved from being this licensing company to now an

[01:07:33.56 - 01:07:40.76]

actual production company with capacity all around the world. So this is a huge win from basically

[01:07:40.76 - 01:07:46.10]

they were going to be taken over for cash by their old rivals, and now they're back in the game.

[01:07:47.32 - 01:07:52.64]

So Novo in response, they need to do something to get capital. They actually do a small IPO

[01:07:52.64 - 01:07:58.58]

on the Copenhagen Stock Exchange in 1974 to raise the capital they need for the transition to MC

[01:07:58.58 - 01:08:07.76]

insulin. So by the time we get to 1980, and just to set some scale here, Novo's annual global

[01:08:07.76 - 01:08:12.94]

insulin sales, this is Novo, they're still much larger. They're about $100 million annually,

[01:08:13.56 - 01:08:19.66]

and Nordisk's are about $30 million annually. That makes them the number two and number four

[01:08:19.66 - 01:08:24.70]

producers in the world by market share behind Eli Lilly in America, who's first with about

[01:08:24.70 - 01:08:30.86]

160 million in sales. By the way, these numbers are staggeringly small. These are like series C

[01:08:30.86 - 01:08:38.06]

startup. And this is exactly my point. So you might be wondering, wait a minute, if you add all that

[01:08:38.06 - 01:08:45.90]

up, the whole global insulin market is about half a billion dollars here in 1980. And that's not

[01:08:45.90 - 01:08:51.68]

exactly tiny and like you were saying, you know, the drug markets themselves weren't that huge back

[01:08:51.68 - 01:08:58.06]

in this era. But what is the path from here to Novo Nordisk today being the 15th largest company in

[01:08:58.06 - 01:09:02.64]

the world? Like what gives? What happened? Yeah, just look at pictures of people in the 70s and

[01:09:02.64 - 01:09:10.56]

look at pictures of people today. Yes. The answer is one, what you just said, we all got fat and

[01:09:10.56 - 01:09:17.00]

the diabetes market and specifically type two diabetes exploded. But two, and this is gonna be

[01:09:17.00 - 01:09:22.18]

such a fun story to tell here on Acquired because it's a huge part of Silicon Valley history that

[01:09:22.18 - 01:09:31.42]

we've never touched. Yes. Genentech. Two, Genentech happened. Oh yes. Which totally revolutionized

[01:09:31.42 - 01:09:38.14]

everything, launched the biotech market, made drug development and production vastly more scalable,

[01:09:38.14 - 01:09:45.00]

and it all happened right here in San Francisco, venture backed by Kleiner Perkins,

[01:09:45.38 - 01:09:51.20]

and it changed everything. Former Kleiner Perkins employee. Yeah. Was a co-founder of the company.

[01:09:51.76 - 01:09:57.94]

But before we talk about that. Yes. Now is the perfect time to introduce one of our other new

[01:09:57.94 - 01:10:02.60]

Acquired partners for season 14, an incredible company that we have gotten to know well over

[01:10:02.60 - 01:10:08.68]

the last couple of years, ServiceNow. ServiceNow, as many of you know, is the cloud-based platform

[01:10:08.68 - 01:10:13.58]

that automates and manages workflows across the whole enterprise, making everything about the way

[01:10:13.58 - 01:10:20.48]

a company or organization works actually work better for 85% of the fortune 500. It has also

[01:10:20.48 - 01:10:25.18]

been one of the absolute best performing technology companies over recent years. Yeah. I mean,

[01:10:25.24 - 01:10:29.74]

ServiceNow has outperformed almost every enterprise software company over the past five years,

[01:10:29.74 - 01:10:35.14]

including Microsoft. Yep. But what you may not know is ServiceNow is also an incredible Silicon

[01:10:35.14 - 01:10:40.42]

Valley startup story that ranks right up there with Google, Facebook, NVIDIA, Genentech as one

[01:10:40.42 - 01:10:45.10]

of the best venture investments of all time. Funnily enough, the ServiceNow campus is actually

[01:10:45.10 - 01:10:49.94]

right next door to the NVIDIA campus in Santa Clara. Yeah. We waved hi when we were there to

[01:10:49.94 - 01:10:57.14]

hang out with Jensen. So ServiceNow was started in 2003 by Fred Luddy. And Fred, kind of like

[01:10:57.14 - 01:11:02.18]

August Crowe starting Nordisk, was already the equivalent of a Nobel Prize winning software

[01:11:02.18 - 01:11:07.84]

developer and founder. He dropped out of college in 1970. Yeah. This is like a Nolan Bushnell

[01:11:07.84 - 01:11:13.44]

Atari era Silicon Valley. Totally. And he started programming and ultimately built a $4 billion

[01:11:13.44 - 01:11:19.06]

company as CTO. He really was part of that original technical crew like Woz and others

[01:11:19.06 - 01:11:23.98]

that formed the backbone of Silicon Valley. But all the way back when he first started in the

[01:11:23.98 - 01:11:31.38]

at age 17, Fred wrote a simple little program for an order clerk named Phyllis. Now, this was when

[01:11:31.38 - 01:11:37.84]

he was working at a company that fulfilled building materials orders. And Phyllis spent all day just

[01:11:37.84 - 01:11:43.58]

typing up the orders on these forms. So one night as a favor, Fred wrote a program that automated it.

[01:11:43.90 - 01:11:50.16]

80% of each form got filled in automatically. Phyllis comes in the next morning, Fred shows it

[01:11:50.16 - 01:11:57.28]

to her, and she breaks down crying. He took this incredibly soul-crushing, mind-numbing task that

[01:11:57.28 - 01:12:06.10]

she hated and made it 80% easier, 80% faster, and 100% less soul-crushing. So fast forward to 2004.

[01:12:06.70 - 01:12:12.18]

Software as a service is just becoming a thing. And Fred is like, whoa, we now have a delivery

[01:12:12.18 - 01:12:18.32]

mechanism that can take what I did for Phyllis back in 72 and scale it infinitely. Now, how many

[01:12:18.32 - 01:12:22.80]

Phyllises are there in the world? Well, it turns out it's hard to remember because ServiceNow

[01:12:22.80 - 01:12:27.86]

changed this forever. Every single company back then was filled with people just like Phyllis who

[01:12:27.86 - 01:12:33.70]

spent hours every day on repetitive tasks that software could handle 80% of. So Fred started

[01:12:33.70 - 01:12:39.30]

ServiceNow and took that same simple automation concept and brought it to IT, brought to customer

[01:12:39.30 - 01:12:46.30]

service, HR, ops, risk, kind of like AI is doing now, and ServiceNow is a part of that. They freed up

[01:12:46.30 - 01:12:51.74]

knowledge workers to go create more knowledge across the whole enterprise rather than more

[01:12:51.74 - 01:12:57.14]

forms and more individual point solutions. And like Novo Nordisk, it turned out that singularly

[01:12:57.14 - 01:13:03.10]

focusing on eliminating suffering from just one pervasive worldwide disease, in this case, not

[01:13:03.10 - 01:13:09.64]

diabetes, but repetitive manual office work, that was a path to becoming a $100 billion plus Fortune

[01:13:09.64 - 01:13:15.04]

500 company. It's an incredible story. So if you want to learn more about ServiceNow and connect

[01:13:15.04 - 01:13:21.14]

with the team, go on over to ServiceNow.com slash acquired. And when you get in touch, just tell them

[01:13:21.14 - 01:13:28.80]

that Ben and David sent you. Yep. Okay, so David, the 80s are here. For some reason, in the early

[01:13:28.80 - 01:13:34.54]

80s, the world starts becoming more overweight, addictive foods being the cause of this. Yes,

[01:13:34.74 - 01:13:40.46]

more metabolically unhealthy. Correct. And just to put some numbers on that, the number of type

[01:13:40.46 - 01:13:48.72]

two diabetes patients quadruples from 1980 to 2016. Yeah, and population growth was a lot slower

[01:13:48.72 - 01:13:55.20]

than that. So definitely the share of the population is massively expanding. And at this point in time,

[01:13:55.28 - 01:14:02.12]

we are still using pigs and cows to harvest pancreases and their islets and their extracts

[01:14:02.12 - 01:14:09.06]

in order to make insulin, even with this incredibly refined process until Genentech. Yes, and

[01:14:09.06 - 01:14:15.90]

specifically what that meant using animals to make insulin was that type two was not treated

[01:14:15.90 - 01:14:22.30]

with insulin. And actually, until this point in time, type two used to be called quote non-insulin

[01:14:22.30 - 01:14:27.22]

dependent diabetes because you didn't treat it with insulin because there wasn't enough insulin.

[01:14:27.36 - 01:14:33.20]

There weren't enough animal pancreases in the world to do it. Oh, I had no idea. And it wasn't

[01:14:33.20 - 01:14:39.10]

necessarily that insulin didn't help type two. I mean, lots and lots of type two diabetics these

[01:14:39.10 - 01:14:48.00]

days use insulin. It was that there just wasn't enough of it. Wow. And then in 1980, Genentech

[01:14:48.00 - 01:14:57.18]

and Eli Lilly as their partner changed everything with recombinant DNA and genetic engineering of

[01:14:57.18 - 01:15:03.56]

drugs. And I suspect many people don't know this. I sort of vaguely knew this before researching

[01:15:03.56 - 01:15:10.96]

the episode, but the first drug that they genetically engineered and that started this

[01:15:10.96 - 01:15:18.20]

whole revolution was insulin. Absolutely. It was the founding first application of the idea that

[01:15:18.20 - 01:15:24.76]

Genentech had of commercializing recombinant DNA. The first implementation was insulin. And to just

[01:15:24.76 - 01:15:30.60]

paint a little bit of a picture of why this is so amazing, it's not just that we now had a way to

[01:15:30.60 - 01:15:36.62]

not rely on animal pancreases. It's that for the first time we actually had human insulin. It is

[01:15:36.62 - 01:15:42.10]

insulin that is chemically identical to the insulin that naturally is produced by your body rather

[01:15:42.10 - 01:15:48.08]

than injecting something slightly different from a pig or cow. Yes, because you couldn't really

[01:15:48.08 - 01:15:55.90]

extract human insulin from humans before this point. And people thought that human insulin

[01:15:56.64 - 01:16:03.58]

would be a lot better to use than animal insulin. It turns out that that's debatable.

[01:16:04.42 - 01:16:08.32]

Yeah, it's interesting that this ended up being more of a manufacturing and scale advantage than

[01:16:08.32 - 01:16:17.02]

an efficacy advantage. Yes. But at the time, nobody really knew that. So in 1980, which is

[01:16:17.02 - 01:16:23.14]

when Genentech and Eli Lilly announced their partnership together, that Eli Lilly is going

[01:16:23.14 - 01:16:30.42]

to be the go-to-market partner for Genentech's new recombinant DNA bioengineering revolution,

[01:16:30.72 - 01:16:36.94]

and they're going to make human insulin. They announced that in 1980. People go nuts,

[01:16:37.14 - 01:16:44.32]

and it triggers this race for human insulin. And Novo gets swept up in it. They're like,

[01:16:44.32 - 01:16:48.80]

oh no, Eli Lilly, they're going to come back into the research game. They're going to innovate

[01:16:48.80 - 01:16:53.60]

in product. We had the chance to work with Genentech. Genentech had actually approached

[01:16:53.60 - 01:16:58.76]

them about being a partner in Europe. Novo had turned them down because they didn't think the

[01:16:58.76 - 01:17:03.08]

science was ready yet, and they were wrong. So they're like, shoot, we got to scramble.

[01:17:04.50 - 01:17:11.06]

They find a team of Japanese researchers who have shown that you can actually chemically

[01:17:11.06 - 01:17:16.92]

modify pig insulin to make it chemically identical to human insulin. You can't make

[01:17:16.92 - 01:17:22.08]

this stuff up. So Novo is like, great, we're going to race to market. We're going to beat

[01:17:22.08 - 01:17:27.28]

Eli Lilly with human insulin. It's not going to be genetically engineered. We're just going to

[01:17:27.28 - 01:17:34.96]

take our pig insulin and modify it. It turns out to be a huge boondoggle. It works, but it's not

[01:17:34.96 - 01:17:41.86]

any better than pig insulin. So it's a big flop for Novo. Which the timing lines up to really be

[01:17:41.86 - 01:17:46.56]

a nail in the coffin for them. I mean, if this is right after everything you just described with

[01:17:46.56 - 01:17:51.70]

Nordisk scaling up production and compounding at 30% per year and massively growing share,

[01:17:51.86 - 01:17:58.64]

like this is not a good use of Novo's precious dollars right now. Well, it's funny you say that.

[01:17:59.28 - 01:18:06.26]

So when the Genentech and Eli Lilly announcement happened in 1980, I mean,

[01:18:07.00 - 01:18:12.86]

truly this was a bombshell. It's hard to remember now. I mean, we weren't even alive, but this was

[01:18:13.76 - 01:18:20.24]

one of, if not the most important announcement to come out of Silicon Valley ever still to this day.

[01:18:21.34 - 01:18:27.14]

Investors went nuts. Anything that even you could squint and look like a biotech

[01:18:27.14 - 01:18:34.00]

was suddenly the hottest thing in the world. So Genentech goes public in the fall of 1980.

[01:18:34.30 - 01:18:39.42]

This is well before Humulin, the product that they create with Eli Lilly comes on the market.

[01:18:40.06 - 01:18:47.52]

They go public and it is, I believe the largest venture-backed IPO ever at that time

[01:18:48.10 - 01:18:51.90]

until it's eclipsed two months later when Apple goes public.

[01:18:53.34 - 01:19:00.92]

But investors are just mad for biotech companies. So when Novo announces that they're going to be

[01:19:00.92 - 01:19:05.70]

first to market with human insulin and like, yeah, yeah, just ignore that. It's actually

[01:19:05.70 - 01:19:13.04]

pig insulin that we're modifying. They use the hype on the back of that to do a US IPO

[01:19:13.04 - 01:19:18.10]

with Goldman Sachs and raise a hundred million dollars. When your currency is expensive,

[01:19:18.10 - 01:19:23.28]

sell it. Right. There are a number of analogies that we could make from the past few years that

[01:19:23.28 - 01:19:29.54]

I'll refrain from here. So as you say, is this a nail in the coffin for Novo? You know, I mean,

[01:19:29.56 - 01:19:35.96]

it's not good for the underlying business. Nordisk meanwhile, remember they're in the midst of this

[01:19:35.96 - 01:19:43.72]

aggressive expansion plan and scaling based on MC insulin. They're like, you know, I don't know

[01:19:43.72 - 01:19:50.60]

that human insulin in and of itself is all that much more effective. We're going to take a wait

[01:19:50.60 - 01:19:57.42]

and see approach. We are going to invest in building up our recombinant DNA and genetic

[01:19:57.42 - 01:20:02.02]

engineering capabilities because it's clear the whole industry is moving this way for production

[01:20:02.02 - 01:20:07.60]

reasons, if nothing else. And Novo is doing this too in the background, but Nordisk like,

[01:20:07.74 - 01:20:12.28]

we're not going to get caught up in the specifically human insulin hype. And this

[01:20:12.28 - 01:20:19.20]

really works out for them. So in 1984, Nordisk passes the German company Hosch to become the

[01:20:19.20 - 01:20:24.30]

number three global player in insulin. I think that's how you say it today is part of Sanofi,

[01:20:24.46 - 01:20:29.52]

the large international pharma conglomerate. And they're the only other player left besides Novo

[01:20:29.52 - 01:20:33.84]

and Eli Lilly. Yeah. Sanofi today. Yeah. The three of those companies are essentially the

[01:20:33.84 - 01:20:41.68]

entire insulin market. Yep. So 1984 Nordisk passes them on the back of that. They do their

[01:20:41.68 - 01:20:47.84]

own share listing on the Copenhagen Stock Exchange. So they changed the structure of

[01:20:47.84 - 01:20:53.28]

the operating company and still the foundation controls the majority of the votes. But for the

[01:20:53.28 - 01:20:58.80]

first time, outside investors can hold shares in the operating company of Nordisk. And by the end

[01:20:58.80 - 01:21:08.18]

of the 1980s, Nordisk is now up to 20% global market share in insulin. And that's really all

[01:21:08.18 - 01:21:13.74]

come at the expense of Novo, which is down to 30% global market share. Whoa. So they're close

[01:21:13.74 - 01:21:20.62]

to matching them. Yeah, they're pretty close. And this brings us finally to the summer of 1988,

[01:21:21.04 - 01:21:27.66]

when merger discussions begin for real between these two companies, now on much more equal

[01:21:27.66 - 01:21:34.02]

footing than the last time. Interesting. And this time, there actually is a really compelling reason

[01:21:34.02 - 01:21:39.58]

for both of them to merge and combine scale, which wasn't true before when it was really just

[01:21:39.58 - 01:21:46.28]

like, hey, Novo had a problem and needed cash. Now, with genetic engineering and the way the

[01:21:46.28 - 01:21:54.92]

whole industry is headed, scale is becoming much more important. It takes huge CapEx to do this

[01:21:54.92 - 01:22:01.16]

stuff. And scale becomes important for R&D. Scale becomes important for trials and approval. Scale

[01:22:01.16 - 01:22:07.50]

becomes important for negotiating with actually getting the product sold. Scale becomes important

[01:22:07.50 - 01:22:13.72]

for everything in healthcare, starting around this time, the late 80s, early 90s, and obviously went

[01:22:13.72 - 01:22:19.56]

nuts till today. And a big part of it is the production and infrastructure side of things.

[01:22:20.18 - 01:22:26.06]

But the other part is the go-to-market. Pharma kind of almost becomes like the enterprise software

[01:22:26.06 - 01:22:32.18]

industry. At the end of the day, there only are a few companies at scale that have the infrastructure

[01:22:32.70 - 01:22:40.12]

and the go-to-market to operate in. Yes, you can build a big company on top of or underneath

[01:22:40.12 - 01:22:45.38]

Microsoft or Oracle or Amazon or Salesforce or Google, but they're the ones with the infrastructure.

[01:22:45.82 - 01:22:49.90]

They're the ones with the channels. That's an interesting analogy. I hadn't thought of it that

[01:22:49.90 - 01:22:55.20]

way. Yeah, this is a good place to try to understand the pharma value chain as it exists today.

[01:22:55.20 - 01:23:00.52]

I think first off, we should say you basically can't. I'm actually not sure there's a human who

[01:23:00.52 - 01:23:05.14]

can hold all of it in their head, and we won't promise to make this comprehensive, but it is

[01:23:05.14 - 01:23:10.28]

worth knowing a few key concepts and the players involved. And I should say this whole thing only

[01:23:10.28 - 01:23:15.44]

applies to the U.S. market, which many of you listening in other places will be laughing and

[01:23:15.44 - 01:23:19.08]

saying, like, why is this so complicated? But yes, this is how the U.S. market functions.

[01:23:19.72 - 01:23:23.78]

So I wrote a sentence, David, that I thought would be a fun way to break it down.

[01:23:23.78 - 01:23:31.52]

And that simple sentence is, a patient buys a drug. But really, actually, that's not how it works.

[01:23:31.52 - 01:23:35.56]

It's like a butterfly flaps its wings. A person doesn't merely buy a drug.

[01:23:35.94 - 01:23:41.56]

So let's actually name all the parties, starting with the manufacturer. A manufacturer,

[01:23:41.82 - 01:23:48.28]

like Novo Nordisk, develops a drug. They sell it to distributors like McKesson or Cardinal Health,

[01:23:48.28 - 01:23:53.86]

who then sell the drug to pharmacies like CVS or your local neighborhood store.

[01:23:54.42 - 01:23:59.70]

The pharmacy then charges a price at the window to a customer. So far, there's nothing different

[01:23:59.70 - 01:24:04.34]

about how this is working from any retail supply chain. But here's where it gets weird.

[01:24:04.92 - 01:24:10.18]

In health care, when a consumer goes up to the pharmacy window, they typically don't pay their

[01:24:10.18 - 01:24:16.00]

own money for the price that the pharmacy actually puts on the register. Their insurance company does.

[01:24:16.00 - 01:24:21.74]

Well, the insurance company doesn't want to pay whatever price the pharma manufacturer picked for

[01:24:21.74 - 01:24:27.16]

their drug. And they have huge scale to throw around. So they go negotiate with the pharma

[01:24:27.16 - 01:24:32.58]

manufacturer to try to get some kind of discounted rate. But rather than do that themselves,

[01:24:33.18 - 01:24:38.66]

insurance companies outsource that task to a new type of company called a pharmacy benefits manager

[01:24:38.66 - 01:24:44.72]

or a PBM. The PBM negotiates with the pharma company for a discount, often in the form of

[01:24:44.72 - 01:24:49.96]

rebate, that the pharma company pays back to the PBM. They then take that discount,

[01:24:50.14 - 01:24:54.02]

they keep some of it for themselves, and then they pass some of it back to the insurance company,

[01:24:54.12 - 01:24:59.76]

who can then choose to share it with the employer in some way. And as you can imagine,

[01:25:00.02 - 01:25:02.92]

when there are this many middlemen in a transaction...

[01:25:02.92 - 01:25:05.16]

Yeah, so that's what, four middlemen, Sarah?

[01:25:05.26 - 01:25:10.86]

The PBM, the insurance company, the distributor, and for some reason, employers are involved.

[01:25:10.86 - 01:25:14.52]

So we're talking about a six-sided market.

[01:25:14.84 - 01:25:20.00]

Well, I don't think it's a sided market. There's two good diagrams that I'd found in the research

[01:25:20.00 - 01:25:25.02]

that we'll put on the Acquired Twitter account and the Threads account to get access to these

[01:25:25.02 - 01:25:29.86]

visuals that I think are pretty good illustrations of the way the dollars flow and the way the

[01:25:29.86 - 01:25:34.04]

product flows. But you can imagine when there are this many middlemen in a transaction,

[01:25:34.48 - 01:25:39.86]

it's really hard to have a functioning market, to actually interpret demand signals and have

[01:25:39.86 - 01:25:44.90]

them clearly flow all the way upstream. And for the end consumer to really be treated as the

[01:25:44.90 - 01:25:50.66]

customer versus just like a statistic in a large aggregated basket, we've sort of lost the plot

[01:25:50.66 - 01:25:54.98]

in being able to actually have a functioning free market. But anyways, I want to do a little dive

[01:25:54.98 - 01:26:00.16]

into each of the parties to understand what they do. The drug manufacturers, like Novonortis,

[01:26:00.24 - 01:26:07.20]

do all the R&D, and they do all the production. They also own the responsibility of the clinical

[01:26:07.20 - 01:26:12.66]

trial. So they work with partners to do this, but proving that the drug is safe and efficacious is up

[01:26:12.66 - 01:26:18.32]

to them. There's the distributor wholesaler that does exactly what you think they do. They buy all

[01:26:18.32 - 01:26:23.08]

the drugs from all the pharma manufacturers. They warehouse and distribute them. They actually do

[01:26:23.08 - 01:26:27.46]

take risk. When I say they buy, they actually do buy them and hold them, and they end up distributing

[01:26:27.46 - 01:26:33.16]

them to the pharmacies. Pharmacies do exactly what you think they do. Those companies have gotten

[01:26:33.16 - 01:26:40.58]

merged into PBMs in some cases, and so thinking of CVS as just CVS is not really right anymore.

[01:26:40.72 - 01:26:45.88]

It's CVS Caremark, so they're sort of with a PBM. There's the Walgreens Boots Alliance,

[01:26:46.46 - 01:26:50.82]

which is the way they named it is sort of all you need to know. So the way to think about

[01:26:50.82 - 01:26:55.24]

pharmacies is that there are a few big ones, and that is kind of what matters, even though

[01:26:55.24 - 01:27:00.66]

there are many people interested in keeping a thriving, independent set of pharmacies out there.

[01:27:01.46 - 01:27:06.72]

Then there's the PBM. So why does the PBM exist, the pharmacy benefits manager?

[01:27:07.30 - 01:27:08.10]

That's a good question.

[01:27:08.46 - 01:27:12.88]

Yeah. Well, in the old days, there were lots of drug companies and lots of insurance carriers,

[01:27:13.10 - 01:27:17.04]

and so it would be nice if every little insurance company or every employer

[01:27:17.04 - 01:27:23.38]

didn't have to go negotiate directly with every drug company to get all the best prices. So PBMs

[01:27:23.38 - 01:27:29.18]

provided value by doing that on everyone's behalf. PBMs created what's called a formulary,

[01:27:29.18 - 01:27:35.12]

which is basically a big ledger, a big list of drugs and the prices. And obviously today,

[01:27:35.32 - 01:27:40.10]

that is less necessary because there's less fragmentation given all the mergers that have

[01:27:40.10 - 01:27:47.30]

happened. But the PBMs still establish themselves as a key sort of immovable piece of this puzzle.

[01:27:47.62 - 01:27:52.22]

So are they sort of like agents? Is that the right way to think about them?

[01:27:52.68 - 01:27:58.18]

Agent implies that the principal can sort of make a decision to go elsewhere.

[01:27:58.74 - 01:27:59.82]

You're not going elsewhere.

[01:28:00.58 - 01:28:03.16]

The PBMs are the ones actually setting the prices.

[01:28:03.66 - 01:28:08.32]

Well, that's the key question. So maybe a little more context on PBMs and then let's

[01:28:08.32 - 01:28:13.08]

try to answer your question, David. So one, they're huge. PBMs manage pharmacy benefits

[01:28:13.08 - 01:28:18.74]

for 266 million Americans, and that number's old. That's as of 2016. So think about basically all

[01:28:18.74 - 01:28:25.32]

Americans get their prescription drugs through a PBM. Despite their used to being hundreds of PBMs,

[01:28:25.32 - 01:28:30.10]

there's now fewer than 30. And there's essentially three that cover about 80% of the market. And

[01:28:30.10 - 01:28:35.54]

those are Express Scripts, CVS Caremark, and OptumRx, which is actually owned by United

[01:28:35.54 - 01:28:40.62]

Health Group. So interesting to know that Caremark, that PBM, is corporately bundled

[01:28:40.62 - 01:28:45.82]

with CVS, a pharmacy, but OptumRx, corporately bundled with an insurance provider.

[01:28:46.32 - 01:28:48.16]

So there's vertical integration happening here too.

[01:28:48.34 - 01:28:51.98]

Yes. So if you want to be a little bit cynical about it, you can say they've really become

[01:28:51.98 - 01:28:57.14]

the gatekeeper for consumers getting access to drugs since a doctor is not going to prescribe

[01:28:57.14 - 01:29:03.86]

a drug if only two of the three big PBMs have it on a negotiated agreement there. So each PBM

[01:29:03.86 - 01:29:10.40]

individually has control or almost like a veto. If a PBM says, well, we're not going to work with

[01:29:10.40 - 01:29:14.70]

that drug or that drug manufacturer, doctors aren't going to keep a big list in their head of

[01:29:14.70 - 01:29:20.28]

what insurance companies work with, what PBMs that have what drugs. So as a pharma company,

[01:29:20.28 - 01:29:25.92]

you kind of need all three big PBMs to come to some terms with you to be on their formulary and

[01:29:25.92 - 01:29:30.68]

handle the reimbursement for your drug. So one other way you can kind of think about it is a

[01:29:30.68 - 01:29:36.10]

PBM is sort of like a health insurance company, but they just do it for the pharmaceutical benefit

[01:29:36.10 - 01:29:41.18]

and not all the other stuff that the health insurance companies do. So you talked about

[01:29:41.18 - 01:29:47.12]

prices. A major mechanism for the way that these prices are negotiated and set is the

[01:29:47.12 - 01:29:54.22]

rebate mechanism that the PBM negotiates. So manufacturers usually have to pay the PBM

[01:29:54.22 - 01:30:00.50]

a rebate, which lowers the net price of the drug, even though the list price stays the same.

[01:30:01.22 - 01:30:07.18]

So there's a sticker price, but then there's a rebate that, you know, once the PBM pays the

[01:30:07.18 - 01:30:12.82]

sticker price, actually the drug manufacturer... How does any of this get past the DOJ?

[01:30:12.82 - 01:30:17.80]

Great question. So initially the rebates worked well for drug manufacturers since there were a

[01:30:17.80 - 01:30:23.32]

lot of PBMs and they could negotiate. But now that there are three big PBMs, the pharma manufacturers

[01:30:23.32 - 01:30:28.24]

have essentially lost all their leverage in most cases. I'll say in most cases, and we should come

[01:30:28.24 - 01:30:34.36]

back later to what are the exceptions. So rebates are extremely high. Eli Lilly has publicly claimed

[01:30:34.36 - 01:30:40.94]

that the cost of these discounts and rebates accounted for 75% of the sticker price of

[01:30:40.94 - 01:30:47.36]

insulin. If you're getting a rebate on 75% of the total price, the sticker price is not the price.

[01:30:47.84 - 01:30:53.14]

Wow. Wait, so who gets the rebates? Is it the PBMs themselves or the consumers?

[01:30:53.72 - 01:30:59.20]

Well, PBMs say that they tend to pass most of the rebate along to the healthcare plan.

[01:31:00.04 - 01:31:06.64]

Yeah. Consumers are far away from any of this. And the healthcare plan says they share it in

[01:31:06.64 - 01:31:12.56]

some fashion with the employer in some part of their agreement to be the healthcare provider,

[01:31:12.74 - 01:31:18.72]

the insurance provider for the employer. But this is a quagmire of a debate that is out of scope for

[01:31:18.72 - 01:31:23.42]

this episode. And my favorite quote from one source that we talked to described rebates as a

[01:31:23.42 - 01:31:30.26]

game of hide the sausage. Oh, gosh. Wow. But yes, you're right, David. Nowhere in there did I say,

[01:31:30.26 - 01:31:37.32]

oh, the patient gets the rebate. You can see how demand signals from patient and actual clearing

[01:31:37.32 - 01:31:42.56]

prices of a patient and what they're willing to pay for a drug, all that signal just gets lost

[01:31:42.56 - 01:31:51.58]

in all of this middleman mania. Wow. So that is the current state of what happens when

[01:31:52.30 - 01:31:56.88]

many people or most people go and fill a prescription.

[01:31:58.04 - 01:32:04.10]

So bringing it back to when the Novo Nordisk merger finally happens,

[01:32:04.68 - 01:32:11.72]

this is the background on the go-to-market side, at least in the US. And then there's also

[01:32:11.72 - 01:32:19.18]

the background on the infrastructure side, thanks to genetic engineering, where scale now really

[01:32:19.18 - 01:32:26.28]

matters. And both companies are now on much more of an even footing. So in January 1989,

[01:32:27.02 - 01:32:34.02]

the Novo Nordisk merger is finally announced. And it's a dual merger of both the operating

[01:32:34.02 - 01:32:40.62]

companies and their respective foundations. So the two foundations merged into one and the two

[01:32:40.62 - 01:32:46.44]

operating companies merged into one as well. And I had to dig a bit to figure out the exact

[01:32:46.44 - 01:32:57.22]

economic splits. I believe that the final ratio was 62% Novo and 38% Nordisk. So Novo was still

[01:32:57.22 - 01:33:03.46]

the kind of larger majority institution here, but this is a far cry from when discussions first

[01:33:03.46 - 01:33:09.00]

started 10 years ago. And Nordisk was this little, you know, hey, we're buying you for cash, essentially.

[01:33:09.44 - 01:33:14.96]

No, now it's like, this is really a 60-40 merger. It's crazy. The two guys that split off and went

[01:33:14.96 - 01:33:19.98]

to be cowboys and start their own little competitor, even though they didn't have the license, ended up

[01:33:19.98 - 01:33:25.80]

creating the bigger company. Yeah. Wild. And they drove each other to create all of this innovation

[01:33:25.80 - 01:33:32.02]

over the years. So the new combined company has roughly a billion dollars in insulin revenue

[01:33:32.02 - 01:33:40.98]

and 50%, 5-0% global market share, with Eli Lilly just behind at 45% and Hosted at 5%.

[01:33:41.62 - 01:33:47.42]

That kind of tells you right there how much the market has grown just during the decade of the

[01:33:47.42 - 01:33:52.64]

1980s. You know, that puts the total market size at roughly around $2 billion for insulin.

[01:33:53.14 - 01:34:00.78]

10 years ago, the total market size was $500 million. Wow. Yeah. Wow. The Enzyme and other

[01:34:00.78 - 01:34:06.68]

businesses within Novo, they stay with the company for now. They would get spun out later in the year

[01:34:06.68 - 01:34:12.26]

2000. And that contributes another roughly half a billion in revenue, but with lower margins,

[01:34:12.36 - 01:34:20.00]

as we talked about. The Novo CEO and Henry Brenham from the Nordisk side, they remain as co-CEOs for

[01:34:20.00 - 01:34:26.10]

the next couple of years. And Brenham notes that they are still a dwarf compared to the increasingly

[01:34:26.10 - 01:34:33.12]

consolidated pharma market out there. But we are, quote, a specialized dwarf that will probably

[01:34:33.12 - 01:34:39.92]

create a certain furor on the global stage. And what they're referencing here is, as we were

[01:34:39.92 - 01:34:47.22]

talking about, this is the era when just huge pharma mergers start happening. So Glaxo and

[01:34:47.22 - 01:34:54.28]

Welcome merge around this time. Astra and Zeneca merge around this time. Sanofi buys Horsch. These

[01:34:54.28 - 01:35:00.66]

are all multi, multi-billion dollar, tens of billions of dollar transactions that makes Novo

[01:35:00.66 - 01:35:06.54]

and Nordisk look kind of like small potatoes at the time. And actually, Wall Street and the

[01:35:06.54 - 01:35:13.72]

investment community believes that this is really just the first step, that this is Novo and Nordisk

[01:35:13.72 - 01:35:20.56]

and the leading insulin business in the world sort of preparing itself for a further merger or sale

[01:35:20.56 - 01:35:29.50]

into one of these new diversified global pharma conglomerates. And actually, this is crazy to

[01:35:29.50 - 01:35:36.28]

think about in retrospect, but Novo Nordisk management agrees with that. That's actually

[01:35:36.28 - 01:35:44.68]

their plan. Like, there's no rush here, but they think that they do need to merge into a larger

[01:35:44.68 - 01:35:49.56]

organization. So they think the writing is on the wall where we need scale in order to function in

[01:35:49.56 - 01:35:54.60]

this changing marketplace. And so we're going to merge in. And what they didn't realize was

[01:35:54.60 - 01:36:02.18]

that the market that they were on top of would actually, sadly, be a tailwind that gets them to

[01:36:02.18 - 01:36:07.82]

scale without merging with anyone else. Yes. Basically, all throughout the decade of the

[01:36:07.82 - 01:36:14.64]

1990s and into the 2000s, management is in constant merger or sale negotiations with one of

[01:36:14.64 - 01:36:23.00]

these big pharma giants or another. And kind of luckily, none of them come to fruition. And in

[01:36:23.00 - 01:36:29.96]

the meantime, without anyone including them really noticing, the combined company just keeps

[01:36:29.96 - 01:36:37.30]

compounding on these tailwinds of the expansion of the insulin market and insulin treatment of

[01:36:37.30 - 01:36:43.62]

type 2 diabetics and all the supply that's unleashed by genetic engineering. So revenue

[01:36:43.62 - 01:36:49.80]

and profit compound again at like 20 percent, sometimes 20 percent plus annually for like

[01:36:49.80 - 01:36:55.68]

15 years there. They're firing on all cylinders. In the year 2000, they signed a huge deal with

[01:36:55.68 - 01:37:00.58]

Walmart. They land a supply agreement with the VA hospital system for the first time,

[01:37:00.66 - 01:37:07.16]

the Veterans Affairs hospital system in the US, which is enormous. And so by the end of 2003,

[01:37:07.84 - 01:37:13.96]

annual revenue for the company is now over $4 billion. And that's pretty much just on insulin

[01:37:13.96 - 01:37:20.12]

alone. Remember, they've spun out Novozymes, all the subscale pharma businesses that Novo had are

[01:37:20.12 - 01:37:29.34]

all gone. And that's when management finally decides to sell the company. So in 2004,

[01:37:29.68 - 01:37:36.00]

they have a deal on the table to combine with the Swiss company Serono. Management is bought in.

[01:37:36.12 - 01:37:40.52]

They've got the operating company board bought in. They're ready to do it. They just need to

[01:37:40.52 - 01:37:47.10]

get approval from the foundation board, which is the only shareholder that matters. But there's

[01:37:47.10 - 01:37:52.76]

never been a conflict between the foundation board and the management board. Everybody's always been

[01:37:52.76 - 01:37:59.90]

aligned here. But this is like the whole C-suite of meta deciding to sell the company to Apple,

[01:38:00.12 - 01:38:05.14]

and then they just have to go get Zuckerberg's approval to do it. It's literally that scenario.

[01:38:05.14 - 01:38:11.56]

Yes. And there's a clause in the foundation's agreement with the company that there must be

[01:38:11.56 - 01:38:17.68]

a quote, convincing business argument from the company's board of directors to the foundation

[01:38:17.68 - 01:38:23.86]

board of directors, that any merger or sale is a necessary precondition for the business to

[01:38:23.86 - 01:38:30.16]

maintain and expand its position as a competitive business at the international level. Now in

[01:38:30.16 - 01:38:34.18]

management's eyes, like we've just been talking about, there's so much consolidation happening

[01:38:34.18 - 01:38:39.32]

in the industry. Of course it is a necessary precondition, given everything going on,

[01:38:39.62 - 01:38:44.42]

that we need to get to a larger scale. And so that's why we have, after 10 plus years,

[01:38:44.60 - 01:38:50.76]

finally found the right deal. So they go to the foundation board, expecting that everybody's

[01:38:50.76 - 01:38:56.64]

going to see the light and just agree here. And the foundation board is like, yeah, I mean,

[01:38:56.64 - 01:39:02.66]

I hear what you're saying, but have you looked at our revenue and profit growth over the last 15

[01:39:02.66 - 01:39:09.90]

years? Are you really telling me that we need to do this in order to maintain and expand our

[01:39:09.90 - 01:39:15.32]

position as a competitive business? Are you really, really telling me that? And management's like,

[01:39:15.90 - 01:39:20.74]

yes. Isn't this what we've been working to? Why did we spin off the enzyme business? Why did

[01:39:20.74 - 01:39:25.36]

we do all this if we weren't just preparing for a sale? And the foundation board is like,

[01:39:25.92 - 01:39:30.08]

uh, how about you come in and present to us with your financial advisors?

[01:39:30.72 - 01:39:34.16]

My rubber stamp's feeling like it's not working right now. I'm not sure.

[01:39:36.06 - 01:39:39.98]

Oh, my daughter loves to say when something doesn't go her way these days, she says,

[01:39:40.06 - 01:39:50.78]

not working. Foundation board is like, not working. So what ensues, management comes in,

[01:39:50.98 - 01:39:55.42]

they present in two board meetings, first in August, 2004, and then a second one in September

[01:39:56.06 - 01:40:01.92]

where they get a do-over, and they fail to convince the foundation board. So they block

[01:40:01.92 - 01:40:07.52]

the merger. This is like the opposite of what happened at OpenAI, where the foundation here

[01:40:07.52 - 01:40:13.08]

is saying, no, you must continue as an independent commercial entity. It's a fascinating analog.

[01:40:13.52 - 01:40:18.72]

And this is, I think, one thing that makes this company really, really unique. But for having

[01:40:18.72 - 01:40:24.38]

foundation control with a very specific charter and mission, this company gets rolled up.

[01:40:24.38 - 01:40:29.08]

Absolutely. 100% chance if this ownership structure were not in place,

[01:40:29.24 - 01:40:33.72]

we would not be doing this episode today. And I don't exactly know what the deal terms were,

[01:40:33.92 - 01:40:39.24]

but basically in public company land, if anybody comes to you and offers you 25 to 30%

[01:40:39.24 - 01:40:43.66]

higher than your shares are currently trading, congratulations, they get to own your company.

[01:40:43.96 - 01:40:47.98]

And that didn't happen. That didn't happen here, which turns out to be,

[01:40:48.96 - 01:40:53.86]

unbeknownst to pretty much anyone at the time, and I'm sure not even the foundation board,

[01:40:54.38 - 01:41:04.56]

a very prescient decision because there is a small group of researchers within Novo Nordisk,

[01:41:05.22 - 01:41:13.18]

led by a woman named Lotte Bjerre Knudsen, who is working on a pretty incredible project

[01:41:13.90 - 01:41:20.86]

that is showing a lot of promise. And that would be GLP-1 agonist drugs.

[01:41:21.30 - 01:41:22.22]

That is a mouthful, David.

[01:41:22.78 - 01:41:28.90]

That it is. But I'm pretty sure many of you know what that term means, or even if you don't,

[01:41:28.94 - 01:41:32.96]

you've probably heard the marketing names for the current class of those drugs that

[01:41:32.96 - 01:41:38.60]

Novo Nordisk has on the market, which would be Ozempic and Wegavi.

[01:41:39.20 - 01:41:42.34]

Or Ribelsis, which just got FDA approval pretty recently.

[01:41:42.66 - 01:41:43.28]

Yes, indeed.

[01:41:43.72 - 01:41:50.36]

So, before we tell the story of how GLP-1s started being researched,

[01:41:50.36 - 01:41:56.08]

and the very unlikely place that they came from, we want to thank our longtime friend of the show,

[01:41:56.24 - 01:42:00.34]

Vanta, the world's leading security compliance and trust management platform.

[01:42:00.90 - 01:42:05.30]

Vanta automates your security reviews and compliance efforts, so frameworks like SOC2,

[01:42:05.46 - 01:42:10.88]

GDPR, FedRAMP for payments, and critically for healthcare, HIPAA compliance and monitoring.

[01:42:11.46 - 01:42:15.74]

Vanta takes these otherwise incredibly time and resource draining efforts for your organization

[01:42:15.74 - 01:42:17.58]

and makes them fast and simple.

[01:42:17.58 - 01:42:21.98]

Yep, it's the perfect example of a quote we talk about all the time on Acquired,

[01:42:22.38 - 01:42:27.40]

Jeff Bezos' maxim to focus only on what makes your beer actually taste better.

[01:42:28.04 - 01:42:32.60]

In other words, spend your time and resources only on what's actually going to move the needle

[01:42:32.60 - 01:42:36.62]

for your product and your customers, and outsource everything else that doesn't.

[01:42:37.06 - 01:42:41.04]

Vanta and security compliance and trust management is this to a T.

[01:42:41.50 - 01:42:44.94]

Every company needs it, especially every company operating in healthcare,

[01:42:44.94 - 01:42:49.60]

and it plays a major role in enabling revenue because customers and partners demand it,

[01:42:50.04 - 01:42:53.32]

but yet it adds zero flavor to your actual product.

[01:42:53.82 - 01:42:54.50]

So enter Vanta.

[01:42:54.88 - 01:42:57.10]

Vanta takes all the spreadsheets, fragmented tools,

[01:42:57.22 - 01:43:01.02]

and manual reviews that go into managing modern security and compliance requirements

[01:43:01.02 - 01:43:05.24]

and turns them into a single software pane of glass that connects all of your services

[01:43:05.24 - 01:43:08.78]

via APIs and eliminates 90% of the work for your organization.

[01:43:09.28 - 01:43:13.70]

And it makes these otherwise static, point-in-time security reviews dynamic,

[01:43:13.70 - 01:43:16.88]

so you can monitor your security posture in real-time

[01:43:16.88 - 01:43:18.64]

and share it with your customers and partners.

[01:43:19.18 - 01:43:23.60]

Yep, and it scales all the way up from seed stage startups to large enterprises like Autodesk,

[01:43:23.70 - 01:43:26.72]

Gusto, ZoomInfo, many large AI companies, and more.

[01:43:26.90 - 01:43:31.00]

They have over 6,000 customers now and are quite a large enterprise themselves.

[01:43:31.44 - 01:43:36.04]

So if your company is ready to automate compliance and go back to making your beer taste better,

[01:43:36.42 - 01:43:40.24]

head on over to Vanta.com slash Acquired and tell them Ben and David sent you.

[01:43:40.24 - 01:43:42.88]

And thanks to our friend Christina, Vanta's CEO,

[01:43:43.42 - 01:43:46.98]

all Acquired listeners get $1,000 of free credit.

[01:43:47.36 - 01:43:48.66]

Our thanks to Vanta.

[01:43:49.26 - 01:43:55.60]

So David, glucagon-like-peptide-1-receptor agonists.

[01:43:56.02 - 01:43:57.72]

What is it and where did it come from?

[01:43:58.28 - 01:44:02.02]

Well, it really is the story of Lotta Biera-Newton.

[01:44:02.34 - 01:44:07.06]

She started at Novo in 1989, the same year the merger happened.

[01:44:07.62 - 01:44:12.32]

Right out of undergrad as a scientist, actually in the enzyme division,

[01:44:12.72 - 01:44:16.86]

which I didn't realize until you sent me an article last night, I think, about this.

[01:44:17.34 - 01:44:21.62]

Yeah, remarkably, there is this paper, I guess it's a paper,

[01:44:22.00 - 01:44:24.94]

called Inventing Lyraglutide, a glucagon-like-peptide-1

[01:44:24.94 - 01:44:28.54]

analog for the treatment of diabetes and obesity that was published in 2019.

[01:44:29.02 - 01:44:34.42]

But it is a first-person account by Lotta of the entire journey and her career

[01:44:34.42 - 01:44:37.32]

and how all the research went down and where it came from,

[01:44:37.60 - 01:44:41.12]

that is published in ACS Pharmacology and Translational Science,

[01:44:41.44 - 01:44:42.78]

publicly available to everyone.

[01:44:43.12 - 01:44:47.60]

Like, she has just told the story, and it's very academic, scientifically written,

[01:44:47.88 - 01:44:50.66]

but it's super cool that she's the hero of this story

[01:44:50.66 - 01:44:53.18]

and sort of got to write how it all went down.

[01:44:53.34 - 01:44:54.58]

Yeah, super cool.

[01:44:54.66 - 01:44:55.66]

We'll link to it in the sources.

[01:44:56.10 - 01:44:56.34]

Yep.

[01:44:57.44 - 01:44:59.54]

So eventually, after a couple years,

[01:44:59.84 - 01:45:03.04]

she switches from the enzyme division to the diabetes business.

[01:45:03.04 - 01:45:06.40]

And specifically, remember, this is not long after

[01:45:06.40 - 01:45:08.82]

the genetic engineering revolution has happened,

[01:45:09.34 - 01:45:13.52]

she gets put on the team that is screening new potential compounds

[01:45:13.52 - 01:45:18.50]

that they could create for treatment of type 2 diabetes.

[01:45:18.94 - 01:45:23.36]

Right around this same time, oral anti-diabetic medications

[01:45:23.36 - 01:45:25.70]

are becoming a big thing in the market.

[01:45:26.00 - 01:45:28.80]

So these are drugs like metformin, if you've ever heard of that,

[01:45:28.86 - 01:45:31.38]

that's the most commonly used one for type 2 diabetics.

[01:45:31.38 - 01:45:36.40]

They're kind of like the first line of defense for type 2 diabetes

[01:45:36.40 - 01:45:39.10]

before you progress to insulin treatments.

[01:45:40.14 - 01:45:44.62]

And Novo doesn't have a drug in this category.

[01:45:44.74 - 01:45:46.78]

Despite being like the insulin leader,

[01:45:47.34 - 01:45:51.92]

Novo and Novo Nordisk never had a viable oral anti-diabetic.

[01:45:52.64 - 01:45:55.94]

So Latte's part of this group that's looking for new candidates.

[01:45:56.62 - 01:45:59.08]

So in the early to mid 90s,

[01:45:59.08 - 01:46:02.08]

Latte starts digging into the academic research,

[01:46:02.48 - 01:46:05.72]

and there's new work coming out that in type 2 patients,

[01:46:05.98 - 01:46:09.60]

a big part of the mechanism that messes with actual insulin production

[01:46:10.12 - 01:46:12.98]

is a hormone called glucagon-like peptide 1,

[01:46:13.40 - 01:46:16.10]

or GLP-1, Ben as you were talking about.

[01:46:16.80 - 01:46:21.32]

And the thought is that if you could somehow get more GLP-1

[01:46:21.32 - 01:46:23.50]

into these patients' bodies,

[01:46:23.86 - 01:46:27.96]

you could stabilize their insulin production and thus treat the disease.

[01:46:28.60 - 01:46:30.10]

Seems pretty straightforward.

[01:46:30.40 - 01:46:34.92]

You could imagine that you could now just use the same recombinant DNA techniques

[01:46:34.92 - 01:46:39.36]

to genetically engineer more GLP-1, just like you engineer human insulin.

[01:46:39.86 - 01:46:40.58]

No big deal.

[01:46:40.90 - 01:46:42.08]

Seems pretty straightforward.

[01:46:42.76 - 01:46:45.16]

In fact, why don't you just go eat some GLP-1?

[01:46:45.28 - 01:46:47.06]

Just get it into your body however you want.

[01:46:47.16 - 01:46:48.14]

I'm sure it'll work out.

[01:46:48.42 - 01:46:49.52]

Right. No big deal.

[01:46:49.94 - 01:46:55.90]

Except the problem is GLP-1 only stays active in your body

[01:46:55.90 - 01:46:57.26]

for about five minutes

[01:46:57.26 - 01:47:00.90]

before your body completely metabolizes it and breaks it down.

[01:47:01.42 - 01:47:03.16]

So in a normal healthy person,

[01:47:03.16 - 01:47:05.16]

you're just producing GLP-1 all the time,

[01:47:05.16 - 01:47:07.20]

and it's regulating your insulin production, etc.

[01:47:07.68 - 01:47:10.30]

In type 2 diabetes, that gets disrupted.

[01:47:10.68 - 01:47:14.88]

You can't just put more regular human GLP-1 in the body,

[01:47:15.00 - 01:47:16.68]

or it's going to go away immediately.

[01:47:17.92 - 01:47:20.86]

So a whole lot of people across the industry

[01:47:20.86 - 01:47:22.84]

kind of bang their heads against the wall.

[01:47:23.42 - 01:47:25.82]

Nobody can figure out how to make this work.

[01:47:26.86 - 01:47:30.06]

And the industry and the academic research community

[01:47:30.60 - 01:47:33.32]

pretty much abandons it as a drug candidate.

[01:47:34.06 - 01:47:36.84]

But Lata is like, if we could make it work,

[01:47:37.18 - 01:47:40.82]

this would really, really help people and be a great drug.

[01:47:41.70 - 01:47:46.08]

So she faces a lot of pressure inside the company, outside the company.

[01:47:46.22 - 01:47:47.60]

Why are you still hanging on to this?

[01:47:47.66 - 01:47:49.16]

Why are you still pursuing this path?

[01:47:49.16 - 01:47:53.00]

And then finally, a few years later in the mid-90s,

[01:47:53.42 - 01:47:55.22]

management actually gives her an ultimatum.

[01:47:55.44 - 01:47:57.90]

And they're like, you either need to crack this

[01:47:57.90 - 01:48:02.16]

and get an actual drug candidate in the pipeline within a year,

[01:48:02.30 - 01:48:04.82]

or we're going to shut down this whole program.

[01:48:05.16 - 01:48:07.58]

And remember, this is even like Novo Nordisk,

[01:48:07.76 - 01:48:11.10]

the world-class, most focused

[01:48:11.10 - 01:48:14.46]

on pure play diabetes research company in the world.

[01:48:14.50 - 01:48:16.10]

And even they are like,

[01:48:16.66 - 01:48:19.58]

yeah, we're almost ready to abandon this whole thing.

[01:48:20.16 - 01:48:21.04]

Crazy. What year is this?

[01:48:21.62 - 01:48:23.92]

This is like 95, 96.

[01:48:24.30 - 01:48:28.46]

All right. And she's been doing research on this since like 91,

[01:48:28.72 - 01:48:30.76]

I think is when her and the team started

[01:48:30.76 - 01:48:34.36]

cranking away on GLP-1 research inside Novo.

[01:48:34.64 - 01:48:37.30]

Around that. So a few years with nothing to show for it.

[01:48:37.62 - 01:48:37.90]

Yep.

[01:48:38.38 - 01:48:42.00]

So she keeps tweaking the GLP-1 molecule.

[01:48:42.34 - 01:48:44.76]

And again, you can do this with recombinant DNA.

[01:48:44.76 - 01:48:46.06]

You can tweak any molecule.

[01:48:46.62 - 01:48:50.26]

So eventually she develops a GLP-1 analog,

[01:48:50.88 - 01:48:53.54]

analog being, you know, similar type molecule

[01:48:53.54 - 01:48:57.64]

called liraglutide that includes a fatty acid

[01:48:57.64 - 01:49:01.18]

grafted onto the molecule that helps prevent the body

[01:49:01.18 - 01:49:02.32]

from breaking it down.

[01:49:02.52 - 01:49:04.50]

And this is the big breakthrough.

[01:49:05.44 - 01:49:07.76]

Liraglutide ends up having a half-life

[01:49:07.76 - 01:49:10.58]

in the human body of 13 hours

[01:49:10.58 - 01:49:12.98]

compared to, you know, like a half-life

[01:49:12.98 - 01:49:15.08]

of two and a half minutes for straight up GLP-1.

[01:49:15.26 - 01:49:15.96]

That'll help.

[01:49:16.30 - 01:49:19.10]

Yeah. That satisfies management's ultimatum.

[01:49:19.30 - 01:49:22.42]

The mechanism by which it does this is totally fascinating.

[01:49:22.54 - 01:49:25.30]

So you mentioned that the fatty acid gets attached

[01:49:25.30 - 01:49:28.26]

to the GLP-1 to create this GLP-1 analog.

[01:49:28.64 - 01:49:31.32]

The way it basically works is it has to bind

[01:49:31.32 - 01:49:35.26]

in a very specific location such that the receptor

[01:49:35.26 - 01:49:38.76]

is not blocked, but it is sort of grafted

[01:49:38.76 - 01:49:40.64]

onto that molecule so they can travel together.

[01:49:40.64 - 01:49:44.00]

The fatty acids then make it so the GLP-1 can bind

[01:49:44.00 - 01:49:47.82]

to another protein, which I believe is pronounced albumin,

[01:49:48.18 - 01:49:50.38]

which is this really large protein

[01:49:50.38 - 01:49:52.24]

that is very common in the bloodstream.

[01:49:52.64 - 01:49:55.28]

And so it protects the GLP-1 molecule

[01:49:55.28 - 01:49:57.76]

from the degradation by enzymes,

[01:49:57.88 - 01:50:00.36]

and it protects it from being sort of quickly cleared

[01:50:00.36 - 01:50:03.30]

in the kidney because that sort of bound molecule

[01:50:03.30 - 01:50:05.78]

is now too complex, too large to be filtered.

[01:50:06.08 - 01:50:08.48]

So it kind of makes it like a big truck

[01:50:08.48 - 01:50:09.92]

bouncing down a small highway

[01:50:09.92 - 01:50:12.24]

in that the molecule is protected.

[01:50:13.20 - 01:50:15.44]

Yeah, and I think that's how she phrases it too

[01:50:15.44 - 01:50:17.70]

when she describes it as protecting the molecule.

[01:50:18.52 - 01:50:21.06]

Yep, the fatty acid sort of, well,

[01:50:21.52 - 01:50:23.20]

it makes it big and stick to stuff.

[01:50:23.60 - 01:50:25.76]

Sometimes it's good to have a layer of fat around you.

[01:50:26.64 - 01:50:29.92]

Okay, so 13-hour half-life, you know,

[01:50:30.10 - 01:50:34.68]

this liraglutide can become basically a once-a-day drug

[01:50:34.68 - 01:50:36.54]

instead of an every-five-minutes drug?

[01:50:36.92 - 01:50:39.04]

Yeah, well, I mean, eventually.

[01:50:39.52 - 01:50:41.30]

But now here's the thing with this stuff.

[01:50:42.10 - 01:50:44.48]

To get a whole new class of drugs to market

[01:50:45.20 - 01:50:46.88]

takes a really long time.

[01:50:47.36 - 01:50:48.48]

So this is a big breakthrough,

[01:50:49.06 - 01:50:51.24]

kind of 97-ish timeframe.

[01:50:52.40 - 01:50:54.00]

But, you know, Nova's like,

[01:50:54.06 - 01:50:55.20]

great, we're going to invest in this.

[01:50:55.26 - 01:50:55.96]

This is promising.

[01:50:57.08 - 01:50:59.86]

We'll see in a decade if we can get this to market.

[01:51:00.20 - 01:51:02.72]

So they start the clinical trial path

[01:51:02.72 - 01:51:04.96]

first with animal trials for several years,

[01:51:05.12 - 01:51:07.20]

then many phases of human trials, et cetera.

[01:51:07.20 - 01:51:10.52]

And that brings us to 2005,

[01:51:11.44 - 01:51:15.62]

when the world's first GLP-1 analog drug

[01:51:16.24 - 01:51:17.28]

finally comes to market

[01:51:17.28 - 01:51:19.30]

for the treatment of type 2 diabetes.

[01:51:20.04 - 01:51:22.72]

Of course, I'm talking about the world-famous,

[01:51:22.96 - 01:51:26.38]

well-known, Bayetta from Eli Lilly.

[01:51:26.82 - 01:51:27.56]

Ba-na-na!

[01:51:28.42 - 01:51:32.32]

Not a Novo drug, not from Latte's work,

[01:51:32.68 - 01:51:35.26]

and developed in a completely parallel way.

[01:51:35.26 - 01:51:38.66]

Not Ozempic, not Victoza, not Wegewee.

[01:51:39.10 - 01:51:40.30]

Something completely different.

[01:51:40.90 - 01:51:44.18]

This might be the most random occurrence

[01:51:44.18 - 01:51:45.70]

that we've ever had on Acquired.

[01:51:46.08 - 01:51:47.84]

David, if I called you and said,

[01:51:47.98 - 01:51:49.52]

ship me a lizard, this is important,

[01:51:49.96 - 01:51:50.58]

would you do it?

[01:51:52.14 - 01:51:54.52]

Knowing this context, I would actually say yes.

[01:51:54.98 - 01:51:56.14]

An actual lizard.

[01:51:56.30 - 01:51:57.06]

Is that where you're going?

[01:51:57.56 - 01:51:57.84]

Yes.

[01:51:58.04 - 01:51:58.42]

Yes.

[01:51:58.62 - 01:51:59.08]

Okay, great.

[01:52:00.34 - 01:52:01.82]

So during this time,

[01:52:02.06 - 01:52:04.36]

in parallel to Latte's work at Novo,

[01:52:05.08 - 01:52:06.74]

two American researchers

[01:52:06.74 - 01:52:08.96]

in the VA hospital system,

[01:52:09.06 - 01:52:10.56]

the Veterans Affairs hospital system.

[01:52:11.18 - 01:52:11.80]

Government employees.

[01:52:12.10 - 01:52:12.98]

Government employees.

[01:52:13.98 - 01:52:17.14]

Somehow discovered that a hormone

[01:52:17.14 - 01:52:19.00]

contained in the venom

[01:52:19.00 - 01:52:21.22]

of the Gila monster lizard,

[01:52:21.86 - 01:52:23.80]

literally the lizard called the Gila monster,

[01:52:24.04 - 01:52:25.42]

which has poisonous venom.

[01:52:26.14 - 01:52:28.18]

One of the hormones in its venom

[01:52:29.44 - 01:52:32.04]

also was a GLP-1 analog,

[01:52:33.04 - 01:52:35.64]

acted similarly to GLP-1 in the body,

[01:52:36.22 - 01:52:38.86]

and didn't break down within five minutes.

[01:52:39.74 - 01:52:43.02]

David, go get that poisonous lizard venom,

[01:52:43.40 - 01:52:44.48]

take all the poison out

[01:52:44.48 - 01:52:45.86]

and inject it into me, please.

[01:52:46.08 - 01:52:47.16]

That's what I'm asking you to do.

[01:52:47.24 - 01:52:48.14]

Let's see if that works.

[01:52:48.50 - 01:52:50.42]

I just, I have no idea how this got proposed

[01:52:50.42 - 01:52:52.14]

and why people thought this was a good idea,

[01:52:52.24 - 01:52:53.84]

but like incredible that it worked.

[01:52:54.00 - 01:52:54.48]

Incredible.

[01:52:54.76 - 01:52:57.38]

So in 1995, Daniel Drucker

[01:52:57.38 - 01:53:00.90]

had a lizard shipped from Utah to his lab

[01:53:00.90 - 01:53:02.66]

and he started experimenting

[01:53:02.66 - 01:53:03.86]

with the deadly venom.

[01:53:04.38 - 01:53:06.16]

David, aside from the research

[01:53:06.16 - 01:53:06.78]

done at the VA,

[01:53:07.04 - 01:53:08.84]

do you know where Daniel Drucker

[01:53:08.84 - 01:53:09.82]

was a researcher?

[01:53:10.50 - 01:53:13.48]

Ooh, well, I know one of the scientists

[01:53:13.48 - 01:53:15.60]

at the VA was a guy named John Eng,

[01:53:15.74 - 01:53:17.92]

and I believe he was at the VA hospital

[01:53:17.92 - 01:53:18.78]

in the Bronx.

[01:53:19.68 - 01:53:20.54]

I'll give you a hint.

[01:53:21.20 - 01:53:22.88]

Daniel Drucker was not a researcher

[01:53:22.88 - 01:53:23.50]

at the VA.

[01:53:23.66 - 01:53:25.06]

He was at a university.

[01:53:25.74 - 01:53:26.06]

Ooh.

[01:53:26.54 - 01:53:27.22]

Daniel Drucker,

[01:53:27.30 - 01:53:29.30]

and I believe still to this day,

[01:53:29.94 - 01:53:30.74]

was a researcher

[01:53:30.74 - 01:53:32.72]

at the University of Toronto.

[01:53:33.62 - 01:53:34.98]

Oh, amazing.

[01:53:35.38 - 01:53:35.68]

Yep.

[01:53:36.46 - 01:53:37.62]

It comes full circle.

[01:53:38.00 - 01:53:40.28]

And he owns the domain glucagon.com

[01:53:40.28 - 01:53:42.04]

to establish some extra credibility.

[01:53:42.94 - 01:53:43.60]

I love it.

[01:53:44.24 - 01:53:46.50]

Yeah, so it seems best I can tell

[01:53:46.50 - 01:53:47.56]

that there were sort of parallel

[01:53:47.56 - 01:53:49.24]

research efforts being done

[01:53:49.24 - 01:53:51.52]

on the early GLP-1

[01:53:51.52 - 01:53:53.66]

and sort of place to find GLP-1

[01:53:53.66 - 01:53:54.14]

in the world

[01:53:54.14 - 01:53:56.60]

to eventually turn it into a product.

[01:53:57.48 - 01:54:00.70]

The naturally occurring GLP-1 analog.

[01:54:01.12 - 01:54:01.44]

Yes.

[01:54:01.70 - 01:54:03.36]

As opposed to the engineered

[01:54:04.02 - 01:54:04.62]

lyriglutide.

[01:54:05.06 - 01:54:08.10]

It actually does become a drug candidate.

[01:54:08.40 - 01:54:10.36]

They license it to Eli Lilly.

[01:54:10.70 - 01:54:12.80]

Eli Lilly develops it into Bayetta,

[01:54:12.94 - 01:54:15.28]

and Bayetta hits the market in 2005.

[01:54:15.38 - 01:54:17.96]

It's FDA approved, and it works.

[01:54:18.16 - 01:54:19.00]

It's not poisonous.

[01:54:19.18 - 01:54:19.84]

It doesn't kill people.

[01:54:20.16 - 01:54:22.98]

And it is the world's first GLP-1 analog

[01:54:22.98 - 01:54:24.34]

to come to market.

[01:54:25.14 - 01:54:27.16]

But, like, it is effective.

[01:54:27.76 - 01:54:28.68]

But it's not, like,

[01:54:28.96 - 01:54:30.90]

overwhelmingly more effective

[01:54:30.90 - 01:54:34.02]

than traditional anti-diabetic orals

[01:54:34.02 - 01:54:35.86]

like metformin and the like.

[01:54:36.36 - 01:54:37.88]

And more importantly,

[01:54:38.56 - 01:54:40.36]

the half-life is not as good

[01:54:40.36 - 01:54:41.60]

as lyriglutide.

[01:54:42.24 - 01:54:45.54]

So Bayetta requires two injections per day,

[01:54:46.10 - 01:54:47.00]

which, you know,

[01:54:47.12 - 01:54:49.24]

if you're a type 2 diabetic

[01:54:49.24 - 01:54:51.44]

and you're not yet at insulin treatments,

[01:54:51.90 - 01:54:52.62]

you're like, well,

[01:54:52.62 - 01:54:55.24]

I could stick with oral anti-diabetics

[01:54:55.24 - 01:54:56.12]

like metformin.

[01:54:56.82 - 01:54:58.48]

I could go try this new thing,

[01:54:58.60 - 01:55:01.34]

but that's going to be two injections per day.

[01:55:01.76 - 01:55:03.36]

Do I really want to do that

[01:55:03.36 - 01:55:04.48]

versus stick with orals

[01:55:04.48 - 01:55:06.10]

and then transition to insulin injections

[01:55:06.10 - 01:55:06.92]

when I need it?

[01:55:07.04 - 01:55:08.82]

I can barely remember to take my multivitamin

[01:55:08.82 - 01:55:09.88]

orally once a day.

[01:55:10.14 - 01:55:11.48]

Asking anybody to do something,

[01:55:11.56 - 01:55:12.90]

especially invasive, twice a day

[01:55:12.90 - 01:55:13.92]

is a big behavior change.

[01:55:14.38 - 01:55:15.90]

Big, big behavior change, totally.

[01:55:16.56 - 01:55:17.90]

And it's important to remember

[01:55:17.90 - 01:55:20.52]

what these GLP-1 agonists are actually doing.

[01:55:20.52 - 01:55:23.66]

It's just generally raising the baseline

[01:55:23.66 - 01:55:25.96]

of your body's own ability

[01:55:25.96 - 01:55:27.86]

to secrete insulin.

[01:55:28.16 - 01:55:29.86]

It's sort of making you behave

[01:55:29.86 - 01:55:31.94]

more like a person without diabetes

[01:55:32.44 - 01:55:33.54]

than you otherwise would.

[01:55:34.30 - 01:55:34.96]

Yes, correct.

[01:55:35.26 - 01:55:37.92]

But many people still would need insulin on top,

[01:55:38.00 - 01:55:39.98]

depending how far along the spectrum you are.

[01:55:40.44 - 01:55:40.72]

Yes.

[01:55:41.20 - 01:55:42.82]

So that's 2005.

[01:55:43.50 - 01:55:44.88]

So then in 2007,

[01:55:45.30 - 01:55:47.82]

Lata and Novo Nordisk's lyriglutide

[01:55:47.82 - 01:55:49.68]

GLP-1 agonist

[01:55:49.68 - 01:55:52.80]

enters phase three human clinical trials.

[01:55:53.42 - 01:55:53.54]

Yep.

[01:55:53.90 - 01:55:55.60]

And for those who have heard these phrases

[01:55:55.60 - 01:55:57.26]

before phase one, phase two, phase three,

[01:55:57.28 - 01:55:58.52]

and never knew what they meant,

[01:55:58.78 - 01:56:00.22]

phase three is the really big,

[01:56:00.32 - 01:56:01.38]

really expensive one.

[01:56:01.54 - 01:56:03.82]

And I'm going to quote Alex Telford,

[01:56:03.82 - 01:56:07.16]

who wrote this really amazing long blog post

[01:56:07.16 - 01:56:08.10]

sort of explaining

[01:56:08.10 - 01:56:09.84]

how the clinical trial process works

[01:56:09.84 - 01:56:11.82]

and why drug development has gotten so expensive

[01:56:11.82 - 01:56:12.20]

and all that.

[01:56:12.30 - 01:56:12.94]

We'll link to it in the show notes.

[01:56:13.00 - 01:56:14.34]

It's one of my primary sources.

[01:56:14.54 - 01:56:15.26]

He says,

[01:56:15.42 - 01:56:18.16]

typically phase one trials focus on safety

[01:56:18.16 - 01:56:19.86]

and finding an appropriate dose,

[01:56:20.06 - 01:56:21.12]

often in healthy volunteers,

[01:56:21.62 - 01:56:24.10]

phase two on establishing preliminary evidence

[01:56:24.10 - 01:56:25.50]

of efficacy in patients,

[01:56:25.82 - 01:56:27.80]

phase three on confirming efficacy

[01:56:27.80 - 01:56:29.70]

in a larger sample of patients

[01:56:29.70 - 01:56:32.26]

and collecting robust safety data.

[01:56:32.44 - 01:56:34.02]

And it is worth pointing out

[01:56:34.02 - 01:56:35.48]

when I say the expensive one,

[01:56:35.82 - 01:56:40.84]

29% of all R&D for a drug is spent right here.

[01:56:41.18 - 01:56:42.46]

So phase one is 9%,

[01:56:42.46 - 01:56:43.74]

phase two is 12%,

[01:56:43.74 - 01:56:45.64]

phase three is 29%

[01:56:45.64 - 01:56:47.72]

with the rest of it sort of coming from

[01:56:47.72 - 01:56:49.26]

that early basic research,

[01:56:49.36 - 01:56:50.92]

drug discovery, preclinical studies,

[01:56:51.12 - 01:56:51.68]

and the, you know,

[01:56:51.76 - 01:56:53.62]

a little bit later with the regulatory review,

[01:56:53.70 - 01:56:56.52]

but like almost a third of the entire spend

[01:56:56.52 - 01:56:59.12]

of the whole R&D pipeline for a drug is here.

[01:56:59.22 - 01:57:00.44]

So big freaking deal

[01:57:00.44 - 01:57:02.18]

to go through a phase three trial.

[01:57:02.70 - 01:57:03.90]

And my understanding is that

[01:57:03.90 - 01:57:06.04]

most drugs never make it to phase three.

[01:57:06.40 - 01:57:07.86]

And if you make it to phase three,

[01:57:07.94 - 01:57:09.24]

that's like very promising.

[01:57:09.24 - 01:57:11.54]

It's not automatic that you're going to get approved

[01:57:11.54 - 01:57:12.66]

and it's going to work,

[01:57:12.70 - 01:57:13.86]

but it's promising.

[01:57:14.30 - 01:57:14.92]

It's a great question.

[01:57:15.02 - 01:57:15.50]

Thanks to Alex,

[01:57:15.54 - 01:57:16.60]

we have the data right in front of us.

[01:57:16.60 - 01:57:18.16]

So here's the probability

[01:57:18.64 - 01:57:20.44]

that a preclinical study

[01:57:20.44 - 01:57:22.06]

even makes it to the phases.

[01:57:22.26 - 01:57:23.40]

That's 69%.

[01:57:23.40 - 01:57:24.88]

So you're a little over two thirds

[01:57:24.88 - 01:57:26.56]

once you enter a preclinical study

[01:57:26.56 - 01:57:28.40]

to graduate to phase one, two, and three.

[01:57:28.50 - 01:57:29.94]

But in phase one, two, and three,

[01:57:30.36 - 01:57:32.62]

about half of them get weeded out each time.

[01:57:32.70 - 01:57:34.70]

So 52% make it through phase one,

[01:57:34.84 - 01:57:36.76]

36% through phase two,

[01:57:36.80 - 01:57:38.98]

and only 62% through phase three.

[01:57:39.08 - 01:57:40.54]

And once you get into regulatory review,

[01:57:40.54 - 01:57:42.90]

then there's a 90% chance that you get approved.

[01:57:43.06 - 01:57:45.12]

But each one of these gates filters out

[01:57:45.12 - 01:57:47.18]

about half of the drugs that enter.

[01:57:47.80 - 01:57:48.70]

But I guess if you look at the

[01:57:48.70 - 01:57:51.18]

like kind of lifetime risk of approval for a drug,

[01:57:51.26 - 01:57:52.52]

by the time you make it to phase three,

[01:57:52.62 - 01:57:53.16]

you're pretty far.

[01:57:53.56 - 01:57:55.74]

So of the 69% that even make it

[01:57:55.74 - 01:57:57.18]

into clinical development,

[01:57:57.44 - 01:58:01.52]

you've got 36% left at graduating phase one,

[01:58:02.80 - 01:58:05.82]

then 13% left graduating phase two,

[01:58:06.30 - 01:58:07.54]

then all the way at the end,

[01:58:07.64 - 01:58:09.76]

8% graduating out of phase three.

[01:58:09.84 - 01:58:12.74]

So it gets pretty winnowed down over that course.

[01:58:12.84 - 01:58:13.52]

But to your point,

[01:58:13.52 - 01:58:15.36]

it's a big deal to enter phase three

[01:58:15.36 - 01:58:18.46]

because it shows that you are one of the 13%

[01:58:18.46 - 01:58:19.72]

that have made it this far.

[01:58:20.16 - 01:58:21.50]

Yep. Cool. Okay.

[01:58:22.82 - 01:58:24.70]

So as they're in trials,

[01:58:25.02 - 01:58:25.78]

and Novo knew this,

[01:58:25.82 - 01:58:27.08]

but it's starting to get confirmed

[01:58:27.08 - 01:58:30.30]

that one, Liraglutide is going to be

[01:58:30.30 - 01:58:32.40]

more effective than Bayetta.

[01:58:33.80 - 01:58:35.12]

Two, more importantly,

[01:58:35.70 - 01:58:38.36]

it's only going to need to be injected once per day

[01:58:38.36 - 01:58:39.80]

because the half-life is longer.

[01:58:40.46 - 01:58:44.88]

And three, it's also now starting to be observed

[01:58:44.88 - 01:58:47.18]

and confirmed in these human trials,

[01:58:47.52 - 01:58:49.26]

something that Lotta had noticed

[01:58:49.26 - 01:58:52.20]

all the way back in the animal trial phase,

[01:58:52.50 - 01:58:54.96]

that rats who were injected

[01:58:54.96 - 01:58:57.02]

with very large amounts of Liraglutide

[01:58:57.96 - 01:58:58.98]

would stop eating.

[01:58:59.28 - 01:59:02.12]

And it seemed to have an effect on appetite.

[01:59:02.60 - 01:59:05.02]

And if these rats had very large amounts of it,

[01:59:05.04 - 01:59:06.82]

they would literally starve themselves to death

[01:59:06.82 - 01:59:07.56]

and refuse to eat.

[01:59:08.12 - 01:59:12.40]

And this effect is persisting in humans

[01:59:12.40 - 01:59:14.24]

here in the phase three trials.

[01:59:14.56 - 01:59:15.36]

Which wasn't a guarantee

[01:59:15.36 - 01:59:16.88]

because there's lots of rat behaviors

[01:59:16.88 - 01:59:19.38]

that then don't replicate in human trials.

[01:59:20.08 - 01:59:22.66]

And so while they were not specifically studying it

[01:59:22.66 - 01:59:23.28]

in this trial,

[01:59:23.32 - 01:59:25.46]

they were studying the effects on type two diabetes.

[01:59:26.14 - 01:59:29.06]

The early reports of this might be replicating in humans

[01:59:29.06 - 01:59:31.34]

was promising and surprising,

[01:59:31.34 - 01:59:34.14]

but it wasn't happening to huge degrees.

[01:59:34.14 - 01:59:36.40]

Like with the dosage of Liraglutide

[01:59:36.40 - 01:59:37.30]

that they were planning

[01:59:37.30 - 01:59:39.24]

to sort of make the approved dose.

[01:59:39.52 - 01:59:40.34]

It's not like you were seeing

[01:59:40.34 - 01:59:42.16]

this crazy dramatic weight loss.

[01:59:42.24 - 01:59:42.86]

It was just like,

[01:59:43.06 - 01:59:43.80]

oh, that's interesting.

[01:59:43.94 - 01:59:45.78]

You also eat a little bit less

[01:59:45.78 - 01:59:47.78]

when you're on this Liraglutide drug.

[01:59:48.40 - 01:59:48.72]

But nonetheless,

[01:59:48.86 - 01:59:50.62]

it's a pretty interesting thread to pull on,

[01:59:50.98 - 01:59:55.58]

especially because many other anti-diabetic drugs

[01:59:55.58 - 01:59:56.40]

up until this point

[01:59:56.40 - 01:59:58.46]

had actually caused patients to gain weight.

[01:59:58.98 - 01:59:59.20]

Right.

[01:59:59.54 - 02:00:01.16]

Which of course compounds the problem.

[02:00:01.76 - 02:00:02.06]

Right.

[02:00:03.02 - 02:00:06.66]

So Lada and her R&D team,

[02:00:06.88 - 02:00:08.84]

they push Novo Nordisk

[02:00:08.84 - 02:00:11.44]

to consider also pursuing

[02:00:12.06 - 02:00:14.94]

a parallel FDA approval

[02:00:14.94 - 02:00:16.44]

and commercialization path

[02:00:16.44 - 02:00:18.80]

for the same molecule, Liraglutide,

[02:00:19.10 - 02:00:20.84]

as a weight management drug

[02:00:20.84 - 02:00:22.62]

based on this evidence

[02:00:22.62 - 02:00:23.82]

that they're seeing in the trials.

[02:00:24.60 - 02:00:26.34]

Which in FDA speak is an indication.

[02:00:26.68 - 02:00:27.56]

You're trying to get it approved

[02:00:27.56 - 02:00:28.80]

for a second indication.

[02:00:29.32 - 02:00:29.56]

Yeah.

[02:00:29.56 - 02:00:33.06]

Now this was truly an out there idea.

[02:00:33.32 - 02:00:36.96]

There is a huge, huge stigma.

[02:00:37.26 - 02:00:37.52]

Yes.

[02:00:37.68 - 02:00:38.92]

Around weight loss drugs.

[02:00:39.74 - 02:00:40.28]

Enormous.

[02:00:40.50 - 02:00:40.82]

Yes.

[02:00:41.02 - 02:00:42.02]

The stigma is real,

[02:00:42.18 - 02:00:43.34]

but there's also an interesting

[02:00:43.34 - 02:00:45.20]

product efficacy thing here.

[02:00:45.34 - 02:00:47.16]

So Vox.com put it really well.

[02:00:47.24 - 02:00:47.62]

They said,

[02:00:47.74 - 02:00:49.70]

not only do weight loss medications

[02:00:49.70 - 02:00:50.96]

have a dangerous history,

[02:00:51.06 - 02:00:52.72]

but there is also a persistent bias

[02:00:52.72 - 02:00:54.10]

and stigma against the disease

[02:00:54.10 - 02:00:56.02]

that now afflicts nearly half of Americans.

[02:00:56.50 - 02:00:57.92]

Obesity is still widely viewed

[02:00:57.92 - 02:00:59.98]

as a personal responsibility problem,

[02:01:00.32 - 02:01:02.34]

despite scientific evidence to the contrary.

[02:01:02.82 - 02:01:03.74]

And history has shown

[02:01:03.74 - 02:01:06.10]

that the most effective medical interventions,

[02:01:06.24 - 02:01:07.50]

such as bariatric surgery,

[02:01:07.66 - 02:01:08.90]

which is stomach stapling,

[02:01:09.28 - 02:01:10.58]

effectively the gold standard

[02:01:10.58 - 02:01:11.46]

in treating obesity,

[02:01:11.84 - 02:01:14.52]

often go unused in favor of diet and exercise,

[02:01:14.88 - 02:01:16.04]

which for many don't work.

[02:01:16.28 - 02:01:17.44]

And like this is proven over

[02:01:17.44 - 02:01:18.72]

and over and over and over again.

[02:01:19.00 - 02:01:19.92]

You can't just tell people

[02:01:19.92 - 02:01:20.90]

change your lifestyle.

[02:01:21.26 - 02:01:22.46]

Most people literally can't.

[02:01:22.50 - 02:01:24.12]

There's too many things working against it,

[02:01:24.16 - 02:01:25.38]

including their own biology.

[02:01:26.18 - 02:01:26.70]

Additionally,

[02:01:26.70 - 02:01:27.82]

this is pretty interesting.

[02:01:28.42 - 02:01:29.72]

Researchers thought it was

[02:01:29.72 - 02:01:31.18]

actually impossible

[02:01:31.18 - 02:01:32.88]

to create a weight loss drug

[02:01:32.88 - 02:01:35.44]

that was both safe and effective.

[02:01:36.18 - 02:01:36.22]

Yeah.

[02:01:36.70 - 02:01:38.38]

You're talking about Fen-Phen?

[02:01:38.60 - 02:01:39.02]

Yes.

[02:01:39.28 - 02:01:40.32]

I mean, it dates way back,

[02:01:40.40 - 02:01:41.14]

even before Fen-Phen,

[02:01:41.24 - 02:01:42.84]

to the amphetamines in the 70s.

[02:01:42.90 - 02:01:43.76]

People are taking Speed

[02:01:43.76 - 02:01:45.74]

because that's like the accepted

[02:01:45.74 - 02:01:47.02]

weight loss drug.

[02:01:47.36 - 02:01:47.68]

Yeah.

[02:01:47.96 - 02:01:49.72]

Fen-Phen was a combination of

[02:01:49.72 - 02:01:51.10]

a drug with Speed.

[02:01:51.32 - 02:01:53.18]

One of the Fens is Speed, I believe.

[02:01:53.44 - 02:01:54.52]

And so in the 90s,

[02:01:54.66 - 02:01:55.66]

was it heart attacks?

[02:01:55.66 - 02:01:58.04]

Yeah, it was major heart damage.

[02:01:58.58 - 02:02:00.34]

Yeah. So that scared the crap

[02:02:00.34 - 02:02:01.54]

out of the FDA,

[02:02:01.88 - 02:02:02.62]

out of companies

[02:02:02.62 - 02:02:04.24]

that are pursuing weight loss drugs.

[02:02:04.44 - 02:02:06.24]

Yeah, this was a disaster.

[02:02:06.98 - 02:02:08.68]

It kind of was like a grassroots

[02:02:09.54 - 02:02:10.98]

thing that built up.

[02:02:11.12 - 02:02:12.24]

And the two Fens

[02:02:12.24 - 02:02:14.66]

were independently approved

[02:02:14.66 - 02:02:15.78]

for separate use cases.

[02:02:16.54 - 02:02:18.32]

And a physician got the idea

[02:02:18.32 - 02:02:19.42]

to combine them.

[02:02:19.60 - 02:02:21.66]

And since both drugs were approved,

[02:02:21.82 - 02:02:22.64]

Big Pharma was like,

[02:02:22.72 - 02:02:24.36]

oh, wow, weight loss drug,

[02:02:24.46 - 02:02:25.10]

miracle drug.

[02:02:25.10 - 02:02:26.38]

Let's commercialize this.

[02:02:27.24 - 02:02:28.48]

And so they pushed the FDA

[02:02:28.48 - 02:02:29.76]

to rush the process,

[02:02:29.84 - 02:02:30.56]

which they did,

[02:02:30.66 - 02:02:31.20]

thinking, again,

[02:02:31.26 - 02:02:33.16]

both of these drugs are approved.

[02:02:33.60 - 02:02:34.66]

And it turned out that

[02:02:34.66 - 02:02:35.94]

when used in concert,

[02:02:36.08 - 02:02:37.56]

it caused major heart damage.

[02:02:37.94 - 02:02:39.02]

So I think something like

[02:02:39.02 - 02:02:40.14]

six million Americans

[02:02:40.14 - 02:02:41.18]

took this thing

[02:02:41.18 - 02:02:43.26]

and a large portion of them

[02:02:43.26 - 02:02:44.26]

ended up with

[02:02:44.26 - 02:02:45.70]

major cardiovascular issues.

[02:02:46.02 - 02:02:46.76]

It's awful.

[02:02:46.86 - 02:02:47.66]

I mean, that was the worst one.

[02:02:47.70 - 02:02:48.80]

But there's like seven or eight

[02:02:48.80 - 02:02:50.06]

over four decades

[02:02:50.06 - 02:02:51.86]

of these either dangerous

[02:02:51.86 - 02:02:53.50]

or just completely ineffective

[02:02:53.50 - 02:02:54.52]

weight loss drugs.

[02:02:54.52 - 02:02:55.74]

So most pharma companies

[02:02:55.74 - 02:02:57.34]

completely steered clear of

[02:02:57.34 - 02:02:59.18]

the black hole budget item

[02:02:59.18 - 02:03:00.48]

that was weight loss

[02:03:00.48 - 02:03:01.32]

research and development.

[02:03:01.46 - 02:03:02.54]

It's kind of going back to

[02:03:02.54 - 02:03:03.64]

the beginning of the episode

[02:03:03.64 - 02:03:04.74]

in Rockefeller's dad

[02:03:04.74 - 02:03:06.22]

and the snake oil salesman.

[02:03:06.34 - 02:03:07.74]

Like, this is the stigma

[02:03:07.74 - 02:03:08.64]

around this stuff.

[02:03:09.20 - 02:03:09.50]

Totally.

[02:03:09.90 - 02:03:11.42]

And to illustrate this numerically,

[02:03:11.80 - 02:03:14.32]

the annual obesity drug sales

[02:03:14.32 - 02:03:17.32]

were only $744 million

[02:03:17.88 - 02:03:18.92]

up until 2020.

[02:03:19.40 - 02:03:21.34]

The market for weight loss drugs,

[02:03:21.66 - 02:03:22.50]

you know, was just tiny

[02:03:22.50 - 02:03:23.82]

because basically nothing worked

[02:03:23.82 - 02:03:24.80]

and everyone was scared of it.

[02:03:25.10 - 02:03:26.64]

That $744 million

[02:03:26.64 - 02:03:30.02]

included the commercial sale

[02:03:30.02 - 02:03:32.14]

of liraglutide for weight loss,

[02:03:32.32 - 02:03:34.16]

which had already been on sale

[02:03:34.16 - 02:03:35.04]

for six years.

[02:03:35.48 - 02:03:36.94]

So why is everyone freaking out

[02:03:36.94 - 02:03:37.96]

about Ozempic now?

[02:03:38.14 - 02:03:39.50]

Does it feel like basically

[02:03:39.50 - 02:03:40.40]

nothing worked before?

[02:03:40.78 - 02:03:41.58]

It was true.

[02:03:41.90 - 02:03:43.58]

Nothing worked before in a safe way.

[02:03:44.00 - 02:03:44.78]

So there is sort of this

[02:03:44.78 - 02:03:46.10]

magic number around

[02:03:46.10 - 02:03:47.66]

if you can actually safely

[02:03:48.24 - 02:03:49.44]

enable someone to lose

[02:03:49.44 - 02:03:51.34]

10% of their body weight or more,

[02:03:51.72 - 02:03:52.54]

then there's a market.

[02:03:52.54 - 02:03:53.60]

But otherwise,

[02:03:54.00 - 02:03:55.14]

it basically rounds to zero

[02:03:55.14 - 02:03:56.16]

because people just don't think

[02:03:56.16 - 02:03:56.82]

it's worth the trouble

[02:03:56.82 - 02:03:57.68]

and neither do the companies.

[02:03:58.28 - 02:03:58.32]

Yeah.

[02:03:58.46 - 02:03:59.92]

It's like you need the appropriate

[02:03:59.92 - 02:04:01.16]

amount of activation energy

[02:04:01.16 - 02:04:03.16]

for the reaction to catalyze.

[02:04:03.26 - 02:04:03.62]

Exactly.

[02:04:04.14 - 02:04:04.92]

And just to, you know,

[02:04:05.10 - 02:04:06.56]

put a really close to home,

[02:04:06.68 - 02:04:08.16]

even finer point on this stigma,

[02:04:08.46 - 02:04:11.16]

as recently as 2005,

[02:04:11.30 - 02:04:12.66]

2005, like same year,

[02:04:12.68 - 02:04:13.50]

Biotic came out,

[02:04:14.44 - 02:04:17.26]

Novo Nordisk's own official position

[02:04:18.32 - 02:04:20.20]

on the obesity category

[02:04:20.20 - 02:04:23.04]

as articulated by the then CEO,

[02:04:23.34 - 02:04:25.30]

Lars Sorensen was quote,

[02:04:25.74 - 02:04:27.60]

obesity is primarily a social

[02:04:27.60 - 02:04:28.78]

and cultural problem.

[02:04:29.38 - 02:04:30.62]

It should be solved by means

[02:04:30.62 - 02:04:32.52]

of a radical restructuring of society.

[02:04:32.98 - 02:04:35.42]

There is no business for Novo Nordisk

[02:04:35.42 - 02:04:36.42]

in that area.

[02:04:37.08 - 02:04:38.40]

Now, imagine your Latte and her team

[02:04:38.92 - 02:04:40.32]

trying to get the company

[02:04:40.32 - 02:04:42.16]

to release alleroglutide

[02:04:42.16 - 02:04:42.88]

for weight loss

[02:04:42.88 - 02:04:44.10]

when that is the company's

[02:04:44.10 - 02:04:44.82]

official position.

[02:04:45.00 - 02:04:45.42]

Right.

[02:04:45.56 - 02:04:46.20]

You're like, look,

[02:04:46.24 - 02:04:47.60]

I'm looking at these humans

[02:04:47.60 - 02:04:48.68]

who are eating less.

[02:04:49.34 - 02:04:49.60]

Right.

[02:04:49.60 - 02:04:50.66]

So, you know,

[02:04:50.72 - 02:04:51.34]

what's going on here

[02:04:51.34 - 02:04:52.94]

and why is Latte pushing for this?

[02:04:53.18 - 02:04:55.50]

You know, she's a great scientist,

[02:04:55.68 - 02:04:56.74]

well-respected, you know,

[02:04:56.76 - 02:04:57.40]

and at this point,

[02:04:57.48 - 02:04:58.84]

she's made her career

[02:04:58.84 - 02:05:00.20]

on the development

[02:05:00.20 - 02:05:01.88]

of alleroglutide and GLP-1

[02:05:01.88 - 02:05:03.10]

against all odds,

[02:05:03.20 - 02:05:03.98]

just for diabetes.

[02:05:04.12 - 02:05:04.96]

Why is she pushing this?

[02:05:05.76 - 02:05:07.48]

This is a very,

[02:05:07.80 - 02:05:09.32]

very different situation

[02:05:09.32 - 02:05:11.10]

than what happened with Fen-Phen.

[02:05:11.62 - 02:05:11.82]

Totally.

[02:05:12.06 - 02:05:12.78]

We still don't know

[02:05:12.78 - 02:05:14.08]

the super long-term effects of it,

[02:05:14.12 - 02:05:15.06]

but we certainly know that

[02:05:15.06 - 02:05:16.62]

months after taking this thing,

[02:05:16.72 - 02:05:17.88]

large populations of people

[02:05:17.88 - 02:05:18.84]

are not having heart attacks.

[02:05:18.84 - 02:05:19.60]

Yes.

[02:05:20.24 - 02:05:22.16]

And Latte knows this too,

[02:05:22.50 - 02:05:23.48]

obviously, because

[02:05:23.48 - 02:05:25.56]

leriglutide, like the drug,

[02:05:25.78 - 02:05:27.50]

the same drug, the same thing,

[02:05:27.62 - 02:05:30.16]

has now been through 12 plus years

[02:05:30.16 - 02:05:32.58]

of super rigorous trials,

[02:05:32.78 - 02:05:33.52]

starting with animals,

[02:05:33.66 - 02:05:34.40]

now with humans,

[02:05:34.96 - 02:05:36.62]

international approval processes.

[02:05:37.40 - 02:05:38.50]

You know, there were issues

[02:05:38.50 - 02:05:39.08]

along the way,

[02:05:39.08 - 02:05:40.14]

like there are with any drug.

[02:05:40.26 - 02:05:41.50]

Dude, the 2010 trial

[02:05:41.50 - 02:05:43.08]

was 9,000 patients

[02:05:43.08 - 02:05:44.66]

across 32 countries.

[02:05:45.08 - 02:05:46.44]

This is a big, expensive,

[02:05:47.12 - 02:05:48.66]

almost two-year trial.

[02:05:48.84 - 02:05:49.44]

Yep.

[02:05:49.70 - 02:05:51.00]

She's like, yeah, I mean,

[02:05:51.28 - 02:05:52.22]

we're pretty sure here

[02:05:52.22 - 02:05:54.16]

this is about as safe as any drug

[02:05:54.16 - 02:05:55.46]

possibly could be.

[02:05:56.00 - 02:05:56.98]

And at least in the medium

[02:05:56.98 - 02:05:58.32]

to short term, like,

[02:05:58.82 - 02:06:00.60]

this is not a cause for worry

[02:06:00.60 - 02:06:01.50]

in terms of safety.

[02:06:02.34 - 02:06:03.96]

It's just that all that testing

[02:06:03.96 - 02:06:05.00]

and everything was done

[02:06:05.00 - 02:06:06.90]

for a different use case,

[02:06:07.44 - 02:06:08.38]

but it's the same drug.

[02:06:08.68 - 02:06:10.66]

So she eventually convinces

[02:06:10.66 - 02:06:12.66]

the company to push forward with this.

[02:06:13.02 - 02:06:14.70]

And in 2007,

[02:06:15.32 - 02:06:16.14]

so only two years

[02:06:16.14 - 02:06:17.50]

after the CEO made that statement,

[02:06:17.50 - 02:06:20.80]

Novo enters a slightly higher dose

[02:06:20.80 - 02:06:22.06]

version of liraglutide

[02:06:22.06 - 02:06:24.60]

into human trials for weight loss.

[02:06:25.30 - 02:06:26.80]

And why do minds

[02:06:26.80 - 02:06:27.86]

change quickly on this?

[02:06:28.06 - 02:06:31.42]

Like the commercial opportunity here,

[02:06:32.14 - 02:06:33.28]

if you can get approved,

[02:06:33.40 - 02:06:34.34]

if you can get it to work,

[02:06:34.34 - 02:06:35.12]

if it's safe,

[02:06:35.76 - 02:06:38.66]

is unlike anything else

[02:06:38.66 - 02:06:41.00]

the pharma industry has ever seen.

[02:06:41.04 - 02:06:42.40]

Like if you could really crack

[02:06:42.40 - 02:06:43.34]

this market.

[02:06:43.58 - 02:06:45.32]

So at this time,

[02:06:45.42 - 02:06:47.12]

back here in the mid 2000s,

[02:06:47.12 - 02:06:49.38]

already about a third

[02:06:49.38 - 02:06:50.72]

of the U.S. population

[02:06:50.72 - 02:06:52.56]

is medically obese,

[02:06:53.06 - 02:06:54.04]

you know, defined as a body

[02:06:54.04 - 02:06:55.34]

mass index over 30.

[02:06:55.84 - 02:06:57.50]

Two thirds are medically overweight.

[02:06:57.84 - 02:06:59.14]

The World Health Organization

[02:06:59.14 - 02:07:01.98]

estimates that 500 million people

[02:07:01.98 - 02:07:03.48]

worldwide are obese,

[02:07:04.08 - 02:07:04.90]

you know, so that's

[02:07:04.90 - 02:07:07.08]

a total addressable market here

[02:07:07.08 - 02:07:09.50]

of like 100 million people

[02:07:09.50 - 02:07:12.28]

just of medically obese people

[02:07:12.28 - 02:07:13.76]

in the U.S. alone,

[02:07:14.38 - 02:07:15.64]

half a billion plus,

[02:07:15.70 - 02:07:16.78]

probably more like a billion

[02:07:16.78 - 02:07:17.34]

worldwide.

[02:07:18.14 - 02:07:19.60]

There are no other drugs

[02:07:19.60 - 02:07:21.04]

and diseases that affect

[02:07:21.04 - 02:07:22.20]

this many people,

[02:07:22.28 - 02:07:23.28]

not even diabetes.

[02:07:24.14 - 02:07:24.24]

Yep.

[02:07:24.84 - 02:07:26.40]

And just like diabetes,

[02:07:26.56 - 02:07:28.98]

it turns out that in most cases,

[02:07:29.08 - 02:07:31.96]

obesity also is a chronic disease.

[02:07:32.36 - 02:07:33.50]

So yes,

[02:07:33.52 - 02:07:35.76]

you have this huge tam of people,

[02:07:35.76 - 02:07:37.22]

but it's also people

[02:07:37.22 - 02:07:37.86]

that are then going to be

[02:07:37.86 - 02:07:38.50]

taking the drug

[02:07:38.50 - 02:07:40.32]

probably for the rest of their lives.

[02:07:40.54 - 02:07:42.16]

Which is just like a statin

[02:07:42.16 - 02:07:43.04]

or, you know,

[02:07:43.04 - 02:07:44.44]

there's a lot of treatments

[02:07:44.44 - 02:07:45.34]

for chronic diseases

[02:07:45.34 - 02:07:46.10]

that we give people

[02:07:46.10 - 02:07:47.10]

that are drugs

[02:07:47.10 - 02:07:47.96]

that you have to take

[02:07:47.96 - 02:07:48.88]

for the rest of your life.

[02:07:49.48 - 02:07:49.82]

Yeah, you're right.

[02:07:49.88 - 02:07:50.82]

It's like totally different

[02:07:50.82 - 02:07:52.44]

than making a vaccine

[02:07:52.44 - 02:07:53.74]

or making a,

[02:07:53.74 - 02:07:55.20]

you know, hepatitis C cure

[02:07:55.20 - 02:07:56.18]

or something like that.

[02:07:56.28 - 02:07:57.06]

It really is a,

[02:07:57.62 - 02:07:58.94]

for better or for worse,

[02:07:59.08 - 02:07:59.68]

a durable,

[02:08:00.14 - 02:08:00.60]

ongoing,

[02:08:01.02 - 02:08:01.96]

recurring revenue stream.

[02:08:02.30 - 02:08:03.90]

This is annual recurring revenue here.

[02:08:04.22 - 02:08:04.36]

Yeah.

[02:08:05.16 - 02:08:06.12]

So in early 2010,

[02:08:06.28 - 02:08:07.42]

Novo gets final approval

[02:08:07.42 - 02:08:08.98]

for Victoza,

[02:08:09.40 - 02:08:10.46]

which is the marketing name

[02:08:10.46 - 02:08:11.80]

for the diabetes version

[02:08:11.80 - 02:08:13.24]

of lyriglutide.

[02:08:13.44 - 02:08:14.88]

So five years after Bayetta,

[02:08:14.88 - 02:08:16.52]

Victoza is finally

[02:08:16.52 - 02:08:18.16]

officially hitting the market

[02:08:18.16 - 02:08:19.00]

in the US.

[02:08:19.48 - 02:08:19.74]

And remember,

[02:08:19.84 - 02:08:21.98]

this is just FDA approved

[02:08:21.98 - 02:08:22.78]

for diabetes.

[02:08:23.28 - 02:08:24.36]

But of course,

[02:08:24.44 - 02:08:25.44]

everybody knows

[02:08:25.44 - 02:08:26.94]

about these trials going on

[02:08:26.94 - 02:08:27.90]

for weight loss

[02:08:27.90 - 02:08:29.70]

and the ability to lose weight.

[02:08:30.12 - 02:08:31.34]

It hits the market

[02:08:32.00 - 02:08:35.42]

and it is a enormous hit.

[02:08:35.66 - 02:08:37.22]

It doesn't just overtake Bayetta

[02:08:37.22 - 02:08:39.06]

as the leading GLP-1

[02:08:39.06 - 02:08:40.44]

drug on the market for diabetes.

[02:08:40.70 - 02:08:43.06]

It massively expands the market.

[02:08:43.06 - 02:08:44.20]

So year one,

[02:08:44.80 - 02:08:45.50]

in the first year

[02:08:45.50 - 02:08:46.18]

that it's on the market,

[02:08:46.36 - 02:08:47.30]

Victoza does

[02:08:47.30 - 02:08:50.14]

roughly $300 million in sales.

[02:08:50.44 - 02:08:51.54]

The next year,

[02:08:51.62 - 02:08:52.36]

the first full year

[02:08:52.36 - 02:08:53.52]

it's on the market in 2011,

[02:08:54.10 - 02:08:56.42]

it does over a billion dollars in sales

[02:08:56.98 - 02:08:58.08]

just in that year.

[02:08:58.24 - 02:08:59.30]

So there's this concept

[02:08:59.30 - 02:09:00.20]

in the pharma industry

[02:09:00.20 - 02:09:00.84]

of a quote unquote

[02:09:00.84 - 02:09:01.96]

blockbuster drug.

[02:09:02.26 - 02:09:03.24]

And these are drugs

[02:09:03.24 - 02:09:04.64]

that achieve a billion dollars

[02:09:04.64 - 02:09:05.44]

in annual revenue.

[02:09:06.18 - 02:09:07.64]

Sort of like the tech industry

[02:09:07.64 - 02:09:08.82]

calling it a unicorn

[02:09:08.82 - 02:09:10.22]

with a billion dollar valuation.

[02:09:10.48 - 02:09:10.86]

Exactly.

[02:09:11.68 - 02:09:12.90]

It's the pharma

[02:09:12.90 - 02:09:14.10]

version of a unicorn.

[02:09:14.64 - 02:09:15.80]

And these are like Lipitor,

[02:09:16.04 - 02:09:17.48]

Humira, Atavir.

[02:09:17.86 - 02:09:19.16]

There's a bunch of examples,

[02:09:19.40 - 02:09:20.32]

but that really are

[02:09:20.32 - 02:09:21.06]

a huge breakthrough

[02:09:21.06 - 02:09:22.66]

address a large enough population.

[02:09:23.16 - 02:09:24.18]

There's a bunch of ways

[02:09:24.18 - 02:09:25.14]

to sort of slice it,

[02:09:25.24 - 02:09:26.22]

but usually they're drugs

[02:09:26.22 - 02:09:26.86]

you've heard of.

[02:09:27.44 - 02:09:27.56]

Yeah.

[02:09:27.98 - 02:09:30.08]

And Victoza hits it

[02:09:30.08 - 02:09:32.46]

in its first full standalone

[02:09:32.46 - 02:09:33.30]

year on the market,

[02:09:33.44 - 02:09:35.16]

which is super fast.

[02:09:35.72 - 02:09:37.44]

So what's going on here

[02:09:37.44 - 02:09:38.68]

obviously is that

[02:09:38.68 - 02:09:40.24]

people are not using

[02:09:40.24 - 02:09:42.48]

Victoza just for diabetes.

[02:09:42.62 - 02:09:43.10]

I mean, people are

[02:09:43.10 - 02:09:43.96]

using it for diabetes,

[02:09:44.20 - 02:09:45.50]

but people are also

[02:09:45.50 - 02:09:46.70]

using this for weight loss.

[02:09:47.06 - 02:09:47.46]

And you might be

[02:09:47.46 - 02:09:48.10]

asking yourself,

[02:09:48.24 - 02:09:49.24]

how does that work?

[02:09:49.28 - 02:09:50.44]

If the FDA has only

[02:09:50.44 - 02:09:52.38]

approved it for diabetes,

[02:09:52.56 - 02:09:53.34]

what's going on there?

[02:09:53.66 - 02:09:54.32]

Well, it is actually

[02:09:54.32 - 02:09:55.96]

at the doctor's discretion

[02:09:55.96 - 02:09:57.32]

if they want to prescribe

[02:09:57.32 - 02:09:58.36]

an off-label use.

[02:09:58.50 - 02:09:59.76]

So if a doctor does

[02:09:59.76 - 02:10:00.80]

enough independent research

[02:10:00.80 - 02:10:01.96]

or reads a study or

[02:10:02.40 - 02:10:02.84]

technically,

[02:10:02.98 - 02:10:04.00]

I don't think the drug

[02:10:04.00 - 02:10:05.50]

companies can provide

[02:10:05.50 - 02:10:06.52]

any marketing materials

[02:10:06.52 - 02:10:08.18]

or sway the doctors in any way.

[02:10:08.26 - 02:10:09.46]

So the information

[02:10:09.46 - 02:10:10.38]

can't come from the

[02:10:10.38 - 02:10:11.14]

drug manufacturer.

[02:10:11.52 - 02:10:12.34]

But should the doctor

[02:10:13.68 - 02:10:15.60]

believe that this drug

[02:10:15.60 - 02:10:16.64]

would be good for their patient,

[02:10:16.70 - 02:10:17.32]

even though their patient

[02:10:17.32 - 02:10:18.24]

doesn't have the FDA

[02:10:18.92 - 02:10:19.72]

approved illness,

[02:10:19.84 - 02:10:20.32]

or I guess

[02:10:20.32 - 02:10:21.90]

whatever the indication is.

[02:10:22.22 - 02:10:23.54]

The FDA sanctioned indication.

[02:10:23.74 - 02:10:24.02]

Yes.

[02:10:24.12 - 02:10:25.36]

The doctor can prescribe

[02:10:25.36 - 02:10:26.46]

it for an off-label use.

[02:10:26.82 - 02:10:26.94]

Right.

[02:10:27.00 - 02:10:27.82]

And that's not illegal.

[02:10:28.18 - 02:10:29.68]

And let's be honest here,

[02:10:29.76 - 02:10:31.18]

like some of this is doctors,

[02:10:31.40 - 02:10:32.64]

but a lot of this is patients

[02:10:32.64 - 02:10:34.18]

going to doctors and being like,

[02:10:34.62 - 02:10:36.06]

hey, I heard that this

[02:10:36.06 - 02:10:36.86]

Victoza thing could

[02:10:36.86 - 02:10:37.64]

help me lose weight.

[02:10:38.10 - 02:10:39.00]

What do I got to do

[02:10:39.00 - 02:10:40.34]

to make you prescribe it for me?

[02:10:40.82 - 02:10:41.84]

I saw an ad that said,

[02:10:41.88 - 02:10:43.84]

ask your doctor if Victoza

[02:10:43.84 - 02:10:44.60]

is right for you.

[02:10:44.66 - 02:10:45.44]

So I'm asking you

[02:10:45.44 - 02:10:46.30]

if it's right for me.

[02:10:46.76 - 02:10:46.88]

Yeah.

[02:10:48.60 - 02:10:49.66]

We should say everything

[02:10:49.66 - 02:10:51.00]

in health care

[02:10:51.54 - 02:10:54.52]

has a modifier of sometimes.

[02:10:55.08 - 02:10:56.52]

And everything I just said

[02:10:56.52 - 02:10:57.36]

is true sometimes.

[02:10:57.52 - 02:10:59.36]

It's not always true

[02:10:59.36 - 02:11:00.18]

that the doctor has

[02:11:00.18 - 02:11:01.14]

complete control

[02:11:01.14 - 02:11:02.22]

to prescribe off-label,

[02:11:02.36 - 02:11:03.42]

but I think it's a reasonable

[02:11:03.42 - 02:11:04.16]

way to think about it.

[02:11:04.44 - 02:11:04.56]

Yeah.

[02:11:04.98 - 02:11:05.70]

But David,

[02:11:06.10 - 02:11:07.96]

it's not that effective.

[02:11:08.68 - 02:11:09.50]

You can lose weight

[02:11:09.50 - 02:11:10.28]

taking Victoza,

[02:11:10.46 - 02:11:12.30]

but it's not necessarily

[02:11:12.30 - 02:11:13.82]

a life-changing thing.

[02:11:14.90 - 02:11:15.08]

Right.

[02:11:15.62 - 02:11:17.64]

So at the end of 2013,

[02:11:18.36 - 02:11:19.78]

Novo submits Saxenda,

[02:11:20.16 - 02:11:21.32]

the official weight loss

[02:11:21.32 - 02:11:22.10]

version of allergally

[02:11:22.10 - 02:11:23.92]

tied to the FDA and EU

[02:11:23.92 - 02:11:24.64]

for approval.

[02:11:25.08 - 02:11:26.04]

And it's a slightly

[02:11:26.04 - 02:11:26.96]

higher dose version.

[02:11:27.30 - 02:11:28.92]

And expectations are at

[02:11:28.92 - 02:11:30.86]

a all time high for this.

[02:11:31.20 - 02:11:32.10]

Novo's market cap

[02:11:32.10 - 02:11:33.46]

has already been running.

[02:11:33.76 - 02:11:35.56]

It now passes $100 billion

[02:11:35.56 - 02:11:37.04]

on the anticipation

[02:11:37.04 - 02:11:38.36]

of Saxenda's performance.

[02:11:40.12 - 02:11:42.96]

And it's not that big a hit.

[02:11:43.38 - 02:11:44.02]

It's a hit.

[02:11:44.28 - 02:11:45.30]

It has good sales.

[02:11:45.82 - 02:11:46.32]

And to be fair,

[02:11:46.40 - 02:11:47.46]

I think a large amount

[02:11:47.46 - 02:11:49.38]

of the early adopter

[02:11:49.38 - 02:11:51.64]

GLP-1 weight loss market

[02:11:51.64 - 02:11:53.90]

was already just using Victoza.

[02:11:54.04 - 02:11:54.96]

So clearly a lot of the

[02:11:54.96 - 02:11:55.76]

Victoza revenue

[02:11:55.76 - 02:11:57.20]

was actually Saxenda revenue

[02:11:57.20 - 02:11:58.88]

that was pulled forward,

[02:11:59.00 - 02:11:59.56]

so to speak.

[02:12:00.02 - 02:12:01.06]

But Ben, like you're saying,

[02:12:01.12 - 02:12:02.10]

the big issue is that

[02:12:02.10 - 02:12:03.86]

even with the slightly

[02:12:03.86 - 02:12:05.72]

higher dose of Liraglutide,

[02:12:06.60 - 02:12:09.30]

it yields long term on average

[02:12:09.30 - 02:12:10.42]

across populations

[02:12:10.42 - 02:12:13.92]

about an 8% BMI reduction,

[02:12:14.24 - 02:12:15.24]

you know, which is meaningful,

[02:12:15.60 - 02:12:18.10]

but it's not that meaningful.

[02:12:18.88 - 02:12:19.76]

In research, it is crazy.

[02:12:19.92 - 02:12:21.08]

I heard over and over again,

[02:12:21.22 - 02:12:22.52]

physicians and other people

[02:12:22.52 - 02:12:23.40]

in the industry echo

[02:12:23.40 - 02:12:24.50]

this kind of magical

[02:12:24.50 - 02:12:26.62]

10% weight loss reduction number

[02:12:26.62 - 02:12:27.34]

where there was always

[02:12:27.34 - 02:12:28.48]

this belief in the industry

[02:12:28.48 - 02:12:29.86]

that if something could reliably

[02:12:30.52 - 02:12:33.18]

help you lose 10% or more,

[02:12:33.28 - 02:12:34.16]

then it sort of tips.

[02:12:34.16 - 02:12:36.36]

And Saxenda just didn't get there.

[02:12:36.82 - 02:12:38.34]

Yep. So regardless,

[02:12:38.72 - 02:12:39.74]

the next year, 2015,

[02:12:39.98 - 02:12:40.90]

is a record year.

[02:12:41.18 - 02:12:42.32]

Total company revenues

[02:12:42.32 - 02:12:43.38]

for Novo Nordisk

[02:12:43.38 - 02:12:45.08]

hit $16 billion,

[02:12:45.64 - 02:12:47.34]

which is incredible

[02:12:47.34 - 02:12:49.74]

for a pure play diabetes

[02:12:49.74 - 02:12:50.86]

and now diabetes

[02:12:50.86 - 02:12:53.36]

and relatedly obesity pharma company.

[02:12:53.60 - 02:12:55.66]

But the stock flatlines.

[02:12:56.32 - 02:12:57.04]

Yeah, and right around

[02:12:57.04 - 02:12:57.64]

the same time,

[02:12:57.70 - 02:12:59.24]

you've got the insulin pricing scandal

[02:12:59.24 - 02:13:01.52]

where America is waking up

[02:13:01.52 - 02:13:02.48]

to the idea that insulin

[02:13:02.48 - 02:13:03.68]

is getting more and more expensive.

[02:13:03.68 - 02:13:05.32]

And it's becoming more and more essential

[02:13:05.32 - 02:13:07.26]

for a huge population of people.

[02:13:07.82 - 02:13:09.04]

And this is across the whole industry.

[02:13:09.18 - 02:13:10.38]

It's Sanofi, it's Novo Nordisk,

[02:13:10.42 - 02:13:11.30]

and it's Eli Lilly.

[02:13:12.00 - 02:13:12.78]

Everyone's insulin

[02:13:12.78 - 02:13:14.18]

has gotten more expensive

[02:13:14.18 - 02:13:15.56]

and they come under fire

[02:13:15.56 - 02:13:16.24]

in the public eye.

[02:13:16.42 - 02:13:17.82]

And so the sort of Saxenda

[02:13:17.82 - 02:13:19.66]

not being the blockbuster drug

[02:13:19.66 - 02:13:21.12]

that expectations

[02:13:21.12 - 02:13:22.26]

had trumpeted it up to be,

[02:13:22.50 - 02:13:23.92]

plus this increasing pressure

[02:13:23.92 - 02:13:25.28]

around insulin

[02:13:25.28 - 02:13:27.54]

and I think a CEO change.

[02:13:28.30 - 02:13:29.36]

Yeah, well, the CEO change,

[02:13:29.44 - 02:13:30.70]

I think, was a result of this.

[02:13:31.28 - 02:13:32.26]

So what you're leading up to

[02:13:32.26 - 02:13:33.42]

is in 2016,

[02:13:33.70 - 02:13:35.68]

the stock takes a 40% hit,

[02:13:36.30 - 02:13:36.94]

which is wild.

[02:13:37.12 - 02:13:37.92]

You know, today,

[02:13:38.10 - 02:13:39.16]

at the beginning of 2024,

[02:13:39.48 - 02:13:41.18]

this is a half a trillion dollar company.

[02:13:41.96 - 02:13:43.54]

And a few years ago,

[02:13:43.84 - 02:13:44.94]

it was a well less than

[02:13:44.94 - 02:13:46.52]

$100 billion market cap company.

[02:13:47.40 - 02:13:48.18]

But there was that

[02:13:48.18 - 02:13:49.48]

really dangerous narrative

[02:13:49.48 - 02:13:51.30]

that these GLP-1s

[02:13:51.30 - 02:13:53.04]

aren't going to be as crazy as everyone,

[02:13:53.28 - 02:13:55.12]

at least everyone in the know, thinks.

[02:13:55.36 - 02:13:58.56]

And also their only franchise of insulin

[02:13:58.56 - 02:13:59.86]

is suddenly under fire.

[02:13:59.86 - 02:14:02.64]

Yeah, so in September 2016,

[02:14:03.16 - 02:14:05.84]

the then CEO Lars Sorensen resigns.

[02:14:06.48 - 02:14:08.88]

Current CEO Lars Jørgensen takes over.

[02:14:09.38 - 02:14:10.78]

Amazing. So wonderfully Danish.

[02:14:11.36 - 02:14:12.70]

Sidebar, this is wild.

[02:14:12.86 - 02:14:14.76]

So right now, today, as we record this,

[02:14:15.28 - 02:14:17.06]

Novo Nordisk is the 15th

[02:14:17.06 - 02:14:18.54]

largest company in the world

[02:14:18.54 - 02:14:19.38]

by market cap.

[02:14:19.82 - 02:14:21.00]

And when I was doing research

[02:14:21.00 - 02:14:21.86]

for this episode,

[02:14:22.34 - 02:14:24.28]

I, of course, googled Lars Jørgensen.

[02:14:24.76 - 02:14:25.62]

When I did,

[02:14:26.06 - 02:14:27.74]

the results that Google gave me,

[02:14:28.30 - 02:14:29.76]

results one through six

[02:14:29.76 - 02:14:31.58]

were for the University of Kentucky

[02:14:31.58 - 02:14:32.78]

swimming coach,

[02:14:33.02 - 02:14:35.60]

who is also named Lars Jørgensen.

[02:14:35.94 - 02:14:36.76]

Talk about below the radar.

[02:14:37.04 - 02:14:38.92]

Who I'm sure is a great and storied,

[02:14:38.94 - 02:14:40.34]

you know, NCAA swimming coach.

[02:14:41.56 - 02:14:43.50]

But it wasn't until number seven

[02:14:43.50 - 02:14:44.58]

when I actually got

[02:14:44.58 - 02:14:46.68]

the CEO of Novo Nordisk.

[02:14:46.94 - 02:14:47.70]

That is how, like,

[02:14:48.28 - 02:14:49.72]

underappreciated this company is.

[02:14:50.02 - 02:14:50.60]

It's crazy.

[02:14:51.22 - 02:14:53.36]

Anyway, right around the same time,

[02:14:53.54 - 02:14:55.50]

Novo begins phase three trials

[02:14:55.50 - 02:14:58.16]

with their new next generation

[02:14:59.20 - 02:15:01.24]

improved GLP-1 analog,

[02:15:02.40 - 02:15:02.88]

semaglutide,

[02:15:03.50 - 02:15:05.50]

which I think is pronounced semaglutide.

[02:15:06.74 - 02:15:08.42]

We've also heard semaglutide.

[02:15:08.90 - 02:15:10.60]

We did an obscene amount of

[02:15:10.60 - 02:15:11.90]

research on this and

[02:15:11.90 - 02:15:13.22]

don't have a good answer.

[02:15:13.34 - 02:15:14.06]

So if you know,

[02:15:14.36 - 02:15:15.40]

get in touch with us.

[02:15:15.64 - 02:15:17.12]

The most reputable source we could find

[02:15:17.12 - 02:15:19.16]

seemed to say semaglutide.

[02:15:19.50 - 02:15:19.98]

Yes.

[02:15:20.12 - 02:15:21.14]

Which makes sense, you know,

[02:15:21.20 - 02:15:22.66]

coming out of liraglutide.

[02:15:22.72 - 02:15:24.34]

And I believe there's a duaglutide.

[02:15:24.34 - 02:15:26.50]

So we're rolling with semaglutide.

[02:15:26.94 - 02:15:28.32]

Acquiredfm at gmail.com

[02:15:28.32 - 02:15:29.34]

if you disagree.

[02:15:32.24 - 02:15:34.10]

And semaglutide has

[02:15:34.10 - 02:15:36.42]

several benefits over liraglutide.

[02:15:36.78 - 02:15:39.32]

One, it is much,

[02:15:39.58 - 02:15:41.46]

much longer lasting in the body.

[02:15:41.60 - 02:15:43.34]

So it only needs to be injected

[02:15:43.34 - 02:15:44.30]

once per week

[02:15:44.30 - 02:15:46.24]

instead of once per day.

[02:15:46.88 - 02:15:48.08]

Massive benefit

[02:15:48.08 - 02:15:49.94]

just on patient convenience there

[02:15:49.94 - 02:15:52.02]

with the half-life being so much longer.

[02:15:52.82 - 02:15:54.82]

Two, and much more

[02:15:54.82 - 02:15:56.20]

important for the near term,

[02:15:56.90 - 02:15:59.28]

it is twice as effective

[02:15:59.94 - 02:16:01.76]

as liraglutide for weight loss.

[02:16:01.92 - 02:16:04.74]

So we're talking 15% plus

[02:16:05.46 - 02:16:08.18]

long-term BMI reduction,

[02:16:08.52 - 02:16:10.28]

which is well beyond,

[02:16:10.54 - 02:16:11.68]

Ben, as you were saying,

[02:16:11.76 - 02:16:13.46]

the 10% magical threshold.

[02:16:13.96 - 02:16:14.08]

Yep.

[02:16:14.36 - 02:16:15.84]

It moves from the

[02:16:15.84 - 02:16:17.44]

domain of irrelevancy

[02:16:17.44 - 02:16:18.56]

to the domain of,

[02:16:18.78 - 02:16:20.06]

is this a miracle drug?

[02:16:20.16 - 02:16:20.82]

In the press.

[02:16:20.82 - 02:16:22.16]

And there's some more

[02:16:22.84 - 02:16:24.22]

benefits, potential benefits,

[02:16:24.32 - 02:16:24.96]

that we'll talk about

[02:16:24.96 - 02:16:26.08]

in a little bit here.

[02:16:26.28 - 02:16:28.52]

But this compound,

[02:16:29.20 - 02:16:30.80]

this GLP-1 agonist,

[02:16:31.14 - 02:16:31.90]

semaglutide,

[02:16:32.22 - 02:16:33.90]

is, of course,

[02:16:34.12 - 02:16:36.08]

ozempic and wegavy.

[02:16:36.32 - 02:16:37.32]

All the same thing,

[02:16:37.74 - 02:16:38.60]

all semaglutide,

[02:16:38.70 - 02:16:39.72]

ozempic is the

[02:16:39.72 - 02:16:41.20]

diabetes marketing product

[02:16:41.20 - 02:16:43.04]

and wegavy is the

[02:16:43.04 - 02:16:44.94]

weight loss marketing product.

[02:16:45.50 - 02:16:45.68]

Yep.

[02:16:45.98 - 02:16:47.60]

So a few words on

[02:16:47.60 - 02:16:48.66]

how it affects weight.

[02:16:48.66 - 02:16:50.60]

The natural GLP-1

[02:16:50.60 - 02:16:51.66]

produced in your gut

[02:16:51.66 - 02:16:53.12]

travels to your brain.

[02:16:53.22 - 02:16:53.82]

This is a hormone

[02:16:53.82 - 02:16:54.90]

that moves throughout your body,

[02:16:55.00 - 02:16:56.08]

much like many other hormones,

[02:16:56.38 - 02:16:57.50]

and it triggers a response

[02:16:57.50 - 02:16:58.52]

to tell your brain,

[02:16:58.70 - 02:16:59.50]

hey, I'm satiated.

[02:16:59.70 - 02:17:01.18]

It tells you that you've had enough,

[02:17:01.30 - 02:17:02.12]

that you feel full,

[02:17:02.24 - 02:17:03.50]

and it can cause you to

[02:17:03.50 - 02:17:04.92]

stop thinking about your hunger.

[02:17:05.38 - 02:17:05.92]

And if you're someone

[02:17:05.92 - 02:17:08.08]

that's constantly fixated on food

[02:17:08.08 - 02:17:09.08]

and restraining yourself

[02:17:09.08 - 02:17:09.76]

from indulging,

[02:17:10.16 - 02:17:11.82]

it can quiet that impulse,

[02:17:12.38 - 02:17:13.94]

or at least reports are

[02:17:13.94 - 02:17:14.78]

that that is sort of

[02:17:14.78 - 02:17:15.70]

what people feel.

[02:17:16.26 - 02:17:18.20]

It can also slow digestion.

[02:17:18.20 - 02:17:19.54]

So not only does your brain

[02:17:19.54 - 02:17:20.38]

think you're full,

[02:17:20.74 - 02:17:22.54]

you literally are now full

[02:17:22.54 - 02:17:24.14]

since the food takes longer

[02:17:24.14 - 02:17:24.78]

to move through

[02:17:24.78 - 02:17:25.80]

your digestive system.

[02:17:26.44 - 02:17:27.08]

And David, you mentioned

[02:17:27.08 - 02:17:28.28]

that 15% weight loss.

[02:17:28.80 - 02:17:29.60]

They're still studying

[02:17:29.60 - 02:17:31.26]

exactly why it works,

[02:17:31.60 - 02:17:32.56]

but it's believed to be

[02:17:32.56 - 02:17:32.96]

that it's sort of

[02:17:32.96 - 02:17:33.86]

these two mechanisms

[02:17:33.86 - 02:17:35.42]

working in action together.

[02:17:35.96 - 02:17:36.84]

And as you can imagine,

[02:17:37.04 - 02:17:38.04]

food taking longer

[02:17:38.04 - 02:17:39.58]

to move through your system

[02:17:39.58 - 02:17:41.66]

kind of can make you feel gross.

[02:17:41.82 - 02:17:42.60]

Like the side effects

[02:17:42.60 - 02:17:43.78]

naturally include things

[02:17:43.78 - 02:17:44.72]

like nausea, vomiting,

[02:17:44.88 - 02:17:45.42]

constipation,

[02:17:45.92 - 02:17:46.62]

things like that.

[02:17:46.62 - 02:17:48.56]

But these reports of side effects

[02:17:48.56 - 02:17:49.88]

are pretty widespread.

[02:17:50.16 - 02:17:51.12]

I listened to a bunch of things,

[02:17:51.20 - 02:17:52.20]

one of which was a Tegas call

[02:17:52.20 - 02:17:53.52]

with a professor of cardiology

[02:17:53.52 - 02:17:54.16]

that cited about

[02:17:54.16 - 02:17:55.40]

one out of six patients

[02:17:55.40 - 02:17:56.54]

have side effects

[02:17:56.54 - 02:17:57.24]

that are so severe

[02:17:57.24 - 02:17:58.80]

that they discontinue the drug.

[02:17:59.18 - 02:17:59.94]

So it's sort of this,

[02:18:00.06 - 02:18:02.16]

we don't exactly know why it works.

[02:18:02.30 - 02:18:03.22]

We have studied a bunch,

[02:18:03.24 - 02:18:04.42]

so we know that it works.

[02:18:04.70 - 02:18:06.34]

But you can sort of imagine

[02:18:06.34 - 02:18:07.36]

why the side effects

[02:18:07.36 - 02:18:09.00]

might be linked to the idea

[02:18:09.00 - 02:18:10.34]

that if you're eating,

[02:18:10.70 - 02:18:12.10]

you know, really calorie dense food,

[02:18:12.22 - 02:18:12.90]

really fatty food,

[02:18:12.98 - 02:18:13.96]

hard to digest food.

[02:18:14.48 - 02:18:15.38]

And it's moving slower.

[02:18:15.38 - 02:18:17.26]

Right. I wouldn't want food either.

[02:18:17.84 - 02:18:18.02]

Yeah.

[02:18:18.54 - 02:18:19.68]

The thing that's really fascinating

[02:18:19.68 - 02:18:21.38]

to me about semaglutide

[02:18:21.38 - 02:18:22.54]

as a weight loss drug

[02:18:22.54 - 02:18:24.42]

is that you can't just sit around

[02:18:24.42 - 02:18:25.64]

eating pizza and ice cream

[02:18:25.64 - 02:18:26.28]

and lose weight.

[02:18:26.42 - 02:18:28.06]

The laws of thermodynamics

[02:18:28.06 - 02:18:29.60]

in the universe still apply.

[02:18:29.74 - 02:18:30.88]

Your body will always

[02:18:30.88 - 02:18:32.40]

retain the difference

[02:18:32.40 - 02:18:34.44]

between the digestible calories

[02:18:34.44 - 02:18:35.08]

that you eat

[02:18:35.08 - 02:18:36.64]

and the calories that you burn.

[02:18:36.78 - 02:18:38.00]

But the reports

[02:18:38.00 - 02:18:39.32]

from those who are taking it,

[02:18:39.64 - 02:18:41.04]

it's really more like

[02:18:41.04 - 02:18:41.96]

you just don't want

[02:18:41.96 - 02:18:42.88]

to eat large quantities.

[02:18:43.02 - 02:18:43.84]

You don't want to eat

[02:18:43.84 - 02:18:45.28]

calorie dense food.

[02:18:45.74 - 02:18:46.68]

And it sort of just changes

[02:18:46.68 - 02:18:48.66]

your habits without you trying,

[02:18:48.86 - 02:18:50.36]

or at least you having to try

[02:18:50.36 - 02:18:51.58]

as hard as you did

[02:18:51.58 - 02:18:53.02]

in other attempts to lose weight.

[02:18:53.52 - 02:18:54.80]

You know, it sort of solves

[02:18:54.80 - 02:18:56.06]

the debate that had been

[02:18:56.06 - 02:18:57.90]

going on for decades of

[02:18:57.90 - 02:18:59.66]

is it a behavioral problem

[02:18:59.66 - 02:19:00.98]

or is it a medical problem?

[02:19:01.40 - 02:19:02.80]

Well, if you're taking medicine

[02:19:02.80 - 02:19:04.58]

that changes the way

[02:19:04.58 - 02:19:06.26]

that your body chemistry works,

[02:19:06.28 - 02:19:08.02]

but also literally causes you

[02:19:08.02 - 02:19:09.34]

to naturally change your behavior,

[02:19:09.94 - 02:19:10.74]

it really actually

[02:19:10.74 - 02:19:11.88]

addresses both concerns.

[02:19:11.88 - 02:19:14.50]

Right. So 2018,

[02:19:15.60 - 02:19:16.78]

Ozempic finally hits

[02:19:16.78 - 02:19:17.76]

the market for diabetes.

[02:19:18.42 - 02:19:19.64]

And then in 2021,

[02:19:20.22 - 02:19:21.04]

Wegewee gets approved

[02:19:21.04 - 02:19:22.28]

for weight loss.

[02:19:23.36 - 02:19:25.30]

Ozempic does over a billion

[02:19:25.30 - 02:19:26.88]

dollars in revenue in 2019,

[02:19:27.58 - 02:19:28.62]

its first year on the market.

[02:19:28.90 - 02:19:30.00]

It's clear it's going

[02:19:30.00 - 02:19:30.76]

to be a huge hit.

[02:19:31.00 - 02:19:32.80]

And it's like even more than that.

[02:19:32.84 - 02:19:34.08]

This is like even more

[02:19:34.08 - 02:19:35.36]

than Victoza back in the day.

[02:19:35.44 - 02:19:36.86]

It does a billion dollars in revenue,

[02:19:36.86 - 02:19:38.12]

but like it's massively

[02:19:38.12 - 02:19:39.18]

supply constrained.

[02:19:39.38 - 02:19:40.28]

Like it could have done

[02:19:40.28 - 02:19:41.44]

a lot more.

[02:19:41.96 - 02:19:43.32]

These drugs still,

[02:19:43.60 - 02:19:44.32]

Ozempic and Wegewee,

[02:19:44.44 - 02:19:46.10]

could do a lot more revenue

[02:19:46.10 - 02:19:47.34]

than they are doing right now.

[02:19:47.74 - 02:19:48.12]

Which, by the way,

[02:19:48.18 - 02:19:48.80]

on earnings calls,

[02:19:48.90 - 02:19:49.64]

the company says,

[02:19:49.84 - 02:19:50.60]

yeah, that's going to be true

[02:19:50.60 - 02:19:51.32]

for a long time.

[02:19:51.74 - 02:19:53.74]

The demand for this drug

[02:19:54.34 - 02:19:55.60]

will continue to

[02:19:55.60 - 02:19:57.02]

massively outpace our supply.

[02:19:57.28 - 02:19:57.98]

And we will be here

[02:19:57.98 - 02:19:58.62]

on earnings calls

[02:19:58.62 - 02:19:59.70]

over and over and over again,

[02:19:59.82 - 02:20:00.58]

telling you that no matter

[02:20:00.58 - 02:20:01.70]

how many factories we build,

[02:20:01.76 - 02:20:03.08]

we are supply constrained still.

[02:20:04.06 - 02:20:05.62]

Yes. So at this point,

[02:20:05.76 - 02:20:06.32]

you know, it's funny.

[02:20:06.42 - 02:20:07.24]

I think for most people

[02:20:07.24 - 02:20:08.34]

that are discovering

[02:20:08.34 - 02:20:09.82]

Novo Nordisk now,

[02:20:09.82 - 02:20:10.70]

us included,

[02:20:10.86 - 02:20:11.38]

I didn't know anything

[02:20:11.38 - 02:20:12.00]

about this company

[02:20:12.00 - 02:20:13.00]

until a few years ago.

[02:20:13.40 - 02:20:14.90]

32 years after Lada

[02:20:14.90 - 02:20:16.24]

and her team started this research.

[02:20:16.66 - 02:20:17.10]

Right.

[02:20:17.28 - 02:20:18.10]

If anything,

[02:20:18.38 - 02:20:19.56]

we think of this company

[02:20:19.56 - 02:20:20.32]

as like, oh,

[02:20:20.74 - 02:20:22.06]

it's the GLP-1 company.

[02:20:22.24 - 02:20:23.78]

It's the weight loss drug company.

[02:20:23.90 - 02:20:24.66]

And like, no,

[02:20:24.80 - 02:20:26.02]

for 100 years,

[02:20:26.14 - 02:20:26.94]

it was the diabetes

[02:20:26.94 - 02:20:28.34]

and the insulin company.

[02:20:28.68 - 02:20:30.74]

But it's clear at this point now

[02:20:30.74 - 02:20:31.22]

that no,

[02:20:31.48 - 02:20:33.66]

this is now a GLP-1 company.

[02:20:33.94 - 02:20:36.06]

And that grew naturally

[02:20:36.06 - 02:20:38.16]

out of the diabetes

[02:20:38.16 - 02:20:39.38]

and the insulin research

[02:20:39.38 - 02:20:40.14]

and Lada's work

[02:20:40.14 - 02:20:41.46]

and sort of in this

[02:20:41.46 - 02:20:43.18]

organic fashion

[02:20:43.18 - 02:20:45.02]

that is so different

[02:20:45.02 - 02:20:46.66]

than the rest of the pharma industry.

[02:20:47.66 - 02:20:49.50]

But the net result of this now

[02:20:49.50 - 02:20:50.64]

is that yes,

[02:20:50.74 - 02:20:52.14]

insulin is still a large business

[02:20:52.14 - 02:20:53.86]

within Novo Nordisk,

[02:20:53.92 - 02:20:56.10]

but it is a GLP-1 company.

[02:20:56.46 - 02:20:58.64]

So when Wegewee

[02:20:58.64 - 02:21:00.18]

finally launches in the US

[02:21:00.18 - 02:21:01.84]

in 2021

[02:21:01.84 - 02:21:04.68]

as the official FDA sanctioned

[02:21:04.68 - 02:21:06.04]

weight loss version

[02:21:06.04 - 02:21:07.26]

of semaglutide,

[02:21:07.90 - 02:21:09.80]

it gets the same number

[02:21:09.80 - 02:21:10.78]

of prescriptions

[02:21:11.34 - 02:21:12.76]

written for it by doctors

[02:21:13.42 - 02:21:15.78]

in the first slightly over one month

[02:21:15.78 - 02:21:17.44]

than Saxenda had

[02:21:17.44 - 02:21:19.66]

in its entire drug lifetime.

[02:21:20.06 - 02:21:21.36]

People were already

[02:21:22.38 - 02:21:24.68]

misusing ozempic for weight loss

[02:21:24.68 - 02:21:25.74]

before this.

[02:21:26.38 - 02:21:27.66]

So like ozempic supply

[02:21:27.66 - 02:21:29.08]

was fully exhausted.

[02:21:29.52 - 02:21:31.62]

And then now Wegewee supply

[02:21:31.62 - 02:21:32.98]

fully exhausted.

[02:21:33.28 - 02:21:34.78]

Well, in February of 2021,

[02:21:34.78 - 02:21:37.04]

after the clinical trial finishes,

[02:21:37.88 - 02:21:39.32]

semaglutide for weight loss,

[02:21:39.40 - 02:21:40.70]

so for Wegewee to hit the market

[02:21:40.70 - 02:21:41.18]

in the US,

[02:21:41.70 - 02:21:42.84]

the New York Times runs a story

[02:21:42.84 - 02:21:44.48]

and just calls it a game changer.

[02:21:44.94 - 02:21:45.84]

They say for the first time,

[02:21:45.88 - 02:21:46.66]

a drug has been shown

[02:21:46.66 - 02:21:48.08]

to be so effective against obesity

[02:21:48.08 - 02:21:49.50]

that patients may dodge

[02:21:49.50 - 02:21:51.20]

many of its worst consequences,

[02:21:51.38 - 02:21:52.24]

including diabetes.

[02:21:52.72 - 02:21:54.70]

So like with the biggest megaphone

[02:21:54.70 - 02:21:56.06]

you could possibly point at people,

[02:21:56.24 - 02:21:57.14]

they're being told

[02:21:57.64 - 02:21:58.90]

this thing freaking works

[02:21:58.90 - 02:21:59.88]

and it's a miracle drug.

[02:22:00.70 - 02:22:02.72]

And we'll talk a lot more about

[02:22:02.72 - 02:22:04.50]

pros and cons and all of that

[02:22:04.50 - 02:22:05.70]

and everything around that

[02:22:05.70 - 02:22:06.84]

in a minute here in analysis.

[02:22:06.84 - 02:22:08.78]

But just to wrap up the story,

[02:22:09.46 - 02:22:10.64]

the company's market cap

[02:22:10.64 - 02:22:11.70]

basically goes vertical.

[02:22:12.50 - 02:22:15.26]

In 2020, right before all this hit

[02:22:15.26 - 02:22:16.96]

and as ozempic was coming online,

[02:22:17.40 - 02:22:18.58]

the market cap had climbed

[02:22:18.58 - 02:22:20.28]

back up above $100 billion.

[02:22:20.82 - 02:22:24.12]

Summer 2021, it hits $250 billion.

[02:22:24.42 - 02:22:26.12]

By the end of 2022,

[02:22:26.68 - 02:22:28.00]

it hits $300 billion,

[02:22:28.78 - 02:22:29.72]

which, mind you,

[02:22:29.80 - 02:22:32.26]

is against a market and macro backdrop

[02:22:32.26 - 02:22:34.32]

of massively rising interest rates

[02:22:34.32 - 02:22:35.96]

and stocks and equities

[02:22:35.96 - 02:22:37.52]

being down across the board,

[02:22:37.84 - 02:22:39.34]

like Novo Nordisk is up

[02:22:39.34 - 02:22:40.12]

during this period.

[02:22:40.90 - 02:22:43.38]

And then this past summer in 2023,

[02:22:44.04 - 02:22:45.68]

it passes $400 billion market cap

[02:22:45.68 - 02:22:47.24]

and it is currently flirting

[02:22:47.24 - 02:22:50.20]

with the half a trillion dollar mark.

[02:22:50.54 - 02:22:52.82]

Revenue goes from $20 billion in 2019

[02:22:52.82 - 02:22:54.86]

to $25 billion in 2021,

[02:22:55.46 - 02:22:57.16]

$30 billion in 2022,

[02:22:57.62 - 02:22:59.72]

and in 2023, so far,

[02:22:59.94 - 02:23:00.82]

in the first three quarters

[02:23:00.82 - 02:23:01.58]

that they've reported,

[02:23:02.00 - 02:23:04.80]

it is up another 30% year on year,

[02:23:04.80 - 02:23:06.80]

of course, with, Ben, as you said,

[02:23:07.14 - 02:23:09.10]

years worth of supply constraint

[02:23:09.10 - 02:23:10.42]

demand pipeline.

[02:23:11.26 - 02:23:12.96]

Yep, that is pretty crazy.

[02:23:13.46 - 02:23:14.24]

David, you mentioned it

[02:23:14.24 - 02:23:16.52]

as the GLP-1 company already,

[02:23:16.92 - 02:23:18.40]

and that sort of transition

[02:23:18.40 - 02:23:19.26]

has already occurred.

[02:23:19.50 - 02:23:20.46]

You're totally right.

[02:23:20.54 - 02:23:21.20]

Looking at the numbers,

[02:23:21.36 - 02:23:23.52]

51% of their revenue comes from

[02:23:23.52 - 02:23:25.82]

diabetes-focused GLP-1 drugs

[02:23:25.82 - 02:23:27.32]

and an additional 18%

[02:23:27.32 - 02:23:29.20]

from obesity-related GLP-1.

[02:23:29.26 - 02:23:31.32]

So 69% of their revenue

[02:23:31.32 - 02:23:35.42]

comes from semaglutide or liraglutide.

[02:23:35.92 - 02:23:36.68]

I mean, it's crazy.

[02:23:37.12 - 02:23:38.24]

That happened in a decade.

[02:23:39.00 - 02:23:40.56]

Yeah, totally wild.

[02:23:41.14 - 02:23:42.80]

Insulin has become, to your point,

[02:23:42.86 - 02:23:43.80]

it's still a part of the business,

[02:23:43.88 - 02:23:44.82]

a smaller share of the business.

[02:23:44.96 - 02:23:45.86]

Again, this is of revenue,

[02:23:46.00 - 02:23:46.82]

not of profits,

[02:23:46.94 - 02:23:49.64]

but 22% of their revenue today

[02:23:49.64 - 02:23:50.48]

comes from insulin.

[02:23:50.70 - 02:23:52.12]

That leaves about 9%

[02:23:52.12 - 02:23:53.66]

from the other efforts

[02:23:53.66 - 02:23:54.96]

that they're putting energy into,

[02:23:55.08 - 02:23:55.88]

rare diseases,

[02:23:56.22 - 02:23:57.16]

so things like hemophilia.

[02:23:57.70 - 02:23:58.76]

They continue to be

[02:23:58.76 - 02:24:00.72]

a ridiculously concentrated company.

[02:24:00.72 - 02:24:03.44]

They make about $10 billion a year

[02:24:03.44 - 02:24:04.08]

in net income,

[02:24:04.22 - 02:24:05.12]

so they're also a

[02:24:05.12 - 02:24:07.10]

very, very profitable company

[02:24:07.10 - 02:24:08.22]

among the most profitable

[02:24:08.22 - 02:24:09.20]

in all of pharma.

[02:24:09.80 - 02:24:11.62]

They have 55,000 employees,

[02:24:11.90 - 02:24:14.62]

so it's a huge international company

[02:24:14.62 - 02:24:15.26]

at this point.

[02:24:16.14 - 02:24:18.20]

And I want to talk briefly about margins.

[02:24:18.68 - 02:24:19.94]

Later, we will talk about

[02:24:19.94 - 02:24:21.86]

why margins are actually

[02:24:21.86 - 02:24:23.78]

not the most interesting measure

[02:24:23.78 - 02:24:24.38]

to look at,

[02:24:24.64 - 02:24:26.00]

but it's worth knowing them

[02:24:26.00 - 02:24:26.72]

because we talk about them

[02:24:26.72 - 02:24:27.62]

on every other episode.

[02:24:28.36 - 02:24:30.16]

Gross margins are better than software.

[02:24:30.16 - 02:24:31.68]

They run about 84%.

[02:24:32.50 - 02:24:35.22]

Lilly is also a very high margin company,

[02:24:35.26 - 02:24:35.92]

running about 80%.

[02:24:36.88 - 02:24:38.00]

For context,

[02:24:38.22 - 02:24:40.78]

Microsoft has a gross margin of 70%,

[02:24:40.78 - 02:24:41.92]

and Google is 56%.

[02:24:42.50 - 02:24:45.04]

How is Google's gross margin 56%?

[02:24:45.20 - 02:24:46.68]

They must be stuffing a lot of

[02:24:46.68 - 02:24:48.28]

other revenue besides search

[02:24:48.28 - 02:24:49.16]

into the top line.

[02:24:49.36 - 02:24:51.34]

I assume all the billions they pay Apple

[02:24:51.34 - 02:24:52.84]

comes out of costs of goods sold,

[02:24:53.18 - 02:24:54.82]

all the traffic acquisition costs.

[02:24:55.26 - 02:24:57.04]

Probably also for their infrastructure

[02:24:57.04 - 02:24:57.98]

and for Google Cloud.

[02:24:58.38 - 02:24:58.58]

Yep.

[02:24:59.14 - 02:25:00.94]

So at 84% gross margins,

[02:25:01.18 - 02:25:02.24]

you should know they're

[02:25:02.24 - 02:25:03.96]

10 percentage points higher

[02:25:03.96 - 02:25:04.96]

than your average

[02:25:04.96 - 02:25:06.76]

successful big pharma company.

[02:25:07.12 - 02:25:08.26]

They're concentrated

[02:25:08.90 - 02:25:11.12]

in terms of what they actually focus on,

[02:25:11.22 - 02:25:12.38]

but they're enormous

[02:25:12.38 - 02:25:14.20]

and more profitable than everybody else.

[02:25:14.34 - 02:25:16.42]

So they've sort of threaded a needle

[02:25:16.42 - 02:25:18.56]

that if you were pitched a blank canvas,

[02:25:18.74 - 02:25:19.34]

you would say like,

[02:25:19.40 - 02:25:20.00]

well, it's impossible.

[02:25:20.00 - 02:25:21.36]

You need to make a trade-off somewhere

[02:25:21.36 - 02:25:22.90]

if you're going to be so narrowly focused

[02:25:22.90 - 02:25:24.76]

on just one or two conditions

[02:25:24.76 - 02:25:26.08]

and really one singular

[02:25:26.08 - 02:25:27.16]

interrelated condition

[02:25:27.16 - 02:25:28.22]

of metabolic disorders.

[02:25:28.22 - 02:25:30.28]

Either you can't have all the revenue

[02:25:30.28 - 02:25:32.88]

or you can't be so ludicrously profitable.

[02:25:33.28 - 02:25:35.26]

And turns out the thing that they picked,

[02:25:35.40 - 02:25:36.08]

they can be both.

[02:25:36.60 - 02:25:36.74]

Yes.

[02:25:37.20 - 02:25:39.14]

And also it gets better.

[02:25:40.34 - 02:25:42.24]

So because semaglutide

[02:25:42.24 - 02:25:45.64]

has such a long half-life

[02:25:45.64 - 02:25:48.20]

relative even to liraglutide,

[02:25:48.32 - 02:25:49.80]

I mean, it's a once-weekly injection.

[02:25:50.08 - 02:25:51.00]

So like, you know,

[02:25:51.00 - 02:25:52.58]

the half-life in your body is days.

[02:25:52.70 - 02:25:54.08]

It's staying in there for a long time.

[02:25:54.88 - 02:25:58.12]

Remember, natural human GLP-1,

[02:25:58.32 - 02:26:00.54]

your body processes that in like five minutes.

[02:26:01.16 - 02:26:05.12]

So having GLP-1s active in your body for so long,

[02:26:05.34 - 02:26:09.12]

it's reaching other tissues in your body

[02:26:09.68 - 02:26:11.84]

that normally GLP-1s wouldn't.

[02:26:12.62 - 02:26:14.46]

And indications are showing

[02:26:14.46 - 02:26:17.98]

that that is beneficial for those organs.

[02:26:18.24 - 02:26:20.90]

So currently Novo has clinical trials

[02:26:20.90 - 02:26:23.02]

going for semaglutide,

[02:26:23.02 - 02:26:23.88]

same drug,

[02:26:24.20 - 02:26:25.48]

same GLP-1s,

[02:26:25.78 - 02:26:28.58]

use case in treating cardiovascular disease,

[02:26:28.88 - 02:26:30.36]

in treating Alzheimer's,

[02:26:30.42 - 02:26:31.94]

in treating kidney disease,

[02:26:32.30 - 02:26:33.26]

many others.

[02:26:33.94 - 02:26:35.40]

Again, this is all for like a molecule

[02:26:35.40 - 02:26:38.18]

that through FDA processes

[02:26:38.18 - 02:26:39.18]

and EU processes

[02:26:39.18 - 02:26:41.58]

has been deemed safe enough

[02:26:41.58 - 02:26:42.80]

to be on the market

[02:26:42.80 - 02:26:45.26]

for the accepted use cases.

[02:26:45.62 - 02:26:46.48]

Same drug.

[02:26:46.70 - 02:26:48.40]

Now it's showing evidence

[02:26:48.40 - 02:26:49.88]

that it can also attack

[02:26:49.88 - 02:26:51.96]

these other major disease areas.

[02:26:51.96 - 02:26:54.48]

This is the gift that keeps on giving here.

[02:26:55.22 - 02:26:55.48]

Could be.

[02:26:55.76 - 02:26:57.24]

Everything is really early,

[02:26:57.46 - 02:26:59.72]

but it really might earn the title of miracle drug.

[02:27:00.14 - 02:27:00.70]

It really might.

[02:27:01.34 - 02:27:03.36]

Now, not a scientist at all.

[02:27:03.42 - 02:27:05.26]

This is just my thought looking at this.

[02:27:05.88 - 02:27:07.32]

But yes,

[02:27:07.90 - 02:27:11.10]

could be a miracle drug for humanity

[02:27:11.10 - 02:27:14.08]

and certainly already is a miracle drug

[02:27:14.08 - 02:27:14.84]

for Novo Nordisk

[02:27:14.84 - 02:27:16.14]

in terms of financial performance.

[02:27:16.48 - 02:27:17.72]

Like no doubt about that one.

[02:27:17.84 - 02:27:18.94]

No doubt about that.

[02:27:19.64 - 02:27:21.52]

Well, this is a very good place.

[02:27:21.52 - 02:27:23.92]

I've got a couple of broad topic areas

[02:27:23.92 - 02:27:24.84]

that I want to hit here.

[02:27:25.18 - 02:27:27.74]

Let's start with the general state of affairs

[02:27:27.74 - 02:27:28.92]

of GLP ones today.

[02:27:29.76 - 02:27:31.38]

So the first thing to know is sticker price.

[02:27:31.66 - 02:27:33.78]

The price of Ozempic to treat diabetes

[02:27:33.78 - 02:27:34.96]

is north of $1000

[02:27:34.96 - 02:27:36.70]

and Wegovy for weight loss

[02:27:36.70 - 02:27:40.04]

is north of $1300 per month

[02:27:40.64 - 02:27:41.54]

before insurance.

[02:27:41.70 - 02:27:42.54]

And this is in the US.

[02:27:43.22 - 02:27:44.70]

So expensive, right?

[02:27:44.82 - 02:27:45.60]

That's a lot of money.

[02:27:46.02 - 02:27:47.40]

In Canada, of course,

[02:27:47.80 - 02:27:49.88]

Ozempic is $147 a month.

[02:27:49.88 - 02:27:52.42]

In the UK, it's $93 a month.

[02:27:52.72 - 02:27:54.34]

So everything that I'm about to talk about

[02:27:54.34 - 02:27:55.90]

is a uniquely American problem,

[02:27:56.10 - 02:27:57.22]

much like most problems

[02:27:57.22 - 02:27:58.34]

in our health care system.

[02:27:59.08 - 02:28:02.06]

So how do these drugs get paid for in the US?

[02:28:02.38 - 02:28:03.12]

Well, that depends.

[02:28:03.72 - 02:28:05.80]

Rich people just out of pocket

[02:28:05.80 - 02:28:06.76]

if they don't have coverage.

[02:28:07.08 - 02:28:08.22]

We've seen all the headlines

[02:28:08.22 - 02:28:09.30]

about it being rampant

[02:28:09.30 - 02:28:10.64]

in wealthy New York neighborhoods

[02:28:10.64 - 02:28:11.36]

or around Hollywood.

[02:28:11.76 - 02:28:14.08]

But let's segment that away for a moment

[02:28:14.08 - 02:28:16.10]

and say, well, okay, outside of that.

[02:28:16.76 - 02:28:18.40]

Well, first, let's talk about private insurers.

[02:28:19.12 - 02:28:20.28]

You might have coverage

[02:28:20.28 - 02:28:22.00]

by your company's insurance.

[02:28:22.26 - 02:28:23.38]

And this is a good place to talk about

[02:28:23.38 - 02:28:24.88]

the two most pernicious issues

[02:28:24.88 - 02:28:26.64]

in the entire US health care system

[02:28:26.64 - 02:28:28.34]

that are deeply intertwined.

[02:28:28.78 - 02:28:29.90]

One, incentive alignment.

[02:28:30.26 - 02:28:31.88]

And two is time horizon.

[02:28:32.38 - 02:28:34.36]

So the average American

[02:28:34.36 - 02:28:35.86]

in the private sector

[02:28:35.86 - 02:28:38.70]

holds a job for 3.7 years.

[02:28:39.28 - 02:28:40.56]

That means that on average...

[02:28:40.56 - 02:28:41.64]

I see where you're going with this.

[02:28:42.18 - 02:28:43.24]

Insurance companies

[02:28:43.24 - 02:28:44.84]

are going to churn you

[02:28:44.84 - 02:28:46.90]

every 3.7 years or sooner

[02:28:46.90 - 02:28:48.94]

if your company changes the insurance plan.

[02:28:49.70 - 02:28:51.26]

So their incentive

[02:28:51.26 - 02:28:52.78]

is to cover you

[02:28:52.78 - 02:28:54.88]

only in two categories of things.

[02:28:55.28 - 02:28:57.60]

One, things that pay themselves back

[02:28:57.60 - 02:28:59.62]

in less than 3.7 years.

[02:29:00.08 - 02:29:02.22]

Or two, things that have

[02:29:02.22 - 02:29:04.76]

such an overwhelming demand from employees

[02:29:04.76 - 02:29:06.28]

that their employers think

[02:29:06.28 - 02:29:07.82]

that they absolutely have to cover them

[02:29:07.82 - 02:29:08.52]

to stay competitive.

[02:29:09.26 - 02:29:10.36]

Now, you're sitting there

[02:29:10.36 - 02:29:11.58]

thinking exactly the right thing,

[02:29:11.66 - 02:29:12.84]

which David, you already acknowledged.

[02:29:13.20 - 02:29:14.58]

But if I lose weight today,

[02:29:14.72 - 02:29:16.72]

I'll benefit in the long run.

[02:29:16.90 - 02:29:18.48]

But will my insurance company

[02:29:18.48 - 02:29:20.00]

lower their costs in some way?

[02:29:20.16 - 02:29:21.26]

I mean, if I'm obese,

[02:29:21.42 - 02:29:22.44]

I'll almost certainly

[02:29:22.44 - 02:29:23.92]

have complications later

[02:29:23.92 - 02:29:25.26]

that'll cost hundreds of thousands

[02:29:25.26 - 02:29:26.44]

or millions of dollars

[02:29:26.44 - 02:29:28.72]

once those become acute conditions.

[02:29:28.90 - 02:29:32.08]

But those costs won't be realized

[02:29:32.08 - 02:29:33.58]

by your current insurance

[02:29:33.58 - 02:29:35.08]

or your current employer.

[02:29:35.40 - 02:29:35.80]

Oh, man.

[02:29:35.82 - 02:29:37.54]

So if I'm an insurer, I'm like,

[02:29:37.72 - 02:29:38.60]

great, I'm going to offload

[02:29:38.60 - 02:29:39.62]

all that onto Medicare.

[02:29:40.48 - 02:29:41.00]

Exactly.

[02:29:41.34 - 02:29:43.14]

The insurers are not really

[02:29:43.14 - 02:29:45.32]

holding the bag for this class.

[02:29:45.32 - 02:29:47.02]

You know, these chronic conditions.

[02:29:47.32 - 02:29:49.62]

This is the crux of the incentive problem

[02:29:49.62 - 02:29:50.64]

in our health care system.

[02:29:50.94 - 02:29:52.92]

There is just a mismatch in time horizon.

[02:29:53.44 - 02:29:55.22]

You are invested in your own health

[02:29:55.22 - 02:29:56.14]

for your whole life,

[02:29:56.28 - 02:29:58.58]

but your insurance carrier is not.

[02:29:58.98 - 02:30:00.24]

They're invested in your health

[02:30:00.24 - 02:30:03.34]

for your planned life with them.

[02:30:03.62 - 02:30:04.16]

Exactly.

[02:30:04.82 - 02:30:05.96]

So what is the exception?

[02:30:06.26 - 02:30:07.88]

The exception is if your carrier

[02:30:07.88 - 02:30:08.84]

is the U.S. government.

[02:30:09.04 - 02:30:10.68]

So let's talk about Medicare.

[02:30:11.36 - 02:30:13.26]

And Medicaid is a whole different discussion

[02:30:13.26 - 02:30:14.24]

that involves states

[02:30:14.24 - 02:30:16.14]

and is unbelievably fragmented.

[02:30:16.30 - 02:30:17.38]

So we'll just not actually

[02:30:17.38 - 02:30:18.18]

talk about it right now.

[02:30:18.52 - 02:30:19.46]

But let's talk about Medicare.

[02:30:19.96 - 02:30:21.30]

So Medicare is through

[02:30:21.30 - 02:30:22.42]

the U.S. federal government.

[02:30:22.74 - 02:30:24.22]

It is a health insurance

[02:30:24.22 - 02:30:25.90]

for people who are over 65.

[02:30:26.70 - 02:30:29.10]

Basically, the U.S. federal government

[02:30:29.10 - 02:30:31.24]

funds that plan with taxpayer dollars.

[02:30:31.62 - 02:30:32.48]

And so a while back,

[02:30:32.58 - 02:30:34.24]

which is actually not that long ago,

[02:30:34.32 - 02:30:35.36]

just like 20 years ago,

[02:30:35.96 - 02:30:36.96]

Medicare did not cover

[02:30:36.96 - 02:30:38.60]

prescription drugs at all.

[02:30:39.10 - 02:30:41.04]

Medicare Part D was passed into law

[02:30:41.04 - 02:30:43.74]

in 2003 and took effect in 2006.

[02:30:43.74 - 02:30:45.94]

It allowed Medicare to cover drugs,

[02:30:46.20 - 02:30:47.90]

not just hospital and doctor visits,

[02:30:48.04 - 02:30:49.34]

which was Part A and Part B.

[02:30:49.98 - 02:30:52.58]

So today, Part D, interestingly enough,

[02:30:52.98 - 02:30:54.56]

is legally prohibited

[02:30:54.56 - 02:30:56.32]

from paying for weight loss.

[02:30:56.46 - 02:30:58.16]

And it is specifically called out

[02:30:58.16 - 02:30:59.36]

that it is legally prohibited.

[02:31:00.06 - 02:31:01.72]

There have been efforts to change this,

[02:31:01.74 - 02:31:03.72]

but there was a bill introduced in 2013

[02:31:03.72 - 02:31:05.56]

that basically has never been passed

[02:31:05.56 - 02:31:06.74]

to try to get through.

[02:31:07.58 - 02:31:08.76]

Do you know if this was a result

[02:31:08.76 - 02:31:09.74]

of the Fen-Phen debacle?

[02:31:10.60 - 02:31:11.78]

That's part of it.

[02:31:11.80 - 02:31:13.06]

But I think a lot of it

[02:31:13.06 - 02:31:14.78]

is really just this stigma of like,

[02:31:14.84 - 02:31:15.66]

well, you really should be

[02:31:15.66 - 02:31:16.70]

taking care of that yourself.

[02:31:16.94 - 02:31:17.46]

You really should be

[02:31:17.46 - 02:31:18.78]

making lifestyle changes.

[02:31:19.44 - 02:31:19.50]

Yeah.

[02:31:19.68 - 02:31:21.30]

I could see the argument of like,

[02:31:21.36 - 02:31:22.74]

why is the whole taxpayer base

[02:31:22.74 - 02:31:23.58]

covering, you know,

[02:31:23.58 - 02:31:25.54]

people who should just be exercising more?

[02:31:25.94 - 02:31:26.24]

Yeah.

[02:31:26.34 - 02:31:26.98]

Even though, like,

[02:31:27.12 - 02:31:28.36]

it's definitely been proven

[02:31:28.36 - 02:31:29.86]

that that is not the case.

[02:31:30.06 - 02:31:30.94]

It's not their fault.

[02:31:31.30 - 02:31:31.64]

Totally.

[02:31:32.10 - 02:31:33.52]

The Wall Street Journal has this great quote.

[02:31:33.76 - 02:31:34.72]

The scientific foundation

[02:31:34.72 - 02:31:36.32]

for treating obesity as a disease

[02:31:36.32 - 02:31:37.64]

rather than a lifestyle problem

[02:31:37.64 - 02:31:39.56]

was solidified in the mid-1990s

[02:31:39.56 - 02:31:40.78]

when researchers discovered

[02:31:40.78 - 02:31:42.58]

that fat tissues release proteins

[02:31:42.58 - 02:31:43.62]

that act as hunger

[02:31:43.62 - 02:31:45.46]

and fullness signals to the brain.

[02:31:45.86 - 02:31:47.14]

This system is out of balance

[02:31:47.14 - 02:31:48.00]

in people with obesity,

[02:31:48.14 - 02:31:49.20]

making it more difficult

[02:31:49.20 - 02:31:50.20]

for them to lose weight.

[02:31:50.62 - 02:31:52.54]

And for those who do lose weight,

[02:31:52.70 - 02:31:54.04]

there are biological mechanisms

[02:31:54.04 - 02:31:55.60]

making it hard to keep it off.

[02:31:56.00 - 02:31:57.88]

So what is so interesting about Medicare

[02:31:57.88 - 02:32:00.56]

is that we will all end up on it one day

[02:32:00.56 - 02:32:01.34]

when we retire

[02:32:01.34 - 02:32:02.90]

and we get off of our private insurance.

[02:32:03.20 - 02:32:04.68]

So it does mean the government

[02:32:04.68 - 02:32:05.86]

is left holding the bag

[02:32:05.86 - 02:32:07.36]

with our health for the long term.

[02:32:07.72 - 02:32:09.14]

So there are really two parties

[02:32:09.14 - 02:32:10.12]

with aligned interests

[02:32:10.12 - 02:32:11.16]

for us to stay healthy.

[02:32:11.78 - 02:32:13.22]

Ourselves and Uncle Sam.

[02:32:13.40 - 02:32:14.28]

And for us,

[02:32:14.58 - 02:32:15.50]

it's actually quite hard

[02:32:15.50 - 02:32:16.84]

to look out for long term interests

[02:32:16.84 - 02:32:18.42]

because the feedback loop is too long.

[02:32:18.52 - 02:32:20.24]

So like I go out and drink

[02:32:20.24 - 02:32:20.94]

even though I'm going to have

[02:32:20.94 - 02:32:21.78]

a hangover the next morning

[02:32:21.78 - 02:32:23.84]

and that's only a 12 hour feedback loop.

[02:32:24.00 - 02:32:25.10]

Like lots of times

[02:32:25.10 - 02:32:26.36]

you make long term bad decisions.

[02:32:26.86 - 02:32:28.32]

So the question is,

[02:32:28.50 - 02:32:29.92]

can Uncle Sam fix that problem

[02:32:29.92 - 02:32:30.80]

in some way?

[02:32:31.38 - 02:32:33.66]

Well, it is far too early to say

[02:32:33.66 - 02:32:35.40]

whether these recent GLP-1s

[02:32:35.40 - 02:32:36.78]

are actually miracle drugs

[02:32:36.78 - 02:32:37.94]

that massively reduce

[02:32:37.94 - 02:32:39.36]

the complications later in life.

[02:32:39.44 - 02:32:40.16]

And David, you mentioned

[02:32:40.16 - 02:32:41.72]

there's research being done

[02:32:41.72 - 02:32:42.30]

to figure out

[02:32:42.30 - 02:32:44.90]

it might reduce heart attacks meaningfully

[02:32:44.90 - 02:32:47.04]

and strokes and liver and kidney disease.

[02:32:47.40 - 02:32:48.82]

But if all of these things

[02:32:48.82 - 02:32:49.88]

turn out to be the case,

[02:32:50.02 - 02:32:52.64]

the American taxpayer has a huge benefit

[02:32:52.64 - 02:32:53.84]

in investing early

[02:32:53.84 - 02:32:56.10]

to keep all of our health care bills down

[02:32:56.10 - 02:32:57.22]

later in life.

[02:32:57.78 - 02:32:57.92]

Yep.

[02:32:58.38 - 02:32:59.62]

So I don't have a specific proposal.

[02:32:59.80 - 02:33:00.50]

I'm not saying the government

[02:33:00.50 - 02:33:01.84]

should pay for every single person

[02:33:01.84 - 02:33:02.98]

in the country to be on Ozempic.

[02:33:03.24 - 02:33:04.04]

We'll have to see

[02:33:04.04 - 02:33:05.84]

where the studies kind of net out

[02:33:05.84 - 02:33:07.88]

on the benefits of these long term things

[02:33:08.44 - 02:33:11.72]

and taking the sort of moral thing aside

[02:33:11.72 - 02:33:13.44]

of like, does everyone deserve

[02:33:13.44 - 02:33:15.54]

a miracle drug if it exists,

[02:33:15.78 - 02:33:17.54]

even if there is no economics around it?

[02:33:17.74 - 02:33:19.46]

It might just be ROI positive

[02:33:20.04 - 02:33:22.48]

for Medicare to do this

[02:33:22.48 - 02:33:24.54]

if everyone's going to need

[02:33:24.54 - 02:33:26.46]

knee replacements and hip replacements

[02:33:26.46 - 02:33:28.10]

and diabetes treatment

[02:33:28.10 - 02:33:29.60]

and amputations

[02:33:29.60 - 02:33:31.96]

and cardiovascular interventions.

[02:33:32.24 - 02:33:32.80]

Right.

[02:33:32.88 - 02:33:34.42]

That is kind of the crux

[02:33:34.42 - 02:33:36.64]

of the broader societal debate

[02:33:36.64 - 02:33:38.68]

and issue here is obesity

[02:33:38.68 - 02:33:41.24]

leads to such a huge amount

[02:33:41.24 - 02:33:43.56]

of comorbidities and disease

[02:33:43.56 - 02:33:45.18]

and health problems and issues.

[02:33:45.58 - 02:33:46.48]

And, you know, that's even

[02:33:46.48 - 02:33:47.80]

just talking about the medical system,

[02:33:47.92 - 02:33:48.52]

let alone everything

[02:33:48.52 - 02:33:49.98]

outside of the medical system

[02:33:49.98 - 02:33:50.82]

that it leads to.

[02:33:50.98 - 02:33:54.00]

And is it worth a certain amount

[02:33:54.00 - 02:33:56.88]

of both risk in terms of the drugs

[02:33:56.88 - 02:33:59.80]

and cost and tax on society

[02:33:59.80 - 02:34:03.16]

to save those expenses later?

[02:34:03.46 - 02:34:04.42]

That's the question here.

[02:34:05.06 - 02:34:05.16]

Right.

[02:34:05.72 - 02:34:06.88]

So last thing to say here,

[02:34:07.34 - 02:34:10.30]

payers are scared and rightly scared

[02:34:10.30 - 02:34:11.88]

of how much it will cost them

[02:34:11.88 - 02:34:12.58]

in the short term

[02:34:12.58 - 02:34:14.56]

if they do start covering these drugs.

[02:34:15.00 - 02:34:16.40]

Forty percent, as we keep saying,

[02:34:16.48 - 02:34:17.94]

of the population today is obese.

[02:34:18.42 - 02:34:20.42]

And the list price of these drugs

[02:34:20.42 - 02:34:23.22]

is over $12,000 per person per year.

[02:34:23.82 - 02:34:24.90]

So insurance companies,

[02:34:25.06 - 02:34:26.00]

employers, Medicare,

[02:34:26.36 - 02:34:27.24]

they literally don't have

[02:34:27.24 - 02:34:28.10]

the budget right now

[02:34:28.10 - 02:34:29.18]

to fund all the demand

[02:34:29.18 - 02:34:29.80]

for these drugs.

[02:34:30.12 - 02:34:32.28]

So even if we had all the supply,

[02:34:32.44 - 02:34:34.12]

so there's a lot of intentional

[02:34:34.12 - 02:34:35.96]

slow rolling and campaigning

[02:34:35.96 - 02:34:37.50]

to try to get people to look at

[02:34:37.50 - 02:34:39.06]

other interventions first

[02:34:39.06 - 02:34:40.36]

before these drugs,

[02:34:40.48 - 02:34:42.70]

given how colossally expensive

[02:34:42.70 - 02:34:44.02]

it would be right away.

[02:34:44.78 - 02:34:46.46]

Yep. Which might be a good time

[02:34:46.46 - 02:34:48.18]

to talk about Eli Lilly

[02:34:48.18 - 02:34:49.98]

and other companies out there

[02:34:49.98 - 02:34:51.14]

that are also bringing

[02:34:51.14 - 02:34:52.30]

GLP-1 drugs to market.

[02:34:52.60 - 02:34:54.32]

Yes, please tell me about Terzipatide.

[02:34:56.10 - 02:34:57.86]

Yeah, so obviously

[02:34:58.44 - 02:34:59.74]

other big pharma companies

[02:34:59.74 - 02:35:01.14]

have not just been

[02:35:01.14 - 02:35:02.26]

completely ignoring

[02:35:02.26 - 02:35:04.12]

this incredible development

[02:35:04.12 - 02:35:05.26]

slash cash gusher

[02:35:05.26 - 02:35:06.90]

that has emerged in

[02:35:06.90 - 02:35:08.04]

Novo Nordisk land.

[02:35:08.56 - 02:35:12.00]

Eli Lilly now has a GLP-1

[02:35:12.00 - 02:35:14.86]

diabetes-approved treatment

[02:35:14.86 - 02:35:16.02]

on the market

[02:35:16.02 - 02:35:17.80]

under the diabetes brand

[02:35:17.80 - 02:35:18.56]

named Monjaro

[02:35:18.56 - 02:35:20.34]

that seems to be

[02:35:20.34 - 02:35:21.88]

as if not more effective

[02:35:21.88 - 02:35:23.00]

as semaglutide

[02:35:23.00 - 02:35:24.54]

in terms of weight loss

[02:35:24.54 - 02:35:26.20]

when used for obesity.

[02:35:26.86 - 02:35:27.96]

And Terzipatide is basically

[02:35:27.96 - 02:35:28.80]

the same.

[02:35:28.96 - 02:35:31.52]

It's a GLP-1 receptor agonist,

[02:35:31.52 - 02:35:33.72]

but it is also a GIP,

[02:35:34.06 - 02:35:34.68]

which is basically

[02:35:34.68 - 02:35:36.00]

bundling two hormones together

[02:35:36.00 - 02:35:36.94]

that act in concert

[02:35:36.94 - 02:35:38.06]

to be certainly

[02:35:38.06 - 02:35:38.96]

a little bit more effective

[02:35:38.96 - 02:35:39.66]

on weight loss

[02:35:39.66 - 02:35:40.86]

from the early trial data,

[02:35:40.98 - 02:35:42.06]

but also potentially

[02:35:42.06 - 02:35:42.56]

more effective

[02:35:42.56 - 02:35:43.52]

on helping your body

[02:35:43.52 - 02:35:45.22]

produce insulin as well.

[02:35:45.98 - 02:35:47.02]

So that's showing great promise.

[02:35:47.28 - 02:35:48.34]

It was approved in the U.S.

[02:35:48.36 - 02:35:49.28]

for diabetes treatment

[02:35:49.28 - 02:35:50.42]

in May 2022,

[02:35:51.10 - 02:35:53.44]

and approval just came recently

[02:35:53.44 - 02:35:54.68]

in November 2023

[02:35:55.20 - 02:35:57.36]

for official FDA-sanctioned

[02:35:57.36 - 02:35:58.24]

weight loss use case

[02:35:58.24 - 02:35:59.52]

under the marketing name

[02:35:59.52 - 02:36:00.28]

ZepBound.

[02:36:00.28 - 02:36:03.00]

So look for that in 2024.

[02:36:03.80 - 02:36:05.44]

What this really shows though

[02:36:05.44 - 02:36:07.20]

between Eli Lilly and Novo

[02:36:07.20 - 02:36:08.62]

and other companies

[02:36:08.62 - 02:36:10.04]

that are almost certainly

[02:36:10.04 - 02:36:12.00]

going to get into the GLP-1 business,

[02:36:12.40 - 02:36:14.28]

I think this is going to be like

[02:36:14.28 - 02:36:15.52]

insulin all over again,

[02:36:15.52 - 02:36:16.68]

where there's just going to be

[02:36:16.68 - 02:36:18.32]

a series of product improvements

[02:36:18.32 - 02:36:20.46]

and companies will drive innovation

[02:36:20.46 - 02:36:23.60]

and increase supply.

[02:36:23.80 - 02:36:24.00]

I mean,

[02:36:24.24 - 02:36:26.18]

the demand is so huge out there

[02:36:26.18 - 02:36:28.50]

that Monjaro can be a huge hit.

[02:36:28.96 - 02:36:29.78]

Ozempic and Wegaby

[02:36:29.78 - 02:36:31.08]

will continue to be huge hits.

[02:36:31.54 - 02:36:32.96]

Other companies getting into the game

[02:36:32.96 - 02:36:33.82]

will be huge hits.

[02:36:34.42 - 02:36:37.30]

Novo has next-generation GLP-1

[02:36:37.30 - 02:36:39.30]

drugs in the pipeline themselves.

[02:36:40.18 - 02:36:41.76]

Kagrasema is the big one

[02:36:41.76 - 02:36:43.04]

that they're currently working on

[02:36:43.04 - 02:36:44.98]

that they think will be as good,

[02:36:45.08 - 02:36:45.64]

if not better,

[02:36:45.72 - 02:36:47.74]

than what Eli Lilly has with terzibatide.

[02:36:47.98 - 02:36:50.06]

So I think we're basically just

[02:36:50.06 - 02:36:52.18]

assuming that everything continues

[02:36:52.18 - 02:36:54.82]

to be proven safe in the long run.

[02:36:54.92 - 02:36:57.88]

We're kicking off a new super cycle here

[02:36:57.88 - 02:36:59.28]

in pharma development

[02:36:59.28 - 02:37:00.22]

around these compounds,

[02:37:00.34 - 02:37:01.60]

just like played out with insulin

[02:37:01.60 - 02:37:02.64]

over the last century.

[02:37:03.56 - 02:37:04.98]

And it really also just goes to show

[02:37:04.98 - 02:37:05.80]

like it was time.

[02:37:06.08 - 02:37:08.10]

Multiple researchers arrived

[02:37:08.10 - 02:37:09.84]

at similar ideas concurrently,

[02:37:09.92 - 02:37:11.74]

which we see over and over again

[02:37:11.74 - 02:37:12.32]

in the world.

[02:37:12.96 - 02:37:14.12]

Uber and Lyft is sort of our

[02:37:14.12 - 02:37:15.58]

modern canonical example.

[02:37:16.26 - 02:37:17.78]

Cellular connectivity plus GPS

[02:37:17.78 - 02:37:20.18]

plus iPhone sort of made it possible

[02:37:20.18 - 02:37:21.40]

to do something for the first time.

[02:37:21.62 - 02:37:22.62]

Multiple parties were arriving

[02:37:22.62 - 02:37:23.90]

at the same time to do that.

[02:37:24.14 - 02:37:26.42]

And I think science had sort of

[02:37:26.42 - 02:37:27.60]

just arrived at a place

[02:37:27.60 - 02:37:28.74]

where multiple parties

[02:37:28.74 - 02:37:30.70]

could develop similar things

[02:37:30.70 - 02:37:31.48]

side by side.

[02:37:31.72 - 02:37:32.88]

And so now there's certainly

[02:37:32.88 - 02:37:34.18]

a catch-up race among

[02:37:34.18 - 02:37:35.44]

other pharmaceutical companies

[02:37:35.44 - 02:37:36.82]

who weren't doing this

[02:37:36.82 - 02:37:37.78]

to now try to get into it

[02:37:37.78 - 02:37:38.62]

and see if they can compete.

[02:37:40.10 - 02:37:41.48]

Other things to know about

[02:37:41.48 - 02:37:43.12]

these GLP-1 drugs today.

[02:37:44.02 - 02:37:45.06]

For diabetes,

[02:37:45.56 - 02:37:47.16]

I try to basically figure out

[02:37:47.16 - 02:37:47.94]

from asking around,

[02:37:48.04 - 02:37:49.70]

what are people actually paying for this?

[02:37:49.80 - 02:37:51.20]

Like what are most people

[02:37:51.20 - 02:37:52.04]

actually paying?

[02:37:52.56 - 02:37:53.96]

Because list prices of drugs,

[02:37:53.96 - 02:37:54.84]

as we discussed earlier,

[02:37:55.14 - 02:37:55.86]

is stupid.

[02:37:56.80 - 02:37:58.40]

At least in the US, yeah.

[02:37:58.40 - 02:37:58.96]

Yes.

[02:37:59.32 - 02:38:01.56]

So there are a lot of reports

[02:38:01.56 - 02:38:02.32]

of people paying

[02:38:02.32 - 02:38:03.32]

somewhere in the neighborhood

[02:38:03.32 - 02:38:04.92]

of $300 a month

[02:38:05.44 - 02:38:06.48]

after insurance

[02:38:06.48 - 02:38:07.78]

as their actual cost.

[02:38:08.12 - 02:38:09.04]

And to corroborate that,

[02:38:09.10 - 02:38:09.88]

a different way to arrive

[02:38:09.88 - 02:38:10.34]

at that number.

[02:38:10.42 - 02:38:12.06]

One person told me that

[02:38:12.06 - 02:38:13.90]

it is common for most employers

[02:38:13.90 - 02:38:16.14]

to put between a 20% to 50%

[02:38:16.14 - 02:38:17.36]

co-pay on these drugs.

[02:38:17.68 - 02:38:18.82]

So at $1,000,

[02:38:19.10 - 02:38:19.96]

you know, that's $200 to $500.

[02:38:20.70 - 02:38:21.92]

So on the one hand,

[02:38:21.94 - 02:38:22.78]

it's still very expensive,

[02:38:22.96 - 02:38:25.16]

$3,000 to $4,000 out of pocket per year.

[02:38:25.24 - 02:38:26.30]

That's probably like

[02:38:26.94 - 02:38:28.92]

my entire out-of-pocket

[02:38:28.92 - 02:38:30.00]

healthcare spend

[02:38:30.00 - 02:38:31.44]

in an expensive year.

[02:38:31.80 - 02:38:33.04]

You know, that's a big price tag.

[02:38:33.38 - 02:38:34.26]

But on the other hand,

[02:38:34.38 - 02:38:35.42]

if that's the thing

[02:38:35.42 - 02:38:36.56]

that changes your life,

[02:38:36.66 - 02:38:38.60]

that could be seen as an easy choice.

[02:38:38.84 - 02:38:40.68]

Now, it's easy for us sitting here

[02:38:40.68 - 02:38:42.02]

to say something like that

[02:38:42.02 - 02:38:42.82]

because there's a lot of people

[02:38:42.82 - 02:38:44.42]

that don't have that kind of cash

[02:38:44.42 - 02:38:45.14]

to spend on something

[02:38:45.14 - 02:38:46.06]

that could potentially

[02:38:46.06 - 02:38:46.84]

change their life.

[02:38:46.90 - 02:38:47.50]

So there's definitely

[02:38:47.50 - 02:38:49.22]

a meaningful access problem,

[02:38:49.62 - 02:38:50.96]

not just the supply constraint

[02:38:50.96 - 02:38:51.98]

on the manufacturing side,

[02:38:52.02 - 02:38:54.54]

but even at a highly subsidized rate

[02:38:54.54 - 02:38:55.02]

from insurance,

[02:38:55.02 - 02:38:56.36]

a lot of people still can't

[02:38:56.36 - 02:38:57.46]

actually afford the drugs.

[02:38:58.20 - 02:39:00.06]

The last thing I want to say

[02:39:00.06 - 02:39:02.26]

on the current state of GLP-1s

[02:39:02.26 - 02:39:03.98]

is that not adherence

[02:39:03.98 - 02:39:07.08]

is a bigger issue with these drugs

[02:39:07.08 - 02:39:08.64]

than many other drugs

[02:39:08.64 - 02:39:09.52]

that have come before it.

[02:39:09.90 - 02:39:11.58]

There's some research that points out

[02:39:11.58 - 02:39:13.98]

that as many as 68% of people

[02:39:13.98 - 02:39:16.04]

roll off it after a year.

[02:39:16.64 - 02:39:18.58]

And part of this is related to price

[02:39:18.58 - 02:39:20.08]

or changing insurance

[02:39:20.08 - 02:39:21.06]

that doesn't cover it

[02:39:21.06 - 02:39:22.54]

or that it's hard to find

[02:39:22.54 - 02:39:24.02]

since they're still supply constrained

[02:39:24.02 - 02:39:26.04]

or maybe there are side effects

[02:39:26.04 - 02:39:27.68]

that a doctor is not sort of like

[02:39:27.68 - 02:39:28.92]

staying on top of with you,

[02:39:29.00 - 02:39:29.94]

so you just get fed up

[02:39:29.94 - 02:39:30.26]

and you're like,

[02:39:30.32 - 02:39:31.14]

screw this, I'm off.

[02:39:31.80 - 02:39:32.96]

But a lot of employers

[02:39:32.96 - 02:39:33.92]

and insurance companies

[02:39:33.92 - 02:39:35.60]

are sort of waving their arms around

[02:39:35.60 - 02:39:35.90]

and saying,

[02:39:35.98 - 02:39:36.64]

why are we covering

[02:39:36.64 - 02:39:37.48]

this expensive thing

[02:39:37.48 - 02:39:38.84]

when people don't even stay on it

[02:39:38.84 - 02:39:39.92]

and all the benefit goes away

[02:39:39.92 - 02:39:40.80]

when they get off of it

[02:39:40.80 - 02:39:41.70]

or at least, you know,

[02:39:41.74 - 02:39:43.12]

90% of the benefit goes away

[02:39:43.12 - 02:39:44.50]

and your weight yo-yos back up.

[02:39:44.64 - 02:39:46.44]

So there's some very real things

[02:39:46.44 - 02:39:47.86]

to figure out in making sure

[02:39:47.86 - 02:39:49.22]

that you can prescribe

[02:39:49.22 - 02:39:50.62]

these GLP-1s in a way

[02:39:50.62 - 02:39:52.68]

that come with enough handholding

[02:39:52.68 - 02:39:53.54]

to help you understand

[02:39:53.54 - 02:39:54.70]

and manage the side effects

[02:39:54.70 - 02:39:56.80]

and make all the behavioral lifestyle changes

[02:39:56.80 - 02:39:58.08]

that you sort of need to

[02:39:58.08 - 02:39:59.22]

to make them be effective

[02:39:59.22 - 02:40:00.52]

and sustainable.

[02:40:01.36 - 02:40:01.38]

Interesting.

[02:40:01.58 - 02:40:03.42]

I hadn't found that about non-adherence.

[02:40:03.86 - 02:40:04.30]

Yeah.

[02:40:04.54 - 02:40:05.92]

It came up in a bunch of Tegas calls.

[02:40:06.14 - 02:40:06.56]

There must have been

[02:40:06.56 - 02:40:07.54]

some hedge fund investor

[02:40:07.54 - 02:40:08.82]

trying to dig into building a model

[02:40:08.82 - 02:40:10.70]

of non-adherence into their DCF.

[02:40:11.52 - 02:40:12.70]

Well, before we go into analysis,

[02:40:13.38 - 02:40:15.60]

there is a little bit of catching up

[02:40:15.60 - 02:40:18.04]

to do on the insulin market

[02:40:18.04 - 02:40:21.42]

because we kind of left it as,

[02:40:21.42 - 02:40:24.08]

hey, it's still 22% of revenue

[02:40:24.08 - 02:40:25.46]

in Novo's business

[02:40:25.46 - 02:40:27.38]

and, you know, big three companies,

[02:40:27.52 - 02:40:29.78]

Sanofi and Eli Lilly and Novo

[02:40:29.78 - 02:40:31.10]

really compete here

[02:40:31.10 - 02:40:32.36]

and they've iterated

[02:40:32.36 - 02:40:33.64]

to become great products over time.

[02:40:34.20 - 02:40:36.82]

Well, one thing that we didn't talk about

[02:40:36.82 - 02:40:39.16]

is the complete destruction

[02:40:39.16 - 02:40:41.20]

of how attractive it is

[02:40:41.20 - 02:40:43.24]

to operate an insulin business.

[02:40:43.52 - 02:40:44.86]

And this is super recent.

[02:40:45.26 - 02:40:47.10]

So if you would have asked

[02:40:47.10 - 02:40:48.74]

any of these companies 10 years ago,

[02:40:49.04 - 02:40:50.58]

how durable is this revenue stream

[02:40:50.58 - 02:40:51.86]

and how durable are the profits

[02:40:51.86 - 02:40:52.66]

from the revenue stream,

[02:40:53.04 - 02:40:54.04]

they probably would have told you

[02:40:54.04 - 02:40:55.12]

that it's pretty durable

[02:40:55.12 - 02:40:56.16]

because we have things

[02:40:56.16 - 02:40:57.78]

like delivery pen mechanisms

[02:40:57.78 - 02:40:59.28]

that we keep improving over time

[02:40:59.28 - 02:41:00.02]

that are proprietary,

[02:41:00.50 - 02:41:02.00]

that give us some pricing power,

[02:41:02.16 - 02:41:03.82]

that we keep revising the formulation

[02:41:03.82 - 02:41:05.40]

so we keep getting the ability

[02:41:05.40 - 02:41:06.56]

to patent new things.

[02:41:06.94 - 02:41:08.32]

It's kind of difficult to manufacture

[02:41:08.32 - 02:41:11.78]

because it is developed from living cells.

[02:41:11.82 - 02:41:13.38]

So we're not just pouring chemicals

[02:41:13.38 - 02:41:14.06]

into a vat.

[02:41:14.22 - 02:41:16.56]

We do have to do some complex work

[02:41:16.56 - 02:41:17.50]

to produce the insulin.

[02:41:17.68 - 02:41:19.62]

So somebody is not just going to waltz

[02:41:19.62 - 02:41:20.72]

in here and figure it out.

[02:41:21.12 - 02:41:23.12]

And that was a pretty widely held view.

[02:41:23.38 - 02:41:24.16]

And one of the reasons

[02:41:24.16 - 02:41:25.80]

why I think these companies thought

[02:41:25.80 - 02:41:27.02]

they had so much pricing power,

[02:41:27.48 - 02:41:28.98]

which they got in trouble for.

[02:41:29.44 - 02:41:31.18]

So one thing that happened

[02:41:31.18 - 02:41:32.98]

was a big controversy over pricing

[02:41:32.98 - 02:41:33.88]

that we talked about.

[02:41:34.00 - 02:41:36.98]

In 2021, US officials alleged

[02:41:36.98 - 02:41:40.12]

that Novo Nordisk increased prices

[02:41:40.12 - 02:41:44.28]

more than 600% between 2001 and 2019

[02:41:44.28 - 02:41:45.92]

in lockstep with competitors

[02:41:45.92 - 02:41:47.80]

to the detriment of diabetics.

[02:41:47.80 - 02:41:50.44]

Now, Novo, of course, denied this.

[02:41:50.72 - 02:41:52.46]

And they pointed out that the net prices

[02:41:52.46 - 02:41:54.14]

had actually decreased since 2017.

[02:41:54.68 - 02:41:56.24]

So very convenient that they just talked

[02:41:56.24 - 02:41:57.30]

about the last two years

[02:41:57.30 - 02:41:58.92]

of that 18-year accusation.

[02:41:59.40 - 02:42:00.98]

So my read into that is,

[02:42:01.24 - 02:42:02.64]

yeah, prices were really rising.

[02:42:02.84 - 02:42:03.48]

And yeah, we all thought

[02:42:03.48 - 02:42:04.44]

we had a lot of pricing power

[02:42:04.44 - 02:42:06.18]

and we don't want to dig too much into it.

[02:42:06.76 - 02:42:08.46]

Now, if you look at the last five years,

[02:42:08.46 - 02:42:09.80]

and especially the last two,

[02:42:10.18 - 02:42:12.56]

the opportunity to sell insulin for a profit

[02:42:12.56 - 02:42:14.68]

has basically completely fallen apart.

[02:42:14.78 - 02:42:16.64]

So you've got regulation that came in

[02:42:16.64 - 02:42:18.02]

after the public outcry.

[02:42:18.20 - 02:42:19.20]

So there's real price caps

[02:42:19.20 - 02:42:20.88]

on what you can sell insulin for now.

[02:42:21.54 - 02:42:22.92]

Biosimilars also came in.

[02:42:23.46 - 02:42:24.68]

Biosimilars are effectively

[02:42:24.68 - 02:42:26.48]

what people call generics,

[02:42:26.56 - 02:42:28.64]

but for the category of drugs

[02:42:28.64 - 02:42:30.44]

that involve live cells

[02:42:30.44 - 02:42:32.32]

rather than mixing chemicals together.

[02:42:32.52 - 02:42:34.08]

So traditional drugs have generics

[02:42:34.08 - 02:42:36.68]

and biologics have biosimilars.

[02:42:37.06 - 02:42:38.90]

Biosimilar insulin became a thing.

[02:42:39.20 - 02:42:40.56]

And so a lot of the profits

[02:42:40.56 - 02:42:42.40]

just got completely arbitraged away.

[02:42:42.84 - 02:42:44.52]

And GLP-1s are here,

[02:42:44.52 - 02:42:46.58]

so those are reducing demand for insulin too.

[02:42:47.00 - 02:42:48.04]

Those three things

[02:42:48.04 - 02:42:49.48]

in the last five years or so

[02:42:49.48 - 02:42:51.82]

created this complete perfect storm

[02:42:51.82 - 02:42:54.54]

for insulin to be a super unattractive business.

[02:42:55.42 - 02:42:55.52]

Interesting.

[02:42:56.28 - 02:42:58.14]

Obviously, as we've shown throughout this story,

[02:42:58.26 - 02:42:59.28]

it's not like Novo and Nordisk

[02:42:59.28 - 02:43:00.74]

planned it that way.

[02:43:01.28 - 02:43:04.74]

However, this is really to their great benefit, right?

[02:43:04.80 - 02:43:07.92]

Because of all the insulin manufacturers,

[02:43:08.06 - 02:43:08.86]

I mean, I guess Eli Lilly

[02:43:08.86 - 02:43:10.80]

was first to market with GLP-1s,

[02:43:10.80 - 02:43:15.50]

but Novo really created the true GLP-1 market

[02:43:16.06 - 02:43:17.70]

and were the ones to really benefit

[02:43:17.70 - 02:43:18.66]

from these early years

[02:43:18.66 - 02:43:20.04]

while the competitors are catching up.

[02:43:20.58 - 02:43:22.60]

In many ways, they disrupted it just in time.

[02:43:23.06 - 02:43:23.86]

In some ways, you could say,

[02:43:23.92 - 02:43:25.24]

wow, it's so courageous of them

[02:43:25.24 - 02:43:27.90]

to come in and disrupt themselves.

[02:43:28.38 - 02:43:29.42]

But on the other hand...

[02:43:29.42 - 02:43:30.54]

It's like the headphone jack.

[02:43:31.04 - 02:43:31.34]

Right.

[02:43:32.44 - 02:43:33.28]

Was it courageous

[02:43:33.28 - 02:43:35.46]

or did they see the writing on the wall

[02:43:35.46 - 02:43:36.62]

that eventually we're not going to make

[02:43:36.62 - 02:43:37.48]

any money from insulin

[02:43:37.48 - 02:43:39.02]

and so it's time to really start

[02:43:39.02 - 02:43:40.46]

putting our foot on the gas on this thing

[02:43:40.46 - 02:43:42.26]

where we could have bigger market,

[02:43:42.36 - 02:43:43.36]

differentiated profitability?

[02:43:44.12 - 02:43:45.70]

I kind of think it was a happy accident

[02:43:45.70 - 02:43:46.90]

that the timing worked out,

[02:43:47.26 - 02:43:48.74]

but there are different ways to look at it.

[02:43:49.70 - 02:43:52.02]

I certainly didn't find anything in my research

[02:43:52.02 - 02:43:54.44]

that suggests it was anything but a coincidence.

[02:43:55.20 - 02:43:55.72]

Yeah.

[02:43:56.34 - 02:43:58.16]

It's interesting to think about the fact

[02:43:58.16 - 02:44:00.38]

that these companies thought that biosimilars

[02:44:00.38 - 02:44:01.94]

weren't just going to waltz in

[02:44:01.94 - 02:44:03.26]

and, you know, eat their lunch

[02:44:03.26 - 02:44:04.68]

and arbitrage all the profits away.

[02:44:05.18 - 02:44:07.90]

Over time, the market for insulin

[02:44:07.90 - 02:44:09.68]

became sufficiently large

[02:44:09.68 - 02:44:11.14]

that they just had a target on their back.

[02:44:11.30 - 02:44:13.16]

The prize became worth it.

[02:44:13.22 - 02:44:15.12]

As we talked about in the NVIDIA episode,

[02:44:15.78 - 02:44:17.02]

moats are only sufficient

[02:44:17.02 - 02:44:19.88]

if the castle is sufficiently lame to invade.

[02:44:20.54 - 02:44:22.36]

Otherwise, the castle becomes better.

[02:44:22.46 - 02:44:23.20]

You need a bigger moat.

[02:44:23.66 - 02:44:25.74]

In 1999, I think it was,

[02:44:25.88 - 02:44:28.64]

Eli Lilly sold $700 million

[02:44:29.36 - 02:44:30.40]

of insulin in America.

[02:44:31.02 - 02:44:31.36]

1999.

[02:44:32.16 - 02:44:34.58]

By 2017, just two of their products

[02:44:34.58 - 02:44:37.72]

sold $2.6 billion in America.

[02:44:38.16 - 02:44:39.40]

Yeah, two of their insulin products.

[02:44:40.62 - 02:44:42.66]

$700 million to $2.6 billion.

[02:44:43.14 - 02:44:45.66]

It's just an illustration of how large

[02:44:45.66 - 02:44:47.82]

and how interesting that revenue stream

[02:44:47.82 - 02:44:49.54]

became for other people to go after.

[02:44:50.44 - 02:44:50.50]

Totally.

[02:44:51.30 - 02:44:52.42]

All right, should we get into power?

[02:44:52.56 - 02:44:53.44]

We're kind of there anyway.

[02:44:53.56 - 02:44:55.22]

We're kind of in analysis land here.

[02:44:55.44 - 02:44:57.10]

Yeah, let's talk power.

[02:44:57.48 - 02:44:59.14]

And for folks who are new to the show,

[02:44:59.42 - 02:45:01.94]

this is borrowed from our great friend Hamilton Helmer

[02:45:01.94 - 02:45:03.94]

and his wonderful book, Seven Powers,

[02:45:04.52 - 02:45:05.54]

where he talks about the means

[02:45:05.54 - 02:45:07.40]

by which a company can achieve

[02:45:07.40 - 02:45:10.04]

persistent differential positive returns

[02:45:10.04 - 02:45:12.36]

versus their competitors in an industry.

[02:45:13.14 - 02:45:14.06]

Yeah, or put another way,

[02:45:14.12 - 02:45:15.24]

how to be more profitable

[02:45:15.24 - 02:45:16.80]

than their closest competitor

[02:45:16.80 - 02:45:18.52]

and do so sustainably.

[02:45:18.70 - 02:45:20.62]

So the seven powers are

[02:45:20.62 - 02:45:22.08]

counter-positioning,

[02:45:22.46 - 02:45:23.46]

scale economies,

[02:45:24.52 - 02:45:25.64]

switching costs,

[02:45:26.48 - 02:45:27.34]

network economies,

[02:45:28.16 - 02:45:29.00]

process power,

[02:45:29.90 - 02:45:30.24]

branding,

[02:45:30.92 - 02:45:32.14]

and cornered resource.

[02:45:33.26 - 02:45:35.80]

So the first thing I want to say is

[02:45:35.80 - 02:45:37.64]

we are in the pharma industry,

[02:45:37.82 - 02:45:40.84]

and so the one that has a blinking red light around it

[02:45:40.84 - 02:45:41.76]

is cornered resource.

[02:45:42.42 - 02:45:45.14]

Yes, this is a patent-driven industry.

[02:45:45.50 - 02:45:48.92]

Yes, Novo Nordisk has the patent on somaglutide

[02:45:48.92 - 02:45:50.74]

until 2032.

[02:45:51.26 - 02:45:52.28]

And this is an industry

[02:45:52.28 - 02:45:55.04]

where when you have the patent

[02:45:55.04 - 02:45:58.92]

and you are able to make an N-of-one drug,

[02:45:59.24 - 02:45:59.78]

and you know,

[02:45:59.82 - 02:46:01.62]

we're not quite seeing an N-of-one drug here,

[02:46:01.68 - 02:46:03.24]

but it's an N-of-two drug,

[02:46:03.76 - 02:46:04.66]

you get the profits.

[02:46:04.66 - 02:46:06.34]

And frankly, the crazy thing is

[02:46:06.34 - 02:46:07.44]

when you look at some of the analysis,

[02:46:07.76 - 02:46:09.68]

the profits evaporate

[02:46:09.68 - 02:46:12.78]

within two years of your patent going away.

[02:46:13.46 - 02:46:16.08]

Now, that was from the previous era,

[02:46:16.22 - 02:46:17.38]

before biologics.

[02:46:17.88 - 02:46:19.86]

So now that things are harder to copy

[02:46:19.86 - 02:46:22.58]

because the molecules themselves are more complex

[02:46:22.58 - 02:46:24.50]

and they require growing living tissue.

[02:46:24.88 - 02:46:25.38]

More engineering.

[02:46:25.68 - 02:46:28.70]

Yeah, that would fall more under process power

[02:46:28.70 - 02:46:30.18]

and frankly, scale economies

[02:46:30.18 - 02:46:31.58]

because it requires more capital.

[02:46:32.12 - 02:46:33.02]

But right now,

[02:46:33.02 - 02:46:33.70]

historically,

[02:46:34.42 - 02:46:37.40]

pharma is a patent-driven cornered resource industry.

[02:46:38.44 - 02:46:42.40]

I think how this GLP-1 kind of super cycle

[02:46:42.40 - 02:46:44.12]

is going to play out if it continues.

[02:46:44.78 - 02:46:47.16]

And what's interesting about the insulin history

[02:46:47.16 - 02:46:48.66]

and the analog to that,

[02:46:49.00 - 02:46:52.28]

it's looking like it's going to be like this

[02:46:52.28 - 02:46:56.58]

ever-stacking waves of patentable innovation

[02:46:56.58 - 02:46:58.68]

and product innovation happening here.

[02:46:58.82 - 02:47:00.16]

So like, yes,

[02:47:00.16 - 02:47:03.84]

the semaglutide patent will expire in 2032.

[02:47:04.44 - 02:47:06.06]

But if Kagura Sema,

[02:47:06.26 - 02:47:09.66]

their new kind of next generation GLP-1 product

[02:47:09.66 - 02:47:12.26]

shows the promise that they think it'll have,

[02:47:12.54 - 02:47:15.02]

then that'll be a new patent cycle starting then.

[02:47:15.10 - 02:47:16.52]

And then they'll develop the next generation

[02:47:16.52 - 02:47:17.68]

and it'll play out again,

[02:47:18.08 - 02:47:18.86]

just like insulin.

[02:47:19.16 - 02:47:22.96]

But yes, absolutely cornered resource for sure.

[02:47:23.62 - 02:47:23.68]

Yep.

[02:47:24.06 - 02:47:25.94]

The patents aren't just on the molecules.

[02:47:25.94 - 02:47:27.96]

They also patent delivery mechanisms.

[02:47:27.96 - 02:47:30.38]

And so they keep changing delivery mechanisms.

[02:47:30.76 - 02:47:32.08]

You basically have the scenario

[02:47:32.08 - 02:47:34.78]

where doctors don't really want to prescribe the old thing.

[02:47:34.88 - 02:47:39.46]

And so when you introduce a new novel form of a pen,

[02:47:39.64 - 02:47:41.80]

oftentimes doctors will say,

[02:47:41.90 - 02:47:43.42]

well, that's the thing we need to be prescribing now.

[02:47:43.46 - 02:47:45.50]

And so there's like a brand that gets built

[02:47:45.50 - 02:47:48.72]

around the most current thing that's patented,

[02:47:48.80 - 02:47:51.22]

even if it's not that much better than the old thing.

[02:47:51.44 - 02:47:53.40]

And there's a lot of people in pharma

[02:47:53.40 - 02:47:55.20]

that are going to get mad at me for that characterization.

[02:47:55.76 - 02:47:57.72]

But in addition to patenting molecules,

[02:47:57.94 - 02:48:00.34]

delivery mechanisms also provide defensibility.

[02:48:01.08 - 02:48:02.10]

Yep, yep, yep.

[02:48:02.68 - 02:48:03.66]

One question I had was,

[02:48:04.36 - 02:48:07.80]

there might be like contractual things

[02:48:07.80 - 02:48:10.00]

that entrench relationships too.

[02:48:10.36 - 02:48:12.56]

When you get really big,

[02:48:12.62 - 02:48:14.06]

and this would be a scale economy,

[02:48:14.76 - 02:48:18.18]

are there contractual relationships with formularies

[02:48:18.18 - 02:48:19.94]

that sort of entrench you

[02:48:19.94 - 02:48:22.74]

and make it so that even if someone else comes out

[02:48:22.74 - 02:48:25.30]

with something similar to treat any given condition,

[02:48:25.92 - 02:48:27.54]

and your patent isn't defending you

[02:48:27.54 - 02:48:28.92]

because it's a different molecule,

[02:48:29.44 - 02:48:32.30]

well, sorry, you've locked up a distribution channel

[02:48:32.30 - 02:48:34.48]

with the PBM and getting on the formulary

[02:48:34.48 - 02:48:36.84]

in such a way that like, good luck to anyone else.

[02:48:37.24 - 02:48:39.14]

Yep, I think that falls into scale economies,

[02:48:39.44 - 02:48:41.42]

which for sure also apply here.

[02:48:41.76 - 02:48:42.26]

Yep.

[02:48:42.48 - 02:48:43.60]

I think really on three sides,

[02:48:43.72 - 02:48:45.90]

on the R&D and research side,

[02:48:46.18 - 02:48:48.34]

because that is incredibly capital intensive.

[02:48:48.56 - 02:48:50.14]

$2.3 billion a drug.

[02:48:50.38 - 02:48:50.90]

Yep.

[02:48:51.90 - 02:48:53.32]

The production side,

[02:48:53.50 - 02:48:55.24]

as we've talked about for much of the episode,

[02:48:55.66 - 02:48:57.42]

and then also here on the go-to-market side,

[02:48:57.68 - 02:48:58.60]

you can't just, you know,

[02:48:58.80 - 02:49:00.20]

waltz into these markets.

[02:49:01.42 - 02:49:03.32]

And the gigantic amount of R&D,

[02:49:03.60 - 02:49:05.04]

it literally is $2.3 billion

[02:49:05.04 - 02:49:06.86]

to bring a drug to market on average.

[02:49:07.44 - 02:49:08.96]

You need to make a lot of profit dollars

[02:49:08.96 - 02:49:11.04]

on any given drug to benefit.

[02:49:11.44 - 02:49:13.06]

You don't necessarily need scale of patients,

[02:49:13.16 - 02:49:14.62]

but you do need scale of dollars

[02:49:14.62 - 02:49:17.28]

in order to outrun the fixed costs of R&D.

[02:49:17.80 - 02:49:18.14]

Yep.

[02:49:18.14 - 02:49:19.90]

I think we can say

[02:49:20.40 - 02:49:22.94]

there's no network economies here pretty safely.

[02:49:23.64 - 02:49:25.68]

And I think we can probably also say

[02:49:25.68 - 02:49:26.50]

there's no branding,

[02:49:27.64 - 02:49:29.98]

although Ozempic has become such a buzzword.

[02:49:30.22 - 02:49:31.40]

Oh, I think there actually is.

[02:49:31.90 - 02:49:32.94]

Normally there isn't,

[02:49:33.30 - 02:49:35.52]

but that's one of the breakout things about Ozempic is

[02:49:35.52 - 02:49:37.62]

there actually is brand power.

[02:49:37.90 - 02:49:39.28]

The first time I heard about Manjaro

[02:49:39.86 - 02:49:42.10]

was 18 months after I'd heard about Ozempic,

[02:49:42.16 - 02:49:44.36]

and I was like, oh, it must be some kind of knockoff.

[02:49:45.02 - 02:49:46.38]

You know, it's my first time studying pharma.

[02:49:46.50 - 02:49:48.12]

I was like, oh, it's probably something crappy

[02:49:48.12 - 02:49:50.24]

that's trying to ride this same wave,

[02:49:50.36 - 02:49:52.06]

but isn't actually the breakthrough molecule.

[02:49:52.56 - 02:49:54.36]

And like the studies show,

[02:49:54.60 - 02:49:56.38]

Manjaro helps you lose more weight

[02:49:56.38 - 02:49:58.50]

and has a very similar mechanism

[02:49:58.50 - 02:50:00.68]

plus another mechanism that together worked.

[02:50:00.82 - 02:50:02.38]

But like most people don't know that.

[02:50:02.44 - 02:50:05.82]

Most people know I read on the cover of the New York Times

[02:50:05.82 - 02:50:07.84]

that Ozempic is a breakthrough.

[02:50:07.84 - 02:50:09.90]

And I heard about it at the Oscars

[02:50:09.90 - 02:50:11.52]

because a joke was made on stage.

[02:50:11.74 - 02:50:13.08]

Jimmy Kimmel was talking about it.

[02:50:13.16 - 02:50:13.30]

Yeah.

[02:50:13.46 - 02:50:13.80]

Yes.

[02:50:14.08 - 02:50:15.94]

I think for the first time,

[02:50:16.02 - 02:50:17.56]

and it's happened a little bit before,

[02:50:17.56 - 02:50:19.62]

but for the biggest time in a while,

[02:50:19.98 - 02:50:21.46]

Ozempic has actual brand power.

[02:50:22.16 - 02:50:24.92]

I mean, there's like Tylenol, et cetera,

[02:50:25.14 - 02:50:27.48]

but like, yeah, it's entering that category.

[02:50:27.60 - 02:50:29.22]

An admission on that front too.

[02:50:29.60 - 02:50:31.80]

When we very first started talking

[02:50:31.80 - 02:50:33.40]

about potentially doing this episode

[02:50:33.40 - 02:50:34.66]

a number of months ago,

[02:50:35.32 - 02:50:37.38]

I thought the same thing you did about Manjaro

[02:50:37.38 - 02:50:38.92]

about Wigovi.

[02:50:39.16 - 02:50:41.22]

I was like, oh, that must be a crappy knockoff.

[02:50:41.34 - 02:50:42.68]

I did a cursory amount of research

[02:50:42.68 - 02:50:44.04]

and I was like, holy crap,

[02:50:44.04 - 02:50:45.62]

it's the same drug from the same company.

[02:50:45.70 - 02:50:46.46]

Like, I'm an idiot.

[02:50:46.46 - 02:50:48.06]

It's like literally the same thing.

[02:50:48.10 - 02:50:49.78]

It's literally the same thing.

[02:50:49.94 - 02:50:50.92]

Often in the same doses.

[02:50:51.46 - 02:50:52.98]

It's technically a higher dosage,

[02:50:53.06 - 02:50:54.56]

but you can get many different

[02:50:54.56 - 02:50:56.10]

dosage levels of either drug.

[02:50:56.38 - 02:50:56.64]

Right.

[02:50:56.76 - 02:50:57.50]

And not only that,

[02:50:57.58 - 02:50:58.42]

it is the one that is

[02:50:58.42 - 02:50:59.86]

supposed to be for weight loss.

[02:51:00.14 - 02:51:00.68]

But you're right.

[02:51:00.72 - 02:51:02.62]

Ozempic has become this brand name.

[02:51:03.32 - 02:51:05.18]

Yep. Vitamin O or Oz or,

[02:51:05.72 - 02:51:06.62]

yeah, there's all sorts of,

[02:51:06.70 - 02:51:07.92]

I've been reading the Ozempic subreddit

[02:51:07.92 - 02:51:09.38]

for a while to prep for this episode.

[02:51:10.76 - 02:51:13.46]

I bet you found some fun stuff in there.

[02:51:13.80 - 02:51:14.14]

Totally.

[02:51:14.72 - 02:51:16.52]

Switching costs are a thing.

[02:51:17.22 - 02:51:18.56]

Switching costs with any drug

[02:51:18.56 - 02:51:19.46]

are a big thing.

[02:51:19.58 - 02:51:20.48]

Because once you find something

[02:51:20.48 - 02:51:21.22]

that works for you,

[02:51:21.28 - 02:51:22.24]

you never change.

[02:51:22.54 - 02:51:24.18]

Like I've been on citrusine hydrochloride

[02:51:24.18 - 02:51:26.44]

for my allergies for 15 years.

[02:51:26.56 - 02:51:27.26]

I think it's Zyrtec.

[02:51:27.52 - 02:51:29.12]

And like, no, I'm not trying anything else.

[02:51:29.16 - 02:51:29.56]

It works.

[02:51:29.70 - 02:51:30.56]

Why would I try something else?

[02:51:31.00 - 02:51:33.72]

Yep. And especially in this case,

[02:51:33.82 - 02:51:36.40]

where in the vast majority of patients,

[02:51:36.80 - 02:51:38.32]

it does seem that if you stop treatment,

[02:51:38.48 - 02:51:39.52]

you will regain the weight.

[02:51:40.08 - 02:51:41.92]

Yeah, that's one of the worst things about it.

[02:51:42.52 - 02:51:45.82]

I will also throw in network economies.

[02:51:46.64 - 02:51:48.64]

Oh, I had said I thought there was none,

[02:51:48.78 - 02:51:50.22]

but I want to hear your case for it.

[02:51:50.32 - 02:51:51.70]

Well, so I think most of the time

[02:51:51.70 - 02:51:52.74]

in pharma, there's none.

[02:51:53.36 - 02:51:54.78]

But with Ozempic,

[02:51:55.14 - 02:51:56.42]

so I think there's two ways

[02:51:56.42 - 02:52:00.84]

in which GLP-1s used for weight loss

[02:52:00.84 - 02:52:03.36]

resemble consumer tech products.

[02:52:04.60 - 02:52:06.88]

One is a tight feedback loop.

[02:52:07.20 - 02:52:08.36]

When I start taking Lipitor,

[02:52:08.78 - 02:52:10.42]

I don't like physically notice

[02:52:10.42 - 02:52:11.30]

anything about myself,

[02:52:11.30 - 02:52:12.84]

despite the fact that something

[02:52:12.84 - 02:52:14.36]

that is potentially very dangerous to me

[02:52:14.36 - 02:52:16.58]

has become less dangerous with cholesterol.

[02:52:17.24 - 02:52:19.78]

When I lose weight, I immediately notice,

[02:52:19.92 - 02:52:21.38]

like if I lose, what, six pounds

[02:52:21.38 - 02:52:22.12]

in the first month,

[02:52:22.56 - 02:52:25.14]

there is a super tight feedback loop there.

[02:52:25.36 - 02:52:26.64]

And so in the same way that Zynga

[02:52:26.64 - 02:52:27.80]

created these feedback loops

[02:52:27.80 - 02:52:29.24]

for mobile gaming,

[02:52:29.66 - 02:52:31.86]

and that sort of psychology has been used

[02:52:31.86 - 02:52:33.86]

in all tech consumer products now

[02:52:33.86 - 02:52:35.64]

to create these gratification loops,

[02:52:35.94 - 02:52:37.90]

that totally exists with Ozempic.

[02:52:38.08 - 02:52:39.68]

The second one is what I think

[02:52:39.68 - 02:52:40.54]

is a network economy.

[02:52:41.00 - 02:52:42.94]

You kind of become a walking billboard.

[02:52:43.82 - 02:52:44.40]

Hmm, yeah.

[02:52:44.82 - 02:52:47.24]

There's a little bit of taboo

[02:52:47.24 - 02:52:50.42]

around sort of saying I'm taking Ozempic,

[02:52:50.60 - 02:52:52.24]

but people know you lost weight.

[02:52:52.48 - 02:52:54.56]

It has almost like a shareable,

[02:52:55.10 - 02:52:57.74]

Ozempic can go viral in a different way

[02:52:57.74 - 02:53:00.34]

than most pharma describes going viral.

[02:53:00.90 - 02:53:02.18]

I totally agree with you.

[02:53:02.28 - 02:53:03.40]

I would push back a little bit

[02:53:03.40 - 02:53:04.22]

in the classification.

[02:53:04.70 - 02:53:05.72]

I don't think this is actually

[02:53:05.72 - 02:53:06.56]

a network economy.

[02:53:07.00 - 02:53:07.90]

I think this is just

[02:53:07.90 - 02:53:09.94]

incredible word of mouth marketing,

[02:53:10.40 - 02:53:12.10]

because I don't think other people

[02:53:12.10 - 02:53:13.20]

actually get a benefit

[02:53:13.20 - 02:53:15.28]

from you taking Ozempic.

[02:53:15.52 - 02:53:15.60]

Yeah.

[02:53:15.74 - 02:53:17.00]

But I mean, literally,

[02:53:17.12 - 02:53:18.28]

you become a walking billboard.

[02:53:18.42 - 02:53:19.62]

Like it is an obvious

[02:53:19.62 - 02:53:20.58]

word of mouth marketing.

[02:53:21.10 - 02:53:22.54]

I guess the only one would be like

[02:53:22.54 - 02:53:23.58]

the taboo thing.

[02:53:23.84 - 02:53:24.62]

If I'm taking Ozempic

[02:53:24.62 - 02:53:25.40]

and I'm ashamed of it

[02:53:25.40 - 02:53:26.24]

because I'm the first person,

[02:53:26.54 - 02:53:28.24]

if a million more people start taking it,

[02:53:28.42 - 02:53:29.94]

then it is actually better for me.

[02:53:30.36 - 02:53:30.62]

Right.

[02:53:30.82 - 02:53:32.90]

If Elon Musk tweets that he's taking it.

[02:53:32.94 - 02:53:33.34]

We govy.

[02:53:33.82 - 02:53:34.02]

Yeah.

[02:53:35.26 - 02:53:36.78]

But again, it's the same thing.

[02:53:36.94 - 02:53:37.26]

Right.

[02:53:37.26 - 02:53:38.92]

Not to mention ribelsis.

[02:53:39.06 - 02:53:40.10]

That's the new oral one.

[02:53:40.28 - 02:53:40.90]

They have figured out

[02:53:40.90 - 02:53:41.98]

how to make semi-glutide

[02:53:41.98 - 02:53:43.30]

a once a day pill.

[02:53:43.32 - 02:53:44.36]

If you prefer taking that

[02:53:44.36 - 02:53:45.38]

to a once a week injection.

[02:53:45.72 - 02:53:46.36]

It's a little bit weird

[02:53:46.36 - 02:53:47.52]

because you have to take it

[02:53:47.52 - 02:53:48.30]

on an empty stomach

[02:53:48.30 - 02:53:49.60]

and then not eat

[02:53:49.60 - 02:53:50.56]

for 30 minutes afterwards.

[02:53:50.78 - 02:53:51.94]

But if you don't like needles,

[02:53:52.30 - 02:53:53.24]

I believe it is also

[02:53:53.24 - 02:53:54.50]

not quite as effective

[02:53:54.50 - 02:53:55.90]

as the injectable version.

[02:53:56.32 - 02:53:56.48]

Huh?

[02:53:56.80 - 02:53:58.16]

But still, it is an amazing

[02:53:58.16 - 02:53:58.80]

feat of engineering

[02:53:58.80 - 02:54:00.24]

that they created

[02:54:00.24 - 02:54:01.44]

an oral version of this.

[02:54:01.64 - 02:54:02.46]

And this is the kind of stuff

[02:54:02.46 - 02:54:03.94]

that Novo Nordisk is so good at.

[02:54:04.00 - 02:54:04.82]

It's all these decades

[02:54:04.82 - 02:54:05.44]

of researching.

[02:54:05.62 - 02:54:06.88]

How do we make this stuff

[02:54:06.88 - 02:54:08.60]

break down differently in the body?

[02:54:08.80 - 02:54:10.58]

Because the issue with the GLPs

[02:54:10.58 - 02:54:11.82]

is it can't get absorbed

[02:54:11.82 - 02:54:12.72]

into your bloodstream

[02:54:12.72 - 02:54:15.74]

by you putting it in your mouth

[02:54:15.74 - 02:54:17.28]

and then it going into your stomach

[02:54:17.28 - 02:54:18.00]

and, you know,

[02:54:18.02 - 02:54:19.36]

hitting the harsh environment

[02:54:19.36 - 02:54:19.86]

of your stomach.

[02:54:20.08 - 02:54:21.20]

So like figuring out

[02:54:21.20 - 02:54:23.14]

how to make something

[02:54:23.14 - 02:54:23.92]

go from your stomach

[02:54:23.92 - 02:54:24.92]

into your bloodstream

[02:54:24.92 - 02:54:26.36]

for a sustained period of time.

[02:54:27.00 - 02:54:28.50]

Protect the molecule enough.

[02:54:28.62 - 02:54:29.52]

Right. That is sort of

[02:54:29.52 - 02:54:30.30]

the Novo magic.

[02:54:30.92 - 02:54:31.18]

Yep.

[02:54:31.86 - 02:54:33.52]

Wow. There's a lot of power here.

[02:54:33.84 - 02:54:34.84]

I think the only one

[02:54:34.84 - 02:54:35.82]

we haven't talked about yet

[02:54:35.82 - 02:54:37.12]

is counter-positioning,

[02:54:37.46 - 02:54:38.50]

which is interesting.

[02:54:38.66 - 02:54:39.46]

You know, maybe you could

[02:54:39.46 - 02:54:40.28]

make an argument

[02:54:40.28 - 02:54:41.74]

at the beginning there was

[02:54:41.74 - 02:54:43.00]

because this could disrupt

[02:54:43.00 - 02:54:44.04]

the insulin market.

[02:54:44.72 - 02:54:46.48]

But I don't really think so.

[02:54:47.14 - 02:54:48.54]

Yeah. And counter-positioning

[02:54:48.54 - 02:54:49.72]

basically always exists

[02:54:49.72 - 02:54:50.66]

in the takeoff phase

[02:54:50.66 - 02:54:52.26]

and never exists later.

[02:54:52.66 - 02:54:53.58]

I think that we keep kind of

[02:54:53.58 - 02:54:54.24]

finding that pattern

[02:54:54.24 - 02:54:55.10]

over and over again

[02:54:55.10 - 02:54:56.42]

is incumbents don't really

[02:54:56.42 - 02:54:56.96]

counter-position.

[02:54:57.14 - 02:54:58.02]

Startups counter-position.

[02:54:58.56 - 02:54:58.76]

Yep.

[02:54:59.32 - 02:55:00.44]

Yeah. I think

[02:55:00.44 - 02:55:01.82]

in the world of healthcare,

[02:55:02.30 - 02:55:04.54]

there is a ton of power

[02:55:04.54 - 02:55:06.90]

for basically any company

[02:55:06.90 - 02:55:07.70]

that we would study

[02:55:07.70 - 02:55:09.96]

because the returns

[02:55:09.96 - 02:55:11.08]

over and over and over again

[02:55:11.08 - 02:55:12.56]

keep going to these incumbents

[02:55:12.56 - 02:55:13.52]

that keep getting bigger.

[02:55:14.08 - 02:55:15.40]

And I know biotech investing

[02:55:15.40 - 02:55:16.60]

in startups is a thing,

[02:55:16.98 - 02:55:18.46]

and there'll be new disruptions

[02:55:18.46 - 02:55:19.74]

on the horizon, CRISPR

[02:55:19.74 - 02:55:21.04]

and gene and cell therapies

[02:55:21.04 - 02:55:21.86]

and things like that.

[02:55:21.90 - 02:55:24.02]

But the last 30 years,

[02:55:24.12 - 02:55:25.90]

at least, of healthcare

[02:55:25.90 - 02:55:28.98]

has consisted of returns to scale,

[02:55:29.20 - 02:55:30.50]

which would indicate

[02:55:30.50 - 02:55:31.48]

lots of power.

[02:55:32.72 - 02:55:34.02]

And it'll be interesting

[02:55:34.02 - 02:55:36.06]

to explore healthcare broadly

[02:55:36.06 - 02:55:37.50]

and specifically biotech

[02:55:37.50 - 02:55:38.24]

more on the show.

[02:55:39.18 - 02:55:40.80]

My sort of arm's length

[02:55:40.80 - 02:55:42.10]

understanding of the industry

[02:55:42.10 - 02:55:45.06]

is that where startups primarily

[02:55:45.06 - 02:55:46.56]

are doing drug discovery

[02:55:47.22 - 02:55:48.48]

and then they get acquired

[02:55:48.48 - 02:55:49.98]

by the big companies

[02:55:49.98 - 02:55:50.72]

for go-to-market.

[02:55:51.14 - 02:55:52.02]

Yep. That's right.

[02:55:52.12 - 02:55:52.96]

Or they do a deal,

[02:55:53.08 - 02:55:54.24]

some kind of distribution deal.

[02:55:54.38 - 02:55:55.44]

But a lot of the economics

[02:55:55.44 - 02:55:56.52]

of that deal are eaten up

[02:55:56.52 - 02:55:57.42]

by the big pharma company

[02:55:57.42 - 02:55:58.10]

as the distributor,

[02:55:58.38 - 02:55:58.84]

which really,

[02:55:58.94 - 02:55:59.62]

they're not the distributor.

[02:56:00.00 - 02:56:02.36]

The PBM handles making sure

[02:56:02.36 - 02:56:03.82]

that the reimbursements

[02:56:03.82 - 02:56:04.54]

are there so doctors

[02:56:04.54 - 02:56:05.40]

will prescribe them

[02:56:05.40 - 02:56:07.20]

and the wholesaler distributors

[02:56:07.82 - 02:56:10.28]

handle physically moving the drugs.

[02:56:10.50 - 02:56:11.20]

But when you do a

[02:56:11.20 - 02:56:12.42]

distribution deal

[02:56:12.42 - 02:56:14.04]

as a biotech company with a pharma,

[02:56:14.36 - 02:56:15.36]

it's because the pharma

[02:56:15.36 - 02:56:16.10]

has the relationship

[02:56:16.10 - 02:56:17.48]

with those two other parties

[02:56:17.48 - 02:56:19.46]

to ensure that you actually

[02:56:19.46 - 02:56:21.04]

can be available at broad scale.

[02:56:21.82 - 02:56:23.46]

And really, this model all started

[02:56:23.46 - 02:56:24.64]

going back to Genentech

[02:56:24.64 - 02:56:25.70]

and Eli Lilly.

[02:56:26.22 - 02:56:27.28]

And Genentech ended up

[02:56:27.28 - 02:56:28.44]

getting acquired by Roche.

[02:56:28.56 - 02:56:29.66]

But it was that partnership

[02:56:30.22 - 02:56:32.68]

of Eli Lilly being the go-to-market

[02:56:32.68 - 02:56:34.16]

for Genentech and insulin

[02:56:34.16 - 02:56:35.68]

that started this whole,

[02:56:35.70 - 02:56:36.30]

you know, startup,

[02:56:36.44 - 02:56:37.50]

big pharma partnership.

[02:56:38.08 - 02:56:39.58]

Yep. All right.

[02:56:39.86 - 02:56:40.22]

Playbook?

[02:56:40.64 - 02:56:42.40]

Playbook. Let's do it.

[02:56:42.68 - 02:56:43.72]

So the first one

[02:56:43.72 - 02:56:44.74]

that we've hit a few times,

[02:56:44.82 - 02:56:45.64]

but is just worth

[02:56:45.64 - 02:56:46.88]

putting a fine point on

[02:56:46.88 - 02:56:47.92]

is concentration.

[02:56:48.28 - 02:56:49.72]

The focus of this company

[02:56:49.72 - 02:56:51.02]

is unbelievable.

[02:56:51.46 - 02:56:52.66]

85% of their revenue

[02:56:52.66 - 02:56:54.40]

is dedicated to metabolic disorders.

[02:56:54.78 - 02:56:56.66]

They are the second largest

[02:56:56.66 - 02:56:58.08]

market cap pharma,

[02:56:58.22 - 02:56:59.52]

second only to Eli Lilly.

[02:57:00.30 - 02:57:00.96]

It's crazy.

[02:57:01.20 - 02:57:02.20]

They're that focused,

[02:57:02.20 - 02:57:03.32]

but they have an ability

[02:57:03.32 - 02:57:05.44]

to be that large by market cap.

[02:57:05.88 - 02:57:06.86]

It is worth knowing

[02:57:06.86 - 02:57:08.32]

they aren't in the top 10

[02:57:08.32 - 02:57:09.44]

pharma companies by revenue.

[02:57:09.58 - 02:57:10.60]

In fact, they're 20th.

[02:57:11.66 - 02:57:12.22]

Wow, I didn't realize

[02:57:12.22 - 02:57:13.08]

they were that low.

[02:57:13.26 - 02:57:14.64]

Yeah, no, it's a multiples thing.

[02:57:14.80 - 02:57:15.72]

Part of the reason why

[02:57:15.72 - 02:57:17.04]

they're Europe's biggest company

[02:57:17.04 - 02:57:18.56]

is people are very optimistic

[02:57:18.56 - 02:57:19.32]

about their future

[02:57:19.32 - 02:57:20.28]

and about their ability

[02:57:20.28 - 02:57:21.82]

to be profitable in the future,

[02:57:21.90 - 02:57:23.30]

not just make a lot of revenue.

[02:57:23.66 - 02:57:26.00]

But it continues to blow my mind

[02:57:26.00 - 02:57:28.44]

that they have had the huge success

[02:57:28.44 - 02:57:29.14]

that they have had

[02:57:29.14 - 02:57:30.64]

with how focused they have stayed.

[02:57:31.14 - 02:57:31.80]

You know, it's funny.

[02:57:31.80 - 02:57:33.12]

I was thinking the same thing

[02:57:33.12 - 02:57:34.32]

as my main playbook

[02:57:34.32 - 02:57:35.24]

takeaway from this one.

[02:57:35.64 - 02:57:36.80]

It reminds me of our

[02:57:36.80 - 02:57:38.02]

Sequoia Capital episodes

[02:57:38.02 - 02:57:38.92]

a few years ago,

[02:57:39.16 - 02:57:41.48]

and Sequoia's kind of historical

[02:57:41.48 - 02:57:42.52]

classic mantra,

[02:57:42.84 - 02:57:44.04]

the Don Valentine ethos

[02:57:44.04 - 02:57:45.48]

of target big markets,

[02:57:45.92 - 02:57:46.84]

find a big market,

[02:57:47.26 - 02:57:48.46]

target it, and then like

[02:57:48.46 - 02:57:49.46]

stay focused on it

[02:57:49.46 - 02:57:51.22]

for decades and decades and decades.

[02:57:51.48 - 02:57:52.70]

And that's the story

[02:57:52.70 - 02:57:53.42]

of a lot of companies

[02:57:53.42 - 02:57:54.06]

we've covered here.

[02:57:54.12 - 02:57:55.72]

But this is such a pure

[02:57:55.72 - 02:57:56.66]

play example of that,

[02:57:56.72 - 02:57:58.08]

like one disease,

[02:57:58.68 - 02:58:00.82]

one drug area for 100 years.

[02:58:00.82 - 02:58:02.00]

And now a second drug area

[02:58:02.00 - 02:58:03.08]

that came out of that

[02:58:03.08 - 02:58:04.48]

first drug area.

[02:58:04.64 - 02:58:06.04]

Well, but for 60 years,

[02:58:06.08 - 02:58:06.78]

it wasn't actually

[02:58:06.78 - 02:58:07.88]

that interesting of a market.

[02:58:08.06 - 02:58:08.92]

That's the crazy thing,

[02:58:08.94 - 02:58:10.20]

like 1920 to 1980,

[02:58:10.58 - 02:58:11.86]

it was type one diabetes,

[02:58:12.16 - 02:58:13.14]

which again,

[02:58:14.64 - 02:58:15.52]

absolutely incredible

[02:58:15.52 - 02:58:16.14]

for the world

[02:58:16.14 - 02:58:17.34]

that they took children

[02:58:17.34 - 02:58:18.52]

who had a death sentence

[02:58:18.52 - 02:58:19.48]

that gave them life

[02:58:19.48 - 02:58:20.20]

and they got to live

[02:58:20.20 - 02:58:21.30]

basically a full life.

[02:58:22.26 - 02:58:23.96]

But was type one diabetes

[02:58:23.96 - 02:58:25.84]

actually this colossal,

[02:58:25.90 - 02:58:26.80]

mega interesting market?

[02:58:27.04 - 02:58:28.26]

No, not at all.

[02:58:28.46 - 02:58:29.72]

Yeah, something changed.

[02:58:29.82 - 02:58:30.48]

Yeah, absolutely.

[02:58:30.48 - 02:58:31.56]

You're totally right.

[02:58:31.92 - 02:58:33.04]

What did Charlie Munger tell us?

[02:58:33.16 - 02:58:33.60]

He said,

[02:58:33.66 - 02:58:34.76]

there aren't many times

[02:58:34.76 - 02:58:35.26]

in a lifetime

[02:58:35.26 - 02:58:36.24]

where you know you're right

[02:58:36.24 - 02:58:37.30]

and you know you really

[02:58:37.30 - 02:58:37.92]

have an investment

[02:58:37.92 - 02:58:38.66]

that's going to work.

[02:58:39.12 - 02:58:40.00]

You may even find it

[02:58:40.00 - 02:58:41.64]

five years after you bought it.

[02:58:41.74 - 02:58:43.16]

Your own understanding gets better.

[02:58:43.54 - 02:58:44.56]

And I think that's basically

[02:58:44.56 - 02:58:45.56]

what happened with

[02:58:45.56 - 02:58:46.80]

the Novo Nordisk Foundation.

[02:58:46.94 - 02:58:48.18]

They realized,

[02:58:48.54 - 02:58:49.06]

oh my God,

[02:58:49.12 - 02:58:50.86]

this isn't just a service

[02:58:50.86 - 02:58:51.80]

we're doing for the world.

[02:58:52.00 - 02:58:54.04]

This is one of the most

[02:58:54.04 - 02:58:55.66]

important markets in the world.

[02:58:56.16 - 02:58:56.82]

Totally right.

[02:58:56.84 - 02:58:57.58]

And it's so funny.

[02:58:57.66 - 02:58:57.92]

I mean,

[02:58:58.32 - 02:58:59.62]

obviously we weren't in the room

[02:58:59.62 - 02:59:00.76]

as these conversations

[02:59:00.76 - 02:59:01.30]

were happening,

[02:59:01.48 - 02:59:03.04]

but from reading the history,

[02:59:03.24 - 02:59:05.32]

it feels like they understood

[02:59:05.32 - 02:59:06.58]

it more than management

[02:59:06.58 - 02:59:07.20]

at the time.

[02:59:07.48 - 02:59:08.10]

Management was like

[02:59:08.10 - 02:59:09.18]

kind of too close to it

[02:59:09.18 - 02:59:09.62]

and thinking,

[02:59:09.98 - 02:59:11.26]

you know, industry wisdom.

[02:59:11.44 - 02:59:12.40]

We need to merge.

[02:59:12.72 - 02:59:13.68]

Consolidation is happening.

[02:59:13.82 - 02:59:14.32]

And they were like,

[02:59:14.82 - 02:59:17.24]

no, there's this incredible wave

[02:59:17.24 - 02:59:18.36]

that we are riding here.

[02:59:18.48 - 02:59:20.06]

Let's keep compounding.

[02:59:20.50 - 02:59:21.90]

You should share the stat

[02:59:21.90 - 02:59:23.88]

on the size of the endowment.

[02:59:24.56 - 02:59:25.32]

Oh, yes.

[02:59:25.84 - 02:59:27.64]

So I kind of can't believe

[02:59:27.64 - 02:59:28.70]

we haven't talked about this yet.

[02:59:29.62 - 02:59:30.72]

Novo Holdings,

[02:59:30.86 - 02:59:32.40]

which is the vehicle

[02:59:32.40 - 02:59:34.32]

by which the foundation

[02:59:34.98 - 02:59:36.00]

holds their stakes

[02:59:36.00 - 02:59:38.74]

in Novo Nordisk and Novozymes,

[02:59:39.40 - 02:59:41.08]

their sort of assets under management

[02:59:41.08 - 02:59:42.68]

and thus the endowment

[02:59:42.68 - 02:59:43.58]

of the foundation

[02:59:44.66 - 02:59:47.58]

is worth $120 billion,

[02:59:49.22 - 02:59:49.98]

which makes it

[02:59:49.98 - 02:59:51.94]

the single largest

[02:59:51.94 - 02:59:53.34]

charitable foundation

[02:59:54.26 - 02:59:54.98]

in the world,

[02:59:55.16 - 02:59:56.88]

over 2x larger

[02:59:56.88 - 02:59:58.26]

than the Gates Foundation,

[02:59:58.26 - 02:59:59.58]

which is number two.

[03:00:00.48 - 03:00:02.16]

Just unbelievable.

[03:00:02.62 - 03:00:04.32]

And through Novo Holdings,

[03:00:04.48 - 03:00:06.24]

it has actually now become

[03:00:06.24 - 03:00:08.06]

one of the largest

[03:00:08.06 - 03:00:08.96]

and most active

[03:00:08.96 - 03:00:10.88]

life sciences and biotech

[03:00:10.88 - 03:00:12.32]

investors in the world, too.

[03:00:12.40 - 03:00:13.80]

They hold venture stakes

[03:00:13.80 - 03:00:16.56]

in 80 plus other companies.

[03:00:16.80 - 03:00:18.82]

That's on top of giving out

[03:00:18.82 - 03:00:20.02]

lots and lots of grants

[03:00:20.02 - 03:00:21.94]

to life sciences around the world

[03:00:21.94 - 03:00:23.60]

and fulfilling the foundation's mission.

[03:00:24.16 - 03:00:25.84]

I mean, it's just wild.

[03:00:26.00 - 03:00:26.78]

We're burying this

[03:00:26.78 - 03:00:27.60]

so deep in the episode,

[03:00:27.60 - 03:00:29.30]

but this is the largest

[03:00:29.30 - 03:00:30.16]

charitable foundation

[03:00:30.16 - 03:00:31.16]

in the world.

[03:00:31.48 - 03:00:31.92]

That's wild.

[03:00:32.30 - 03:00:33.08]

Now, it's interesting

[03:00:33.08 - 03:00:34.34]

that it qualifies as that,

[03:00:34.42 - 03:00:35.10]

because yes,

[03:00:35.18 - 03:00:35.92]

that is totally true.

[03:00:36.42 - 03:00:37.06]

On the other hand,

[03:00:37.32 - 03:00:38.28]

$120 billion

[03:00:39.20 - 03:00:40.52]

is pretty neatly

[03:00:40.52 - 03:00:42.00]

just a little bit larger

[03:00:42.00 - 03:00:42.86]

than a quarter of

[03:00:42.86 - 03:00:44.12]

Novo Nordisk's market cap.

[03:00:44.56 - 03:00:45.96]

And so the vast majority

[03:00:45.96 - 03:00:47.12]

of that $120 billion

[03:00:47.12 - 03:00:48.08]

is their ownership

[03:00:48.08 - 03:00:49.32]

of Novo Nordisk.

[03:00:49.72 - 03:00:50.38]

So it's not like,

[03:00:50.42 - 03:00:50.78]

oh my God,

[03:00:50.80 - 03:00:52.30]

they spat off $120 billion

[03:00:52.30 - 03:00:54.12]

in cash that they're investing elsewhere.

[03:00:54.24 - 03:00:54.50]

No.

[03:00:54.86 - 03:00:56.34]

So if Jeff Bezos

[03:00:56.34 - 03:00:57.44]

decided to put his,

[03:00:57.44 - 03:00:59.42]

9% of Amazon,

[03:00:59.58 - 03:01:00.42]

decided to put that

[03:01:00.42 - 03:01:01.46]

into a foundation

[03:01:01.46 - 03:01:02.86]

and call it charitable suddenly,

[03:01:02.96 - 03:01:03.78]

that would be the most charitable

[03:01:03.78 - 03:01:05.32]

up there.

[03:01:05.84 - 03:01:06.06]

Yes.

[03:01:06.22 - 03:01:06.46]

Correct.

[03:01:07.10 - 03:01:08.38]

But the point stands.

[03:01:08.96 - 03:01:09.72]

It's still pretty cool.

[03:01:10.26 - 03:01:10.46]

Yeah.

[03:01:11.14 - 03:01:12.00]

While we're on the topic

[03:01:12.00 - 03:01:12.70]

of the foundation,

[03:01:12.84 - 03:01:14.22]

before we keep going in playbook,

[03:01:14.86 - 03:01:15.88]

it is worth pointing out

[03:01:15.88 - 03:01:17.20]

that there are

[03:01:17.20 - 03:01:18.98]

formally defined objectives

[03:01:18.98 - 03:01:20.12]

of the foundation,

[03:01:20.44 - 03:01:21.74]

and those objectives

[03:01:21.74 - 03:01:23.06]

do not include growth.

[03:01:23.46 - 03:01:24.38]

So it's kind of amazing

[03:01:24.38 - 03:01:25.64]

that they have grown

[03:01:25.64 - 03:01:27.04]

the way that they have.

[03:01:27.60 - 03:01:29.30]

The dual mission now

[03:01:29.30 - 03:01:31.12]

is stability

[03:01:31.84 - 03:01:33.28]

and supporting scientific

[03:01:33.28 - 03:01:34.72]

and humanitarian causes.

[03:01:35.86 - 03:01:38.06]

So what does stability mean?

[03:01:38.56 - 03:01:39.72]

I suppose it means like,

[03:01:39.82 - 03:01:40.92]

ensure the longevity

[03:01:40.92 - 03:01:43.10]

and duration of Novo Nordisk

[03:01:43.10 - 03:01:43.84]

as a company.

[03:01:44.58 - 03:01:45.26]

But it's interesting

[03:01:45.26 - 03:01:46.30]

when your stated mission

[03:01:46.30 - 03:01:47.38]

is stability

[03:01:47.38 - 03:01:49.16]

and this humanitarian cause,

[03:01:49.28 - 03:01:50.60]

that is a byproduct.

[03:01:50.96 - 03:01:51.92]

You could end up being

[03:01:51.92 - 03:01:53.24]

this incredible market leader,

[03:01:53.42 - 03:01:53.88]

innovator,

[03:01:54.38 - 03:01:56.10]

super high growth company too.

[03:01:56.10 - 03:01:56.92]

Yeah.

[03:01:57.22 - 03:01:58.52]

And on the point of mission,

[03:01:59.08 - 03:02:00.40]

Novo Nordisk has a stated mission

[03:02:00.40 - 03:02:01.38]

that it's not just about

[03:02:01.38 - 03:02:02.28]

supplying treatment,

[03:02:02.40 - 03:02:04.14]

it's about eradicating diabetes.

[03:02:04.52 - 03:02:06.26]

And so there was a 2014 paper

[03:02:06.26 - 03:02:06.98]

that came out

[03:02:06.98 - 03:02:08.92]

that suggested a real cure

[03:02:08.92 - 03:02:10.78]

for diabetes using stem cells.

[03:02:11.04 - 03:02:11.80]

I think it was out of Harvard.

[03:02:12.22 - 03:02:12.90]

And at the time,

[03:02:12.98 - 03:02:13.58]

the Novo Nordisk

[03:02:13.58 - 03:02:15.12]

chief medical officer replied,

[03:02:15.52 - 03:02:16.46]

we feel a responsibility

[03:02:16.46 - 03:02:17.68]

for trying to prevent

[03:02:17.68 - 03:02:18.94]

or eradicate diabetes.

[03:02:18.94 - 03:02:19.70]

And if that means

[03:02:19.70 - 03:02:21.26]

the dissolution of Novo Nordisk,

[03:02:21.36 - 03:02:22.24]

that would be fine.

[03:02:22.78 - 03:02:23.86]

I'm having such a hard time

[03:02:23.86 - 03:02:24.94]

wrapping my mind around like,

[03:02:24.94 - 03:02:26.10]

is that actually true?

[03:02:26.50 - 03:02:27.50]

Is all of the behavior

[03:02:27.50 - 03:02:28.96]

of the executives

[03:02:29.72 - 03:02:31.78]

actually in service of

[03:02:32.88 - 03:02:33.84]

curing diabetes,

[03:02:34.00 - 03:02:34.84]

even if it means that

[03:02:34.84 - 03:02:35.92]

their revenue would go to zero?

[03:02:36.32 - 03:02:37.50]

Isn't that at odds

[03:02:37.50 - 03:02:38.88]

with the idea of stability

[03:02:38.88 - 03:02:40.68]

of Novo Nordisk?

[03:02:41.08 - 03:02:42.28]

That quote was from 2014,

[03:02:42.56 - 03:02:43.08]

did you say?

[03:02:43.24 - 03:02:44.68]

Yeah. So previous administration,

[03:02:44.92 - 03:02:45.42]

so to speak.

[03:02:45.68 - 03:02:47.02]

And pre-GLP1's

[03:02:47.02 - 03:02:47.72]

becoming really huge.

[03:02:48.02 - 03:02:48.96]

It's very easy for them

[03:02:48.96 - 03:02:49.66]

to say that now

[03:02:49.66 - 03:02:51.16]

because they could eradicate

[03:02:51.16 - 03:02:52.46]

diabetes now and still be

[03:02:52.46 - 03:02:53.80]

Europe's largest company

[03:02:53.80 - 03:02:55.20]

just based on obesity alone.

[03:02:55.62 - 03:02:57.92]

But from talking to folks

[03:02:57.92 - 03:02:58.94]

from the outside,

[03:02:59.14 - 03:03:00.32]

my sense is I think that is

[03:03:00.32 - 03:03:01.70]

as true as it can be

[03:03:01.70 - 03:03:02.36]

in a corporation.

[03:03:02.82 - 03:03:05.02]

Yep. I also found a stat

[03:03:05.02 - 03:03:06.46]

that in the last six years,

[03:03:06.92 - 03:03:08.28]

four and a half billion dollars

[03:03:08.28 - 03:03:09.66]

of grants have been distributed.

[03:03:10.10 - 03:03:11.70]

So I was a little tongue in cheek

[03:03:11.70 - 03:03:12.48]

about like, well, geez,

[03:03:12.56 - 03:03:13.52]

most of that is their ownership

[03:03:13.52 - 03:03:14.30]

of Novo Nordisk.

[03:03:14.36 - 03:03:16.06]

But like that is a lot

[03:03:16.06 - 03:03:18.04]

of outflows to research.

[03:03:18.26 - 03:03:19.48]

And I think importantly,

[03:03:19.58 - 03:03:21.60]

that research often supports

[03:03:21.60 - 03:03:22.68]

what Novo Nordisk,

[03:03:22.68 - 03:03:23.32]

the corporation,

[03:03:23.62 - 03:03:24.72]

wants to go do.

[03:03:24.88 - 03:03:25.52]

And so it's nice to have

[03:03:25.52 - 03:03:26.20]

a close relationship

[03:03:26.20 - 03:03:26.90]

with researchers.

[03:03:27.74 - 03:03:28.98]

Yes, there is a cycle here.

[03:03:29.22 - 03:03:31.32]

Yes, which rolls up

[03:03:31.32 - 03:03:32.20]

to the mission of stability.

[03:03:32.48 - 03:03:33.88]

But yeah, they deserve

[03:03:33.88 - 03:03:34.88]

to be applauded

[03:03:34.88 - 03:03:36.30]

for the reinvestment.

[03:03:36.68 - 03:03:38.84]

Certainly it is a unique structure

[03:03:38.84 - 03:03:40.18]

in the corporate world

[03:03:40.18 - 03:03:41.72]

and one that has had

[03:03:41.72 - 03:03:42.46]

a huge impact

[03:03:42.46 - 03:03:43.72]

on the company's history.

[03:03:44.24 - 03:03:45.52]

Yep. Okay.

[03:03:45.54 - 03:03:46.34]

While we are in

[03:03:46.34 - 03:03:47.38]

corporate structure land,

[03:03:48.04 - 03:03:48.86]

alignment of incentives

[03:03:48.86 - 03:03:49.80]

is pretty interesting

[03:03:49.80 - 03:03:50.94]

among management.

[03:03:51.12 - 03:03:51.84]

I don't know if you looked

[03:03:51.84 - 03:03:52.44]

into this at all,

[03:03:52.88 - 03:03:53.82]

but their executives

[03:03:53.82 - 03:03:55.90]

are not meaningfully incentivized

[03:03:55.90 - 03:03:57.80]

by stock price performance.

[03:03:59.20 - 03:04:00.46]

No, I didn't look at this at all.

[03:04:00.80 - 03:04:00.98]

Yeah.

[03:04:01.36 - 03:04:03.24]

So they are sort of forced

[03:04:03.24 - 03:04:05.14]

to think on a different time horizon

[03:04:05.14 - 03:04:06.64]

than if your compensation

[03:04:06.64 - 03:04:07.78]

came primarily

[03:04:07.78 - 03:04:09.02]

in the form of stock options

[03:04:09.02 - 03:04:09.78]

and you wanted to,

[03:04:09.98 - 03:04:11.04]

you know, make the stock go up

[03:04:11.04 - 03:04:12.42]

in a three to five year window.

[03:04:13.72 - 03:04:15.28]

So executives and board members

[03:04:15.28 - 03:04:17.08]

are not given stock options

[03:04:17.08 - 03:04:18.60]

as a part of their compensation.

[03:04:19.14 - 03:04:20.08]

And when you talk

[03:04:20.08 - 03:04:21.00]

with folks in the industry,

[03:04:21.00 - 03:04:22.84]

the employees reportedly

[03:04:22.84 - 03:04:24.38]

have lower compensation

[03:04:24.38 - 03:04:25.48]

than their counterparts

[03:04:25.48 - 03:04:26.30]

at other companies.

[03:04:26.78 - 03:04:27.38]

And I couldn't figure out

[03:04:27.38 - 03:04:28.32]

if that was like a Danish

[03:04:28.32 - 03:04:29.58]

versus American thing

[03:04:29.58 - 03:04:31.74]

or if they intentionally try

[03:04:31.74 - 03:04:32.90]

to repel the idea

[03:04:32.90 - 03:04:34.02]

of mercenary employees

[03:04:34.02 - 03:04:35.92]

and attract missionaries.

[03:04:36.10 - 03:04:37.02]

But it would seem

[03:04:37.02 - 03:04:38.42]

that their excellence

[03:04:38.42 - 03:04:40.64]

in pioneering diabetes medicine

[03:04:40.64 - 03:04:42.82]

is really mission driven.

[03:04:43.22 - 03:04:44.44]

There's what they call

[03:04:44.44 - 03:04:45.78]

their remuneration policy,

[03:04:45.78 - 03:04:47.88]

which requires all board directors

[03:04:47.88 - 03:04:49.00]

to hold stock.

[03:04:49.68 - 03:04:50.58]

You know, you're not getting it

[03:04:50.58 - 03:04:51.08]

as your comp,

[03:04:51.12 - 03:04:52.38]

but you're required to hold it,

[03:04:52.62 - 03:04:53.30]

which I think is kind of

[03:04:53.30 - 03:04:54.02]

a similar idea

[03:04:54.02 - 03:04:55.76]

to what Berkshire Hathaway has

[03:04:55.76 - 03:04:58.08]

of, hey, we should have sticks,

[03:04:58.18 - 03:04:58.88]

not carrots.

[03:04:59.46 - 03:05:00.26]

And in Berkshire's case,

[03:05:00.34 - 03:05:01.74]

there's no DNO insurance

[03:05:01.74 - 03:05:02.88]

for board members.

[03:05:03.16 - 03:05:04.50]

You actually have to own

[03:05:04.50 - 03:05:05.96]

the liability of the company's

[03:05:05.96 - 03:05:07.54]

actions yourself to be on the board

[03:05:07.54 - 03:05:08.84]

so that they take it seriously.

[03:05:09.30 - 03:05:10.10]

But in Novo's case,

[03:05:10.52 - 03:05:12.12]

it's, hey, you don't get the carrot

[03:05:12.12 - 03:05:13.94]

of big piles of free equity

[03:05:13.94 - 03:05:14.54]

in our company.

[03:05:14.92 - 03:05:16.10]

Yeah, you got to go buy the stock.

[03:05:16.40 - 03:05:17.90]

Yeah, you have to actually

[03:05:17.90 - 03:05:19.56]

be aligned with the owners

[03:05:19.56 - 03:05:20.22]

so you get the fruit

[03:05:20.22 - 03:05:20.88]

of the appreciation

[03:05:20.88 - 03:05:21.66]

or the punishment

[03:05:21.66 - 03:05:22.64]

if it doesn't do well.

[03:05:23.28 - 03:05:25.58]

Yeah, I suspect it's probably both.

[03:05:25.84 - 03:05:26.96]

I do think Danish culture

[03:05:26.96 - 03:05:28.06]

plays into this, too.

[03:05:28.56 - 03:05:29.84]

You know, it is a much,

[03:05:30.20 - 03:05:32.08]

much more socialist country

[03:05:32.08 - 03:05:33.32]

than America.

[03:05:33.56 - 03:05:34.74]

And actually, you know,

[03:05:34.74 - 03:05:35.96]

watching interviews with Lotte,

[03:05:36.12 - 03:05:37.10]

she talks about this.

[03:05:37.50 - 03:05:38.90]

And sometimes she's asked about it.

[03:05:38.94 - 03:05:39.54]

I'm like, oh, hey,

[03:05:39.56 - 03:05:40.70]

didn't you get rich on

[03:05:41.40 - 03:05:42.84]

basically inventing GLP-1s?

[03:05:42.84 - 03:05:43.50]

And she's like, no,

[03:05:43.56 - 03:05:45.06]

I've never asked for a raise in my life.

[03:05:45.08 - 03:05:46.02]

I'm a socialist.

[03:05:46.52 - 03:05:47.42]

But look at what we've done

[03:05:47.42 - 03:05:47.92]

for the world.

[03:05:48.40 - 03:05:49.82]

Yeah, it's pretty crazy.

[03:05:50.22 - 03:05:51.02]

The question is,

[03:05:51.08 - 03:05:52.62]

does that thinking lead

[03:05:52.62 - 03:05:54.98]

to the GLP-1 breakthrough?

[03:05:55.64 - 03:05:56.58]

Other pharma companies

[03:05:56.58 - 03:05:57.60]

certainly didn't make

[03:05:57.60 - 03:05:58.56]

these investments

[03:05:58.56 - 03:05:59.82]

and these decisions

[03:05:59.82 - 03:06:00.94]

on these time horizons.

[03:06:01.36 - 03:06:02.50]

And so there's a reasonable narrative

[03:06:02.50 - 03:06:03.20]

that it was actually

[03:06:03.20 - 03:06:04.86]

Novo Nordisk's focus

[03:06:04.86 - 03:06:06.22]

and their time horizon

[03:06:06.22 - 03:06:08.94]

that led to the decades-long work

[03:06:08.94 - 03:06:10.06]

to actually bear fruit.

[03:06:10.62 - 03:06:11.50]

I mean, semaglutide

[03:06:11.50 - 03:06:12.36]

isn't out of nowhere.

[03:06:12.54 - 03:06:13.60]

It was built on all the work

[03:06:13.60 - 03:06:14.70]

that went into liraglutide

[03:06:14.70 - 03:06:15.66]

since the early 90s

[03:06:15.66 - 03:06:16.14]

and incorporated

[03:06:16.14 - 03:06:17.18]

all the clever ideas

[03:06:17.18 - 03:06:18.98]

they had previously developing

[03:06:18.98 - 03:06:20.62]

longer-acting insulins

[03:06:20.62 - 03:06:21.46]

and things like that.

[03:06:21.90 - 03:06:23.36]

There is a reasonable narrative of

[03:06:23.36 - 03:06:25.10]

it's their long time horizon

[03:06:25.10 - 03:06:26.08]

and their focus,

[03:06:26.26 - 03:06:27.24]

their ability to learn

[03:06:27.24 - 03:06:29.14]

from doing the same thing well

[03:06:29.14 - 03:06:31.06]

and iterating over 100 years

[03:06:31.06 - 03:06:32.30]

that actually led them

[03:06:32.30 - 03:06:33.08]

to find this breakthrough

[03:06:33.08 - 03:06:33.90]

when others didn't.

[03:06:34.52 - 03:06:34.54]

Yep.

[03:06:34.98 - 03:06:37.76]

The key point is long-term focus.

[03:06:37.98 - 03:06:39.44]

And if you can do that,

[03:06:39.76 - 03:06:41.02]

as we've shown time and time again

[03:06:41.02 - 03:06:41.84]

on this show,

[03:06:42.42 - 03:06:43.68]

you can create something great.

[03:06:43.90 - 03:06:44.48]

If you do that,

[03:06:44.50 - 03:06:45.56]

it's not like you will

[03:06:45.56 - 03:06:46.40]

create something great.

[03:06:46.46 - 03:06:47.40]

You still got to get lucky

[03:06:47.40 - 03:06:49.20]

and also be doing the right things

[03:06:49.20 - 03:06:50.12]

in the right areas.

[03:06:50.48 - 03:06:51.58]

But if you're going to build

[03:06:51.58 - 03:06:52.86]

something really, really big,

[03:06:52.94 - 03:06:54.00]

you got to have that

[03:06:54.00 - 03:06:55.56]

long-term focused mindset.

[03:06:57.00 - 03:06:57.52]

Okay.

[03:06:57.62 - 03:07:00.24]

There are a few unexplored areas

[03:07:00.24 - 03:07:01.80]

that I think are interesting to know

[03:07:01.80 - 03:07:03.04]

about healthcare as a whole

[03:07:03.04 - 03:07:04.04]

and about Novo Nordisk

[03:07:04.04 - 03:07:05.22]

that I want to talk about

[03:07:05.22 - 03:07:05.80]

here in Playbook.

[03:07:06.28 - 03:07:09.82]

One of them is a shift

[03:07:10.44 - 03:07:11.92]

that Novo has done here

[03:07:11.92 - 03:07:13.50]

to broad populations

[03:07:13.50 - 03:07:15.98]

with relatively inexpensive drugs

[03:07:16.60 - 03:07:18.32]

versus other pharma companies.

[03:07:18.46 - 03:07:19.68]

And I know you're going to

[03:07:19.68 - 03:07:20.70]

be allergic to the idea

[03:07:20.70 - 03:07:21.80]

that I just told you $1,000

[03:07:21.80 - 03:07:23.02]

is an inexpensive drug.

[03:07:23.36 - 03:07:25.02]

But the crazy thing here

[03:07:25.02 - 03:07:26.22]

isn't just that the revenue

[03:07:26.22 - 03:07:27.70]

and the focus is so concentrated.

[03:07:27.98 - 03:07:29.42]

It's concentrated in an area

[03:07:29.42 - 03:07:31.06]

that other companies shied away from.

[03:07:31.78 - 03:07:33.06]

Pharma over the last couple decades

[03:07:33.06 - 03:07:34.26]

shifted away from

[03:07:34.26 - 03:07:35.78]

these mass population drugs

[03:07:35.78 - 03:07:36.98]

to specialty drugs.

[03:07:37.46 - 03:07:39.30]

And these are often to treat

[03:07:39.30 - 03:07:40.58]

specific forms of cancer

[03:07:40.58 - 03:07:42.34]

or rare childhood diseases

[03:07:42.34 - 03:07:44.34]

with super narrow populations

[03:07:44.34 - 03:07:45.62]

and huge price tags.

[03:07:45.62 - 03:07:47.12]

To put numbers around that,

[03:07:47.22 - 03:07:49.56]

we're talking total market size

[03:07:49.56 - 03:07:51.68]

of a couple hundred thousand people

[03:07:51.68 - 03:07:52.30]

or fewer,

[03:07:52.62 - 03:07:54.94]

as few as 300 people

[03:07:54.94 - 03:07:57.20]

in these super rare orphan diseases.

[03:07:57.96 - 03:07:59.80]

Occasionally, these diseases are so rare

[03:07:59.80 - 03:08:02.38]

and the treatment is so life-changing

[03:08:02.38 - 03:08:04.06]

or life-giving

[03:08:04.06 - 03:08:05.60]

that the treatment,

[03:08:06.04 - 03:08:08.16]

one dose of the pill

[03:08:08.16 - 03:08:10.00]

or one infusion of the therapy

[03:08:10.00 - 03:08:10.62]

or whatever it is,

[03:08:10.66 - 03:08:11.80]

can be measured literally

[03:08:11.80 - 03:08:12.96]

in the millions of dollars.

[03:08:12.96 - 03:08:15.50]

So it gets far more extreme

[03:08:15.50 - 03:08:17.72]

than a thousand dollars a month.

[03:08:18.22 - 03:08:19.52]

It's understandable why

[03:08:19.52 - 03:08:20.64]

the other pharma companies

[03:08:20.64 - 03:08:22.22]

went there for a few reasons.

[03:08:22.46 - 03:08:23.16]

And this is a little bit

[03:08:23.16 - 03:08:24.20]

of a walkthrough history,

[03:08:24.36 - 03:08:25.64]

but it's been a while

[03:08:25.64 - 03:08:27.34]

since we saw a breakthrough

[03:08:27.34 - 03:08:29.20]

in a mass market drug.

[03:08:29.46 - 03:08:30.30]

Really, the last one

[03:08:30.30 - 03:08:31.88]

that we can point to is statins,

[03:08:32.02 - 03:08:33.70]

which was to treat cholesterol,

[03:08:34.36 - 03:08:35.70]

I don't know, 30 years ago

[03:08:35.70 - 03:08:36.80]

is really when that

[03:08:36.80 - 03:08:37.98]

was kind of the thing.

[03:08:38.06 - 03:08:39.28]

HIV and hep C

[03:08:39.28 - 03:08:41.18]

are examples we can point to.

[03:08:41.24 - 03:08:42.52]

But again, it's been a while.

[03:08:42.52 - 03:08:43.90]

Those are small markets

[03:08:43.90 - 03:08:45.68]

compared to obesity.

[03:08:46.06 - 03:08:47.02]

Well, compared to obesity,

[03:08:47.18 - 03:08:48.10]

but they still qualify

[03:08:48.10 - 03:08:49.20]

as large population.

[03:08:49.66 - 03:08:50.84]

When you're treating millions

[03:08:50.84 - 03:08:51.90]

of people with something,

[03:08:52.34 - 03:08:53.02]

well, A, you can have

[03:08:53.02 - 03:08:53.98]

a different pricing structure,

[03:08:54.10 - 03:08:55.94]

like you can have much cheaper drugs.

[03:08:56.44 - 03:08:57.74]

But B, like you can just affect

[03:08:57.74 - 03:08:59.76]

a huge swath of the population.

[03:09:00.42 - 03:09:00.92]

You know, it's not like

[03:09:00.92 - 03:09:02.36]

we're discovering an antibiotic

[03:09:02.36 - 03:09:03.82]

or a cure for polio

[03:09:03.82 - 03:09:05.18]

every other year these days.

[03:09:05.56 - 03:09:07.02]

In fact, the Alzheimer's researchers

[03:09:07.02 - 03:09:08.16]

have really been trying,

[03:09:08.40 - 03:09:09.12]

but the trials

[03:09:09.12 - 03:09:10.10]

have just been disappointing.

[03:09:10.10 - 03:09:12.78]

And so we had this great heyday

[03:09:12.78 - 03:09:15.46]

30 years ago of small molecule drugs

[03:09:15.46 - 03:09:17.00]

that you could manufacture

[03:09:17.00 - 03:09:18.84]

relatively easily by mixing chemicals.

[03:09:19.14 - 03:09:20.92]

But after those patents expired,

[03:09:21.24 - 03:09:22.62]

and these could be manufactured

[03:09:22.62 - 03:09:24.72]

by other companies as generics

[03:09:24.72 - 03:09:26.18]

and sold to everyone for cheap,

[03:09:26.58 - 03:09:27.60]

we really haven't discovered

[03:09:27.60 - 03:09:29.46]

something like that since.

[03:09:29.74 - 03:09:30.72]

So that's why the shift

[03:09:30.72 - 03:09:31.36]

has really gone.

[03:09:31.64 - 03:09:32.80]

And of course, we have new technology

[03:09:32.80 - 03:09:33.34]

to do it, too,

[03:09:33.40 - 03:09:35.84]

but really shifted to biologics,

[03:09:35.96 - 03:09:37.36]

the complex proteins that are,

[03:09:37.42 - 03:09:38.78]

you know, harder to manufacture.

[03:09:38.78 - 03:09:41.04]

And I think a way to summarize that

[03:09:41.04 - 03:09:42.56]

is a lot of the low-hanging fruit

[03:09:42.56 - 03:09:43.18]

has been picked.

[03:09:44.68 - 03:09:45.84]

Compounding this problem,

[03:09:46.10 - 03:09:47.24]

just because this is health care

[03:09:47.24 - 03:09:48.34]

and you compound every problem.

[03:09:49.32 - 03:09:50.76]

Different type of compounding.

[03:09:50.96 - 03:09:53.54]

Yes. The way that FDA approval works

[03:09:53.54 - 03:09:55.36]

is that you get a label for a drug

[03:09:55.36 - 03:09:57.24]

if you can prove with the right degree

[03:09:57.24 - 03:09:58.44]

of statistical significance

[03:09:58.44 - 03:10:00.86]

that the benefits outweigh the risks

[03:10:01.50 - 03:10:03.30]

and that you are better

[03:10:03.30 - 03:10:04.42]

than current alternatives

[03:10:04.42 - 03:10:06.30]

by some measurable amount.

[03:10:06.30 - 03:10:09.14]

So conditions with existing alternatives

[03:10:09.14 - 03:10:11.16]

are harder to get approval for.

[03:10:12.76 - 03:10:15.42]

Another factor pushing to rare diseases.

[03:10:15.80 - 03:10:16.62]

A hundred percent.

[03:10:16.82 - 03:10:18.56]

Going back to the piece that Alex wrote,

[03:10:18.76 - 03:10:20.16]

he references this idea of

[03:10:20.16 - 03:10:21.70]

the better than the Beatles problem.

[03:10:22.12 - 03:10:23.30]

Like, what if it was a requirement

[03:10:23.30 - 03:10:25.16]

to be releasing a new pop song

[03:10:25.16 - 03:10:25.60]

in the market

[03:10:25.60 - 03:10:27.22]

that it was better than Hey Jude

[03:10:27.22 - 03:10:28.76]

or better than Here Comes the Sun?

[03:10:28.84 - 03:10:30.00]

You'd have no innovation.

[03:10:30.22 - 03:10:31.08]

Like, of course not.

[03:10:31.26 - 03:10:31.72]

Right, right.

[03:10:32.14 - 03:10:34.20]

So the rule both makes sense

[03:10:34.20 - 03:10:36.06]

and you understand why

[03:10:36.06 - 03:10:38.54]

once we hit some minimum level

[03:10:38.54 - 03:10:40.14]

of treatability for something,

[03:10:40.26 - 03:10:40.58]

you're like,

[03:10:40.72 - 03:10:42.28]

geez, is the juice really worth

[03:10:42.28 - 03:10:43.46]

the squeeze there anymore?

[03:10:44.06 - 03:10:44.08]

Right.

[03:10:44.50 - 03:10:45.84]

No, you go work on something

[03:10:45.84 - 03:10:46.70]

that you're actually likely

[03:10:46.70 - 03:10:47.62]

to get approved for

[03:10:47.62 - 03:10:49.74]

and make your billions of dollars

[03:10:49.74 - 03:10:50.70]

of R&D worth it.

[03:10:50.76 - 03:10:51.62]

And your years and years

[03:10:51.62 - 03:10:52.46]

of clinical trials

[03:10:52.46 - 03:10:53.76]

and recruiting all the people

[03:10:53.76 - 03:10:54.32]

for the study.

[03:10:54.54 - 03:10:55.48]

And by the way,

[03:10:55.50 - 03:10:56.78]

these studies have just gotten

[03:10:56.78 - 03:10:58.94]

so insanely expensive to run.

[03:10:59.06 - 03:10:59.80]

And you know,

[03:10:59.84 - 03:11:01.94]

it's not just the studies that cost money,

[03:11:01.98 - 03:11:03.50]

but if you just look at the cost

[03:11:03.50 - 03:11:05.20]

to bring a drug to market in 1953,

[03:11:05.54 - 03:11:08.16]

it cost $40 million for an approval.

[03:11:08.76 - 03:11:10.68]

And that's an inflation-adjusted figure.

[03:11:11.22 - 03:11:14.30]

Today, it averages $2.5 billion.

[03:11:15.52 - 03:11:16.26]

Wow, wow, wow.

[03:11:16.66 - 03:11:17.12]

I don't know.

[03:11:17.14 - 03:11:19.30]

It's easy to be kind of like disillusioned

[03:11:19.30 - 03:11:21.48]

with why would I go after something,

[03:11:21.94 - 03:11:22.64]

large population,

[03:11:22.90 - 03:11:24.00]

if there's already something else

[03:11:24.00 - 03:11:25.26]

that treats a large population

[03:11:25.26 - 03:11:25.90]

good enough.

[03:11:26.48 - 03:11:26.74]

Right.

[03:11:26.96 - 03:11:27.30]

Wow.

[03:11:27.62 - 03:11:28.20]

That's interesting.

[03:11:28.30 - 03:11:28.98]

Whereas you look at

[03:11:29.56 - 03:11:31.22]

almost every other market out there,

[03:11:31.38 - 03:11:32.42]

if it's like a big market,

[03:11:32.42 - 03:11:35.08]

there's insane capitalist incentives

[03:11:35.08 - 03:11:37.52]

to go make a better mousetrap for it.

[03:11:38.46 - 03:11:39.24]

That's super true.

[03:11:39.84 - 03:11:41.18]

So this leads into

[03:11:41.18 - 03:11:43.06]

this other playbook theme.

[03:11:43.86 - 03:11:47.88]

Pharma is the most classic example

[03:11:47.88 - 03:11:49.08]

of the venture business.

[03:11:49.32 - 03:11:50.68]

It's super high risk.

[03:11:51.06 - 03:11:52.56]

It's super high return if it works.

[03:11:53.02 - 03:11:54.84]

And the winners need to subsidize

[03:11:54.84 - 03:11:55.76]

all the failures.

[03:11:56.32 - 03:11:56.82]

And in fact,

[03:11:56.94 - 03:11:59.06]

it's even more sort of severe

[03:11:59.06 - 03:12:00.22]

than typical venture capital

[03:12:00.22 - 03:12:02.26]

because a lot of the research

[03:12:02.26 - 03:12:04.36]

can take over a decade of investing

[03:12:04.36 - 03:12:05.98]

before the winners bear any fruit at all.

[03:12:06.36 - 03:12:06.98]

So everyone was like,

[03:12:07.04 - 03:12:07.58]

oh my God,

[03:12:07.76 - 03:12:10.02]

Figma spent four years writing code

[03:12:10.02 - 03:12:11.68]

before they shipped a product.

[03:12:12.00 - 03:12:13.22]

Like four years.

[03:12:13.42 - 03:12:14.20]

Oh, four years.

[03:12:14.26 - 03:12:14.70]

That's nothing.

[03:12:14.96 - 03:12:15.14]

Yeah.

[03:12:15.28 - 03:12:18.06]

There's no MVP in semi-glutide.

[03:12:18.24 - 03:12:20.40]

Like let's put a couple billion to work

[03:12:20.40 - 03:12:22.26]

and then we'll check in a couple decades later

[03:12:22.26 - 03:12:23.42]

and see if we've changed the world.

[03:12:23.74 - 03:12:24.98]

And obviously there are stage gates

[03:12:24.98 - 03:12:25.56]

along the way,

[03:12:25.64 - 03:12:27.46]

but it's adding a zero or two

[03:12:27.46 - 03:12:28.36]

to the venture business,

[03:12:28.36 - 03:12:28.90]

to be honest.

[03:12:28.90 - 03:12:31.06]

I think that the most illustrative

[03:12:31.06 - 03:12:32.66]

stats on this are that

[03:12:32.66 - 03:12:35.26]

the top decile of pharmaceuticals

[03:12:35.26 - 03:12:37.20]

are what matters for the profits.

[03:12:37.70 - 03:12:39.10]

So if you look at the pipeline

[03:12:39.10 - 03:12:40.54]

of a hundred drugs

[03:12:40.54 - 03:12:41.98]

that enter clinical development,

[03:12:42.50 - 03:12:43.76]

10 actually make it to market

[03:12:43.76 - 03:12:45.68]

and one provides,

[03:12:45.98 - 03:12:46.46]

get this,

[03:12:46.72 - 03:12:47.92]

half the profits.

[03:12:48.56 - 03:12:49.18]

One drug.

[03:12:49.64 - 03:12:50.32]

Oh crap.

[03:12:50.64 - 03:12:50.98]

Wow.

[03:12:51.14 - 03:12:52.78]

The initial part of what you just said

[03:12:52.78 - 03:12:54.24]

jives with our math earlier,

[03:12:54.34 - 03:12:55.64]

that 10% make it to market.

[03:12:56.22 - 03:12:56.52]

I mean,

[03:12:56.52 - 03:12:57.56]

that's a power law right there.

[03:12:57.96 - 03:12:58.24]

Right.

[03:12:58.24 - 03:13:00.44]

10% of the ones that make it to market

[03:13:00.44 - 03:13:02.44]

provide 50% of the profits.

[03:13:02.98 - 03:13:03.58]

Most drugs,

[03:13:03.68 - 03:13:04.54]

this is also crazy stat,

[03:13:04.64 - 03:13:05.84]

even after they are approved,

[03:13:05.96 - 03:13:08.30]

do not earn back their R&D costs.

[03:13:08.96 - 03:13:09.10]

I mean,

[03:13:09.14 - 03:13:11.52]

this is another dynamic

[03:13:11.52 - 03:13:14.66]

showing why the market forces

[03:13:14.66 - 03:13:16.38]

led to consolidation in this industry.

[03:13:16.54 - 03:13:18.44]

Like you just need to be so large

[03:13:18.44 - 03:13:20.16]

and have the capital resources

[03:13:20.16 - 03:13:22.16]

to pool all the risk

[03:13:22.16 - 03:13:23.16]

of these drug pipelines.

[03:13:23.52 - 03:13:24.46]

That's exactly right.

[03:13:24.58 - 03:13:24.74]

Yeah.

[03:13:24.76 - 03:13:26.48]

You need to actually be able to pool risk

[03:13:26.48 - 03:13:28.92]

or have some differentiated way

[03:13:28.92 - 03:13:31.00]

versus all your other competitors

[03:13:31.00 - 03:13:32.84]

of being more likely to create a hit.

[03:13:33.22 - 03:13:33.64]

A.K.A.

[03:13:33.88 - 03:13:34.44]

Novodorisk.

[03:13:34.68 - 03:13:34.96]

Yeah.

[03:13:35.46 - 03:13:38.42]

You will not be a successful pharma company

[03:13:38.42 - 03:13:39.48]

without blockbusters

[03:13:39.48 - 03:13:40.56]

and even then,

[03:13:40.98 - 03:13:42.26]

blockbusters might not be enough.

[03:13:42.80 - 03:13:43.12]

Wow.

[03:13:43.56 - 03:13:43.98]

It's nuts.

[03:13:44.80 - 03:13:45.14]

All right.

[03:13:45.26 - 03:13:47.86]

So now we're into like healthcare as a whole land.

[03:13:47.98 - 03:13:49.38]

So I have some commentary on this.

[03:13:49.74 - 03:13:51.10]

I'm very excited about this.

[03:13:51.14 - 03:13:53.20]

I think this is going to be a new chapter of Acquired

[03:13:53.20 - 03:13:55.40]

because there's a lot of stuff

[03:13:55.40 - 03:13:56.52]

to dive into here

[03:13:56.52 - 03:13:57.84]

and we'll still never understand it all,

[03:13:57.94 - 03:13:58.88]

but it's fun learning.

[03:13:59.84 - 03:14:03.70]

So I think everybody is aware in some sense

[03:14:03.70 - 03:14:05.68]

that for every dollar

[03:14:06.20 - 03:14:08.76]

that we're investing into the healthcare system,

[03:14:08.90 - 03:14:11.56]

we're getting less and less incremental utility out.

[03:14:11.96 - 03:14:13.10]

People complain all the time

[03:14:13.10 - 03:14:15.10]

that as a percentage of GDP,

[03:14:15.52 - 03:14:15.98]

which by the way,

[03:14:16.02 - 03:14:18.20]

is something like 17-18%,

[03:14:18.20 - 03:14:19.36]

which is nuts, right?

[03:14:19.40 - 03:14:21.86]

Our healthcare system costs us 17-18% of GDP.

[03:14:22.14 - 03:14:23.44]

That goes up every year

[03:14:23.44 - 03:14:24.88]

and the quality of care goes down

[03:14:24.88 - 03:14:26.54]

or life expectancy goes down.

[03:14:26.68 - 03:14:28.88]

So everyone sort of like heard some variation

[03:14:28.88 - 03:14:30.22]

of this problem before.

[03:14:30.98 - 03:14:32.70]

On the surface, things appear to be broken.

[03:14:33.08 - 03:14:33.30]

Yeah.

[03:14:33.78 - 03:14:37.56]

The 17.3% of GDP that healthcare costs us,

[03:14:38.04 - 03:14:40.26]

you should just know as a baseline

[03:14:40.26 - 03:14:41.52]

that in 1960,

[03:14:41.84 - 03:14:43.68]

that was 5% of GDP.

[03:14:44.10 - 03:14:45.80]

This isn't like gone up a little bit.

[03:14:45.94 - 03:14:46.48]

This is like,

[03:14:47.20 - 03:14:47.56]

you know,

[03:14:47.60 - 03:14:48.64]

one of the biggest line items

[03:14:48.64 - 03:14:49.70]

for the entire country

[03:14:49.70 - 03:14:51.32]

used to be fairly de minimis

[03:14:51.32 - 03:14:52.36]

and is now enormous.

[03:14:53.56 - 03:14:55.92]

So you should expect a lot of your healthcare system,

[03:14:56.12 - 03:14:56.70]

given what it costs.

[03:14:57.48 - 03:14:58.46]

On the one hand,

[03:14:59.00 - 03:14:59.76]

this is really bad

[03:14:59.76 - 03:15:01.74]

and like there's a zillion people to blame for it.

[03:15:01.78 - 03:15:03.10]

So it's hard to blame one individual

[03:15:03.10 - 03:15:03.80]

or one company.

[03:15:04.02 - 03:15:06.20]

And so it's a little bit of like a tragedy at commons

[03:15:06.20 - 03:15:07.38]

where everyone throws their arms up

[03:15:07.38 - 03:15:07.64]

and says,

[03:15:07.74 - 03:15:10.58]

well, I'm going to go do the best I can

[03:15:10.58 - 03:15:11.48]

and, you know,

[03:15:11.50 - 03:15:12.26]

make sure I'm okay.

[03:15:12.58 - 03:15:15.08]

Because I really don't know like who to point to

[03:15:15.08 - 03:15:15.52]

and be like,

[03:15:15.58 - 03:15:17.54]

this system is effed up for this reason.

[03:15:18.22 - 03:15:19.96]

I mean, you could blame oligopoly,

[03:15:20.14 - 03:15:21.48]

you can blame regulatory capture,

[03:15:21.48 - 03:15:23.02]

you can blame too many middlemen,

[03:15:23.58 - 03:15:25.52]

too high of hurdles to get new drugs on the market.

[03:15:26.16 - 03:15:26.72]

But on the other hand,

[03:15:26.82 - 03:15:28.68]

like you would sort of expect this.

[03:15:29.32 - 03:15:29.64]

I mean,

[03:15:29.96 - 03:15:32.26]

a lot of the low hanging fruit is picked.

[03:15:32.48 - 03:15:35.68]

So it seems like it's going to require more money

[03:15:35.68 - 03:15:38.40]

to go eke out more rewards.

[03:15:38.94 - 03:15:40.40]

People always make fun of pharma

[03:15:40.40 - 03:15:42.18]

with this thing they call Arum's law,

[03:15:42.30 - 03:15:43.82]

which is Moore's law backwards.

[03:15:44.94 - 03:15:48.06]

And the idea is like pharma for every next generation

[03:15:48.06 - 03:15:49.20]

gets more expensive.

[03:15:49.84 - 03:15:53.68]

But like semiconductors also require huge amounts of R&D.

[03:15:54.08 - 03:15:56.96]

And just because we're getting that speed up every 18 months,

[03:15:57.68 - 03:15:59.32]

have you looked at EUV?

[03:15:59.76 - 03:16:02.24]

It's an order of magnitude more expensive

[03:16:02.24 - 03:16:06.14]

every generation to be able to make processors like that.

[03:16:06.24 - 03:16:08.46]

So I think that's a little bit of a false equivalence.

[03:16:08.96 - 03:16:11.00]

I totally understand why,

[03:16:11.66 - 03:16:12.90]

especially in heavy industry,

[03:16:13.24 - 03:16:16.90]

it should be more expensive to get marginal benefit out

[03:16:16.90 - 03:16:19.30]

once you have already picked the low hanging fruit.

[03:16:19.78 - 03:16:21.88]

So I have a little bit of pushback on the

[03:16:21.88 - 03:16:23.30]

healthcare is getting more expensive

[03:16:23.30 - 03:16:24.26]

and we're getting less out of it.

[03:16:24.58 - 03:16:26.26]

The thing that isn't good is that

[03:16:26.26 - 03:16:28.16]

the average life expectancies

[03:16:28.16 - 03:16:30.50]

have actually declined in America the last few years,

[03:16:30.70 - 03:16:33.06]

despite the fact that we're spending more money.

[03:16:33.20 - 03:16:35.20]

So it's not just that our marginal dollars

[03:16:35.20 - 03:16:35.96]

are earning us less,

[03:16:36.06 - 03:16:37.96]

it's that we're putting more money in

[03:16:37.96 - 03:16:40.04]

and life expectancy is actually decreasing.

[03:16:40.44 - 03:16:40.96]

And unfortunately,

[03:16:41.16 - 03:16:43.44]

it's kind of outside the health system's control.

[03:16:43.60 - 03:16:45.80]

It's a lot of like mental health related stuff,

[03:16:46.22 - 03:16:47.34]

overdosing on drugs.

[03:16:47.84 - 03:16:49.76]

A lot of things impacting the length of life

[03:16:49.76 - 03:16:52.22]

are cutting 60 years off of people's lives

[03:16:52.22 - 03:16:52.62]

when they're young,

[03:16:52.70 - 03:16:54.78]

which obviously will massively affect the data.

[03:16:55.68 - 03:16:56.58]

One other thought on this though,

[03:16:56.68 - 03:16:58.78]

so from 1850 onward,

[03:16:58.92 - 03:17:00.80]

we got these huge increases

[03:17:00.80 - 03:17:02.94]

in life expectancy every decade.

[03:17:03.24 - 03:17:04.52]

If you look at these charts, it's astonishing.

[03:17:04.70 - 03:17:05.56]

You're like, wow,

[03:17:05.66 - 03:17:07.04]

there's like a miracle drug every year

[03:17:07.04 - 03:17:08.16]

or there's a miracle process

[03:17:08.16 - 03:17:09.98]

or there's people are washing their hands

[03:17:09.98 - 03:17:11.88]

or there's indoor bathrooms or whatever it is.

[03:17:12.28 - 03:17:13.84]

Life expectancies is getting way better.

[03:17:13.84 - 03:17:16.90]

We were like curing infectious diseases

[03:17:16.90 - 03:17:19.00]

that killed kids all the time.

[03:17:19.42 - 03:17:20.82]

But once we got those mostly covered,

[03:17:20.96 - 03:17:22.74]

at least for the sort of big,

[03:17:22.80 - 03:17:24.26]

large population ones

[03:17:24.26 - 03:17:26.02]

and we got antibiotics and insulin and all this,

[03:17:26.48 - 03:17:30.36]

if you spend money to help a 75 year old live to 80,

[03:17:30.56 - 03:17:32.22]

it has a much different effect on the data

[03:17:32.22 - 03:17:34.98]

than helping a 10 year old live to be 75.

[03:17:35.90 - 03:17:38.42]

And once you compound that with a low hanging fruit,

[03:17:38.58 - 03:17:40.08]

of course, it's going to be really expensive

[03:17:40.08 - 03:17:42.32]

to figure out how to make that 75 year old live to be 80,

[03:17:42.32 - 03:17:46.36]

especially if there's a big fragmentation of disease.

[03:17:47.08 - 03:17:49.42]

Yeah, it's also exponentially harder

[03:17:49.42 - 03:17:51.42]

to get that five extra years of life

[03:17:51.42 - 03:17:52.30]

because you're facing

[03:17:53.00 - 03:17:55.26]

20 different morbidities out there.

[03:17:55.48 - 03:17:58.02]

Right. We rarely are getting the silver bullets

[03:17:58.02 - 03:17:59.80]

like we did with antibiotics.

[03:18:00.14 - 03:18:03.00]

It's going to be $2.3 billion over here

[03:18:03.00 - 03:18:04.34]

to cure this form of melanoma.

[03:18:04.44 - 03:18:06.24]

And it's going to be $2.3 billion over there

[03:18:06.24 - 03:18:08.54]

to cure this form of pancreatic cancer.

[03:18:08.86 - 03:18:09.78]

It's just going to,

[03:18:09.78 - 03:18:12.02]

I think just going to keep getting more expensive

[03:18:12.58 - 03:18:15.76]

to cure the more fragmented small population things.

[03:18:15.94 - 03:18:17.58]

I think there's a reasonable question of like,

[03:18:17.62 - 03:18:19.28]

what do we do about that as a society?

[03:18:19.60 - 03:18:21.40]

Now that's on the benefit side.

[03:18:21.72 - 03:18:23.72]

There might be some massive cost reduction side.

[03:18:23.82 - 03:18:26.70]

Like you could imagine some technology comes along

[03:18:26.70 - 03:18:28.52]

that makes drug development way cheaper

[03:18:28.52 - 03:18:31.14]

or makes us able to like massively collapse

[03:18:31.14 - 03:18:33.24]

the time and dollars spent in a clinical trial

[03:18:33.24 - 03:18:34.68]

by using AI or something.

[03:18:34.68 - 03:18:39.66]

Or there might be ways to collapse costs 10 or 100 X

[03:18:39.66 - 03:18:41.48]

somewhere in the healthcare system.

[03:18:41.60 - 03:18:43.18]

But the current state of affairs

[03:18:43.18 - 03:18:44.52]

is not very free marketing.

[03:18:44.72 - 03:18:46.34]

So it's harder to imagine that happening

[03:18:46.34 - 03:18:49.10]

versus other ecosystems the way it happens in tech.

[03:18:49.68 - 03:18:49.74]

Yeah.

[03:18:50.28 - 03:18:52.06]

A couple other just like fun things

[03:18:52.06 - 03:18:53.56]

that I heard from people during research,

[03:18:53.64 - 03:18:55.06]

which I think are just like interesting problems

[03:18:55.06 - 03:18:55.64]

to think about.

[03:18:56.28 - 03:18:59.74]

The health system that was created over the last century

[03:18:59.74 - 03:19:01.24]

was really designed to treat

[03:19:01.24 - 03:19:03.06]

acute and infectious diseases.

[03:19:03.56 - 03:19:05.82]

If you think about our healthcare system

[03:19:05.82 - 03:19:06.50]

as it exists today,

[03:19:06.64 - 03:19:08.44]

hospitals where you go in when you're sick,

[03:19:08.90 - 03:19:10.36]

doctors that you see when you're sick,

[03:19:10.74 - 03:19:12.46]

surgeries you have when you have an issue,

[03:19:13.08 - 03:19:13.96]

pills that you take

[03:19:13.96 - 03:19:15.40]

when you have an infectious disease,

[03:19:15.52 - 03:19:16.40]

antibiotics that you take.

[03:19:16.76 - 03:19:18.36]

You look at the chart of life expectancy,

[03:19:18.74 - 03:19:20.44]

the people that designed that system

[03:19:20.44 - 03:19:23.26]

and solved the acute infectious disease problems

[03:19:23.26 - 03:19:25.20]

should just hang up a big mission accomplished banner.

[03:19:25.68 - 03:19:26.32]

It worked.

[03:19:26.44 - 03:19:27.42]

It was amazing.

[03:19:27.94 - 03:19:27.96]

Right.

[03:19:28.10 - 03:19:29.00]

We made it to the moon.

[03:19:29.18 - 03:19:31.86]

Human quality of life is just unbelievably high

[03:19:31.86 - 03:19:33.98]

and there's very little in common today

[03:19:33.98 - 03:19:36.86]

on the list of things that will kill you versus 1850.

[03:19:37.12 - 03:19:38.40]

It's a completely different set of things.

[03:19:39.12 - 03:19:42.08]

So the next frontier then is chronic illnesses

[03:19:42.08 - 03:19:44.20]

and they catch up with us later in life

[03:19:44.20 - 03:19:45.84]

and they're basically undetectable

[03:19:45.84 - 03:19:48.34]

for like the first 50 years or the first 30 years.

[03:19:48.80 - 03:19:50.64]

I mean, obesity leading to diabetes

[03:19:50.64 - 03:19:52.32]

or cardiovascular health

[03:19:52.32 - 03:19:53.80]

leading to heart attacks and strokes.

[03:19:54.02 - 03:19:56.56]

These are very different things to treat

[03:19:56.56 - 03:19:58.70]

and require a very different way of thinking,

[03:19:58.88 - 03:20:00.52]

of regulating, of paying for.

[03:20:00.52 - 03:20:03.12]

You don't want to wait until people are sick to treat it

[03:20:03.12 - 03:20:03.92]

because then it's too late.

[03:20:04.34 - 03:20:05.04]

And so in many ways,

[03:20:05.18 - 03:20:07.46]

this entire old system that we created

[03:20:07.46 - 03:20:09.76]

that consumes 18% of our GDP

[03:20:10.34 - 03:20:12.96]

may actually not make sense in this new world

[03:20:12.96 - 03:20:16.22]

of treating the things that are more likely to kill us now,

[03:20:16.30 - 03:20:17.32]

which is chronic illnesses.

[03:20:17.98 - 03:20:18.10]

Right.

[03:20:18.98 - 03:20:20.28]

I don't really know what to do with that.

[03:20:20.44 - 03:20:21.34]

I think it's a pretty interesting.

[03:20:21.62 - 03:20:23.80]

You did so much more of this side of the research than I did.

[03:20:23.86 - 03:20:26.60]

Did you get a sense in talking to people

[03:20:26.60 - 03:20:29.92]

like that transition is happening or no?

[03:20:31.38 - 03:20:32.92]

Well, it's so hard in healthcare

[03:20:32.92 - 03:20:34.20]

because there's so many buzzwords.

[03:20:34.64 - 03:20:36.80]

Like there's a thing called value-based care,

[03:20:37.00 - 03:20:38.82]

which in a sense, it makes sense.

[03:20:38.86 - 03:20:40.34]

It's like we shouldn't have to pay

[03:20:40.34 - 03:20:41.98]

for every little intervention someone does.

[03:20:42.06 - 03:20:44.10]

We should pay for them helping me cure the thing.

[03:20:44.60 - 03:20:45.68]

You don't pay for the interventions,

[03:20:45.88 - 03:20:46.58]

pay for the outcome.

[03:20:47.06 - 03:20:49.22]

And so then that forces the right sort of thinking

[03:20:49.22 - 03:20:50.24]

all the way up the value chain

[03:20:50.24 - 03:20:53.50]

of how can we deliver a quality of service

[03:20:53.50 - 03:20:56.30]

in the cheapest way possible to achieve the same outcome,

[03:20:56.38 - 03:20:58.44]

which is like how free markets work, right?

[03:20:58.90 - 03:20:59.48]

But in healthcare,

[03:20:59.48 - 03:21:01.56]

the way everything gets billed is on a cost basis,

[03:21:01.68 - 03:21:04.04]

which we've talked a lot about cost plus pricing

[03:21:04.04 - 03:21:05.36]

and the dangers of that on the show.

[03:21:05.92 - 03:21:07.46]

So, I mean, to the extent

[03:21:07.46 - 03:21:09.28]

that the value-based care stuff helps,

[03:21:09.84 - 03:21:11.16]

no, I didn't hear any solutions.

[03:21:11.74 - 03:21:12.02]

All right.

[03:21:12.34 - 03:21:14.44]

Well, listeners, if you get inspired.

[03:21:15.22 - 03:21:17.46]

I did hear one credible pushback

[03:21:17.46 - 03:21:19.56]

against why is healthcare getting so expensive

[03:21:19.56 - 03:21:20.90]

as a fraction of GDP.

[03:21:21.46 - 03:21:22.84]

We use a lot more healthcare.

[03:21:23.24 - 03:21:27.48]

People just have a lot more life-bettering interventions,

[03:21:27.48 - 03:21:30.82]

be it from doctors, from pills, from facilities,

[03:21:31.26 - 03:21:33.16]

than we did a long time ago.

[03:21:33.56 - 03:21:35.30]

And so like, I don't know,

[03:21:35.58 - 03:21:37.28]

I had two surgeries a few years ago,

[03:21:37.36 - 03:21:38.74]

one of which was an ACL surgery

[03:21:38.74 - 03:21:41.02]

and like a whole bunch of PT.

[03:21:41.50 - 03:21:43.68]

And in 1980, would I have had those?

[03:21:44.42 - 03:21:46.94]

Maybe the PT, probably a worse surgery

[03:21:46.94 - 03:21:48.82]

because the procedures were worse back then.

[03:21:49.14 - 03:21:51.34]

In 1950, would I have had an ACL surgery at all?

[03:21:51.42 - 03:21:53.08]

No, I'd probably just limp around the rest of my life.

[03:21:53.60 - 03:21:56.38]

There really is just actually a lot more care delivered now

[03:21:56.38 - 03:21:57.18]

than there used to be.

[03:21:57.66 - 03:21:58.38]

Oh man.

[03:21:58.48 - 03:22:00.38]

I mean, even like, gosh, this is so close to home.

[03:22:00.52 - 03:22:02.86]

I mean, for me and Jenny and my family,

[03:22:02.90 - 03:22:04.62]

I've talked about this on the show before,

[03:22:04.68 - 03:22:05.86]

but Jenny and I both have

[03:22:05.86 - 03:22:08.42]

genetic cancer predisposition mutations.

[03:22:08.90 - 03:22:11.20]

So, you know, the amount of screening that we get

[03:22:11.20 - 03:22:13.28]

and then for family planning with, you know,

[03:22:13.28 - 03:22:15.68]

having our daughter and other children in the future,

[03:22:15.68 - 03:22:18.10]

the amount that we have used the medical system

[03:22:18.10 - 03:22:22.52]

as very healthy 30-somethings throughout our life

[03:22:22.52 - 03:22:25.18]

would not have been imaginable a few decades ago.

[03:22:25.32 - 03:22:26.72]

So like, yes, I totally buy that.

[03:22:27.48 - 03:22:27.80]

All right.

[03:22:28.02 - 03:22:30.38]

We're kind of drifting into value creation, value capture here

[03:22:30.38 - 03:22:33.02]

because we're making sort of societal judgments around,

[03:22:33.48 - 03:22:35.28]

you know, are the economics worth it?

[03:22:35.36 - 03:22:37.56]

Do you want to formally enter that section of the show?

[03:22:38.16 - 03:22:38.78]

Let's do it.

[03:22:39.14 - 03:22:41.02]

Maybe to start, you know, on this segment of the show,

[03:22:41.08 - 03:22:42.94]

we talk about for a given company,

[03:22:43.16 - 03:22:45.40]

how much value do they create in the world

[03:22:45.40 - 03:22:46.56]

versus how much they capture?

[03:22:47.16 - 03:22:50.22]

And let's start narrowly with Novo Nordisk itself.

[03:22:50.90 - 03:22:51.48]

What do we think?

[03:22:51.62 - 03:22:54.54]

Like value creation versus value capture.

[03:22:55.52 - 03:22:58.62]

Undeniable that over the 100 plus year history of this company,

[03:22:58.78 - 03:23:03.18]

it has created incredible value for diabetics

[03:23:03.18 - 03:23:07.24]

and now for a much broader population than just diabetics.

[03:23:07.40 - 03:23:10.00]

So the creation amount is large.

[03:23:10.52 - 03:23:14.20]

It is also undeniable that it's a half trillion dollar

[03:23:14.20 - 03:23:16.92]

market cap company on, call it,

[03:23:17.40 - 03:23:19.56]

30 to 40 billion dollars of revenue,

[03:23:19.98 - 03:23:21.38]

highly, highly profitable revenue

[03:23:21.38 - 03:23:23.52]

that they have also captured a lot of value.

[03:23:24.42 - 03:23:26.16]

Well, a lot of people talk about,

[03:23:26.38 - 03:23:28.08]

does the pharma sector over earn?

[03:23:28.34 - 03:23:30.20]

This is sort of the way people talk about this.

[03:23:30.28 - 03:23:32.26]

And on other episodes that we've done,

[03:23:32.38 - 03:23:34.22]

there's far less of a value judgment.

[03:23:34.46 - 03:23:35.58]

We're kind of like, yeah,

[03:23:35.70 - 03:23:37.80]

companies should go be as profitable as they can be.

[03:23:37.92 - 03:23:39.52]

My God, Visa makes so much money.

[03:23:39.92 - 03:23:41.72]

And like, that's a little bit tongue in cheek,

[03:23:41.84 - 03:23:43.58]

but in healthcare, it's sort of different

[03:23:43.58 - 03:23:45.56]

because there's an expectation

[03:23:46.32 - 03:23:48.58]

that you sort of start from a place of public good.

[03:23:48.70 - 03:23:51.28]

And then when healthcare companies earn too much money,

[03:23:51.30 - 03:23:52.38]

you sort of look at it and you're like,

[03:23:52.38 - 03:23:53.80]

I don't know if I like that,

[03:23:54.16 - 03:23:55.42]

which is so interesting, right?

[03:23:55.50 - 03:23:57.28]

It's a very different starting place

[03:23:57.28 - 03:23:59.04]

than I think a lot of people tend to look at businesses.

[03:23:59.96 - 03:24:02.14]

But one thing that is true

[03:24:02.14 - 03:24:05.16]

is that these businesses require

[03:24:05.16 - 03:24:06.96]

a tremendous amount of investment.

[03:24:07.50 - 03:24:11.02]

And so just merely looking at their margins is stupid.

[03:24:11.32 - 03:24:12.42]

I alluded to that earlier,

[03:24:12.80 - 03:24:15.08]

but like, of course they have high gross margins

[03:24:15.08 - 03:24:17.34]

for the things that they actually end up selling

[03:24:17.34 - 03:24:19.62]

rather than killing, they should.

[03:24:19.96 - 03:24:20.08]

Right.

[03:24:20.40 - 03:24:21.80]

That's not taking into account

[03:24:21.80 - 03:24:24.60]

all of the research that they did over the past.

[03:24:24.72 - 03:24:25.62]

All the research,

[03:24:25.74 - 03:24:26.88]

because those are below the line costs

[03:24:26.88 - 03:24:28.30]

and all the failures

[03:24:28.30 - 03:24:29.84]

because they never sell those drugs.

[03:24:30.00 - 03:24:31.12]

So you basically have to say,

[03:24:31.36 - 03:24:33.28]

well, all the margin dollars they earn from the winners,

[03:24:33.48 - 03:24:36.18]

both have to cover all the fixed costs R&D of that drug,

[03:24:36.26 - 03:24:37.70]

but they also have to cover

[03:24:37.70 - 03:24:39.46]

all the failures of every other drug.

[03:24:39.68 - 03:24:41.36]

So when you actually look at their

[03:24:41.36 - 03:24:44.02]

return on invested capital numbers, the ROIC,

[03:24:44.50 - 03:24:46.02]

they are not through the roof.

[03:24:46.18 - 03:24:48.48]

They're like 13% industry wide,

[03:24:48.62 - 03:24:50.14]

but hold for Novo for a second.

[03:24:50.14 - 03:24:52.60]

It's totally in line with other industries

[03:24:52.60 - 03:24:54.58]

like trucking, broadcasting, electronics,

[03:24:54.78 - 03:24:56.40]

when you sort of look at the federal data on it.

[03:24:56.94 - 03:24:59.82]

I mean, the fact that on the blockbuster drugs,

[03:24:59.98 - 03:25:01.34]

the companies earn a ton of money

[03:25:01.34 - 03:25:03.06]

is not the whole picture.

[03:25:03.28 - 03:25:04.52]

The picture really is like,

[03:25:04.86 - 03:25:06.68]

as an industry, are they over-earning?

[03:25:07.08 - 03:25:07.42]

No.

[03:25:07.76 - 03:25:09.48]

They kind of used to until like 2000,

[03:25:09.90 - 03:25:12.10]

but nowadays the ROIC numbers

[03:25:12.10 - 03:25:13.82]

are just actually not that interesting.

[03:25:14.02 - 03:25:14.86]

And in fact, some would argue

[03:25:14.86 - 03:25:17.58]

that as pharma gets less and less efficient,

[03:25:17.58 - 03:25:20.28]

capitalists should just not allocate their dollars there

[03:25:20.28 - 03:25:22.56]

because there's literally not enough incentive

[03:25:23.18 - 03:25:25.84]

in the profit dollars that you get to earn

[03:25:25.84 - 03:25:28.62]

from your drug after it's patented for many years.

[03:25:29.02 - 03:25:31.18]

Like, should you actually index the pharma sector?

[03:25:31.32 - 03:25:32.12]

Probably not.

[03:25:32.34 - 03:25:33.88]

I mean, it's a little better than other sectors,

[03:25:34.04 - 03:25:36.94]

but not necessarily enough to take the sector risk

[03:25:36.94 - 03:25:38.36]

of putting all your dollars there.

[03:25:38.84 - 03:25:39.82]

Well, you're making me feel better

[03:25:39.82 - 03:25:41.70]

about my career choices here to work in tech.

[03:25:43.20 - 03:25:45.88]

Now, Novo Nordisk, on the other hand,

[03:25:45.88 - 03:25:47.82]

massively outperforms their peers.

[03:25:48.26 - 03:25:49.84]

And there's been this really interesting trend

[03:25:49.84 - 03:25:52.96]

where ROIC for pharma as an industry

[03:25:52.96 - 03:25:55.20]

over the last 50 years has declined,

[03:25:55.46 - 03:25:58.94]

but the variance between companies has increased.

[03:25:59.44 - 03:26:03.92]

And so Novo far outperforms the median pharma company

[03:26:03.92 - 03:26:05.46]

in terms of return on invested capital,

[03:26:05.62 - 03:26:07.84]

but there's companies that way underperform too.

[03:26:08.06 - 03:26:09.60]

And it's interesting that the good companies

[03:26:09.60 - 03:26:11.84]

are getting better and the bad companies are getting worse

[03:26:11.84 - 03:26:13.94]

while the whole industry declines

[03:26:13.94 - 03:26:16.10]

in its ability to produce a return.

[03:26:16.84 - 03:26:18.12]

Yeah. Ah, so interesting.

[03:26:18.26 - 03:26:20.02]

I mean, I'm tempted to say from this whole episode

[03:26:20.02 - 03:26:22.26]

that the moral of the story here is focus

[03:26:22.26 - 03:26:23.34]

and long-term focus,

[03:26:23.54 - 03:26:26.08]

but I feel like we need to uncover this industry more

[03:26:26.08 - 03:26:27.42]

and hear from folks in it.

[03:26:27.74 - 03:26:28.80]

If that were always true,

[03:26:28.86 - 03:26:30.62]

why are there not more Novos out there?

[03:26:30.96 - 03:26:31.22]

Right.

[03:26:31.54 - 03:26:34.02]

It may also be play compounding games in big markets.

[03:26:34.36 - 03:26:36.44]

I mean, it's very clear, even if not intentionally,

[03:26:36.70 - 03:26:40.06]

that a lot of Novo's historical work

[03:26:40.06 - 03:26:43.26]

led to them understanding something important

[03:26:43.26 - 03:26:44.34]

better than anybody else.

[03:26:44.50 - 03:26:46.98]

And I think they might've lucked into how important it became,

[03:26:47.22 - 03:26:48.90]

but play compounding games.

[03:26:49.86 - 03:26:50.84]

It's pretty interesting.

[03:26:51.18 - 03:26:55.08]

I mean, pharma as a whole of the medical pie

[03:26:55.08 - 03:26:58.90]

only occupies about 13% of revenue.

[03:26:59.14 - 03:27:01.80]

I really would've thought with all the hate toward big pharma

[03:27:01.80 - 03:27:02.78]

that it would be higher.

[03:27:03.08 - 03:27:05.44]

13% of revenue in the healthcare industry?

[03:27:05.56 - 03:27:05.86]

Yeah.

[03:27:06.14 - 03:27:09.56]

Yeah. So that means 87% of healthcare revenue

[03:27:09.56 - 03:27:10.76]

is not going to pharma.

[03:27:10.76 - 03:27:11.36]

Right.

[03:27:11.64 - 03:27:14.30]

If you could trade never having drugs again

[03:27:14.30 - 03:27:15.56]

or never having doctors again,

[03:27:15.76 - 03:27:17.34]

which one would you pick?

[03:27:17.92 - 03:27:19.10]

Wow. That's a good question.

[03:27:19.18 - 03:27:20.20]

I hadn't thought about that.

[03:27:20.38 - 03:27:21.70]

It's of course kind of a farcical.

[03:27:22.12 - 03:27:23.38]

Right. It's totally farcical.

[03:27:23.52 - 03:27:24.82]

You know, I think about my scenario

[03:27:24.82 - 03:27:26.24]

and Jenny and my scenario,

[03:27:26.46 - 03:27:29.08]

like it's both together for sure.

[03:27:29.54 - 03:27:30.74]

Yeah, of course it is.

[03:27:31.18 - 03:27:33.56]

But do you think drugs only provide 13%

[03:27:34.12 - 03:27:36.10]

of the value to all of healthcare?

[03:27:36.40 - 03:27:37.22]

No, certainly not.

[03:27:37.28 - 03:27:38.04]

It's crazy.

[03:27:38.34 - 03:27:39.38]

Definitely more than that.

[03:27:39.52 - 03:27:40.44]

Especially incrementally.

[03:27:40.44 - 03:27:42.50]

The investments we're making going forward

[03:27:43.16 - 03:27:46.96]

in improving humans and their quality of life,

[03:27:47.42 - 03:27:50.62]

some amount of it comes from amazing new surgeries,

[03:27:50.96 - 03:27:53.88]

some amount of it comes from amazing new medical devices,

[03:27:54.18 - 03:27:55.94]

but some amount of it does not come

[03:27:55.94 - 03:27:59.06]

from new administrative billing practices or...

[03:27:59.06 - 03:28:00.82]

The four middle men in the middle of the equation.

[03:28:00.98 - 03:28:01.40]

Right.

[03:28:01.80 - 03:28:04.46]

The improved ability to move a drug

[03:28:04.46 - 03:28:05.88]

from place A to place B

[03:28:05.88 - 03:28:07.58]

and come up with yet another clever way

[03:28:07.58 - 03:28:09.60]

to build out the formulary

[03:28:09.60 - 03:28:11.88]

so it moves money from this pocket to that pocket.

[03:28:12.50 - 03:28:14.80]

Hospitals, if you back out the drugs they prescribe,

[03:28:15.22 - 03:28:19.96]

hospitals are 28% of the revenue in all of healthcare,

[03:28:20.42 - 03:28:21.64]

which is large,

[03:28:21.78 - 03:28:23.86]

but hospitals provide a crap ton of value.

[03:28:24.36 - 03:28:27.12]

Professional services like doctor's offices are 26%.

[03:28:27.12 - 03:28:28.72]

They also provide a lot of value.

[03:28:28.96 - 03:28:32.26]

Do both of them provide together four times as much value

[03:28:32.26 - 03:28:34.50]

as the breakthrough drugs do?

[03:28:35.20 - 03:28:36.74]

I mean, freaking health insurance,

[03:28:37.08 - 03:28:38.84]

the administrative costs of health insurance

[03:28:38.84 - 03:28:39.56]

are 8%.

[03:28:40.16 - 03:28:41.86]

Of a very, very, very large number.

[03:28:42.14 - 03:28:42.26]

Yeah.

[03:28:42.66 - 03:28:43.10]

Right.

[03:28:43.44 - 03:28:44.28]

Yeah. I mean, that said,

[03:28:44.40 - 03:28:46.26]

the administrative costs of health insurance

[03:28:46.26 - 03:28:49.76]

are within spitting distance of pharma.

[03:28:50.38 - 03:28:51.76]

And pharma, I will say,

[03:28:51.94 - 03:28:55.74]

who is taking any risk in this whole ecosystem?

[03:28:56.28 - 03:28:57.34]

It's only pharma.

[03:28:57.64 - 03:28:57.98]

Yeah.

[03:28:58.22 - 03:29:01.94]

Who's taking risk to innovate and make anything better?

[03:29:02.72 - 03:29:04.76]

Every other bet that a hospital makes

[03:29:04.76 - 03:29:06.04]

or that an insurance company makes

[03:29:06.04 - 03:29:07.38]

is just probably going to pay off.

[03:29:07.38 - 03:29:08.80]

This is actually pretty interesting.

[03:29:08.98 - 03:29:12.54]

If you look at the net income of a pharma company,

[03:29:12.62 - 03:29:13.64]

and let's just take the biggest one

[03:29:13.64 - 03:29:15.02]

or a very large one, Pfizer,

[03:29:15.70 - 03:29:16.58]

super spiky,

[03:29:16.78 - 03:29:17.94]

even though they're diversified,

[03:29:18.04 - 03:29:19.60]

up, down, up, down, up, down.

[03:29:19.96 - 03:29:21.62]

Some years they make very little profit.

[03:29:21.72 - 03:29:22.82]

Some years they make a lot of profit.

[03:29:23.24 - 03:29:24.44]

That is what you should expect

[03:29:24.44 - 03:29:26.60]

from someone who is taking risk,

[03:29:26.82 - 03:29:27.48]

trying to innovate.

[03:29:27.70 - 03:29:28.60]

Sometimes they succeed.

[03:29:28.74 - 03:29:29.52]

Sometimes they don't.

[03:29:29.74 - 03:29:31.20]

You look at an insurance company,

[03:29:31.62 - 03:29:33.36]

and by the way, let's define insurance company.

[03:29:33.74 - 03:29:36.38]

Insurance company is someone that in the good years

[03:29:36.94 - 03:29:37.82]

collects money.

[03:29:38.50 - 03:29:40.02]

And then in the bad years,

[03:29:40.14 - 03:29:41.16]

they have a big loss.

[03:29:41.30 - 03:29:42.76]

And hopefully they collected enough money

[03:29:42.76 - 03:29:45.50]

such that they can still make some profit

[03:29:45.50 - 03:29:46.88]

after covering the losses,

[03:29:46.88 - 03:29:47.96]

like a hurricane hits.

[03:29:48.10 - 03:29:49.74]

The insurance company has a bad year.

[03:29:50.20 - 03:29:51.52]

Does that ever happen?

[03:29:51.52 - 03:29:54.28]

If you look at the net income of the big insurers?

[03:29:55.02 - 03:29:55.16]

No.

[03:29:55.74 - 03:29:55.80]

Yeah.

[03:29:56.00 - 03:29:57.18]

This is no surprise here,

[03:29:57.22 - 03:29:59.74]

but health insurance in the US is not insurance.

[03:29:59.78 - 03:30:00.62]

It's access.

[03:30:00.94 - 03:30:01.92]

It's 100%, right?

[03:30:02.34 - 03:30:04.40]

So we just had the single greatest healthcare crisis

[03:30:04.40 - 03:30:06.52]

in the last several decades with COVID.

[03:30:07.06 - 03:30:08.02]

And what happened to the profits

[03:30:08.02 - 03:30:08.90]

of the big health insurers?

[03:30:09.30 - 03:30:11.18]

They stayed flat or grew.

[03:30:11.80 - 03:30:13.20]

So, I mean, we aren't here unacquired

[03:30:13.20 - 03:30:15.14]

to demonize people for making money

[03:30:15.14 - 03:30:16.04]

or for being capitalists,

[03:30:16.12 - 03:30:17.82]

but I do think we should call a spade a spade.

[03:30:18.24 - 03:30:19.24]

The health insurance companies

[03:30:19.24 - 03:30:21.70]

are not actually insurance.

[03:30:22.10 - 03:30:23.48]

They're not actually holding the bag

[03:30:23.48 - 03:30:25.80]

as the funder of last resort when calamity hits.

[03:30:26.04 - 03:30:26.82]

It's the government.

[03:30:27.16 - 03:30:28.42]

So really it's the taxpayers.

[03:30:28.80 - 03:30:31.02]

The big insurance companies and the PBMs

[03:30:31.02 - 03:30:33.16]

make good profits in the good times,

[03:30:33.16 - 03:30:35.24]

but the taxpayer funds the bad kinds.

[03:30:36.12 - 03:30:36.98]

I would be kinder here

[03:30:36.98 - 03:30:38.04]

to the middlemen of the industry

[03:30:38.04 - 03:30:39.34]

if I thought they were innovating

[03:30:39.34 - 03:30:41.26]

and taking risks the way that the drug companies are.

[03:30:41.40 - 03:30:42.96]

But the incredible consolidation

[03:30:42.96 - 03:30:45.40]

that's happened among insurers and PBMs,

[03:30:45.56 - 03:30:47.54]

and I mean, frankly, even the hospitals

[03:30:47.54 - 03:30:48.62]

and pharmacies too,

[03:30:48.74 - 03:30:50.60]

like there's either local monopolies

[03:30:50.60 - 03:30:51.50]

in the hospital case

[03:30:51.50 - 03:30:54.14]

or kind of a three race oligopoly

[03:30:54.14 - 03:30:56.34]

in every other part of the value chain

[03:30:56.34 - 03:30:58.32]

that really is just obfuscated

[03:30:58.32 - 03:30:59.56]

and insulated profits.

[03:31:01.00 - 03:31:02.74]

So what you're telling me is that pharma,

[03:31:02.74 - 03:31:04.26]

are the guys in the arena.

[03:31:05.36 - 03:31:06.92]

They're out there trying things.

[03:31:07.22 - 03:31:07.40]

Exactly.

[03:31:07.70 - 03:31:08.74]

No matter what value judgments

[03:31:08.74 - 03:31:10.02]

you want to place on them or anyone else.

[03:31:10.18 - 03:31:12.40]

And there are years where pharma way out earns.

[03:31:12.54 - 03:31:12.94]

And frankly,

[03:31:13.34 - 03:31:15.12]

Novo Nordisk has way out earned

[03:31:15.12 - 03:31:17.20]

many of their peers many years in a row.

[03:31:17.64 - 03:31:19.82]

And it's like a very fine question

[03:31:19.82 - 03:31:20.54]

to ask of like,

[03:31:20.68 - 03:31:22.50]

does any healthcare company deserve

[03:31:22.50 - 03:31:25.08]

to have such phenomenal returns

[03:31:25.08 - 03:31:27.08]

on invested capital like Novo Nordisk does?

[03:31:27.36 - 03:31:29.60]

But there are many players in the ecosystem

[03:31:29.60 - 03:31:30.94]

for whom it is obvious to me

[03:31:30.94 - 03:31:32.78]

that they should not be as large

[03:31:32.78 - 03:31:34.42]

and not be as profitable as they are.

[03:31:34.96 - 03:31:35.82]

I got no arguments here.

[03:31:36.26 - 03:31:36.86]

All right.

[03:31:36.94 - 03:31:37.42]

Team Novo.

[03:31:37.90 - 03:31:38.14]

Yes.

[03:31:38.30 - 03:31:39.74]

And frankly, team pharma,

[03:31:39.84 - 03:31:42.46]

at least relative to its reputation.

[03:31:42.88 - 03:31:44.14]

I think there are many players

[03:31:44.14 - 03:31:45.10]

in the healthcare industry

[03:31:45.10 - 03:31:46.36]

that have a fine reputation

[03:31:46.36 - 03:31:48.16]

and they probably deserve a fine reputation.

[03:31:48.42 - 03:31:49.66]

But it's weird to me

[03:31:49.66 - 03:31:52.00]

when a terrible reputation pharma has

[03:31:52.00 - 03:31:53.64]

when they're the ones innovating

[03:31:53.64 - 03:31:55.74]

and trying to massively affect

[03:31:55.74 - 03:31:57.92]

the trajectory of humans.

[03:31:58.58 - 03:31:58.72]

Yeah.

[03:31:59.26 - 03:32:00.38]

And I think that's why,

[03:32:00.38 - 03:32:01.76]

a lot of scientists,

[03:32:02.06 - 03:32:02.74]

including, I think,

[03:32:02.94 - 03:32:04.78]

Lata and many, if not most folks

[03:32:04.78 - 03:32:05.60]

at Novo Nordisk,

[03:32:05.70 - 03:32:06.58]

that's why they work there.

[03:32:07.88 - 03:32:08.12]

All right.

[03:32:08.14 - 03:32:09.52]

So finally, to wrap this section,

[03:32:09.66 - 03:32:09.92]

listeners,

[03:32:10.28 - 03:32:11.76]

this is all very, very complicated.

[03:32:12.14 - 03:32:13.74]

Every time I was tempted to say,

[03:32:13.82 - 03:32:16.44]

well, XYZ party or XYZ mechanism is stupid,

[03:32:16.58 - 03:32:18.72]

which I probably did too much on this episode,

[03:32:18.82 - 03:32:20.90]

I discovered a very rational argument

[03:32:20.90 - 03:32:22.70]

for why that thing exists

[03:32:22.70 - 03:32:24.06]

and why it isn't all that bad,

[03:32:24.10 - 03:32:26.38]

which is a little bit maddening to research

[03:32:26.38 - 03:32:29.26]

and also explains how the system in America

[03:32:29.26 - 03:32:31.04]

ended up the way that it did today.

[03:32:32.04 - 03:32:33.90]

To close value creation, value capture,

[03:32:34.04 - 03:32:35.96]

there is sort of an interesting thing

[03:32:35.96 - 03:32:37.28]

that everyone should just noodle on

[03:32:37.28 - 03:32:38.32]

and try to square the circle.

[03:32:39.06 - 03:32:40.78]

People feel like drugs cost too much

[03:32:40.78 - 03:32:41.74]

and they don't understand

[03:32:41.74 - 03:32:42.94]

how much they're going to cost

[03:32:42.94 - 03:32:44.14]

and they're upset

[03:32:44.14 - 03:32:46.20]

because they can't get drugs that they want.

[03:32:47.00 - 03:32:48.78]

They think they're being extorted in some way.

[03:32:49.24 - 03:32:50.60]

This is patients generally.

[03:32:51.54 - 03:32:52.92]

Shareholders in pharma companies

[03:32:52.92 - 03:32:54.10]

feel like they're actually

[03:32:54.10 - 03:32:55.10]

not making that much money.

[03:32:55.52 - 03:32:56.74]

If you look at the whole industry,

[03:32:57.50 - 03:32:59.12]

their return on invested capital

[03:32:59.12 - 03:33:00.98]

is maybe slightly better,

[03:33:01.18 - 03:33:02.70]

but pretty much on par with other industries.

[03:33:03.44 - 03:33:04.90]

So square that circle.

[03:33:05.38 - 03:33:06.20]

It's pretty weird.

[03:33:07.06 - 03:33:08.42]

All right, bear bull, David,

[03:33:08.90 - 03:33:10.66]

and we can be reasonably quick in this

[03:33:10.66 - 03:33:12.36]

since I think we've hit a lot of these points

[03:33:12.36 - 03:33:12.86]

along the way.

[03:33:13.56 - 03:33:15.16]

Yeah, I mean, to me,

[03:33:15.22 - 03:33:17.06]

for Novo Nordisk specifically,

[03:33:17.28 - 03:33:18.60]

I think it's pretty simple.

[03:33:19.10 - 03:33:22.02]

Are GLP-1s the next super cycle?

[03:33:22.32 - 03:33:23.90]

If yes, that is the bull case.

[03:33:24.44 - 03:33:26.32]

Right, even if Lilly's Manjaro

[03:33:26.32 - 03:33:27.68]

and Zepbound are like,

[03:33:27.68 - 03:33:29.40]

I think they're like 30% cheaper,

[03:33:29.60 - 03:33:30.34]

they might be better,

[03:33:30.66 - 03:33:32.80]

but they can both make a ton of them

[03:33:32.80 - 03:33:34.52]

and all of them will get pulled off the shelves

[03:33:34.52 - 03:33:35.16]

right away.

[03:33:35.36 - 03:33:37.08]

There is room for everybody here

[03:33:37.78 - 03:33:39.94]

and the barriers to entry

[03:33:39.94 - 03:33:41.08]

from everything we talked about

[03:33:41.08 - 03:33:42.88]

to competing in this area

[03:33:42.88 - 03:33:44.64]

are very, very high.

[03:33:45.00 - 03:33:46.72]

So like there will be a number of competitors,

[03:33:47.18 - 03:33:48.22]

including Eli Lilly,

[03:33:48.58 - 03:33:51.08]

but there will be plenty of demand

[03:33:51.08 - 03:33:52.14]

and profits for everyone.

[03:33:52.54 - 03:33:53.56]

That's the bull case.

[03:33:53.98 - 03:33:55.10]

And the bear case is,

[03:33:55.10 - 03:33:57.86]

for any variety of reasons,

[03:33:58.04 - 03:33:59.82]

be it health risk

[03:33:59.82 - 03:34:01.34]

or lack of efficacy

[03:34:01.34 - 03:34:02.26]

or whatever,

[03:34:02.90 - 03:34:03.64]

long term,

[03:34:04.00 - 03:34:05.36]

this just doesn't play out

[03:34:05.36 - 03:34:06.46]

or it doesn't play out

[03:34:06.46 - 03:34:08.92]

on the same multi-decade long timeline

[03:34:08.92 - 03:34:09.84]

that insulin did.

[03:34:10.64 - 03:34:12.42]

Yep, I think that is exactly

[03:34:12.42 - 03:34:13.26]

the right way to put it.

[03:34:13.76 - 03:34:14.34]

For some numbers,

[03:34:14.38 - 03:34:15.28]

which I think are interesting

[03:34:15.28 - 03:34:17.20]

and just sort of to illustrate,

[03:34:17.78 - 03:34:19.20]

if semi-glutide becomes

[03:34:19.20 - 03:34:21.30]

truly a mega blockbuster,

[03:34:21.90 - 03:34:24.52]

an example of this is Humira by AbbVie,

[03:34:25.10 - 03:34:27.60]

that generated $200 billion

[03:34:28.38 - 03:34:29.56]

in lifetime sales

[03:34:29.56 - 03:34:31.50]

since Humira was approved

[03:34:31.50 - 03:34:33.26]

for 11 different indications

[03:34:33.26 - 03:34:34.98]

across this whole spectrum

[03:34:34.98 - 03:34:37.20]

of inflammatory and autoimmune disorders.

[03:34:37.84 - 03:34:39.28]

So it turns out

[03:34:39.28 - 03:34:40.90]

you actually don't need a deep pipeline

[03:34:40.90 - 03:34:42.68]

if you have a drug

[03:34:42.68 - 03:34:45.20]

that you can be profitable on,

[03:34:45.32 - 03:34:47.60]

where there's not a lot of competitors for it,

[03:34:47.74 - 03:34:49.32]

your patent actually gives you

[03:34:49.32 - 03:34:50.36]

a good amount of room,

[03:34:50.74 - 03:34:52.02]

you build a brand around it,

[03:34:52.14 - 03:34:54.06]

you get approved for a ton of indications

[03:34:54.06 - 03:34:55.90]

that all have large populations.

[03:34:56.54 - 03:34:58.42]

I mean, there is such a blockbuster

[03:34:58.42 - 03:34:59.72]

that for a decade,

[03:35:00.36 - 03:35:00.98]

it doesn't matter

[03:35:00.98 - 03:35:02.08]

how deep your pipeline is

[03:35:02.08 - 03:35:03.12]

or how diverse it is,

[03:35:03.30 - 03:35:04.02]

you just win.

[03:35:04.48 - 03:35:05.40]

And there's a chance

[03:35:05.40 - 03:35:07.62]

that with semi-glutide and terzipatide,

[03:35:08.08 - 03:35:10.94]

both Lilly and Novo Nordisk

[03:35:10.94 - 03:35:12.50]

have that for the next decade.

[03:35:13.46 - 03:35:14.56]

Yep, a decade plus

[03:35:14.56 - 03:35:16.10]

with further innovations

[03:35:16.10 - 03:35:17.62]

and iterations that are going to come.

[03:35:17.92 - 03:35:19.42]

Yeah, Eli Lilly has this one

[03:35:19.42 - 03:35:21.16]

in the pipeline called Retatretride

[03:35:21.16 - 03:35:23.20]

that is a triple agonist

[03:35:23.20 - 03:35:24.88]

that adds yet another hormone to the mix.

[03:35:25.24 - 03:35:27.88]

So I think assuming that Novo stays

[03:35:27.88 - 03:35:29.72]

sort of neck and neck with Eli Lilly

[03:35:29.72 - 03:35:30.78]

as they both keep coming out

[03:35:30.78 - 03:35:31.88]

with better and better versions,

[03:35:32.28 - 03:35:34.44]

that this could be the next Humira

[03:35:34.44 - 03:35:36.32]

or potentially much bigger than Humira.

[03:35:36.74 - 03:35:38.22]

And I think the defensibility

[03:35:38.22 - 03:35:40.52]

is an open question for how many years,

[03:35:40.62 - 03:35:41.58]

but at least the next decade.

[03:35:42.30 - 03:35:42.36]

Yep.

[03:35:43.00 - 03:35:43.96]

One other downside

[03:35:43.96 - 03:35:46.02]

that I think you didn't point to specifically,

[03:35:46.10 - 03:35:47.92]

but you sort of meant in saying

[03:35:47.92 - 03:35:49.82]

there's some unknown downside to this.

[03:35:50.08 - 03:35:52.08]

There are some early studies

[03:35:52.08 - 03:35:53.46]

that are showing that

[03:35:53.46 - 03:35:56.10]

you lose more lean muscle mass

[03:35:56.10 - 03:35:57.50]

when you're on a GLP-1

[03:35:57.50 - 03:35:59.80]

than if you were just doing diet and exercise.

[03:36:00.42 - 03:36:01.46]

When you're losing weight normally,

[03:36:01.62 - 03:36:03.48]

you lose like 25% lean muscle

[03:36:03.48 - 03:36:04.84]

and these early studies

[03:36:04.84 - 03:36:06.38]

are showing it's something like 40%.

[03:36:06.38 - 03:36:08.46]

So that would be a bare case

[03:36:08.46 - 03:36:10.02]

is that we learn a couple of years from now,

[03:36:10.08 - 03:36:12.70]

like, oh man, this is actually way worse

[03:36:12.70 - 03:36:14.30]

for some set of people

[03:36:14.30 - 03:36:16.48]

that could lose weight

[03:36:16.48 - 03:36:17.56]

through diet and exercise.

[03:36:18.12 - 03:36:19.46]

But if you're obese,

[03:36:19.58 - 03:36:21.00]

it's still probably better

[03:36:21.00 - 03:36:22.44]

to lose weight,

[03:36:22.56 - 03:36:24.06]

even if a disproportionate amount of it

[03:36:24.06 - 03:36:25.02]

is lean muscle mass.

[03:36:25.14 - 03:36:26.72]

But I think there's sort of this open question

[03:36:26.72 - 03:36:29.06]

of like, is there a boogeyman in the closet like that?

[03:36:29.44 - 03:36:31.32]

Or is that a significant enough boogeyman

[03:36:31.32 - 03:36:32.40]

to really change things?

[03:36:33.10 - 03:36:34.46]

It's probably also worth mentioning

[03:36:34.46 - 03:36:35.82]

quickly here before we wrap.

[03:36:36.26 - 03:36:37.56]

You know, one potential boogeyman

[03:36:37.56 - 03:36:39.00]

that is out there people have talked about

[03:36:39.00 - 03:36:40.16]

is suicidal thoughts.

[03:36:40.68 - 03:36:42.34]

As best as we can tell from the research,

[03:36:42.36 - 03:36:45.90]

it seems like that's not a major risk

[03:36:45.90 - 03:36:46.98]

with these drugs

[03:36:46.98 - 03:36:48.82]

based on the broad population studies.

[03:36:48.82 - 03:36:51.00]

Certainly that's what Novo Nordisk says.

[03:36:51.76 - 03:36:53.30]

Regulators have not indicated

[03:36:53.30 - 03:36:54.48]

that that is an actual issue,

[03:36:54.56 - 03:36:55.60]

but that narrative is out there.

[03:36:55.86 - 03:36:57.46]

And we don't want to go through the episode

[03:36:57.46 - 03:36:58.40]

and not mention it.

[03:36:58.46 - 03:36:59.78]

That could be one of these boogeymen

[03:36:59.78 - 03:37:00.42]

for these drugs.

[03:37:01.86 - 03:37:02.40]

All right.

[03:37:02.54 - 03:37:04.20]

Well, as much as I don't like leaving it there,

[03:37:04.52 - 03:37:05.44]

I think we have beat this horse

[03:37:05.44 - 03:37:07.32]

and we should do something fun like carve-outs.

[03:37:08.00 - 03:37:09.32]

Yes, carve-outs.

[03:37:09.70 - 03:37:10.28]

Let's do it.

[03:37:10.42 - 03:37:12.10]

For new folks to acquire it,

[03:37:12.18 - 03:37:13.90]

and since it's the top of a new season here,

[03:37:14.02 - 03:37:16.14]

we do this for fun at the end of every episode.

[03:37:16.72 - 03:37:16.94]

Yep.

[03:37:17.28 - 03:37:18.02]

So I have two.

[03:37:18.02 - 03:37:18.94]

Oh, great.

[03:37:19.04 - 03:37:19.48]

I do too.

[03:37:19.96 - 03:37:22.46]

One is something that my wife got me

[03:37:22.46 - 03:37:24.06]

as a Christmas present,

[03:37:24.20 - 03:37:26.70]

which is the Noxgear Tracer 2.

[03:37:27.26 - 03:37:29.44]

And this is, I think, a Columbus, Ohio company.

[03:37:29.70 - 03:37:32.44]

It is a running vest and some lights

[03:37:32.44 - 03:37:35.62]

that are rechargeable with USB-C and waterproof.

[03:37:36.28 - 03:37:37.76]

And so it's super lightweight.

[03:37:38.08 - 03:37:39.10]

It fits really well.

[03:37:39.62 - 03:37:40.30]

Perfect for Seattle.

[03:37:40.58 - 03:37:40.88]

I know.

[03:37:40.94 - 03:37:42.32]

I wear it on all my winter runs

[03:37:42.32 - 03:37:43.68]

when I'm out walking the baby now.

[03:37:43.74 - 03:37:44.90]

Oh, you sent me a photo

[03:37:44.90 - 03:37:45.92]

and you were all lit up

[03:37:45.92 - 03:37:46.78]

and I was like, wow,

[03:37:46.78 - 03:37:48.92]

Ben is really invested in some gear.

[03:37:49.22 - 03:37:50.46]

It's pretty hard to hit you

[03:37:50.46 - 03:37:51.74]

when you're this lit up.

[03:37:52.24 - 03:37:54.54]

It also has an optional light you can buy

[03:37:54.54 - 03:37:55.50]

that clicks into the front

[03:37:55.50 - 03:37:56.72]

that's basically like a headlight,

[03:37:56.86 - 03:37:58.28]

but you wear sort of on your chest.

[03:37:58.70 - 03:37:59.48]

You don't really feel it

[03:37:59.48 - 03:38:00.22]

when you're running with it,

[03:38:00.26 - 03:38:01.84]

but you do light up the whole road in front of you.

[03:38:01.92 - 03:38:03.64]

So when you live in a place like I do

[03:38:03.64 - 03:38:07.06]

that is dark from 3.30 p.m. to 8.30 a.m.,

[03:38:07.06 - 03:38:08.96]

it's a great way to get outside and be seen.

[03:38:09.58 - 03:38:09.92]

Nice.

[03:38:10.08 - 03:38:13.46]

I bet we will have a lot of folks in Denmark

[03:38:13.46 - 03:38:14.72]

that are interested in that.

[03:38:14.94 - 03:38:15.30]

Yes.

[03:38:15.30 - 03:38:16.52]

To our Danish friends

[03:38:16.52 - 03:38:17.76]

and our Swedish friends at Spotify,

[03:38:17.94 - 03:38:19.12]

I highly recommend this product.

[03:38:19.28 - 03:38:20.98]

Yeah, nice.

[03:38:21.36 - 03:38:22.22]

All right, that's one.

[03:38:22.74 - 03:38:24.30]

All right, two is a recommendation

[03:38:24.82 - 03:38:26.64]

from friend of the show, Ian McCormick.

[03:38:26.78 - 03:38:28.10]

He texted me and said,

[03:38:28.20 - 03:38:29.48]

I listened to the holiday special.

[03:38:29.78 - 03:38:31.02]

I have a show recommendation for you.

[03:38:31.46 - 03:38:34.08]

Go watch Drops of God on Apple TV+.

[03:38:34.66 - 03:38:36.34]

I'm three episodes into it

[03:38:36.34 - 03:38:37.48]

and it is awesome.

[03:38:37.72 - 03:38:39.54]

It is like thrilling.

[03:38:39.88 - 03:38:42.78]

It's a little bit unapproachable

[03:38:42.78 - 03:38:44.56]

if you don't like subtitles

[03:38:44.56 - 03:38:48.42]

because it takes place in France and Japan.

[03:38:49.04 - 03:38:50.76]

And so parts of it are in French,

[03:38:50.88 - 03:38:51.74]

parts of it are in Japanese,

[03:38:51.90 - 03:38:52.82]

and parts of it are in English.

[03:38:52.96 - 03:38:54.16]

And so you have to read subtitles

[03:38:54.16 - 03:38:55.82]

for the majority of it.

[03:38:56.06 - 03:38:58.16]

But it is a beautiful story

[03:38:58.16 - 03:39:02.62]

about wine and family and love.

[03:39:02.86 - 03:39:05.36]

And it's got some very unexpected twists

[03:39:05.36 - 03:39:07.32]

and turns and drama to it.

[03:39:07.38 - 03:39:08.38]

So I highly recommend it.

[03:39:08.64 - 03:39:09.50]

Ooh, fun.

[03:39:09.68 - 03:39:10.88]

It sounds like Apple TV's

[03:39:10.88 - 03:39:12.02]

got some good shows these days.

[03:39:12.22 - 03:39:13.14]

I've been liking it, yeah.

[03:39:13.28 - 03:39:13.52]

Nice.

[03:39:13.52 - 03:39:15.80]

Well, I have to give you a big thank you

[03:39:15.80 - 03:39:17.18]

because over the last couple of weeks

[03:39:17.18 - 03:39:18.28]

since your recommendation,

[03:39:18.76 - 03:39:20.72]

I have read the book Wool,

[03:39:21.14 - 03:39:22.78]

which is the first in the series

[03:39:22.78 - 03:39:25.90]

that is the silo series on Apple TV+,

[03:39:25.90 - 03:39:27.16]

because I'm more of a book guy

[03:39:27.16 - 03:39:28.24]

than a TV guy.

[03:39:28.36 - 03:39:29.64]

And it is awesome.

[03:39:30.20 - 03:39:31.08]

Book is so good.

[03:39:31.46 - 03:39:33.94]

New addition to my favorite sci-fi books

[03:39:33.94 - 03:39:34.92]

and sci-fi series.

[03:39:35.14 - 03:39:35.68]

It's funny.

[03:39:35.78 - 03:39:36.80]

I've been holding off on reading the book

[03:39:36.80 - 03:39:38.26]

because I don't want to spoil the show too much,

[03:39:38.32 - 03:39:39.58]

but I hear it actually deviates

[03:39:39.58 - 03:39:40.88]

pretty significantly from the show.

[03:39:41.14 - 03:39:42.92]

I wouldn't be surprised by that

[03:39:42.92 - 03:39:44.32]

having now read the book.

[03:39:44.72 - 03:39:46.98]

I'm excited to dive into the rest of the series.

[03:39:47.48 - 03:39:48.44]

Okay, my carve-outs.

[03:39:48.50 - 03:39:49.02]

I've got two.

[03:39:49.28 - 03:39:51.30]

The first one is a fun,

[03:39:51.48 - 03:39:53.60]

timely, in-person carve-out.

[03:39:53.74 - 03:39:55.28]

It's a guest carve-out from my wife, Jenny.

[03:39:56.00 - 03:39:58.02]

San Francisco Ballet, where she works,

[03:39:58.84 - 03:40:00.88]

is premiering a new work

[03:40:00.88 - 03:40:03.28]

at the beginning of the season this year.

[03:40:04.46 - 03:40:06.10]

January 26th here in San Francisco

[03:40:06.10 - 03:40:07.04]

is the premiere.

[03:40:07.12 - 03:40:09.14]

A new ballet called Mere Mortals.

[03:40:09.68 - 03:40:10.66]

And this is pretty cool.

[03:40:10.72 - 03:40:11.00]

She was like,

[03:40:11.00 - 03:40:12.30]

you gotta talk about this on a choir.

[03:40:12.78 - 03:40:14.88]

It is about AI.

[03:40:15.78 - 03:40:20.02]

And it is a Pandora's box analogy for AI.

[03:40:20.46 - 03:40:21.18]

Super cool.

[03:40:21.44 - 03:40:25.32]

The music is composed by the British DJ Floating Points.

[03:40:25.86 - 03:40:28.78]

So it's like super modern ballet choreography

[03:40:28.78 - 03:40:31.36]

from a great up-and-coming choreographer.

[03:40:32.06 - 03:40:34.06]

And SFB's gonna do after parties

[03:40:34.06 - 03:40:35.26]

in the opera house afterwards.

[03:40:35.40 - 03:40:36.88]

Should be like a super cool event.

[03:40:37.08 - 03:40:38.52]

So Jenny and I will be there.

[03:40:38.58 - 03:40:39.82]

I think we'll be there on opening night,

[03:40:39.82 - 03:40:41.02]

January 26th.

[03:40:41.02 - 03:40:43.28]

And it runs through February 1st.

[03:40:43.60 - 03:40:43.96]

For listeners,

[03:40:44.32 - 03:40:45.58]

Dave and Jenny lived in Seattle.

[03:40:45.72 - 03:40:47.38]

And Jenny was involved in the ballet up here.

[03:40:47.56 - 03:40:49.80]

And I went to an event held,

[03:40:50.10 - 03:40:51.44]

you know, where the ballet performs.

[03:40:51.64 - 03:40:53.84]

And it's immensely cool to be in there

[03:40:53.84 - 03:40:54.72]

with the performers

[03:40:54.72 - 03:40:57.04]

and at the place where they perform

[03:40:57.04 - 03:40:58.16]

in a party setting.

[03:40:58.34 - 03:40:59.30]

Like I highly recommend it

[03:40:59.30 - 03:41:01.00]

for any of the before or after stuff too.

[03:41:01.48 - 03:41:03.34]

Yeah, ballet is such a cool art form

[03:41:03.34 - 03:41:05.10]

because of all the classical art forms,

[03:41:05.18 - 03:41:06.68]

it's the most young and modern.

[03:41:06.76 - 03:41:08.30]

You know, like these dancers are athletes.

[03:41:08.30 - 03:41:09.88]

They're like NFL level athletes

[03:41:09.88 - 03:41:10.52]

at what they do.

[03:41:10.64 - 03:41:11.84]

And, you know, they're young.

[03:41:11.96 - 03:41:14.36]

And so there is this like new life in it

[03:41:14.36 - 03:41:15.34]

relative to, I think,

[03:41:15.38 - 03:41:17.04]

a lot of other classical art forms.

[03:41:17.16 - 03:41:18.44]

So anyway, I love it.

[03:41:18.68 - 03:41:19.98]

And obviously it is Jenny's

[03:41:19.98 - 03:41:21.02]

whole life and career.

[03:41:21.34 - 03:41:22.02]

That's one.

[03:41:23.14 - 03:41:25.62]

Two, on some holiday travel flights,

[03:41:25.78 - 03:41:27.54]

I think recommended

[03:41:27.54 - 03:41:29.42]

by an acquired listener, actually.

[03:41:29.58 - 03:41:31.18]

I watched the Blackberry movie.

[03:41:31.72 - 03:41:32.64]

Have you seen this yet?

[03:41:33.22 - 03:41:34.00]

No, but I can't believe

[03:41:34.00 - 03:41:35.20]

it's Dennis from Always Sunny.

[03:41:35.58 - 03:41:36.08]

I know.

[03:41:36.16 - 03:41:37.08]

It's so good.

[03:41:37.08 - 03:41:38.80]

It's really, really well done.

[03:41:39.12 - 03:41:39.82]

I just watched it

[03:41:39.82 - 03:41:40.50]

because I was on the flight

[03:41:40.50 - 03:41:41.70]

and it was on the entertainment system.

[03:41:41.70 - 03:41:42.72]

And I was like, yeah, sure, whatever.

[03:41:42.72 - 03:41:43.48]

I'll give this a try.

[03:41:43.54 - 03:41:45.50]

Like, I don't know, RIM, Blackberry.

[03:41:45.86 - 03:41:48.58]

Yeah, but it's really, really well done.

[03:41:48.64 - 03:41:49.46]

I really enjoyed it.

[03:41:49.50 - 03:41:50.06]

It's hilarious.

[03:41:50.28 - 03:41:52.66]

It's also like a good business story.

[03:41:53.14 - 03:41:54.86]

You know, it's a good example of a,

[03:41:55.30 - 03:41:57.00]

we get asked all the time of like,

[03:41:57.02 - 03:41:58.98]

oh, can you guys cover like a failed company

[03:41:58.98 - 03:42:00.90]

or, you know, a cautionary tale?

[03:42:01.08 - 03:42:02.82]

And it's hard to do when acquired

[03:42:02.82 - 03:42:04.10]

because a lot of these companies

[03:42:04.10 - 03:42:05.58]

are still going and RIM is still going.

[03:42:05.58 - 03:42:07.20]

But Blackberry is a good one

[03:42:07.20 - 03:42:08.34]

because you're like,

[03:42:08.42 - 03:42:09.82]

it's super obvious that they failed.

[03:42:09.92 - 03:42:11.44]

There's no argument about that one.

[03:42:12.34 - 03:42:14.68]

Although, did you just see the add-on keyboard

[03:42:14.68 - 03:42:15.74]

you can get for your iPhone?

[03:42:16.16 - 03:42:16.78]

Oh, no.

[03:42:17.04 - 03:42:18.24]

Someone debuted a physical keyboard.

[03:42:18.40 - 03:42:19.54]

So for you diehards out there

[03:42:19.54 - 03:42:20.76]

who were Crackberry heads.

[03:42:20.86 - 03:42:21.68]

You missed the clicks.

[03:42:21.92 - 03:42:22.60]

You missed the clicks.

[03:42:23.16 - 03:42:24.66]

I think it's actually called clicks, maybe.

[03:42:25.08 - 03:42:26.00]

Oh, nice.

[03:42:26.74 - 03:42:29.06]

With that, we have a bunch of people to thank

[03:42:29.06 - 03:42:31.26]

who massively contributed to this episode.

[03:42:31.52 - 03:42:32.64]

It's been fun doing more

[03:42:32.64 - 03:42:33.50]

and more of this recently.

[03:42:33.64 - 03:42:35.02]

So I think we'll keep doing it too.

[03:42:35.02 - 03:42:37.24]

A huge thank you to the PillPack founders,

[03:42:37.40 - 03:42:38.96]

TJ Parker and Elliot Cohen,

[03:42:39.10 - 03:42:40.40]

for being so generous with their time

[03:42:40.40 - 03:42:41.36]

and having conversations.

[03:42:41.58 - 03:42:42.54]

Yeah, PillPack.

[03:42:42.66 - 03:42:44.12]

Super cool company that got acquired

[03:42:44.12 - 03:42:45.80]

by Amazon a few years back, right?

[03:42:45.86 - 03:42:47.12]

For over a billion dollars?

[03:42:47.40 - 03:42:48.08]

Something like that.

[03:42:48.36 - 03:42:49.54]

And became Amazon Pharmacy,

[03:42:49.84 - 03:42:50.84]

which I actually know some people

[03:42:50.84 - 03:42:52.02]

that use and rave about it.

[03:42:52.52 - 03:42:54.08]

Also, thank you to the founder

[03:42:54.08 - 03:42:57.14]

of Cover My Meds and And Health, Matt Scantland.

[03:42:57.52 - 03:42:59.62]

The founder of Blink Health, Jeff Chaikin.

[03:43:00.02 - 03:43:02.66]

The CEO of JP Morgan's healthcare arm,

[03:43:02.80 - 03:43:03.48]

Morgan Health.

[03:43:03.48 - 03:43:05.40]

His name is Dan Mendelsohn.

[03:43:05.54 - 03:43:07.10]

Had an awesome conversation with him

[03:43:07.10 - 03:43:08.52]

and the other folks I mentioned

[03:43:08.52 - 03:43:10.14]

to kind of bounce some ideas around

[03:43:10.14 - 03:43:11.32]

that we were thinking about

[03:43:11.32 - 03:43:12.46]

as what are the main points

[03:43:12.46 - 03:43:14.38]

that we really need to hit in this episode.

[03:43:14.86 - 03:43:16.20]

Good friend of the show, Kate Karams,

[03:43:16.24 - 03:43:18.54]

who spent her career at various pharma companies.

[03:43:19.20 - 03:43:21.26]

And finally, thanks also to

[03:43:21.26 - 03:43:23.24]

some of my favorite reading materials

[03:43:23.24 - 03:43:24.06]

to prep for this.

[03:43:24.44 - 03:43:27.02]

Out of Pocket, the newsletter from Nikhil Krishnan.

[03:43:27.14 - 03:43:28.74]

Very approachable, fun way to read

[03:43:28.74 - 03:43:29.72]

about the healthcare industry.

[03:43:30.26 - 03:43:32.56]

A shareholder letter from Tom Williams,

[03:43:32.56 - 03:43:33.60]

who's a friend of the show

[03:43:33.60 - 03:43:35.88]

and a portfolio manager at Fidelity.

[03:43:36.36 - 03:43:37.14]

Yeah, Tom is great.

[03:43:37.62 - 03:43:40.36]

Some blog posts from the Drug Channels Institute

[03:43:40.36 - 03:43:41.64]

that were publicly available

[03:43:41.64 - 03:43:42.54]

that I thought were great.

[03:43:42.96 - 03:43:45.50]

Some very helpful DMs with Ashwin Varma,

[03:43:45.86 - 03:43:48.14]

who pointed me to a lot of the great information

[03:43:48.14 - 03:43:49.04]

about the profitability,

[03:43:49.58 - 03:43:51.06]

or frankly, lack thereof,

[03:43:51.10 - 03:43:52.80]

or the returns on invested capital

[03:43:52.80 - 03:43:54.32]

for pharma industry.

[03:43:54.94 - 03:43:56.24]

He's actually a med school student

[03:43:56.24 - 03:43:58.18]

and former Lux Capital Associate,

[03:43:58.36 - 03:44:00.80]

so he's got a foot in both the capitalist

[03:44:00.80 - 03:44:01.80]

and the medical camps.

[03:44:01.80 - 03:44:04.30]

And a truly incredible long-form read

[03:44:04.30 - 03:44:05.88]

on GitHub by Alex Telford.

[03:44:06.06 - 03:44:08.08]

I think that helped frame my understanding

[03:44:08.08 - 03:44:11.14]

of how we got here in drug development

[03:44:11.14 - 03:44:13.44]

better than really anything else I read.

[03:44:13.54 - 03:44:15.16]

So thanks, Alex, for that too.

[03:44:15.54 - 03:44:17.26]

With that, our huge thank you to

[03:44:17.26 - 03:44:20.00]

JP Morgan Payments, ServiceNow, and Vanta.

[03:44:20.40 - 03:44:21.76]

You can click the links in the show notes

[03:44:21.76 - 03:44:22.46]

to learn more.

[03:44:23.06 - 03:44:25.68]

Sign up for notifications of when new episodes drop.

[03:44:25.80 - 03:44:27.48]

Acquire.fm slash email.

[03:44:27.72 - 03:44:29.62]

You can also get our follow-ups

[03:44:29.62 - 03:44:32.40]

and the corrections and teasers

[03:44:32.40 - 03:44:34.64]

at what the next episode will be.

[03:44:35.60 - 03:44:37.06]

ACQ2, just go check it out.

[03:44:37.20 - 03:44:38.74]

It is where we do follow-up interviews

[03:44:38.74 - 03:44:40.98]

when we have topics we're more interested in.

[03:44:41.06 - 03:44:42.02]

Perhaps we'll do that for healthcare

[03:44:42.02 - 03:44:45.02]

or just CEOs or investors that we want to talk to.

[03:44:45.26 - 03:44:46.80]

Look in any podcast player.

[03:44:47.36 - 03:44:48.40]

After you finish this episode,

[03:44:48.58 - 03:44:49.94]

come discuss it with us

[03:44:49.94 - 03:44:52.42]

at acquired.fm slash slack.

[03:44:52.80 - 03:44:54.70]

And if you want any of that sweet acquired merch,

[03:44:55.04 - 03:44:57.62]

go to acquired.fm slash store.

[03:44:57.62 - 03:45:00.18]

In fact, I am wearing the t-shirt now.

[03:45:00.68 - 03:45:02.86]

Yeah, check it out.

[03:45:02.86 - 03:45:04.56]

With that, listeners, we'll see you next time.

[03:45:05.00 - 03:45:05.88]

We'll see you next time.

v1.0.0.241120-1_os