david: this is my kitchen table and also my filing system. over much of the past three decades i have been an investor. the highest calling of mankind

is private equity. then i started interviewing. i've learned from doing my interview house leaders make it to the top. >> i asked him how much he wanted he said 250, i said fine, , i didn't negotiate and did in -- did no due diligence. >> and how they stay there. you do not have -- you do not feel inadequate? one of the most transformative drugs on the market is anti-obesity drugs. one of the leading manufacturers of those is eli lilly. it has transformed itself over the last five years to a company that is one of the most valuable pharmaceutical companies in the world. i sat down with their c.e.o. to talk about this anti-obesity phenomenon and how it's changing -- transforming america. let's talk about the phenomenon that's changed the world to some extent, which is the anti-obesity drug. now make sure everybody is on

the same page, what is the name of your anti-obesity drug. dave: so the name is zepbound. the active ingredient is tirzapetide. david: who comes up with these names? >> not me, david. we can't have names too close to each other because of mistakes, -- because doctors make prescribing errors. we can't have drugs that say what they do, and can't have drugs that are only good in english. so we end up with strange names. david: was that the intention when the drug was developed? rick we launched the first gp-1 : medication in the world in 2005. it was a twice daily injection for people with diabetes. that was the effort. on the cover of our next report is a woman using the drug. she said my diabetes is under control and i'm losing some weight. 2006. the cover of the annual report. we had to improve the medicines to really make them effective for weight loss.

one big improvement was to make them weekly, that's a convenience benefit, but even more important, the action of the medicine flatter, being more consistent through the day and night. when we had it twice a day there were ups and down. one effect of glp-1 medications, they cause nausea and g.i. distress. that is a function of the up and down in your system. when it was weekly, it was dosed -- it was flatter and we could does higher and the changes were flatter, so made it better for weight loss. that was an accidental breakthrough of trying to make a convenient form. david: there's another company in sort of the same business, novo nordisk. which is in denmark. they have a similar product. they have a product that does the same thing. one is for obesity, anti-obesity and one is for diabetes. is there really in difference in terms of the drugs?

rick: there are. there's no real difference between diabetes and obesity. that's for insurance reasons. tirzepatide is one of them. right now, because you just ate lunch your g.i. tract is communicating with the rest of the body, communicating with hormones and protein, saying you have been fed and need to absorb other things that are essential to life. because, food is essential to life. what we're doing is boosting some of those signals with these medications. they're boosting the signal that you're full. boosting the signal that you no longer want to eat more. boosting signals that you should absorb nutrients you have consumed. ours does that with two different hormones. one, glp-1 and another g.i.p. ozempic or semaglutide does -- just uses glp-1. david: so it affects the way you -- so does it tell your body

that you are full? david: it -- dave: it gives your sense of full. we have learned over time our sense of fullness becomes conditional, so as people eat more habitually that signal kicks in later and later. that is a cause and consequence of obesity. is does other things too. it make yours stomach fuller. because it slows gastric motility. it slows down your nutrients, which seems counterintuitive. but when you eat -- when our ancestors were alive 10,000 years ago meals were rare. you wanted to absorb all the nutrients out of it. so, that signal set absorb the nutrients. david: i do not want to confuse people. there are four different names people should know for the drugs. you have an anti-obesity drug. which is called what? >> zepbound. david: and a diabetes drug. >> mounjaro. same medicine, different names. david: there was a study that said one-on-one, comparing the two your anti-obesity drug loses weight more rapidly for people than the other product.

dave more rapidly and more. :47% more. after a year and a half, people on our drug lost 17 more pounds than wegovy. david: why do people need to lose so much weight in this country need to lose so much weight? our country has 75% of the people are overweight and 42% of people in this country are obese. when did we become so obese? dave: when you look at the epidemiology charts it seems to have started in the 1960's, growth in overweight and obesity in the country. and really accelerated in the 1980's and 1990's. what are the reasons? how we live is one of them. energy expenditure has to be part of the story. what we eat is probably more important reason, not just the quantity, which has risen, modestly, through that period of time, but actually what's in our food has changed. and i think that's also attributed tothis. david: back to the drug. when you realized you can lose weight, did you get the f.d.a.

to say, yes, it can be prescribed to lose weight? or, it is still you cannot get prescribed for you? dave as of last year it's for : weight loss. david do insurance companies : reimburse people for the cost of the drugs? dave some do. : more should. [laughter] as of today, the federal government actually has a prohibition on reimbursing any of these drugs. which is a problem, i think. although the biden administration just issued advanced rule making to change that. that is a good news. we hope the next administration will continue that process. david: if losing weight makes you healthier why would people who care about insurance reimbursement not insist on paying for this, since it makes you healthier. and therefore you do not have other diseases. that they have to reimburse you for? dave i think in four or five : years we'll look back and say yeah that's what should have happened. it's silly we don't pay for what is already known to be a primary contributor to poor health. which is excess body weight.

but you know. people have different motives and incentives. maybe your employer has a stronger interest in your long-term health, that's probably why many stepped forward. and then evidence. our job is to make the evidence, produce the evidence that we're not just having people lose weight but losing weight with our medicine causes improved health. we have many studies out this year that are demonstrating that. david: to take this medicine you have to inject yourself. why not just go to a pill? dave great idea. : [laughter] we're working on that. the injection, you have to inject because it's a protein. and if we orally take proteins your body think it's food and breaks up proteins. so you cannot really take these drugs orally. you have to bypass the g.i. track and go right to the bloodstream. but we are working on a pill. we'll have some data as early as next year for, it's a glp-1 only, single acting, won't be as good as tirzepatide or zepbound. it'll be about as good as ozempic, we hope.

and this would be a once daily pill. david: some say if you go on this drug you have side effects that are not completely desirable. is that true? dave all drugs that work have : side effect, sometimes -- side effects, and sometimes untoward effect, we have to warn against those, that's why we do controlled studies and measure them carefully. many people have mild to moderate g.i. distress when we start. that is why we titrate we start , at a low dose and go up slowly. almost everybody stays on the drug and goes through that. usually by the third or fourth month you don't have any more effects at all. david: suppose you take the drug and say i lost weight. happy with my body now. i'm going off the drug. some say it's difficult to not regain the weight? dave: that's right. science tells us that there's a reason for that. some people do maintain the weight reduction or stay in that range. they have to change a lot about how they live. burn more energy. eat different foods. so we can all try that. i think we should all try that

actually. but some people cannot. and there's a recent paper in "nature" that told us why. which is that once you have become obese, your fat cells learn that that's their new state. and they defend that state. and so they are wanting more energy. and that send signals to your brain and so forth. so once we as adults gain weight and have that on for a while it's very, very difficult to reset your thermostat if you would. to reset that level. so for now, we do recommend if they can't -- people cannot maintain weight loss off the drug to go back on the drug and use them chronically. ♪

david: let's talk about eli lilly itself. when was the company started? dave 1876. : it was started by a colonel, eli lilly, who served in the civil war. he was a pharmacist by training, led an infantry and artillery company. was a prisoner of war in alabama actually. he saw firsthand the atrocities

of medical care in the civil war. he started the company with a pledge to say, everything that is in this is on the label. if it's in there you know about it. transparency. that evolved into a company that embraced the scientific method and began to really adopt the methods of the modern industry, which is taking natural products which is what most medicines were in 1876 and refining them into what we think of as medicine now. david: when eli lilly evolved over the years in the 20th century, what were the big products? dave insulin was the birth of : the modern company. this was a terrible condition, type one diabetes, and we were part of commercializing that breakthrough around the world. invented the manufacturing method. and created that business. that was followed by penicillin so during world war ii, lilly was commissioned as one of the manufacturers of antibiotics for the army. from there we iterated for 40 years antibiotics, including still some that are used today, including one that's the last

line of defense for the worst infections. prozac we're famous for, and now -- which is really brought modern psychiatry into the soul. and now mounjaro and zepbound. david: what are you working on now? alzheimer's is one of them? dave absolutely. : we use the scientific method to solve problems. we're not interested in niche problems. we're doing things that we can -- we think we are here as a big company to do hard problems that are scalable. that is the big thing to have the biggest human impact. we select diseases that are common and tough. alzheimer's. neurodegenerative conditions are the most flightenning people think about. and the science, we've been investing there for 30 years. we just launched our first medicine. so now we're getting revenue after 30 years on that project. we're working on a prevention study for that same medicine which would transform alzheimer's. we think other neurodegenerative conditions are becoming more

tractable with science. you will see us invest heavily going forward. david: are you concerned about the new administration coming into power? have you met with president-elect trump to talk about your issues? dave health care is always a : topic, so then our role in it and medicine affordability is a key area. i think everyone would like the u.s. to have a strong biopharma industry that invade -- that invents amazing medicines like eli lilly does but at the same time we want things to be cheap and accessible for all. that is hard to solve for all those things. we can make progress. we were known for the insulin pricing challenges we had and insulin was overpriced in the u.s. according to the critics. and we were able to bring that price down. i think there are solutions. and by engaging we can find them. david: have you met with anybody in the new administration? dave yeah, i think it was : reported last week. we had dinner down in florida. david: did they serve up fattening food? dave probably shouldn't say too : much about it.

it was all you can imagine and a little bit more. [laughter] david: let's talk about your own background. where were you born? dave i was born in bloomington, : indiana, a hoosier by birth. my dad was a grad student at i.u. at the time. we quickly left and moved to california. my mom was from california. i grew up in the bay area. followed in their footsteps and went to purdue back in indiana. david: what did you study there? dave: i started studied business -- studying business and engineering. went to work for i.b.m. in new york. i joined, the stock was at an all-time high, when i left it was at an all-time low. they had a tough time in the 1990's. david: you joined eli lilly when? dave: i left ibm to follow my girlfriend, now my wife, who was going to school in indiana. back to indiana. i needed something to do there. i decided to enroll in the m.b.a. program. i got an mba. medicine is a four-year degree, m.b.a. is two, i still needed something to do in indiana so i

joined lilly. david: what was your position in the beginning? dave: i was in the department that looked at m&a transactions. and the finance and business development group. it was a great introduction. david: did you ever say i'm going to be the c.e.o. someday? dave not then. : i was thinking i'll be here for two years and then off to chicago or san francisco and do something different. but i fell in love with the company. i mean, it's an amazing place. it's a very humanistic culture. but yet very rigorous and scientific. so it's demanding, smart people but people are nice to each other. it's the midwest. and i fell in love with the mission. what could be better than making medicine for people? i worked on a medicine to collaborate and bring into the company for diabetes. right as i was leaving that job my mother was diagnosed with diabetes and she was put on that medicine. sort of the point of what we do, just became super salient for me i said this is not a bad way to spend my time. i said to my wife, let's stay

here. david: when did you realize you were on track to be the c.e.o.? was it five years? dave much later. : so i worked in that job. and then i had some jobs running markets, i ran our canadian business, went to china for 2 -- 2.5 years and ran our chinese business. i was suddenly called back from china by the c.e.o. who was a new c.e.o. he said you need to come run our u.s. business. i said don't you want me to finish the job? he said, you need to come back. that's the point where i was sort of being cultivated for something bigger. david: you have three children? dave yeah, for a while i've had : three children. [laughter] yes. they're young adults now. david: ok. all right. are any of them interested in weight reduction programs or things like that? not really? dave so my son, he's an a.i. : consultant, so not so much. my daughter is getting a masters in cell biology, so she is interested in science. -- so she is thinking about

medicine and medical science. we talk a lot about the weight loss drugs my youngest son is a geology student at purdue. david: what do you do for relaxation, to stay in shape. you're not on one of these drugs, you look very fit, exercise a lot. dave: thank you. i'm not but i would never hesitate to be on one if i needed it. but the best medicine is prevention. and so you know, paying attention to exercise, something i've always cared about. it's a way i reduce stresstoo. i love running, now i don't run any more but i do other things. i like hiking. love backcountry skiing and the outdoors. play golf. being outside is is where i find both fitness and peace. david: you've had outstanding success at eli lilly. suppose a president of the united states said you should be secretary of h.h.s. or something like that, what would you say? dave the company as you pointed : out graciously is doing really well. but you know, we really have a strong desire to do even more. we're just at the beginning of this weight loss story.

you know. right now there's six or seven million americans who are taking these medicines. there are 110 million with obesity. we need to build more plants. develop more data. then there's the whole world to -- get better insurance coverage. and then there's the whole world to cover. it is projected in five years there'll be a billion people on the planet who have obesity. and it's going to become a much bigger problem in the developing world than it ever has been in america. we have a lot of work to do to make the biggest impact we have. we had to stop the study, people were losing too much weight to stay in it. at first this was seen as an alarming thing. but of course we began to process that as wait a minute this could be something very special. ♪ david: in the pharmaceutical world the image is not always so wonderful with the public. how do you respond to the idea that drug companies are charging too much, or people say i'm -- and very often people say i

going to cross over to canada am and get the same drug for a lower price? dave obviously it's something we : want to change and fix. we think what we do is valuable. for article of history, how -- artifact of history and how health care insurance evolved in this country, people are largely shielded from surgery costs and hospital costs. about 3% are paid by consumers. for medicine it is 20%. people think the medicines are a larger part of the health bill because they're exposed to more of that versus services. the second thing is, you know, foreign country, it is true,ou prices are lower in those places. we would like to correct that as well. our idea is that basically the cost of a medicine is the cost of the r&d to produce more so than the manufacturing. manufacturing costs are similar everywhere. right now there's an imbalance. who covers the r&d cost? we need to correct that. but the answer isn't just lower u.s. to canada's pricing. we wouldn't have a pharmaceutical industry if we did that. they do not pay for r&d costs.

we have to raise developed countries what they pay and lower the u.s. i think that's a policy argument we'll hear about soon with the new administration. and we're happy to engage in it. but we need to do both at the same time. ♪ david: when you have drugs that are very, very popular, you have people that make counterfeit or copy cat drugs. what about for this? do you have to worry about counterfeit drugs coming in the

trying to say the same thing? dave it's a terrible problem. : i think consumers don't really know the dangers or the difference. today the f.d.a. and the government has allowed this to sort of grow. of course a weight loss medicine that's effective would be a popular thing for people to seek treatment on their own. the data we have is that the -- is that 80% of the medicines coming out from china from unapproved, unregulated sources. we recently with borders and customs seized a big patch batch that was shipped in dog food. people then reformulate them and sell them locally in med spas and other outfits. but you really don't know what's in that vial. we buy them and test them. we find plant material, virus, fungus. david: but how much more expensive are your drugs than the counterfeit ones? if somebody wants to use your product, zepbound, how much does it cost a month? dave you can buy zepbound direct : from lilly for $399.

david: $3.99? dave no. : this is a valuable innovation, david. $399 a month. about $100 a week. that's a sacrifice for many. that's without insurance. with insurance most people pay $25 a month. so that's the importance of insurance. that's why we build by insurance -- that is why we buy insurance to to shield us from health costs. online ones are as cheap as $100. these are companies that want the benefits of being a drug pane but bear none of the responsibles. david: let us talk about the company today. how many employees does the company have today? dave 44,000. : david: and you're headquartered in indianapolis. dave that is correct. : david: where do you manufacture your drugs, mostly in the u.s.? mostly overseas? dave: mostly in the u.s., a large part in europe as well. in the u.s. we're building a lot of plants right now, mostly to support zepbound and mounjaro. david: when did you realize you

-- this is so transformative that you were going to become the biggest pharmaceutical company in the world by a factor of four or five times. dave it's hard to know. : the story is this. in 2016 i was named incoming c.e.o. and that fall one of our scientists in the diabetes group called me about early results they were receiving from singaporean site we had that was doing a phase 1 study. with the ingredient in zepbound. we had to stop the study, people were losing too much weight to stay in it. and at first this was seen as an alarming thing. but of course we began to process that as, wait a minute, this could be something very special. so we sped to the next stage of development, phase2. where you try to show safety and efficacy in a bigger study. i remember in a, kind of a moment, i was showing my daughter around a college, we were at cal berkeley standing

outside the lawrence hall of science, and i got a phone call. team just got off the plane, got the results. showed that people were losing over 20% body weight in a longer study. that was in april of 2018. we disclosed those results later that year. you could probably argue a lot of the run-up in lilly was execution from that moment forward. david: did you take the credit for this? are you responsible for this happening? dave of course as c.e.o. you : have a role, but it would be overstating the role to take credit. the credit goes to scientists. we have a lot of incumbent capability, like how do you take a protein like glb-1 and make it into a week-long injection? -- which in a natural body last a few seconds and make it into a weeklong ingestion -- injection? that's a pharmacology question. we have people that can do that, and people who can do the clinical trial, we have people who make it every day. we want -- we run our factories 24/7. it's a giant team sport. david: where do you want to take your company now? you can't find any drug more

successful than what you have. you're going to keep promoting this drug? dave: within the obesity metabolic health space, there are two things i am excited about. one is we have mounjaro and zepbound on the market but we have 11 other pipeline projects aimed at the same problem but in different ways. we have one in phase three for -- we have a triple acting medicine that is in phase three for those who have higher body weight or more severe weight problems, the oral project nine , others beyond that. we think this will be a very large segment with many different types of medicines for different conditions. and different situations. people might find themselves in. we're going to exploit that fully. the second thing is, we've talked a lot about cardiovascular health, these conditions we think about with people being overweight. these medicine, we think, we -- these medicines, we think, we want to prove, can be useful for other things we don't think of connected to weight. these are often called anti-hedonics, they are reducing the desire cycle. next year you'll see lilly start large studies in alcohol abuse,

nicotine use, even drug abuse. beyond that we need to make important medicines for the long haul. we're an old company, plan to be here another 150 years plus. and i mentioned my excitement about brain health, i think that's the next frontier. ♪

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francine: hi, everyone. i'm francine lacqua, and welcome to the bloomberg global business forum.