The Exchanges

Q They just don't respect any of our IP, do they?

A Well, I think right now they, they are okay amongst, so if I have a patent and I file and launch a product, I don't see immediate copies because it's in their interest to have a patent system right now for the reason you're raising. So we, um, changed the patent laws in the US in 2011, I think, the American Invents Act, where it's first to file. It used to be first to invent. And all the patent litigation we had was all about whose lab notebook said January fifth versus January fourth on this invention. That was the case. Not did you file it in a reasonable time, but did you invent it first? Now it's first to file. So there's no question about it. We don't care who invented it first. It's just who got into the patent office. As a consequence of that, our biotech companies and big companies like Lilly, Pfizer, et cetera, we file as soon as we can, because we don't get beat on first to file. What does that do? A patent exposes the invention to the world. China's getting very good at patent hacking. So what they do is they look at that chemical structure. They work backwards, sometimes driven by AI. Algorithms define chemical structures that will behave similarly, but are outside the patent scope, and they go fast. So they're really quite a derivative biotech market, but that is also hurting biotech valuations in a significant way.

AI assessment note: “China's getting very good at patent hacking.”

Q the intestines, so tells your brain, don't be hungry, but it also has other effects like secreting insulin, getting cells to make insulin, And as a result, GLP one is what's called a hormone. It's a regulator of all these different cells to do things when our intestines are full of food. Is that an accurate way of kind of describing what a GLP, what the GLP one protein is?

A Yeah, that was perfect. I would just step back one step though and say, there's a broad, there's like a super family of these things. And this is going to come up later in the, when we talk about the drugs, which we call incretins. And this was derived from a, uh, even earlier on your chart here in the seventies, they observed that if you Give someone nutrients intravenously, meaning it bypasses the GI system, that you have a higher spike in glucose than if you give it Via the GI tract. So that's a curiosity, right? Which is why is that the GI tract was doing something and they call that the incretin effect. And later we found out that there's a whole family, a super family really of these hormones signaling tools that are telling your body when you're fed to do different things. That makes a lot of sense because to survive as humans, feeding is like one of the top three essential processes next to breathing and other things. And so there's a lot of redundancy, but also Uh, different hormones for different chores, and GLP- one was the first one that was made into a drug.

AI assessment note: “Yeah, that was perfect. I would just step back one step though and say”

Q Have you been motivated to try some of these drugs prophylactically?

A You know, I, people ask me if I've used the GLP one drugs use. I haven't, but, um, yet is my answer because what's happening as with all medicine technologies, you start with the sickest, the most extreme cases, and you work your way as you prove safety to general use. I think what we're seeing now with the broad benefits, everything from metabolic disease, less drinking, lower inflammation, Uh, our competitor is going to read out a study in a few months on dementia risk. It probably won't be positive. That's my guess, but it will probably be in the right direction. So you have these sort of general, what scientists would say, pleiotropic effect, like broad based positive things. I think we're going to get to a point. We're taking pretty low doses for most people, say over 60, 58.

AI assessment note: “I haven't, but, um, yet is my answer”

Q Biologic product, right? It was putting the genetic, the genetic code from human DNA that codes for human insulin into an E. coli bacteria. And you put that E. coli bacteria in a giant vat. And just like we ferment wine, we put sugar in and it started to make insulin. And that's how we make insulin around the world today is through that recombinant process, right? Yeah, that's right.

A Still. And that was the first DNA based product, uh, made and it solved the problem because We were actually, we had, we had, per the obesity discussion, rising type two diabetes rates. It used to be type one diabetes, which is the childhood form that's really an autoimmune disease, um, was most of the diabetes that needed insulin. But as this, uh, you know, abundancy grew and people got heavier, we saw earlier and earlier onset type two diabetes, which is the adult form. And we, we were worried we were going to run out of animals to slaughtered animal pancreases to refine. So it wasn't just a cool science thing. It was actually solving a pretty big public health problem, which was the risk of scarcity of insulin.

AI assessment note: “It was actually solving a pretty big public health problem, which was the risk of scarcity”

Q agonists, which are Different than GLP one itself. They're different molecules. They're different proteins, but they can bind and have the same sort of activity. So, so there's this discovery process, this research process, as I understand it, to, to develop and identify new proteins that can have a similar or perhaps even a more beneficial effect than GLP ones in the body. Is that, is that kind of fair?

A Yeah, that's right. And I think, you know, this story itself is going from like finding the native Human hormone. And then we found this accidentally, this One in nature that was what we call analog to it. So it had a similar function, but with a different kinetics, different absorption rate. And then Novo actually, uh, engineered that in liraglutide. So they designed that in, and ever since then we've been engineering in different changes in those amino acids, those beads to drive different types of function. The latest one being this sort of dual acting one we have now, which like both ends, think of a chain with both ends with the active warhead versus just one end.

AI assessment note: “Yeah, that's right. And I think, you know, this story itself is going from”

Q it's a new category that seems to be growing. A lot of companies are launching Around this similar concept now. Do you think this is changing the food industry in the United States and in the West and ultimately around the world? And I don't know if you talk, do you talk to CEOs of food companies? Do they call you and like, what are you doing to our business?

A Yeah, I've got, I've got a couple on my board even, but so, you know, I, I think there are, um, certainly displacing effects of this, this category. And I think it's great news overall. First is the health things we talked about. So people will need, You know, uh, less diabetes products for sure. They'll need less other medicines. We're even doing study in like OA pain in the knee because a lot of knee replacements are in obese people and they get painful early in life, uh, knee pain. And we hope to show you can prolong that. So that's a sort of a knock on effect. And then of course food would be the next one you think about. I think you might know about the study, but last year Walmart did this sort of what's in the cart study for people in Ozempic or Manjaro and it showed They were buying about a third less calories. So that's a lot, but that's consistent with how the drugs work. But interesting also, fewer salty snack foods.

AI assessment note: “They were buying about a third less calories. So that's a lot”

Q by and like Yamanaka factors, these factors that can have a profound effect on the epigenome, uh, which can ultimately change how, how cells behave and radically affect the process of aging or what we consider to be aging. What else are you excited about? What's exciting in the portfolio and how do you invest internally versus do M&A versus venture to kind of access those interesting, you know, areas?

A Yeah. Well, let me talk about science and I'll get to the investment strategy, but we've talked about diseases here, but you know, we think about our, our role is like having a pallet of ways to make medicines, which are basically, you know, new molecular matter against, uh, a set of diseases we know something about. That's sort of when those things converge, we do well. So what's in the pallet? I think that's been expanding rapidly lately. And I think this whole new field of genetic medicine Which you talked about, um, like ex vivo gene therapy where you edit cells and they go do things like CAR T's or, uh, gene edits themselves or gene inserts, which are exciting. You know, we had a, um, medicine where we announced results this year that is focused on inner ear Diseases of deafness, basically congenital deafness disorders that are monogenic. Um, and we, we've treated patients that have gone from like six, eight years of life, no hearing at all to now hearing. I mean, this is, it is Lazarus like when you see it, but the, you know, I think the thing that excites me is when you can do amazing things at massive scale. So those two techniques, CAR T and gene therapy, it's hard to think of like super scaled millions of people benefiting. One new family of medicines I'm excited about, the so-called siRNA. This is where we can knock down proteins that are aberrant or causing problems…

AI assessment note: “Well, let me talk about science and I'll get to the investment strategy”

Q I'm sorry, peptides are a small molecule, a small protein, right? Just, just to be clear.

A Smaller protein, yeah. Less amino acids in a chain, um, which is what we call GLP-one really. It's smaller than a protein. It's a hormone, but, but also called a peptide. But we, when you give it in its native form as a medicine, it has a half-life of like minutes. So you'd have to have continuous infusion in your life to use GLP-I's in the human form as it was designed. And of course we have plenty, we can make it ourselves, um, inside our bodies, but if you give it exogenously or from outside, you need a drug that lasts longer than a few minutes. So, you know, both companies set to work on that problem. It was actually Lilly that launched the first GLP-I drug called Exendatide, Which was a strange story, another sidebar of a company discovered that in the saliva of a Gila monster, so this is the lizard that lives in the desert, in their saliva is a, is basically a mimic of the human GLP-one. It's close, but not identical, and the, the amino acid change that it had made for its purposes in saliva actually, uh, prolonged its action in man.

AI assessment note: “Smaller protein, yeah. Less amino acids in a chain”

Q So today, if I want to get transepidide for a weight loss, which I think you guys call ZEP bound, right? Yeah. So, um, can I go to my, my health insurance company and have them pay forward or am I paying out of pocket?

A Depends on who you work for, Dave. So, um, right now about 50% of the employer-sponsored insurance plans cover it. Lily covers it. We cover the NOVA ones, too, um, because we think obesity is a disease. Those skew toward, you know, companies with money, basically. Um, you know, I think health benefits are part of just attracting and retaining employees. Um, so smaller businesses, businesses with lower margins, like Retailers, et cetera, really don't cover these meds yet. I think in five years we'll look back and we'll say that was crazy. Um, once the evidence base is built up and there's more, uh, adoption and less stigma, but right now that's the current state. So a lot of people do pay out of pocket and we've got some work to do to help them. You know, if you're the rule of the land in the U S is if your insurance, uh, if you're in the federal benefit, um, you can't even accept Uh, savings cards from the manufacturer, but for those that have, have a commercial benefit, like if you work at an employer, large employer, like a retailer that doesn't cover it, we can actually buy down your out-of-pocket costs. And we do that.

AI assessment note: “Depends on who you work for, Dave. So, um, right now about 50%”

Q like, or that person, I'm gonna say, hey, if they stay overweight, there's gonna be four diseases they're gonna get over the next 30 years, and I'm gonna have to pay for that, but if we can get them to lose the weight, I'm gonna save all this money, shouldn't I want, shouldn't I have a financial incentive, an economic incentive to, to change that? What's, what's the controversy there?

A Yeah, I think, you know, that's in process. I was actually in a big, you know, um, investor of mine's office a few weeks back, and they said, oh, the, the last company in here was a reinsurance company, and they're changing their actuarial tables for people who have, or are on these drugs, which, you know, I was like, wow, you know, you're making a difference when, when that's happening, but it hasn't trickled through the system. I think there's a lot of still stigma associated with obesity, frankly, like social stigma, And patients report to us, a lot of doctors won't even use these drugs because they're, they think it's a, it's a product of laziness. Um, and you know, why people become obese, we don't really understand completely yet. Why one person would and one person wouldn't. What we do know is once you become overweight or obese, losing that weight as an adult is really difficult. Some studies show like less than five percent of people can reach a healthy body weight on diet and exercise once they're obese. So that's a very ineffective standard of care.

AI assessment note: “I think there's a lot of still stigma associated with obesity, frankly”

Q Uh, budget, uh, cuts have been, that have been proposed. How, what will the follow-on effect be? Are these cuts going to be to low ROI research programs that ultimately wouldn't have translated into the clinic and, and into improving lives? Or are you worried about NIH funding cuts and what they're going to do to the pipeline of therapeutics in America? When will we realize the effects of that?

A Yeah, great question. I don't think anyone knows the answers to those. It's not obvious. Let me put it that way. No doubt that the NIH over its history has done some landmark things that no market could do, and I'm for more of that. Mapping the human genome, a mega project that could only be done by government, and undoubtedly produced a ton of good and economic value for the country. Um, I think If you look at the, first of all, NIH total budget is a little over forty billion dollars. Most of that is extramural. They're granting that to institutions in very, in smaller checks, sometimes very small checks. I personally kind of wonder what the impact of that. Is it sort of a VC model where we spread a ton of bets, and a few of those will bloom into giant successes, or is it just sort of filtered out without a strategy? I, I think that's a question that should be asked. And maybe Jay's asking that. Um, I think the other problem with the NIH granting is as you do that, like any government mechanism, it gets influenced by the people who are making the grants. Who are those people? People receiving grants. So there was a little bit of a back scratching issue here, and I think exposing some sunshine onto that to, you know, sort of say, what is that process? Is it truly competitive? And is it truly pursuing ideas that the market can't solve itself?

AI assessment note: “I don't think anyone knows the answers to those. It's not obvious.”

Q and off. So people are trying lower doses. They're, they're trying the drug for a period of time. They do it once a month, once a week, and then they kind of maintain a healthy weight without needing to be kind of, um, on the typical regular cadence of the drug. Is that something you guys are seeing more frequently? Is that the steady state? Do you think over time?

A We definitely see that in, in, uh, in the clinic and in, in, in practice by people. And, you know, back to the cost, of course, people want to spend less money. And if that works for them, you know, there's certainly, um, and it's under doctor, doctor supervision. We have no problem with that. We need to do more studies in the space of, you know, what you have one drug on here, uh, or not on here, which is coming. And it may be the most important drug because of the scale, uh, um, ability, which is, it's called Orforglupron. It's a, It's a chemical drug. So here, not an amino acid, but, uh, organic chemistry that mimics, that mimics the activating, uh, part of the peptide. Um, and so it's, uh, it's an oral GLP one. Um, in our hands, it, it's about as good as, as high dose semaglutide, and, um, we, we're, we're doing phase three right now. Um, so that will start to read out next year. The benefit of this is one, it's oral, so it's a little easier to take. You don't have to refrigerate. You don't have to worry about the injection. You know, some people don't like to inject, but the real thing is this is a, this is a product for the masses because the systems we make these, these drugs in now are complicated to scale, and that's why there's been shortages. You know, we have approvals in more than 40 countries we haven't even launched in. That's not a normal thing for, for a compan…

AI assessment note: “We definitely see that in, in, uh, in the clinic and in, in, in practice”