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alright first episode back lets see if i can do this sleep to drive， great companies and the stories and playbooks behind them， iben， Gilbert um davidresinthall and we are your hosts todays episode is on the company behind these sensitional diabees and wait lost rugs ozempic and we govi the company is novonoredesk now when i first learned about osampack， a few years ago， i thought of course this is going to be amazing for a lot of people， and could also completely destroy the market for insulin those insulin companies better watch out， but here is the fascinating thing listeners Novo nordesk is the company behind insulin or at least one of the few big ones now you might say well thats OK cause theyre probably a big pharmaceutical company thats you know very diversified with lots of different drugs nope no venoredisc is unique in that the vast majority of their revenue is concentrated in the category of metabolic health they have been the insulin and diabetes company for the last one hundred years and perhaps even more surprising this pharmagiant is unique in that they are owned and controlled by a nonprofit foundation the stats around wait diabetes and its impact on our society are staggering there are 38 million Americans with diabetes thats one intend people globally that number is over five hundred million with the disease diabetes costs the us alone more than 327 billion dollars a year and on the other side of things in the weight category around a billion people suffer from obecity worldwide a billion including forty percent of the us population if you expand that from obecity to overwait， 75 percent of Americans are technically overwait it is really hard to imagine a bigger market to go after which is why novel nortis has become Europs largest company surpassing even lvim h last year David yeah！
its wild i mean there are no other disease and drug categories besides diabetes and obesity that this could be possible to have a company of this size have a pharmagion pretty much just focused on this one area like this is the urmes of the pharma industry yeah！
so why is today in the early 2020， the moment in human history for these new glp onedrugs the crazy thing is sameglutized the molecule in osempicon we govey was pioneered back by nova nor desk with the first trial in 2008 for type to diabd streement and it was built on research started in the early 九十， but here we are in 2023 almost three decades later talking about it as a waitlost rug that sort of magically appeared out of nowhere or thats at least the public perception of it incredibly the fact that GLP 1 drugs could be used to reduce food intake was actually discovered way back in the MID 九十 in the first sort of scientific publication about it but only in twenty 21 did we finish the clinical trials that truly show how effective it can be and as well see thats just the tip of the iceberg i mean this company is a hundredyears old the history goes way back and is way more interesting than i think just about anybodyknows yep pharmacyticles is without a doubt the most complex industry that we have ever studied so to fully understand over nortis we need to go back to a simpler time before the food and drug administration before all this industry consolidation and healthcare ola gopolice before there were treatments for everything we take for granted today and a biodex facscenes for polyotetness measles mumps you name it that is where we will start our story if you want to know everytime in episode drops you can sign up at acquireddatafmslash email these will also contain hints at what the next episode will be and follow up facts from previous episodes when we learn new information come talk about this episode with us after listening at acquireddatafm slash slack and if you want more from David and i you should check out our second show acq to where we interview founders， investors and experts often as followups to the topics on these episodes before we Dive in we want to briefly share that our presenting sponsor this season， which we are so pumped about is jp Morgan specifically， there incredible payment business yeah！
Webe talking about them in depth later in the episode， but weve known jp Morgan for a long time we both personally bank with them as does acquired， but we really uncover the breath of jp Morgan payments as we went deep into our industry research for our visa episode last year just like how we say here on acquirethat every company has a story， every company story is powered by payments and jp Morgan payments turns out to be a part of so many of our required companies journeys and its not just a fortune five hundred theyre also helping companies grow from seed Dipo and beyond yep were pump to explore payments through all these different industries this season through both a technology Innovation lens。
but also a business model innovationlens much more ahead so with that this show is not investment advice David， i may have investments the companies we discuss and the show is for informational an entertainment purposes only David， where are we starting our story？
well， we start in nineteen 21 over a hundredyears ago in Toronto Canada， with the discovery an extraction of the pancryatic hormone insulin by a laboratory group at the university of Teurano medical school insulin of course， as most of you know regulates the absortion of glucos from the blood into the body and its the main anabolic cormony in most if not all animals in the world insufficient insulin production in the bodyof course leads to the disease diabetes so this group if you could call it that at the university of Toronto is comprised of the physician Frederick banting and the medical student his assistant Charles best along with a chemist and the head of the laboratory there and assistant medical school Dean John Mccloud now， theres a whole bunch of Controversy around who actually deserves credit for the discovery of instance the historical consensus at this point now being that it really was banting and best who did all the work but nonethless two years later when the Nobel committee awordsthem， the nineteen 23 Nobel prize in physiology or medicine for the discovery of insulin it is banting and mccloudwho get the award not best this will come back up in a minute yeah and to set some context for the time period here nineteen 21 the public is not aware of what insulin is the public is however！
aware of what type one diabetes is this is the juvenile form of diabetes only five percent of diabetes sufferers have type one today but back then this was the dominant form of diabetes and it was families whose kids had a death sentence and there was basically nothing that could be done and there were a lot of rumors of people trying to figure out what substances you know you could inject or eat or anything to cure this sort of mysterious horrible way to die and people were so convinced in the late teens and early 20 that scientists were on the verge of a breakthrough that the common wisdom was to go on a diet of like two to five hundred calories a day and starve yourself so that you could live long enough even though you a terrible quality of life you could live the monthsoor couple of years long enough when the treatment did arrive to finally get it。
i mean we cant overstay how important this was and how terrible awful diabetes was i mean it was truly a death sentence that treatment that you were referring to that was the official American and globally excepted treemen for diabetes it was literally called the starvation diet and it was just attempt to prolonged your life as long as possible but like you are going to die unless a treatment is found so you know when we say that this group one the Nobel Prize in 1923 this isnt just like a Nobel Prize this is one of if not the most important advance in like all of modern medicine that theyre discovering here i mean were just not that many decades after Snake oil salesmen pattern medicine we talk on the standard oil episode about johndy rocketfellers father literally selling snake oil and thats just barely in the review mirror this is one of the earlyest breakthroughs in modern science we were still years away from antibiodex and certainly decades away from the popularization of antibiotics a treatment so this was the big breakthrough yep alright so what did bank take and best do so scientists had known even going back to the 100 that diabetes was causeby the misfunctioning of some type of hormone that was created in the pancreous but until Toronto nobody had been able to actually isolate what that hormone was let alone extract and to put a finer point on it betting and best didneven know what the hormone was even when they did figure out what to extract they thought it was sort of this soup of a bunch of different chemicals mix together they wouldnfigure out for years and years and years oh， this is like one very pure specific hormone that we are isolating here so by experimenting with dogs and dog pangrys is therabletoextractsomething that comes to be knownisinsulin and not only extracted they then experiment with it and injected into human diabetes patience who are at like severe and of life stages and miracle like the human body is able to use this extract from dog pancreases and these patience have like miraculous recoveries yeah！
i spent a bunch time reading this book breakthrough by theacooper and Arthur Ainsberg and they go away ended this basically this team was the first one to figure out you could target the pink， riatic eylets and isolate the extract and it relatively pure form and you know peer by theirstandards not certainly by today standards but youwrite totally crazy extracting from these dogs and injecting in humans in extremely limited quantities once they figured it out， it was still hard to then go from there to like getting it to people cause theyre like well， OK， we did this thing that kind of work to once from like one dog into one person so um where do we go from here？
and importantly， this new insulin substance while it is a miracle its not a cure injecting patientswith it doesnt magically like restart production of insulin in their own packresses or cure the disease it only works until your body uses it all up， which is pretty quickly so these diabetes patience you know they finally have a new lease on life， but its kind of also just that like a lease in order for them to survive they need to regularly injects an appropriate amount of insulin inoin by regular basis。
especially in these early days thats like every couple hours and you can imagine the incredible highwireact in the earlydayswheretheyve extracted from literally one dog theyve kind of written down the process strangely enough somewhere along the way the process was forgotten someone else had to replicate it and then they took his notes combined them with the original researchers， and then figured out a path forward i mean we discovered the process for refining insulin enough to put it into humans and then lost it and then found it again this was the state of medical science and so you have people ringan off the hook newspapers reporting the breakthrough is here the breakthrough is here and theyve got like you know single digits or dozens of files of useable insulin each of which need to be injected into a single patien every few hours in Toronto so theres not enough to go around the path for the super on clear and this is for shouting a little bit but the error that were in here 1921 there is a firewall between industry and medical science and it was perceived to be unefical to make money on taking your medical breakthroughs and sort of turning them into companies and so theres this extreme culture at the university of Toronto around， we have to protect anyone from making too much money offthis thing so we got to be really careful and potentially even slowdown its development and be really thoughtful about how we distribute it to the world so that nobody takes it makes too much money yeah！
but take in best cloud arengonna go you know today they would go like start a company you know around this like thats not gonna happen back them but all the sudden the world needs a lot of this animal insulin and in a supply chain that cant go down who can once you start patience on this？
they need it forever so what the university of Terano does do is they license production in development writes to a large American drug company based in Indiana you i will and they give ellia one year exclusive development license to try and mass produce this substance and we get like he said this is like a big step for the university of Toronto to do this， but the need in the world is so great that theywilling to work with industry here you literally have presidents in secretaries of state。
trying to call in favors and successfully calling in favors to get access to the limited files that the unifirsting of Toronto has yeah wasnt elisbituse one of these famous first patience the daughter of the secretary of state of the us right Charles evenceus yeah yeah well！
so its obviously not practical or maybe not ethical thats gave beyond the scope of this podcast used dog panquerysisforskillingmasproduction here， but it turns out there actually， is an abundant ready supply of animal pangris is that happened to be just sort of lying around in American Heartland， just about every human food production center in the world and that is cow and pig pancreases from you know all the meat that we indianos got a lot！
a cow farmers and so the clever really startup Eli Lily i mean that company had been around for a while， but this idea of taking on real rnd risk was sort of a new concept so they sort of start up 依赖 Lily is going around hiring sales people to Bang down the door of slaughterhouses all over Indiana and say hey， i know your waste product includes pancreases do you think you could ship those to us were pay you for those yeah and its actually not an easy sale because those farmers are like its gonna slow down my process if i have to figure out how to separate the pancreases， and this is already a real tight ship， so theres a real entrpinarial tail of 依赖 Lily sort of convincing large large numbers of slaughterhouses to do this the other interesting thing did not about the 依赖 Lily license David， which i thought was really clever， is its a one year exclusive license where theres two conditions and the conditions are a trayed one elie has to report back any advances that they make to the university of Toronto its almost like little operation worps be going on kind of a analogisticovid as they figure stuff out they have to share it back with university of Toronto to improve the manufacturing yields of whoever else， will be developing the drug inexchange the thing that elie does get to retain and protect on their own is a brand elie Lily sought really important early to say hey， we want to build a brand around insulin， so that people know its coming from us that its of a certain quality and even when we lose are one year exclusive license， and even when we stop contributing the manufacturing ip back to you。
the brain and actually stays yeah were gonna talk a bunch more about elie years we go， but this moment， this insulin moment， this is what really turbochargesthem in makes them into one of if not the first kind of leading American and international pharmaceutical company， which it still is to this day still bigger than over no desk yep although not by too much well。
much more diverse。
but not too much larger by market cap OK selback to this whole Nobel prize thing， which as we said was awarded to banting an assistant medical school Dean John Mccloud now， how did mccloud end up？
being the guy who shares the award with banting and not best and years later actually， the Nobel committee would basically admit that they messed that up it turns out that the answer to that is the key to the first chapter of our story today because the actual nomination i dont know if you knew this， but the actual nomination for that prize was putforthby a previous Nobel Prize winner in physiologier medicine， the nineteen twenty Nobel prize winner from Copenhagen Denmark， a animal biologist named August crow oh！
who also happens to be the founder of novenordesk is that how Nobel prizes work a previous winner nominates， the current nomines， or is it just like a it certainly helps there case if a previous winner yeah！
i do not think it is a requirement but you know certainly a previous winner in a recent previous winner in the same category， you would imagine carries a lot of wait so the guy who would go on to found over nordesk is the one that nominated banner in the cloud for the Nobel prize before starting the company yeah now heres the wild thing about August grow founder of nova nordesk the world premiere insulin company focused on insulin and diabetes for hundredyears now worlds premier glp one company hes not a physician hes not even a human biologist yeah！
he was an animal biologist right yeah！
he was an anobiologist uh fun factthough this is maybe my favorite side bar in the episode he studied at the university of Copenhag and his like adviser was gay name Christian bor bohr that name might sound familiar to some people the second of nails bor father what of kneel spor that meals board father of Atomic physics you know also winner of the Nobel prize major contributor to the main hatton project so yeah like his August PhD adviser was the father of meals board everybodyswitingnobel prizes you there must even something in the water in gopenhagen at that time also that tells you how long ago this was that in my head meals board is like someone from a longtime ago so would be a descendent but actually！
this is father yeah！
right？
right OK so back to August how the hell does he end up going to torano getting involved in all of this starting you know Novenordesk well， in 1920 the same summer that he winds the Nobel prize his wife maricrow is diagnosed with diabetes and this starts weaving together this whole crazy chain of events that leads to well nor desk no vocums a little later Murray herself is actually， a pretty incredible person she is a physician， so shes the first woman in Denmark to earn a doctorate in medicine and Denmark i kind of suspect has always been pretty progressive relative to the us， but even still like were talking about like the nineteen teens a woman to earn a doctorit in medicid and then be a practicing physicied was um obviously unique yes， so whenshes diagnosed in 1920 bit of sheet basically selfdignosis she knows whatgoing on like she and August like she knows exactly what this means shes going to die this is horrible， but given that theyre both very very active in the scientific and medical community in Europe， they are able to get her the best care possible， which at this point in time in Denmark is a youngcopenhagen based physician named Hans Christian Hagadorn who is widely respected as sort of the best endo chronologist in town， even though hes very young and hes uptodate on all the latest in the workings of the starvation dighted and how the maximize quality of life and prolonged life is long as possible fortunately Murray diagnosis herself very early he puts around a closely monitored starvation diet and they stabilize it enough enough after a year or so now back to August ordinarily you do after you win the Nobel prize you go on a major international lecture torn of course， hes invited all of the world particularly to the elite universites in America to come give speeches on his global price winning research but because Marie fell ill at the same time he had to delay his trip until 1922 so in 1922 augustinemarysetsaleforbostom！
which is by the way amazing that a type one diabetic has made it sort of this far in life。
and is in the early 20 doingtransatlandectravel totally amazing so August is Gonna give a delayed series of lectures here both Harvard in yield， while there in Boston at Harvard they meet with a guy named elliate jocelan who hes actually， the inventor of the starvation diet he is like the worldsforemost diabetes physician and researcher at this point in time and Elliot tells them about whatsgoing on in Toronto this is the world that were living in back then news of the discovery of insulin Hadnt really yet reached Europe and certainly Hadnt reached Denmark at this point in time so it was like a competitive advantage to be a Nobel prize when are on an international lecture circuit？
because you get better faster information about brand new medical advances yes！
well and particularly to competitive advantage like life advantage like theydisconcern devoutmarieslife at this point in time so Elliot says you know i know the guy who runs the lab up there， John a cloud lets write him a letter and see if while youre in America， you can go up in see them and see the labs see whathappening and maybe get some of this insulin so August a Murray right to Mccloud Murray also writes back home to Denmark to Hagadorn and tells him about whatgoing on and about this discovery of insulin she suggests in that letter that since Hagadorn is kind of the leading diabetes physician in Dan mark maybe while there in Toronto they might be able to secure like some writer ability to bring insulin back to Denmark mcloudintorano either he gets the letters like of course， come out upyou and Murray both come stay in my personal home sadly unfortunately Marie falls ill and she cant make the trip up to Toronto so August goes alone but he stays with my cloud observes the insulin production process sees everything thats happening they become closeand friendly most importantly， mccloud takes August to go meet with the insulin committee and talk about what Marie had suggested to hegatorn of like hey， maybe these are the right people to bring insulin to Europe essentially， but at least to Denmark now funnelenough at this particular point in time it turns that you actually cant patent drugs in Denmark so any blessing or pattern licensing from the instance committee to the crows and hagegorn for Denmark is sort of pointless， because its not legally binding in Denmark anyway， but the insulin committee says well， youre really the right people to do this how about we give you rights for all of Scandinavia Norway Sweden demarke you have our official blessingananywrites that you need and this is pretty similar deal that they cut with elie that was for North America they basically gave them the same thing for scantodavia yes， so August Murray setsale back for Europe theyarriving copenhaggan they go tell Haggadorn the news immediately they all go get to work and by get to work they go by cow pancreasis at the local livestock marketing gopenhuggan this is something so you read more about the nova notice history than i did was it cowser was it pigs because i know that Denmark has an abundance of pigs， which actually made it pretty well suited to be an earlyinsulin manufacturer ah interesting it was both i think pigs may have come later， but certainly was both cows and pigs that nor disk and then nova were using both them they were just basically trying to get their hands on any animal packers is that they could right if its got eye lets we want it yup so using the torono method they get a bunch of pancreases they go to August curls lab at the university of Copenhagen run them through a meat grinder pour， hydra Clark acid over them the extract insulin and then they test it on rabbits and mice， and they confirm yeah， weve got it this is insulin certainly for the first time in scandanavia， i think maybe also for the first time in coneurope at least， insulin is extracted here in demark hmm， so this leaves just one obvised problem just like insulin in Toronto， this is not getascale you know， maybe you could do this to treat Murray， but they want to treat the whole country， the whole region right？
this is like a very problem for insulin all the way up until like the nineteen eighties， which is you are scale constrained by the number of dead animal paintcreases you can get your hands on and i found this wildstat it takes 8000 pounds of pink riotic glance from 23500 animals to make a single pound of human insulin yeah！
thats well to put that in more real numbers that means it even by nineteen eighty with all the advances it took one million animals annually for 30 diabetes patience and there are a lot more than 30 diabetes patience in the world in 18 and well talk about who the pioneers were and how we eventually got out of using animals to create insulin in the eids but that was also the moment in time were type to diabees really took off yes！
youre forshadowing its been a 45 year massive issue but like we basically could not have continued to use animal based medicine to treat diabetes once it really exploded。
then were gonna get to this in like two hours sorry organic so back to the crows and haggedorn in 12023 in copenagon， they need to scale production so they go to the lovens chemisky fabric and i need to like majorly apologize to all yeah your danishes Danish people up there his uh i talk to some Danish folks in research for this episode and thank you very much and i just i realize in those conversations， i need to give up on trying to pronounce things correctly stick to French uh， we stickto French yes， but that translates English as the lion chemical factory and it is owned and run by another man named August， August constid with a K K O N， G， S， T， E D， so they partner together and by the summer of nineteen 23 the very same summer that the Nobel committee is debating on the award for that year and of course， curl at this point has nominated his body mccloud along with banting by that summer of nineteen 23 the combo of the crows and Hagadorn and the line chemical factory have produced enough insulin that they can complete trials with 8 human patientswith great success there in Copenhagen and at this point 8C hagadorn who remember was originally mariespition to help treat her diabetes he resides his medical post and decides that hes gonna focus fulltime on this project so the founders are in taggedoran and August demo recro and consted from the line chemical factory these theyfounders the project but theres no novernor deskyet and we should say around this time i believe eliwas further along in terms of the volume that they had developed i think they were making oh！
yeah， like hundreds of files are week of usableinsulin absolutely！
elie had insulin on the American market available to patience at this point in time yup 2 so how does this actually turn into a nordesk but before we do that i want to pick up the thread that we left earlier with our new friends at jbmorgen bayments yes！
we are excited to partner with jpmore in payments this season and discuss all the ways they are helping businesses grow and innovate across a broad industry landscape so whether its a startup that needs merchant acquiring， which you now know what that is from rvs episode or a company building a new multisided marketplace or even a business expanding across borders and having to manage the complications of crossborder treasure in fx the more we dug into the industry and the more we got to know jpmorgin payments the more we realized how relevated it is for founder， ceos and operators to be thinking about how to leverage payments as a source of revenue yep if you think about it。
there whole companies in industries that couldnexist a decay to go without todays modern payment infrastructure itbecomes central the businesses with modern product experiences like ridesharing the creator economy or b to be used cases like SaaS marketplaces are managing supplier relationships for those types of companies payments literally is their business yet thankfully they dont need to go it alone jpmargin payments has been pioneering in this industry for decades i mean there jbmorgan they move ten trilliondollars a day yes， that is trillionwith a t and you can literally never outgrow their capabilities like we said for us required the peace of mind of having a single innovative banking and payments partner for the longterm is pretty powerful yeah！
so lets look at the healthcare industry through the lens of payments there are multiple ways of Innovation on the horizon with telehealth prevenue treatment and new clinical trial processes seamlesson secure payments are critical to the improvement of patient experience in onlocking Innovation for businesses and providers when you zoom out this complicated ecosystem of payments healthcare providers ensurance network， specialist health modeling services in more it creates a complex and friction field payment experience whos paying who when under what terms and then you lay your data privacy requirements on top？
you can understand why there are a lot of forces impeadingchange in this industry so if youre a company your provider trying to innovate in the space？
getting the payments piece right is paramout which is why Jpmorgan payments array of products， including their Healthcare Solutions and instamid offering provides a patented cloudbased technology to securely transform healthcare paymentsby driving electronic transactions processing paymentsand moving healthcare data seamlessly jpmorganpaymentsbelieves that no matter where your business falls on the care continuum better payments can help healthcare companies deliver better care yep some of our listeners may have attended jpmorgans healthcare conference earlier this month in serverciscode。
so if you did let us know when the acquiredslack David， i are curious what your takeaways were from the state of the ecosystem to learn more about jpmorgans and and payment solution， and how they could be used in your business？
today head on over to jpmorgan dot com slash acquired， which just feels good to say i know stay tuned to discover how there accelerating innovation across all the industries we recovering this season OK， so David？
the founding of nordesk how does it happen so the line chemical factory at this point has established a new production line for insulin， but its unclear do they own this production line to the croast is hagadorn is the univer 隙 of Toronto involved growth Hagegorn are sort of consulting on it when Hagadorn makes this decision to go full time what actually happens is he becomes an employee of Lion chemical， which isnt really what he wants August stepsback and he returns to his other research of the university of Copenhagen but once insulin starts rolling off theline later that summer under the brand name insulin Leo like you know line chemical factory they used the brand and that would continue to be nor desks insulin brand name for the next sixty years i think wow pretty quickly demand is just off the charts and they are like we talk about essentially the first mover in Continental Europe so there is a pretty enormous opportunity here so in 1924， chrome hagadorn enconstead who onsline chemical they all come doan agreement theyre gonna setup a new independent and selfoning institution to produce and distribute this insulin throughout Europe yeah， what does that mean still not a company because other than concdid from line chemical， chrome and even haggadorn at this point theyre not particularly commercially minded no its a biologist and a physician yes， so what they do is they set it up as an operating company because thats what they have to do to have employees and make sales and what not but this operating company is one hundred percent owned and controlled by a foundation that they also set up and the three of them are going to be board members of this foundation and haggedorn is going to run it day to day this is really important to know and really crazy how much this impacts in the future this is still the corporate structure of the largest company in Europe and were going to get to this hours from now in playbook but this government structure massively affects the incentives and the way that this company ends up developing products going to market with them the future blueprint of the next hundredyears is laid right here in this corporate structure and foreshadowing there is a moment much later in history where absent the control of this foundation novel nor disgood of seas to exist it is only because of this structure that nover nordist survived and that we have glp ones and everything we have today is fascinating by the way this is not that uncommon in Danish companies。
Lego same structure Mars the shipping company same structure well。
i dug into this a little bit so yes， this is a very common structure in Denmark mostly for tax reasons because Denmark has very very high taxes so this is a common like generational transfer mechanism and Novo later will talk about nova and a sec nova actually has this type of structure that youtalking about the nordesk foundation is not just like a foundation of convenience it really is like hesharedablefoundation with a dual missions， so they give it two missions the first mission is to produce insulin and sell it a at cost in scanned enavia in the original kind of territory mandate， in order to maximize access and kind of humanitarian public health benefit e though exported elsewhere in Europe and around the world at market prices and use the profit from those exports to fund further diabetes， research and development so no prophets allowed in scandanavia prophets are allowed from export activities， and then all of those prophets literally by contract get shipped 100 percent to the foundation to then be used for you to grants and research about diabetes and supporting diabetes patience in Scandinavia fascinating， i did not know that totally fasting and you know more or less as you said that is the same mission and structure that is still in place today its obviously changed a little bit yeah！
theres some coffee output ill get to when we get to today！
yes， the operating company is now publiclytraded but still that foundation controlls 77 percent of the voting shares of Novenordesk and twenty eight percent of the economic shares yeah！
so no shareholder activism in this company or at least no ones effective in doing so yes！
so the name that they choose for this new institution or really dual institution is fittingly nordescinsolen， which nordisc in Danish means Nordic insulin is the insulin manufacture for the nordix very creative！
very creative so um you know， you listen here， you find like OK thats nordesk whats the novel piece of this？
well， it turns out that that is quite the story too because among the very first employees of the insulin project even before nor desk gets created are two brothers herald and torvald Peterson and Petersons you gottner member the time were in there sort of like prototyfical nineteens nineteen 20S kind of engineers in tinkers were not that far remove from like the right brothers and Henry Ford and that kind of stuff here theyre like kind of cast from that mold so the older brother herald he had been working in August curls lab doing all the mechanical engineering stuff to carry out the experiments like you you need to build devices and contractions and set up experiments and so the herald was in charge of doing that once the insulin project gets going， herled naturally sort of shifsover and hes the one going out in building and buying and modifying like the meegrinders and figuring out how to poor hide a Clark acid over it in the right way at all that sort of stuff when line chemical gets involved in the spinning up mass production herald goes to haggorn and August and constant says hey， youre setting up an actual production line ive got just the guy to help you setit up and run it my brother torvel because not only is torvaled a seasoned factory operations manager whos currently running a large soy factory he is also trained as a pharmacist and studied chemistry hes like the perfectlyqualified person to be like a you know early employee of this new operation except it turns out theres just one problem hagadorn things hesinchart and torvald whos just been hired things hey， i know what im doing here im in charged like hagedone you this publish physician like what do you know about running a factory so this githum happens like in the first year of nordistic existence yes， in the first six months after torvald is hired he in hagdorn theyconstantlyfighting one day they get into a huge argument in hagdorgfires him six months in guess we know whos in charge yeah when that happens herald brother resignes in solidarity and theysuperpist they go to see crow and they like hey you the Argus ive been working for you for a while like clearly we know overdoing here why is this happening and crosides with haggedorn hes like no no hes my god hes mariesphysiciand hes gonna run this thing so they save well right fine you know as you know here in Denmark you cant pattern drugs oh， thats why this is important where is gonna go down the street and make insulin two and the legend has it that supposedly August looks at them in replies， but youre not capable of that to which torvaled yelsedhim， we will show you and they storm out of the building and go down the street and they found a new insulin company， a novel insulin company there in Copenhagen insulin novel and that is the beginning of Novo and for the next 65 years， these two companies would compete in bloodsporthead to head hated each other， absolutely hated each other until theyfinally merged in 1989 crazy yep now this is such a key part of the Novo story that certainly you know crow， but then haggorn develops into this amazing scientist as well talk about the advances that nordesk is able to bring to market in the science of insulin and diabetes is huge but certainly without the like biggercompetitive motivation from downthe street i dont know that they would have moved as fast and you know and subbuilding its own scientifically search， keep abilities and like these two companies in this unlikely small country in northern Europe and upleading may be the most important drug development of the twelvesentry its amazing i mean its the local and better competition its ferri in lembergen its all the untrader joels its Adidas in Puma you sort of create the seeds of competition early and you can really infuse that into a companies dna for decades so i think its worth a quick paas here we find you talk about some of this but just a clarify why diabetes in insulin is such a interesting market and large market potential you know one even with just type one at this point in time its still a very large and widespread disease in the world so its kind of a large patien and potential patient market size but two unlike many other diseases and drugs for those diseases you know， its chronic you dont cure it so what insulin is doing is it is enabling these diabetes patientes who often are diagnosed as children to live essentially normal longlives see your talking about decades 40506780 years of patientlifespan here where they are injecting insulin daily if not you know。
most cases multiple times daily theres basically nothing other than food that you can sell someone for their entire life but for diabetics， insulin absolutely has that scenario with the customer yup。
and theres also kind of another aspect that makes it particularly interesting commercially， which is theres also a motivation to constantly improve the insulin product its not like insulin is insulin is insulin there are so many new products in improvements both in the druggetselfbut also in the delivery systems i mean this earlyinsulin is weve alluded to a little bit it was barbaric by modern standards like yes， it saved lives but it didnt last very long see you had to inject a lot of it very frequently， it wasnt super clean there tons of impurities in it， so theres swelling， theres infections。
theres allergical reactions to all the impurities totally！
it wasnt selfstable in liquid injectible form this is wild i dont know if you knew this pen now， so everything were talking about in these days and what nordisc was originally producing were insulin tablets solid insulin tablets now until recent times you cant take insulin intablet form it doesnt get absorbed by the gut you have to inject it， so what patience had to do was take these solid tablets dissolve them in sterilized boiled water measureand draw that solution into a horange themselves like a glass syrange with a big needle no pensnone of this fancy stuff we have today yeah biggest needle and you know so now you get patience doing this multiple times a day and its really important that they get the right amount of insulin for them this makes it really hard yep and theres no measurement i mean theres no like one touch pin prek we get to see what your blood sugar content is right now were so far from that existing that you are guessing your throw in darts totally and actually is kind of a side note to the story but its novel in the nineteen eighties that inventes the insulin pen well！
i didnrealize that wasnt nordesk but Novo yeah Novo invented the pen and nordesk focused on pops and they were um one of several companies but one of the leading companies innovating in pumps i see we should say listeners and David you know this this is a topic that is superpersonal to me a huge number of my family members are diabetic and actively suffer from a complications and actively benefit from all the advancements in it， so this is something ive just had present around me my entire life with family members as ill sure many of you have to im quite certain that almost everybody listening right now either is diabetic themselves or has a close family member who is or is prediabedec when i was doing research for this episode one of the people i talk to i will think of bunch of folks at the end， but pointed out were all pre diabetic in some way and its basically like the idea that look your A1C levels if you live long enough will eventually enter diabetes territory especially with the food system today and all these foods engineered to leave us very unsatiated all of our natural inclinations that we had as hunter， gatherers and farmers and you know imagine the paleo life long ago all the things that serve does evolutionarily to stay alive are now the very things that are killing us so everyones on the path it just depends how long you live we also wert really uh design to you know live this long either so well careful with the word design David well。
so when Novo gets established， this starts the competitive race that really leads to a hundred years of RND pipeline that changes all this so the petersomebrothers they know right off the bat they cant really disgo clone what nordisc is doing i mean technically legally they can in Denmark， but what physician and what patience are going to buy Novo insulin when right down the street， youve got nordesk， which has a Nobel prize winning scientist the bests diabetes under kernologist you know in Denmark running it and the explicit blessing of torono in the insulin committee， if nova just sells the same thing like nobodys gonna buy that right， but they do have a pretty significant advantage that nordist doesnt have， which is theyve got their engineering and tinkering skills so they got to work and pretty quickly actually， they come up with self stable liquid insulin so what i was just talking about about about how nor disc puges these tablets you had to boil them novel comes out with liquidentsulin you dont have to do that not only that because the process for producing liquid insulin that they come up with is so much more efficient they can sell it effectively cheaper purdose them what nordess is selling their solid formas so they go to market novogos to market with their novoe insulin as insulin at half price because its so much more efficient now this is so antithetical to like the ivere tower scientist over at nordesk youre marketing insulin at half priceit does this liquid stuffworker is this safe at all this stuff the petersomebrothers are like yeah whatever you know were gonna crash you hmm alright so Novo scrappy upstart counterpositioned and competition drives innovation so they create better product yes， so then nor disk strikes back with a new longerlasting form of insulin called protomean insulin or nph as it is patented and come to be known around the world， which stands for neutrial protomeanhagaorn really haggedorn is in the name because hc hagdorn， he himself led the research developing this and he puts his own name on it get it telsey what you need to know about him this is much more stable and needs to be injectedfewer times per day， which is a huge benefit for patience so nordesk rather than building up production facilities around the world what they decide to do is license it back to basically any interested pharma company so like Eli Lily back in the states other companies in continentaleurope its the new widely excepted most advanced treatment for patience except theres one company that they refused a license it to and that is Novo amazing so novel undeterred they go and they work around nor disks patterns on this you dont again im not sure at this point if the loss of change， then you can pattern drugs in Denmark， but it kinit doesnmatter because its clear you know demarke is not a very large country by far the bulk of the market is in exports at this point and certainly another countries you can pattern drugs so Novo works around nordex patterns and they come out with an improved version of protomean insulin that they claim is both better and doesninfriend on the patterns？
which the pharma industry has a rich history of figuring out exactly how to do this because the thing about pharma patterns， which is interesting is theyre fairly narrow you can pattern a molecule i dont think this is quite true with the time， but the way it sort of works today is you pattern a molecule， which is extremely specific its different than other industry is where its a system in a method for blah！
blah！
blah you can be very broad with it， so if you can accomplish a similar biological or chemical reaction in the body with a different molecule in basically anyway， then unpatented and so， theres a rich history in pharma of doing exactly this what is slightly next to the pattern but does basically the same thing？
yes！
tier point， though it is still quite scientifically difficult its not like software here were like yeah yeah yeah right some code and its like no no you still got a find a molecule that does what you say it does yep so this leads to a whole bunch of lawsuits it actually ends up going to the Danish supreme court where hagadorn represents nor disk himself you know in the lower courts they had lawyers and i think they lost the case in the lower courts in hagger arts like screen this im gonna be my own lawyer at the supreme court， at the supreme court well， yeah amazing and they win nor disk as one here this is like a huge huge blow for nova you would think， but then literally writes the same time world were two starts and dead mark is invaded by the naxies shortly after they invade Poland and in April 1940， the naxies now occupy demarke so this sort of like in fighting between these two Danish drug companies much less relevant， much much less relevant but what is still super relevant is how is your up going to get insulin in the middle of war two and this is a major major turning point both for the two companies visiv each other but also， i think really what sets Novo on the path to becoming europs dominant produce serve insulin？
and then ultimately the dominant produce serve insulin in the world hut so Novo not nor desk became the globally dominant really i did not know that i actually dont know the terms of the eignines merger so ive excited to listen just like everyone else David well。
so what happens is Denmark is relatively unskized during World War two 盯 small country the danicharm i was quite small and so when the invasion happens in April 1940 theres basically no fighting Germany just takeserver the country i mean theres no distraction， which means that insulin production continues onabated in Denmark now nordescrememberlike i just said once nph comes out there strategy becomes really like we produce domestically， and then we make our revenue in our profits internationally by license saying not by production and with World War two you know most of the dollars for their licencing revenue is coming from allied countries will Germany just took over Denmark so all of that revenue all those prophets go to zero overnight and nordesk for the duration of the war basically just gets put into hybridation mode theyre still producing a little bit to help supply dan mark but theres really nothing going on there they basically cannot address the market of any allied countries anymore yeah， wow， Novo is the complete opposite story they had been scale ingroduction allthroughout Scandinavia allthroughout year of and when Germany takesover Denmark insulin nova was now you know， the ethics of this are really complicated because its Danish owned。
which is not the occupied at the time yeah！
they are now essentially the official naxisanction insulin provider for all of nottyokepiedeurope so the German government basically directs Novo to massively expand production and supply ansolid you know not only to Germany， but to France， to polids， to austriv。
to all everywhere in counyouare basically so just a make sure i have it right it sounds like nordisk is only making a small supply for Denmark novel is supplying all of notti occupied Europe and the allied countries no longer have access to anything nova or no disk make sense so theyre align other own suppliers like elie yes！
now theyre fine they can get insolento problem， because nor disk has license all the technology and production to them they just keep doing that the only problem is for nordesk that nordis can no longer get the payments from them because obviously you know transfer payments from allied countries are now blocked right fascinating， totally fascinating so again， we said the ethics of this are quite complicated there is no doubt that novos fortunes massively changed and expanded by the German occupation and the notsystirring the war on the otherhand literally the notcies ordered them to expand production and provide insulin for Europe and like if they hadnt done， it all the diabetics in Europe would have died oh！
its unquestionably a good thing again im learning about this from the first time from you， but like uneveperson commanding me to make more life saving drugs and distribute it to more people is fine its they other things they commend you to do that are not fine or right right i definitely agree it is important to note though after the war。
the Danish state did require both Novo and the Peter somebrothers personally to repay most of the prophets that they may during the war back to the data state fascinating i get like the ethics are complicated here very yeah wow， so regardless after the war nova were merges as now both the scalled pharmaceutical company generally and the largest producer of insulin in Europe and as part of that now they have the resources to really build up their own scientific and rnd divisions， and become a real powerhouse to rival what nor disk was before the war shortly after the wareends they develop a new product called linta insulin l a nte， which is slower acting insulin， which means its this longer lasting and this can now be used for diabetics as a basil or background insulin， so theyll still take fastacting insulin around meals to help process blood sugar for meals， but a normal human packer is also producing insulin 247 throughout the day this now is a new background insulin the diabetics can take to help stabilize whenyousleeping or not eating。
so this is a pretty big breakthrough and what your scene here is novoanordesk having decades of experience researching mechanisms to slowtheabsorbtion or lengthon the effects of their drugs in the human body and really developing this incredible competency around how do we sort of finely tune how we want injections to react in your body over a long period of time in a a very complex environment you know youve got the human immune system wanting to react anything formen you put into it you 叔 got a lot of systems that you sort of have to make sure that youre interacting well with to achieve something simple like wemake it dissolve slower and i know thats not technically right， but that is kind of the blontway to think about it yeah！
hopefully its obvised， but like this isnt quite like software its like oh just yeah some new code and you ship a new feature its like no no， this is very complicated stuff and you gotta make sure the side effects are not going to kill people so this is really the first major scientific advance that comes out of Novo and Eli Lily licenses this lint to insulin from novoe and kind of rebrands it makes a part of their flagship insulin offerings in the us they were doing this with nph insulin before the war from nordeskinnow you know its kind of novel， thats taking upthismantal you know， this will come back up later in the episode but elie Lily although insulin was install is a huge part of the business what they basically decided is to be a kind of technology follower and license from all the innovationcoming out of nova nor desk license that into their sales and distribution channels in the us im really curious if the elie folks would agree with that characterization。
i know i youread that great history of nova nordeskbook and ill sure thats the way it paintit but at some point， we should dig into 依赖 only a little， more and see if thats how they think about it to yeah well！
that is gonna change in a big way in the nineteen eighties， but during this postword period at least thats how um cart jacobsonsbook makes it sound and we get a givcrt a big shout out and he wrote this great history of Novo Noordesk that just came out last year for the companies hundredanniversary unfortunately you cant buy a it America， so i emailed him a couple months ago and i said courage is there anyway， we could buy a copy of your book and very very graciously he just sent it to us， so uh very very kind they keycurd yep， so this is basically the way things stay for the post were error up until the ninetees Novo followsuplinta insulin in the nine 7 百 eswithmcinsulin or noneimunagent monocomponent insulin， which is the first hundred percent pure zero antibody potential insulin that also becomes the kind of new widely excepted best product in the market internationally， so this is the general state of play after the war novoe is now a scale pharmaceutical company nor desk is mostly in rough shape you know of production capacity has gone down to basically zero you know minimal at this point in time they have resumed the license in business and eventually they do get back payments from all the allied countries that they were old during the war so you know theyre not like in solvent or anything， but theyre the much much smaller company no Novo interestingly theyre now a large pharmaceutical company they want to add a second leg of the stool， a new business line， so they get into the enzymes business this is like laundry detergent enzymes another industrial uses they add that on oflongside the insulin and diabetes business， and you know thats all wellinggood to be a diversified you know industrial conglomerate except the enzyme businesses both capital intensive and not that profitable those donmixwell！
yeah！
those dont tend to mixwell now its still aviable business it actually stays part of Novo and then Novo nor desk all the way until the year 20 when it gets spun out？
oh is this a novosimes this is no vasimes yes！
it is still majordycontrolled by novoholdings， which is the holding company of the novunderdesk foundation interesting。
so just like nova noredisk is majority controlled by the foundationholding company novosimes still is also novosimes as well。
but when we get to the 197， right， as mc insulin is coming online and Novo needs to undertake a huge amount of capx to redo its production， lines and expand them around the world the enzyme market crashes and so this enzyme business that they try to add as like a diversification and heaged to the company expansion all the sudden its bleating cache and they dont have enough capital resources to do the capexupgrades that they need for the main business in insulin oh interesting if only they had a cache rich partner without a lot of capexnedes goodness if only there were such a natural partner right down the street that you know， it might make sense maybe they could merge with so here we are in the early nineteen sevages， Novo approaches the old better， rival， nor， desk and heres the situation you know this is a perfect marriage lets get the bandfactogether you know everybodys basically dead at this point from the original days lets let bygonds be bygones and nordesk theyve disgone through a pretty rocky succession period after hagadorn retired theyre now on their thirdceo in seven years and the new ceo Henry Branham he isnt from the farmer industry at all hes not a scientist he was previously the head of a lumber company， so this merger makes perfect sense huh but they dont merge for another decade and a half so what went wrong its not what happens so instead contrary to all sort of what you would think on paper the new ceo branem actually turns out to be like an amazing leader and ceo the number guy for nordesk the lumber guy huh he is like the wartime ceo for nordesk he rejects novos overtures to merge and then he goes in convinces the board both of the operating company nor desk and the foundation that this new mcinsulin generation， which remember no voe innovated that this actually represents a golden opportunity for nor desk to get back in the game because its gonna be a complete reset of all the instant on the market， whether theyre fastacting or long lasting instance theyre all gonna move over to this mc highly purified method and type of insulin hmm but novos in this spot where theyre gonna be delayed for several years in making the transition in their actual factories because they dont have the capx so its like theyre coming to us hot in hand what do we just put the petal down now that we realize we have the advantage impress so random convinces the board that rather than merging they should use their capital reserves to rebuild up nor disks or production capacity go higher a global salesforce randoms hes really ambitious he says were gonna go enter， directly as this like forgotten you know nor disk company so he goes on hires a global salesforce because he knows Elie Lily is gonna have the same dynamics has nova like everythings gonna have to shift over to mc and elie lilies this into big large diversified giant theyre not going to move as fast as he thinks nordesk can and even though its unrealistic that nordisk is gonna overtake elie in America if they can get even a small percentage of the American market， thats huge nortis gives a small company an America is by far the largest market for diabetes in the world well！
and you get a remember to in the 70 there was still kind of a functioning healthcare market there wasnt massive consolidation yet and so every level was super fragmented manufacturers were fragmented， insurance companies were smaller little doctorsoffices existed everywhere neighborhood pharmacies were there and so entering the American market you didnnecessarily need huge scale to do it and the other thing to note is it wasnt yet the heyday of drugs like of Pharma there were that many drugs that people had highdemand for it wasnt like today where you know everywhere you look theres some amazing drug that could save your life depending on what conditions you have there on tv commercials the federal government with that and will get into this later but Medicare part d wasneven a thing yet drugs were not plentiful enough and good enough yet for the government to cover them as an insurance benefit for people over 65 thats the error were in where if nortis wands to enter the American market， they cut a can without too many barriers yeah！
this is the right windowps so i dont know how random convinced both to do this but he does and like i godhes right it works so for the entire decade of the ninesedays nor disks sales grow at thirty percent compounded annually， which is amazing wow， now theystill small so by 1980 noredisk is still only about one tentth the size of nova overall but there a third the size of novos insulin business and theyve moved from being this license in company to now an actual production company with capacity all around the world so this is a huge win from like basically they were gonna be taken over for cache by their old rivals and now theyback in the game so no fo in response they need to do something to get capital they actually do a small ipo on the Copenhagen stock exchange in 174 to raise the capital they need for the transition to mclan so by the time we get to nineteen eighty just a set some scale here novos annual global insolence sales this is novoe theyre still much larger there are about a hundred million dollars annually， and nordisks are about 30 million annually that makes them the number two and number 4 producers in the world by market share behind elie in America whos first with about a hundred and sixty million in sales by the way。
these numbers are stacker only small， these are like seriesc， startup。
and this is exactly my point so you might be wondering like wait a minute if you add all that up the whole global insulin market is about half a billion dollars here in nineteen eighty and thats not exactly tiny and lake you were saying you know the drug markets themselves werent that huge back in this era but what is the path from here to novel nor disk today being the fifteenth largest company in the world like what gives what happened yeah！
just look at pictures of people in the seventies and look at pictures of people today yes！
the answer is one what you just said we all get fat and the diabds market and specifically type to diabetes exploded but two and this is going such a fun story to tell here on acquirebecause its a huge part of Silicon valley history that weve never touched yes， junantic two Genentec happened oh！
yes！
which totally revolutionized everything launched the biotech market made drug development in production vastly more scalable， and it all happened right here in San Francisco， venturebacked by Cliner Perkins and it changed everything former Cliner Perkins employee yeah was a co founder of the company， but before we talk about that yes！
now is the perfect time to introduce one of our other new acquiredpartners for season 14 an incredible company that we have gotten to know well over the last couple years service now service now as many of you know， is the cloud based platform that automates and managers workflows across the whole enterprise making everything about the way a company your organization works actually work better for 85 percent of the fortune 500， it has also been one of the absolute best performing technology companies over recent years yeah！
i mean service now has outperformed almost every enterprise sofr company over the past five years， including Microsoft yep。
but what you may not know is service now is also an incredible silicon value startup story that ranks right up there with Google， Facebook， Nvidia Genentec as one of the best ventureinvestments of all time finally enough the service now campus is actually right exstore to the Nvidia campus and Santa Clara yeah！
we wavetime when we were there to hang out with Jenson， so service now was started in 203 by Fred Laddie and Fred Kindle like August crow starting nor desk was already the equivalend of a Nobel Prize winning software developer and founder he dropped out a college in 170 yeah this is like a nolandbush now Atari era Silicon value totally and he started programming and ultimately built A4 billion dollar company as CTO he really was parted that original technical crew like was anothers that formed the backbone of silken value but all the way back when he first started in the industry at age 70 Fred road a simple little program for an order clerk named Phyllis now this was when he was working at a company that fulfilled building materials orders and philistspent， all day does typing up the orders on these forms so one night as a favor Fred road， a program that automated it eighty percent of each form got filled in automatically philis comes in the next morning Fred shows it to her and she breaks down crying he took this incredibly soul crushing my numbing task that she heated emated eighty percent easier。
eighty percent faster and a hundred percent less soul crashing so fast forward to two thousand four software as a service is just becoming a thing and Fred is like wow， we now have a delivery magnesm that can take what i did for filesback in seventy two and scale it infinity now how many fileces are there in the world well， it turns out its hard to remember because service now change this forever every single company back then was filled with people just like Phyllis who spent hours every day on repetitive tasks that saw for could handle eighty percent of so fredstarted service now and took that same simple automation concept and brought it to it brought to customer service HR ops risk kind of like ai is doing now and service now is a part of that they freed up knowledge workers to go create you know， more knowledge across the whole enterprise rather than more forms and more individual pointsolutions and like novenordesk it turned out that singularly focusing on eliminating suffering from just one pervasive worldwide disease inthcase not diabetes but repetitive manual office work that was a path to becoming A 100 billion dollar plus fortune 500 company its an incredible story so if you want to learn more about service now and connect with the team goverdasssvicenowdotcom slash acquiredand when you get untouch just tell them that Ben and David sent you yep OK， so David the eighties are here for some reason in the early eighties the world starts becoming more overwait the dictive foods being the cause of this just more metabolically unhealthy correct and just to put some numbers on that the number of type to diabetes patience quadruples from 180 to 2016 yeah and population growth was a lot slower than that so definitely the share of the population is massively expanding and at this point in time， we are still using pigs and cows to harvest pincreases and their eylates and their extracts in order to make insulin even with this incredibly refind process until genetech？
yes and specifically what that meant using animals to make insulin was that type to was not treated with insulin and actually until this point in time type 二 usetobecalledquotnoninsolendependent diabetes because you didnt treat it with insulin because there wasnenough insulin there werenenough animal pancreases in the world to do it oh， i had no idea and it wasnnecessarily that insulin didnt help type two i mean lots and lots of type to diabetics these days insulin it was that there just wasnenough of it wow and then in nineteen eighty ginantic and elie has their partner changed everything with for competent dna enginetic， engineering of drugs and i suspect many people dont know this i sort of vaguely knew this before researching the episode， but the first drug that they genetically engineered and that started this whole revolution was insulin absolutely！
it was the founding first application of the idea that genentec had of commercializing recombanddna the first implementation was insulin and to just paint a little bit of a picture of why this is so amazing its not just that we now had a way to not rely on animal paincreases its that for the first time， we actually had human insulin it is insulin that is chemically identical to the insulin that naturally is produced by your body rather than injecting something slightly different you know from a paper cow yes！
because you couldnt really extract human insulin from you know humans before this point and people thought that human insulin would be a lot better to use than animal insulin it turns out that thats debatible yeah！
is interesting that this ended up being more of a manufacturing and scale advantage than an efficacy advantage yes！
but at the time， nobody really knew that so in nineteen eighty， which is when June tech and Eli Lily announce their partnership together that Elie Lily is Gonna be the go to market partner for genentex new recomminant dna Bio engineering revolution and theyre gonna make human insulin they announce that in nineteen eighty people gots and it triggers this race for human insulin and Novo gets swept up in it theyre like oh no elie theyre gonna come back into the research game theyre gonna innovate in product ah， we had the chance to work with Genentec， Genentec had actually approach them about being a partner in Europe， Novo had turned them down because they didnthink the science was ready yet and they were wrong so they like shoot we got a scramble they find a team of Japanese researchers， who have shown that you can actually chemically modify pig insulin to make it chemically identical to humanitslime what really yeah you canmake this stuff up so dovos like great were gonna race to market were gonna beat Eli Lily with human insulin its not gonna be genetically engineered were just gonna take our pig insulin and modify uh it turns out to be a huge boondoggle you know it works but its not any better than piggansulin so its a big flop for Novo。
which the timing lines up to really be a nail in the coffin for that i mean if this is right after everything you just described with nor disk scaling up production and compounding it 30 percent per year and mastly growing share like this is not a good use of novos pressest dollars right now well。
its funny you say that so when the genentec and elie announcement happened in 1 九八零， i mean truly this was a bombshell its hard to remember now mean we wereneven alive but this was one of if not the most important announcement to come out of silicon value ever still to this day investors went nuts anything that even you could squint in look like a biotech was suddenly the hotdest thing in the world so junan tech goes public in the fall of 1980 this is well before humiling you know the product that they create with elilicomes on the market they go public and it is i believe the largest venturebacteor ever at that time until its eclipse two months later when apple goes public， but investors are just mad for biotech companies so when nova announces that theyre gonna be first to market with human insulin and like yeah， yeah just ignore that its actually pig insulin that were modifying they used the hype on the back of that to do a usipo with Goldman sax and raise a hundred million dollars when your currencies expensive sell it right， there are a number of analogies that we could make from the past few years that ill refrain from here so as you say this a nail in the coffin for Novo you know i mean its not good for the underline business， nor diskmeanwhile remember there in the miths of disagressive expansion plan and scaling based on mc insulin theylike you know i dont know that human insulin in an of itself is all that much more effective were gonna take a wait and see approach we are going to invest in building up our recompetent dna and genetic engineering capabilities because its clear the whole industry is moving this way for production reasons if nothing else and nova was doing this to in the background， but nor dislike were not gonna get caught up in the specifically human insulin hype and this really works out for them so in nineteen eighty four nor desk passes the German company host to become the number three global player in insulin host i think thats how you say it today is part of snophy， the large international pharmacinglomerate and any only other player left besides no vow any live yeah！
snowface day yeah！
the three of those companies are essentially the entire insulin market yep so nineteen eighty four nordesk passes them on the back of that they do their own share listing on the Copenhagen stock exchange so they change the structure of the operating company， install the foundation controlls the majority of the votes， but for the first time， outsideinvestors can hold shares in the operating company of nordesk and by the end of the 1980， noredisk is now up to twenty percent global market share in insulin， and thats really all come at the expensive Novo， which is down to thirty percent global market share wow！
so theyre close to matching up yeah！
theyre pretty close and this brings us finally to the summer of nineteen eighty eight when merge your discussions begin for real between these two companies now， on much more equalfooting than the last time interesting and this time there actually is a really compelling reason for both of them to merge and combine scale， which wasnt true before when it was really just like hey， Novo had a problem， a needed cache now with genetic engineering and the way the whole industry is headed scale is becoming much more important it takes huge catbacks to do this stuff and scale becomes important for rnd。
scale becomes important for trials at approval。
scale becomes important for negotiating with actually getting the product sold scale becomes important for everything in healthcare starting around this time the late eighs early 九十 and obviously went nuts still today and a big part of it is the production and you know infrastructure side of things but the other part is the go to market pharma kind almost becomes like the enterprise software industry like at the end of the day there only are a few companies at scale that have the infrastructure and the go to market to operate in like yes， you can build a big company on top of our underneath microsofter， Oracle or Amazon or Salesforce or Google， but theyre the ones with the infrastructure there the ones with the channels thats an interesting analogy i hadnt thought of it that way yeah！
this is a good place to try to understand the farm of value chain as it existed at i think first of we should say you basically cant Ive actually not sure theres a human who can hold all of it in their head and we wont promise to make this comprehensive but it is worth knowing a few key concepts in the players involved and i should say this whole thing only applies to the us market which many of you listening in other places will be laughing and saying like why is this so complicated， but yes， this is how the us market functions so i wrote a sentence Steven that i thought would be a fun way to break it down and that simple sentence is a patient by the drug， but really actually thats not how its like a butterfly flags its weeks a person doesnt mere lybuy a drug so lets actually name all the parties starting with the manufacturer amanufacturer like novonoredesk develops a drug they sell it to distributers like macassan or cardinal health who then sell the drug to pharmacies like cvs or your local neighborhood store the pharmacythan charges a price at the window to a customer， so so far theres nothing different about how this is working from any retail supply chain but hereswhere it gets weird in healthcare when a consumer goes up to the pharmacywindow， they typically dont pay their own money for the price that the pharmacy actually puts on the register their insurance company does well， the insurance company doesnt want to pay whatever price the farm of manufacturer picked for their drug and they have huge scaleda throw around so they go negotiate with the farmer manufacture to try to get some kind of discounted rate， but rather than do that themselves insurance companies outsource that task to a new type of company called a pharmacy benefits manager or a pbm the pbm negotiates with the pharma company for a discount often in the form of a rebate that the pharma company pays back to the pbm they then take that discount they keep some of it for themselves and that they pass some of it back to the insurance company who can then choose to share it with the employer in some way and as you can imagine when there are this many middlemen in a transaction yeah！
so thats what for middlemen uh the pbm？
the insurance company， the distributor and for some reason。
employers are involved some were talking about a sixsided market well。
i dont think its a sided market theres two good diagrams that i found in the research that will put on the acquiredtwitter account and the uh threads account to kind of get access to these visuals that i think are pretty good illustrations of the way the dollars flow in the way the product flows but you can imagine when there are this many middlemen in a transaction its really hard to have a functioning market to actually interpret demand signals and have them clearly flow all the way up stream and for the end consumer to really be treated as the customer versus just like a statistic in a large aggregated basket web sort of lost the plot in being able to actually have a functioning free market， but anyways i want to do a little dive into each of the parties to understand what they do the drug manufacturers like noban ordust do all the rnd and they do all the production they also own the responsibility of the clinical trial， so they work with partners to do this， but proving that the drug is safe and efficatious is up to them theres the distribuure wholesaler that does exactly what you think they do they buy all the drugs from all the farm of manufacturers they warehouseenjoy them they actually do take risk when i say they buy they actually do buy them and hold them and they end up distributing them to the pharmacies pharmacies do exactly what you think they do those companies have gotten merged into pbms in some cases and so its you know thinking of cvs as just cvs is not really right anymore its cvs care mark so theyre sort of with a pbm theres， the walle， greens， boots alliance， which is uh the way they name did the sort of all you need to know so the way to think about pharmacies is that there are a few big ones and that is kind of what matters even though there are many people interested in keeping a thriving independent， said a pharmacys out there then theres the pbm so why does the pbm exist the pharmacy benefits manager thats a good question yeah well， in the old days， there are a lot of drug companies and lots of insurance carriers， and so it would be nice if every little insurance company or every employer didnt have to go negotiate， directly with every drug company to get all the best prices， so pbms provided value by doing that on everyones behalf pbms created whats called a formula， which is basically a big Ledger， big list of drugs and the prices， and obviously today that is less necessary， because theres less fragmentation， given all the mergers that have happened， but the pbms still established themselves as a key sort of immovable piece of this puzzle， so why they sort of like agents is that the right way to think about them agent implies that the principle can sort of make a decision to go elsewhere youre not going elsewhere uh the pbms are the ones actually setting the prices well， thats the key question so maybe a little more context on pbms， and then lets try to answer your question David， so onetheyirhuge PBMS manage pharmacybenefitsfor 206 million Americans and that numbers all thats as of 2016 so think about like basically all Americans get their prescription drugs through a PBM despite there used to be hundreds of pbms， theres now fewer than 30 theres essentially three that cover about eighty percent of the market， and those are express scripts， CVS， care mark and optimerx， which is actually owned by United health group so interesting to know that care mark that PBM is corportly bundled with CVS afparmacy， but optimarx corportly bundled with an insurance provider so this vertical integration happening here to yes， so if you want to be a little bit cytical about you can say theyre really become kind of the gate keeper for consumers getting access to drugs since a doctors not going to prescribe a drug if only two of the three big pbms have it on an negotiated agreement， there so each pbm individually has control or a almost like a veto if a pbm says were not going to work with that drug or that drug manufacture doctors arent keep a big list in their head of what insurance companies work with what pbms that have what drugs so as a farmer company， you kind of need all three big pbms to come to some terms with you to be on there formula and handle the reimbursement for your drug so one other way you kind of think about it is the pbm is sort of like a health insurance company， but they just do it for the pharmaceutical benefit and not all the other stuff that the health insurance companies do 嗯 so you talk about prices a major mechanism for the way that these prices are negotiated and set is the rebate mechanism that the pbm negotiates so manufacturers usually have to pay the pbm a rebate which lowers the net price of the drug even though the listprice says the same so theres a sticker price， but then theres a rebate that you know once the pbm pays the sticker price actually。
the drug manufacturer how does any of this get pass？
the doj great question so initially the rebates worked well for drug manufacturers since there were a lot of pbms and they could negoshi， but now that there are three big pbms the farm of manufacturers have essentially lost all their leverage inmost cases is say in most cases we should come back later to water the exceptions so rebates are extremely high 依赖 Lily as publicly claimed that the cost of these discounts in rebates accounted for 75 percent of the sticker price of insulin if yougetting a rebate on seventy， five percent of the total price， the sticker price is not the price wow！
wait so who gets the rebates is it the pbms？
themselves or the consumers well pbms say that they tend to pass most of the rebate along to the healthcare plan uh yeah， consumers are far away from any of this and the healthcare plan says they shared in some fashion with the employer in some part of their agreement to be the healthcare provider， the insurance provider for the employer， but this is a quagmire of a debate that is out of scope for this episode and my favorite quote from onesource that we talk to described rebates as a game of hide the sausage oh！
oh， gosh well！
but yes， your right David nowhere in there did i say oh， the patient gets the rebase you can see how demand signals from patient and actual sort of clearing prices of a patien of what theywilling to pay for a drug all that signal just gets lost in all of this middleman mania well！
so that is the current state of what happens when many people or most people go and fill a prescription so bringing it back to when the novel nor disk merger finally happens this is the background on the go to market side at least in the us and then theres also the background on the infrastructure side thanks to genetic engineering were like scale now reallymatters and both companies are now on much more of an evenfooting so in January 1989， the novel nor disk merger is finally announced and its a dual merger of both the operating companies and their respective foundations so the two foundations merged into one and the two operating companies merged into one as well， and i had a diga bit to figure out the exact economic splits i believe that the final ratio was 62 percent Novo and thirty 8 percent nor desk so Novo was still the kind of larger majority institution here but this is a far cry from when discussions first started ten years ago and nor disk was this little Edo hey！
were buying you forcache essentially no now its like this is really a sixty mergery its crazy the two guys that split off and went to be cowvoice and start their own little competitor even though they didnhave a license ended up creating the bigger company yeah well！
and they job each other to create all of this innovation over the years so the new combined company has roughly a billion dollars in insulin revenue and fifty percent five zero percent global market share with elie just behind F4 十五 percent and host had five percent that kind of tells you right there how much the market has grown just during the decade of the nineteen eighties you know that puts the total market size are roughly around two billion for insulin ten years ago， the total market size was five hundred million wow， yeah well， the enzyme and other businesses within Novo they stay with the company for now they would get spun out later in the year two thousand and that contributes another roughly half a billion in revenue but with lower margins as we talked about the novoceo and Henry Binom from the nordess side they remain as cocos for the next couple years and random notes that they are still adorf compared to the increasingly consolidated pharma market out there， but we are quote a specialized work that will probably create a certain furer on the global stage and what the referencinghere is as we are talking about this is the error when just huge pharmamergersstart happening so glaxo and welcome merge around this time after merge around this time， cenofebus horshido these are all multimultibillion dollar tends of billions of dollar transactions that make snowo and or disklook final exmal potatus at the time and actually walstreetin the investment community believes that this is really just the first step that this is nova when nordesk and you know the leading insulin business in the world sort of preparing itself for a further merger sale into one of these new diversified global pharma conglomerates and actually， this is crazy to think about unretrospect but novel nor desk management agrees with that thats actually there plan like theres no rush here but they think that they do need to merge into a larger organization so they think the writing is on the walle where we need scale in order to function in this changing marketplace and so were gonna merge in and what they didnt realize was that the market that they were on top of would actually sadly be a tail when that gets them。
the scale without merging with anyone else yes！
but obsically all throughout the decade of the ninesininto the two thousands managemen is ingconstant merger sale negotiations with one of these big pharmagiants or another and kind of luckily none of them come to fruition and in the meantime without anyone including them really noticing the combined company just keeps compounding on these tail winds of the expansion of the insulin market and insulin treatment of type to diabedics and all the supply thats unleased by genetic engineering so revenue in profit compound again itlike twenty percent sometimes， twenty percent plus annually for like 15 yearsthere theyre firing on all cylinders in the year 20 they signed a huge deal with Walmart they land a supply agreement with the va hospital system for the first time the veterans affairs hospital system in the us， which is enormous and so by the end of two thousand annual revenue for the company is now over four billion dollars and thats pretty much just on insulin alone remember theyve spun out novosimes allthesubscale farmabusinesses that novohadare all gone and thats when management finely decides to sell the company 哈哈哈 2004 they have a deal on the table to combine with the Swiss company serono management is bought in theyve got the operating company board bought in there ready to do it they just need to go get approval from the foundation board。
which is the only shareholder that matters。
but theres never been a conflict between the foundation board in the management board like everybodys always been aligned here but this is like the whole c suite of meta deciding to sell the company to apple。
and then they just have to go get sockerbergs approval to do it its literally that scenario yes！
and theres a clause in the foundations agreement with the company that there must be a quote convincing business argument from the companies board of directors to the foundation board of directors that any merger or sale is a necessary precondition forthebusiness to maintain an expand its position as a competitive business at the international level， now in management size like weve just been talking about theres so much consolidation happening in the industry like of course， it is unnecessary precondition giveneverything going on that we need to get to a larger scale and so thats why we have after ten plus years finally found the right deal so they go to the foundation board expecting that everybodys gonna see the light and just agree here and the foundation board is like yeah i mean i hear what youre saying but have you looked at our revenue and proper growth over the last fifteen years are you really telling me that we need to do this in order to maintain an expand our position as a competitive business are you really really telling me that and managevince like yes isnthis what weve been working to why did we spend off the enzyme business？
why do we do all this？
if we wert just preparing for a sale and the foundation for dislike ah， how bout you come in and present to us with your financial advisers？
my rubber stamps feeling like it does not working right now im not sure yeah uh my daughter loves to say when uh something doesnt go away with these days， she says not working foundation board is like not working， so what ensues management comes in they present in two board meetings first in August 204 then a second， one in September where they get a Dover and they failed convince the foundation board so they block the merger this is like a the opposite of what happened did open ai where like the foundation here is saying like no you must continue as an independent commercialentity to fascinating analog and this is i think one thing that makes this company really really unique but for having foundation control with a very specific charter and mission， this company gets rolled up absolutely one hundred percent chance if this ownership structure were not in place。
we would not be doing this episode today and i dont exactly know the deal terms were， but basically in public company land， if anybodycomes to you and offers you 25 to thirty percent higher than your shares are currently trading congratulations they get to own your company and that didnt happen that didnhappen here！
which turns out to be unbeknowtes to pretty much anyone at the time and im sure not even the foundation board a very pressentdecision because there is a small group ofresearchers within novenordesk lead by a woman named lata biera nudson， who is working on a pretty incredible project that is showing a lot of promise and that would be glp one agonist drugs that is a mouthfuldavid that it is but im pretty sure many of you know whatthat term means or even if you dont probably heard the marketing names for the current class of those drugs that nova nordesk has on the market， which would be oxympic and wegavy or ribalsis？
which just got fda are provoled pretty recently yes indeed so before we tell the story of how glp ones started being researched and the very unlikely place that they came from we want to thank our longtime friend of the show vanta theworldleading security compliance and trust management platform Vanta automates your security reviews and compliance efforts so frameworks like Soc to GDPR fed Ramp for payments and critically for healthcare hipba compliance and monitoring vanta takes these otherwise incredibly time and resource training efforts for your organization it makes them fast and simple yep its the perfect example of a quote we talk about all the time on acquiredjeff basios is maxim to focus only on what makes your beer actually！
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vanta takes all the spreadsheets fragmented tools and manual reviews that go into managing modern security and compliance requirements interns them into a single software pain of glass that connects all of your services via apis eliminates， 90 percent of the work for your organization and it makes these otherwise static pointin time security reviews dynamic so you can monitor your security posture in realtime and share it with your customersome partners yup and it scales all the way up from seeds aged startups to large enterprises like Autodesk gustozoom info many large AI companies and more they have over 6000 customers now and are quite a large enterprise themselves， so if your company is ready to automate compliance and go back to making your beer taste better head on over to vanta dot com slash acquireduntil um Ben and David sent you and thanks to our friend crisina vantaceo all acquiredlisteners get one thousand dollars of free credit are thankstovanta so David Lucagon like peptide one receptor agodus what is it and where it come from well？
it really is the story of lot of yaranutes and she started at nova in 189， the same year， the mergerhappened writeout undergrad as a scientist actually in the enzyme division。
which i didnrealize until you sent me an article last night i think about this yeah remarkably there is this paper i guess its a paper called inventing learning tide a glouge in like peptide one and a log for the treatment of diabetes and obesity that was published in 2019， but it is a first person account by lata of the entire journey and her career and how all the research went down and where it came from that is published in acs pharmacology in translational sides publiclyavailable to everyone like she has just told the story and its very academic scientifically written but its super cool that shes the hero of the story and sort of got to write how it all went down yeah！
super cool will link to it in the sources yep so eventually after a couple years， she switches from the enzyme division to the diab dispisness and specifically remember this is not long after the genetic engineering revolution has happened she gets put on the team that is screening new potential compounds that they could create for treatment of type to diabetes write around this same time oral antidiabedic medications are becoming a big thing in the market， so these are drugs like met formen if youve ever heard of that thats the most commonly used one for type to diabetics theykintelake the first line of defense for type to diabetes before you progress to insulentry ments and novel doesnt have a drug in this category despite being like the instance never had a viable oral entity diabetic so lattice part of this group thats looking for new candidates， so in the earlydimid 90 lattistarts digging into the academic research and theres new workcoming out that in type to patience a big part of the mechanism that messes with actual insulin production is a hormoncalled on like peptide one or glp one banner your talking out and the thought is that if you could somehow get more glp one into these patience bodies you could stabilize their insulin production industry the disease seems pretty straightforward you could imagine that you could now just use the same recommended dna techniques to genetically engineer more GLP one just like you engineer human insulin nobig deal seems pretty straightforward in fact！
why dont you just go eats some GLP one just get it into your body however！
you want im sure itll work out right no video except the problem is glp one only stays active in your body for about five minutes before your body completely metabolises it and breaks it down so in a normal healthy person， youjust producing GLP 1 all the time and its regulating your insulin production etc in type to diabetes they get disrupted you cant just put more regular human GLP one in the body or its gonna go away immediately so a whole lot of people across the industry， kind of bang their heads against the wall nobody configure out how to make this work the industry and the academic research community pretty much abandon said as a drug Canada but lot as like if we could make it work， this would really really help people and be a great drug so she faces a lot of pressure inside the company outside the company why are you still hanging onto this？
why are you still pursuing this path and then finally a few years later in the mid 9 十 management actually gives her an ultimatum and theyre like you either need to crack this and get a actual drug candidate inthepipeline within a year or were gonna shut down this whole program and remember this is even like nova noredisk the world class most focused on pure play diabetes research company in the world and even they are like yeah were almost ready to abandon this whole thing crazy what your is this uh this is like 9596 all right and shes been doing research on this sense like 91 i think is when her and the team started crank it away on GLP 1 research inside Nobel around that so a few years with nothing to show for it yep so she keeps tweaking the GLP one molecule and again you can do this with for common 镜 dna you can tweak any molecule so eventally she develops a glp one analog analog being get a similar type molecule called lyria gllutide that includes a fatty acid graphted onto the molecule that helps prevent the body from breaking a down and this is the big breakthrough lyria gloutide ends up having a halflife in the human body of thirteen hours compared to you know like a halflife of two and half minutesfor straight up GLP one battlehelp yep that satisfies managements ultimatum the mechanism by which it does this is totally fascinating so you mentioned that the fatty acid gets attached to the GLP one to create this GLP one analog the way it basically works is it has to bind in a very specific location。
such that the receptor is not blocked but it is sort of graphed on to that molecule so they can travel together the fatty acids then make it so the glp one combined to another protein， which i believe is pronounced our viewmen， which is this really large protein that is very common in the bloodstream， and so it protects the GLP one molecule from the degradation by enzymes， and it protects it from being sort of quickly cleared in the kidney because that sort of bound molecule is now too complex， too large to be filtered so it kind of makes it like a big truck bounding down a small highway in that the molecule is protected yeah！
and i think thats how she phrases it to when she describes it is protecting the molecule yup！
the fatty acid sort of uh well， it makes it big and stick the stuff sometimes its good to have a layer of fat around OK， so uh thirteen hour half life you know this learning can become basically a once a daydrug instead of at every five minutesdrug yeah well。
i mean eventually but now heres the thing with this stuff to get a whole new classidrugs to market takes a really longtime so this is a big breakthrough kind of 97 ishtimeframe， but you dont notice like great were going to invest in this this is promising well see in a decade if we can get this to market， so they start the clinical trial path first with animal trials for several years， the many faces of human trials， etc and that brings us to two thousand five when the worlds first， glp， one analog drug finally comes to market for the treatment of type to diabetes of course， im talking about the world famous well known baieta from elie banner not a novel drug。
not from lattice work and developed in it completely parallel way。
not osampack， not fictos a not wagav something completely different this might be the most random occurrence that weve ever had on acquire David if i call you and said ship？
me elizered this is important would you do it uh knowing this context？
i would actually say yes an actual lizard is that were your going yes！
yes， OK！
great so during this time in parallel to lattice work at Novo， two American researchers in the va hospital system the veterans affairs hospital system government employees government somehow discovered that a hormone contained in the Venom of the Gila Monster Lizard literally the Lizard call the Gila Monster， which has poisonous Venom one of the hormones inits venom also was a glp one analog acted similarly to glp one in the body and didnt breakdown within five minutes David go getthat poisness lizard venom takeall the poisonout and injected into me please thats what im asking you to do lets see if that works？
i just i have no idea how this got proposed why people thought this was a good idea but like incredible that it worked incredible so in 1995， Daniel Drucker had a lizard shipped from Utah to his lab and he started experimenting with the deadly venom David aside from the research dont the va do you know where Daniel drucker was a researcher oh well， i know one of the scientists at the va was again named John Ang and i believe he was at the va hospital in the brocks ill give you a hint Daniel Drucker was not a researcher at the va he was at a university who Daniel drucker and i believe still to this day was a researcher at the university of Toronto aha amazing yeah， it comes full circle and he owns the domain gluegaon dot com to establish some extra credibility i will love it yeah， so it seems best i can tell that there were sort of parallel research efforts being done on the early glp one and sort of place to find glp one in the world to eventually turn it into a product the uh naturally occurring glp one analog yes！
as opposed to the engineered lyrically tied it actually does become a drug candidate they license it to elidevelopsit into bieta and bieta hits the market in two thousand 5 its fda approved and it works its not poisness it doesnt kill people and it is the worldsfirstglp one analog to come to market， but like it is effective， but its not like overwhelmingly， more effective than traditional antidiabetic， or else like matformen and the like and more importantly， the halflife is not as good as learning tied so bieta requires two injections per day which you know if youre a type to diabetic and youre not yet at insolentments， youlike well， i could stick with oral antidiabetics like matformen i could go try this new thing， but thats gonna be two injections per day do i really want to do that for systickwithurls and then transition to insolen injections when i need it？
i can barely remember to take my multivitemen or only once a day asking anybody to do something especially invasive twice a day as a big behavior change big big behavior change totally and its important to remember what these GLP one agonist are actually doing its just generally raising the baseline of your bodies own ability to secrete insulate its sort of making you behave more like a person without diabetes thenyouotherwisewould yes current but many people still would need insolen on top depending how far along the spectram you are yes！
so thats two thousand five， so then in two 7 lata and evanordisks learning tied GLP 1 agonist enters phase 3 humanclinical trials yep and for those who have heard these phases beforeface 一 phase 2 phase 3 never knew what they met phase 3 is the really big？
really expensive one and im gonna quote Alex Telforde who wrote this really amazing longblogpost sort of explaininghow the clinical trial process works and why drug development has gotten so expensive and all that will link to in the show notes its one of my primary sources he says typically phase one trials focus on safety and finding an appropriate dose， soften and healthy volunteers phase two， on establishing preliminary evidence of efficacy in patience phase three on confirming efficacy in a larger， sample of patience and collecting robust safety data and it is worth pointing out when i say the expensive one twenty nine percent of all rnd for a drug is spent right here， so phase one is nine percent phase two is twelve percent phase three is 29 percent with the rest of it sort of coming from that earlybasic research drug， discovery， pre clinical studies and the you know a little bit later with the regulatory review， but like almost a third of the entire spend of the whole rnd pipeline for a drug is here so big freakin deal to go through a phase 3 trial and my understanding is that most drugs never make it to face three and if you make it to phase three。
thats like very promising its not automatic that youve gonna get approved in its gonna work， but its promising to great question thanks Alex！
we have the data right in front of us so heres the probability that a preclinical study even makes it to the phases thats sixnine percent so your little over two thirds once you enter a preclinical study to graduate to phase one， two in three， but in phase one， two in three about halffrom get weed out each time so fifty two percent make it throughphase one， 36 percent throughphase two， and only sixty two percent through phase three， and once you get a regulatory review， then theres a 90 percent chance that you get approved， but each one of these gates filters out about half of the drugs adventure but i guess if you look at the like kind of lifetime risk of approval for a drug by the time you make it to face three youre pretty far so of the sixnine percent that even make it into clinical development youve got 36 percent left at graduating phase one then thirteen percent left graduating phase two then all the way at the end 8 percent graduating at a phase three so it gets pretty winoeddown over that course， but your point its a big deal that enter phase three because it shows that you are one of the thirteen percent that have made it this far yup cool OK！
so as theyre in trials and no phone knew this， but it starting to get confirmed that one there a glue tide is going to be more effective than bieta two more importantly， its only gonna need to be injected once per day， because the halflife is longer and three its also now starting to be observed and confirmed in these human trials something that lata had noticed all the way back in the animal trial phase that rats who were injected with very large amountively， or glue tide would stop eating， and it seemed to have an effect on appetite and if these rats had very large amounts of it， they would literally starve themselves to data refused to eat then this effect is persisting in humans here in the phase three trials。
which wasnagearentix theres lots of rat behaviors that then dont replicate in human trials and so while they were not specifically studying it in this trial they were studying the effects on type to diabetes the earlyreports of this might be replicating in humans was promising and surprising， but it wasnhappening to huge degrees like with the dosage of learning tide that they were planning to sort of make the approve dos its not like youre seeing this crazy dramatic waitloss it was just like oh， thats interesting you also eat a little bit less when youre on this learning time drug but on the lesson。
its a pretty interesting thread to pull on especially because many other antidiabedic drugs up into this point had actually calls patience to gain way right？
which of course。
compounce the problem right so lot a and her are in the team they push novenordis to consider also pursuing a parallel fda approval in commercialization path for the same molecule layer gluetid as a wait management drug based on this evidence that theyseeingin the trials， which in fda speaker is an indication you try to get it approve for a second indication yeah now this was truly an outthere idea there is a huge huge stigma yes， around wait lost rugs enormous yes！
the stigma is realled， but theres also an interesting product efficacy thing here so vox doc complete it really well， they said not only do waitloss medications of a dangerous history， but there is also a persistent bias and stigma against the disease that now reflects nearly half of Americans obesity is still widely viewed as a personal responsibility problem， despite scientific evidence to the country and history has shown that the most effective medical interventions such as barriatric surgery， which is stomic stapling effectively the gold standard in treating obesity often go unused in favor of diet an exercise， which for many dont work and like this is proven over and over， and over and over again you cant just tell people change your lifestyle most people literally cant theres too many things working against it including their own biology additionally， this is pretty interesting， researchers thought it was actually impossible to create a waitlost rog that was both safe and effective yeah！
you talking about fen fen yes！
i mean it dates wayback even before fen fen to the emphatimeans in the seventies， people are taken speed because thats like the excepted waitlosdrug yeah！
fenfin was a combination of a drugwitd one of the fendsisspeedi believe and so in the 九十 i was at heart attacks yeah， it was major hard damage yeah！
so thats scared the crap out of the fda out of companies that are pursuing waitlost drugs yeah！
this was a disaster it kind of was like a grassroots thing that build up and the two fans were independently approved for several kisses and a physician got the idea to combine them and since both drugs were approved big farmer was like oh， wow， waitlost drugmiracledrugs lets commercialize this and so they push the fta to rush the process， which they did thinking again both of these drugs are approved and it turned out that when used in concern to cause major hard damage， so i think something like six million Americans took this thing and like a large personal them ended up with major cardiovascular issues its awful i mean that was the workstorm but theres like seven or eight over four decades of these either！
dangerous， or just completely an effective wait lost rug so most pharma companies completely steered clear of the black whole budget item that was waitloss research and development its kind of going back to uh the beginning of the episode in rockefellers dad and the snake oil salesmen like this is the stigma around this stuff totally and to illustrate this numerically the annual obesity drugs sales were only 74 million dollars up until twenty twenty the market for waitbosterrugs you know was just tiny， because basically nothing worked and everyone was scared of it that seven hundred four million， included the commercial sale of leir gluetid for waitloss， which had you know already been on sale for six years so why is everyone freaking out about osempact now like does it feel like basically nothing worked before it was true nothing worked before in a safeway so there is sort of this like magic number around if you can actually safely enable someone to lose ten percent of their bodywait or more than theres a market， but otherwise it basically around to zero because people just dont think its worth the trouble and neither of the companies yeah！
its like you need the appropriate amount of activation energy for the reaction to catalyze exactly and just a itll put a really closetohome even finer point on the stigma as recently as 205205 like same year by edit came out nova noredisks own official position on the obesity category as articulated by the then ceo larserenson was quote obc is primarily a social and cultural problem it should be solved by means of a radicalrestructuring of society there is no business for novonor disc in that area now imagine your Latin her team trying to get the company to release a lyria gloutide for waitloss when that is the company official position right youre like look im looking at these humans who are eadingless right？
so you know whatgoing on here and whyislot of pushing for this？
you do？
shes a great scientist well respected you know what at this point shes made her career on the development of lyrically tied into lp one against all lods just for diabetes why is she pushing this？
this is a very very different situation than what happened with fen fen totally！
we still dont know the superlong term effects of it。
but we certainly know that months after taking this thing large populations of people are not having hard attacks yes and lotta knows this to obviously because lyrilutehadlikethedrugthesamedrugthesamething has now been through twelveplus years of super rigorous trials starting with animals international approval processes you know！
there were issues along the way like there are with any drug do the twenty ten trial was nine thousand patience across 32 countries this is a big expensive almost two year trial yeah！
shes like yeah i mean were pretty sure here this is about a safe as any drug possibly could be and at least in the medium the short term like this is not a causefor worry in terms of safety its just that all that testing and everything was done for a different usecase， but its the same drug so she eventually convinces the company to push forward with this and in two thousand so only two years after the ceo made that statement novoe enters a slightly higher dose version of learning tide into human trials for waitloss and why do mindschange quickly on this like the commercial opportunity here if you can get approved， if you can get it to work， if its safe is unlike anything else， the farm industry has ever seen like if you could really crack this market， so at this time back here in the mid 二 thousands already about a third of the us population is medically obese you know， definedas a bodymass index over thirty two thirds are medically overway the world health organization estimates the five hundred million people worldwide are obs you know， so thats a total address ble market here of like a hundred million people just of medicallyobs people in the us alone half abillion plus， probably more like a billion worldwide theyre no other drugs and diseases that affect this many people not even diabetes yep and just like diabetes it turns out that in most caseis obcity also is a chronic disease so yes， you have this huge Tam of people， but its also people that are then going to be taking the drug probably for the rest of their lives。
which is just like a statin or you know theres a lot of treatments for product diseases that we give people that are drugs that you have to take for the rest of your life yeah， youright its like totally different than making a vaccine or making a you know hepatey to see cure or something like that it really is a forbetter for worse a durable ongoing recurring revenue stream this is annual recurring revenue here yeah！
so an early 21 novel gets final approval for victosa， which is the marketing name for the diabetes version of learning tide so five years after by Ada victosisfinally officially hitting the market in the us and remember this is just fda approved for diabetes but of course， everybody knows about these trials going on for waitloss and theability to lose wait it hits the market and it is a enormous hit it doesnt just overtake biada as the leading GLP 1 drug on the market for diabetes it massively expanse the market so year one in the first year that its on the market victia does roughly 300 million dollars in sales the next year the first full year is on the market in 2011 it does over a billion dollars in sales just in that year so theres this concept in the farmen industry of a quota blockbusterdrug。
and these are drugs that achieve a billion dollars in the annual revenue sort of like a the tech industry calling it a unicorn with the of abillion dollar valuation。
exactly its the pharma version of the unicorn。
and these are like lybitor humira at a fair theres a bunch examples， but that really are a huge breakthrough address a large enough population theres a bunch of ways to sort of slice it， but usually。
there drugs youre hurt of yup and victoza hits it in you know its first full standalone year on the market， which is super fast so whatgoing on here？
obviously is that people are not using victos adjust for diabetes i mean people are using it for diabetes but people are also using this for waitloss and you might be asking yourself how does that work if the fda has only approved it for diabetes whatgoing on there？
well， it is actually at the doctorsdiscretion if they want to prescribe an offlabel use， so if a doctor does an often dependent research or read the study or technically， i dont think the drug companies can provide any marketing materials or sway the doctors anyway， so that information cant come from the drug manufacture， but should the doctor believe that this drug would be good for their patien， even other patien doesnt have the fda approved illness right， i guess whatever the indication is the fda sanctional indication yes！
the doctor can prescribe it for an offlabel use right and thats not a legal and lets be honest here like some of this is doctors but a lot of this is patience going to doctors and being like hey， i heard that this fictos the thing could help me lose wait what do i gotta do to make you prescribe it for me i saw！
an ad that said ask your doctor if ectos is right for you， so im asking you if its right for me yeah， we should say everything in healthcare has a modifier of sometimes and everything， i just said is true sometimes its not always true that the doctor has complete control to prescribe offlabel but i think its a reasonable way to think about it yeah， but David its not that effective you can lose way it taking fictos of but its not necessarily a life changing thing right。
so at the end of 2013 novosubmits sexenda the official waitloss version of learning tide to the fda neu for approval and its a slightly higher dose version and expectations are at a alltimehigh， for this novos market cap has already been running it now passes a hundred billion dollars on the anticipation of sex endas performance and its not that big ahead its a hit its good sales to be fair i think a large amount of the earlyadopter GLP 1 wait loss market was already just using Vic tosa so clearly a lot of the victisor revenue was actually sexend or revenue that was pulled forward so to speak but Ben like your saying the big issue is that even with the slightly higher dos of layer gluetid it yields long term on average across populations about an 8 percent BMI reduction you know， which is meaningful！
but its not that meaningful in research it is crazy i heard over and over again physicians and other people in the industry echo this kind of magical ten percent weight loss reduction number where there was always this belief in the industry that if something could reliably help you lose ten percent or more than it sort of tips and six and adjust didnget there yep so regardless the next year 2015 is a record year total company revenues for nova norc hit 16 billion dollars。
which is incredible for a pure play diabetes and now diabetes in relatively obecity pharma company but the stock flatlines yeah and right around the same time youve got the insulin pricing scandold where America is waking up to the idea that insulin is getting more and more expensive。
and its becoming more and more essential for a huge population of people and this is across a whole industry its snophy， its novenordescinits 依赖 Lily everyonesinsulin has gotten more expensive and they come under fire in the public eye and so the sort of six ended not being the blockbuster drug that you know expectations had prompted up to be plus this increasing pressure around insulin and i think a ceo change yeah well！
the ceo change i think was a result of this so what youre leading up to is in 2016 the stock takes A40 percent hit what is wild you know today at the beginning of twenty twenty four this is a half， a triallion dollar company and a few years ago it was a well less than hundred billion dollar market cap company yeah！
but there was a really dangerous narrative that these glp ones arent be as crazy as everyone at least everyone in the no thanks and also， there only franchies of insuland is suddenly under fire yeah！
so in September 2016， the danceo larsourence in resigns current ceo Lars Jorganson takesover amazing so wonderfully Danish sidebar this is a wild so right now today is we record this nova nordesk is the fifteenth largest company in the world by market cap and when i was doing research for this episode， i of course googled larsyourgenson when i did the results that Google gave me results one through 6 were for the university of Kentuckyswimmingcoach who is also named lars yourgesen talk about below the Radar who im sure is a great ant storage you know ntw a swimming， but it wasnt until number seven when i actually got， the ceo of nova nordesk that is how like under appreciated this company is crazy anyway， right around the same time Novo begins phase three trials with their new next generation improvedglp one analog semigletide， which i think is pronounced weve also heard some aglutide we did an obscene amount of research on this and dont have a good idea so if you know get touch with us the both reputablesource。
we could find seem to say some a glue tide yes！
which makes sense you know coming out of learning i believe theres a duaguetide so were roled with semiglue type acquiredifmat gmail dot com if disagree and semaged has several benefits over learning one it is much much longer lasting in the body， so it only needs to be injectedonce per week instead of once per day massive benefit just on patient convenience there with the halflife being so much longer， too and much more important for the nearterm， it is twice as effective as layer gluetid for waitloss so were talking 15 percent plus longterm BMI reduction， which is well beyond that is your saying the ten percent magical threshold yep， it moves from the domain of irrelevancy to the domain of is this a miracledrug in the press and theres some more um benefits potential benefits that will talk about in a little bit here but this compound this glp one agonist some of bluetide is of course。
ozembk and wegavi all the same thing also tied ozembic is the diabetes marketing product and wegavey is the waitloss marketing product yep so a few words on how what affects wait the natural glp one produced in your gut travels to your brain this is a hormone that moves throughout your body much like many other horbones and it triggers a response to tell your brain hey， im satiated it tells you that youve had enough that you feel full and it can cause you to stop thinking about your hunger and if yousomeone thats constantly fixated on food and restraining yourself from indulging it can quiet that impulse or at least reports are that that is sort of what people feel it can also slow digestion， so not only does your brain think your full you literally are now full since the food takes longer to move through your digestive system and David you mentioned that fifteen percent waitloss theyre still studying exactly why it works but its believed to be that its sort of these two mechanisms working in action together and as you can imagine food taking longer to move through your system kind of can make you feel growth like the side effects naturally include things like nazia vomiting customer things like that， but these reports of side effects are pretty widespread i listen to a bunch of things one of which was a tegus call with a professor of cardiology that sided about one at a six patience have side effects that are so severe that they discontinue the drug so its sort of this we dont exactly know why it works we have studied of bunch so we know that it works but you can sort of imagine why the side effects might be linked to the idea that if youeating you know really calorie dense food really fatty food， harded digest food and its moving slower right， i wouldnt want food either yeah the thing thats really fastening to me about some a glue tied as a waitlost rug is that you cant just sit around eating peets on ice cream and lose wait the laws of thermal dynamics in the universe still apply your body will always retain the difference between the digestable calories that you eat and the calories that you burn but the reports from those who are taking it its really more like you just dont want to eat large quantities you dont want to eat really calorie dense food and it sort of just changes your habits without you trying or at least you having to try as hard as you did in other attempts to lose way you know， it sort of solves the debate that had been going on for decades of is it a behavioral problem， or is it a medical problem well， if youtaking medicine that changes the way that your bodychemistry works， but also literally causes you to naturally change your behavior it really actually addresses both concerns right？
so 2018 ozempic finally hits the market for diabetes and then in 2021， wegavi gets approved for waitloss ozempic does over a billion dollars in revenue in 2019， its first year on the market， its clear its gonna be a huge hit and its like even more than that this is like even more than victosaback in the day， it does a billion dollars in revenue， but like its massively supply constrained like it could have done a lot more these drugs still osmacing wagaby could do a lot more revenue than they are doing right now？
which by the way on earnings calls， the company says yeah， thats gonna be true for a long time the demand for this drug will continue to massively outpace our supply and we will be here on earnings calls over and over over again telling you that no matter how refactories we build we are supply constrained still yes！
so at this point you know its funny i think for most people that are discovering Novo nor desk now us included i dont know anything about this company until a few years ago？
32 years after a lot on her team started this research right？
if anything we think of this company as like oh its the glp one company， its the waitlost rug company and like no for hundred years it was the diabetes on the insulin company but its clear at this point now that no this is now a glp one company and that grew naturally out of the diabetes in the insulin research and lot as work and sort of in this organic fashion that is so different than the rest of the farm industry but the net result of this now is that yes intone is still a large business within Devenordesk， but it is a glp one company so when wegavey finely launches in the us in 2021， as the official fda sanction waitloss version of sumiglued， it gets the same number of prescriptions written for it by doctors in the first slightly over one month， then sexenda had in its entire drug lifetime people were already quota quote misusing osempicfor waitloss before this so like oxympic supply was fully exhausted and then now we get we supply fully exhausted oh in February of twenty twenty one after the clinical trial finishes on some glue tide for waitloss so for we go v to hit the market of the us the neartime runs a story and just calls it a game changer they say for the first time。
a drug has been shown to be so effective against obcity that patience may dodge many of its worse consequences including diabetes so like it with the biggest megaphone you could possibly point at people there being told this thing freakin works and its a miracledrug yeah and well talk a lot more about prosing kinds in all of data everything around that in a minute here in analysis。
but just a wrap up the story the companies market cap basically goes vertical in 2020 right before all this hidden as osempics was coming online the market cap had climbed back up above a hundred billion summer twenty one it hits two hundred and fifty billion by the end of 2022， it hits 300 billion， which mindyou is against a market and macro backdrop of massively rising interest rates said stocks and equities being down across the board like novenor disk is up during this period and then this pathsummer in twenty twenty three it passes 4 hundred billion market cap and it is currently flirting with the half trillian dollar mark revenue goes from twentybillion in twenty nineteen to 25 in twenty twenty one thirty billion twenty twenty two and in twenty twenty three so far and the first threquarters that they reported is up another thirty percent year on year of course， with Ben as you said yearsworth of supply constraint demand pipeline yep that is pretty crazy David！
you mentioned it is the GLP one company already and that sort of transition has already occurred youre totally right looking at the numbers 51 percent of their revenue comes from diabetes focused GLP 1 drugs and an additional eighteen percent from obesity related GLP one so six 9 percent of their revenue comes from semagid or learning i mean its crazy that happened in the decade yeah， totally well insulin has become to your point its still a part of the business a smaller shared the business again this is of revenue not of profits， but 22 percent of their revenue today comes from insulin that lease about 9 percent from the other efforts that theyre putting energy into rare diseases so things like chemafilia they continue to be a ridiculously concentrated company they make about ten billion dollars a year in that income so there are also a very very profitable company among the most profitable in all of pharma 55 employees so its a huge international company at this point and i want to talk briefly about margins later， we will talk about why margins are actually not the most interesting measure to look at but its worth knowing them because we talk about that on every other episode growth margins are better than software they run about eid four percent Lily is also a very high margin company running about eid percent for context， Microsoft has a growth margin of 70 percent and Google is 56 percent Howis googlesgrossmargin 56 percent？
they must be stuffing a lot of other revenue besides search into the top line i assume all the billions they pay apple comes out of cost of good sold all the traffic acquisition costs probably also for their infacstructure and for Google cloud yep so at AD4 percent growth margins you should know there ten percentage points higher than your average successful big pharma company theyre concentrated in terms of what they actually focus on。
but there enormous and more profitable than everybody else so theyre sort of threaded a needle that if you were pitch to blank canvas you would say like whats impossible you need to make a trade off somewhere if youve got to be so nearly focused on just wander two conditions are really at one singular inner related condition of metabolic disorders either you cant have all the revenue or you cant be so ludicrously profitable and turns out the thing that they picked they can be both yes and also it gets better so because summonted has such a long halflife relative even to literally tied i mean its a once weekly injection and so like you know the half life in your body is days its staying in there for a long time remembernatural human GLP 1 your bodyprocesses that in like 5 minutes so having GLP 1 active in your bodyfor so long its reaching other tissues in your body that normally glp once wouldnt and indications are showing that that is beneficial for those organs so currently Novo has clinical trials going for semagi like same drug SHAMTLP1USECASEINTREATINGCARDIOVASCULARDISEASEINTREADINGALLSIMERSINTRIDINGKIDNEYDISEASESMANYOTHERS again this is offer like a molecule that through fda processes and eu processes has been deemed safe enough to be on the market for the accepted use cases same drug now is showing evidence that it can also attack these other major disease areas this is the gift keeps on giving here could be everything is really earlybut it really might earn the title of miracledrug everyreally might now not a scientist at all this is just my thought looking at this but yes could be a miraclejug for humanity and certainly already is a miracledrug for nova noredisk in terms of financial performance like no doubt about that one no doubt about that well。
this is a very good place ive got a couple of broad topigarias that i want to hit here lets start with the general state of affairs of glp ones today so the first thing i know is sticker price the price of osempic to treat diabetes is north of a thousand dollars and we govey for waitloss is north of thirteen hundred dollars per month before insurance and this is in the us so expensive right thats a lot of money in Canada of course， osampack is a hundred 47 dollars a month in the uk， its 93 dollars a month so everything that im about to talk about is a unique American problem much like most problems in our healthcare system， so how do these drugs get paid for in the us all that depends rich people just out a pocket if they dont have coverage we have seen all the headlines but it being Rampint in wealthy New York neighborhoods are around Hollywood but lets segment that away for a moment and say well OK outside of that well first lets talk about private insurance you might have coverage by your companies insurance and this is a good place to talk about the two most pernicious issues in the entire us healthcare system that are deeply entertwined one incentive alignment and two is time horizon so the average American in the private sector holds a job for three point 7 years that means that on ever actually where you going with this insurance companies are going to churn you every three point 7 years or sooner if your company changes the insurance plan， so there incentive is to cover you only in two categories of things one things that pay themselves back in less than three point 7 years or two things that have such an overwhelming demand from employees that theyre employers think that they absolutely have to cover them to stay， competitive now yousitting there thinking exactly the right thing which David you are the acknowledged but if i lose waittoday， ill benefit in the long run， but will my insurance company lower the cost in some way？
i mean if i obese， ill almost certainly have complications later thatll cost hundreds of thousands or millions of dollars once those become acute conditions， but those costs wont be realized by your current insurance or your current employees oh man， so i find ensure im like great im not float all that on the Medicare exactly the ensurres are not really holding the bag for this class you know these chronic conditions this is the crux of the incentive problem in our healthcare system there is just a mismatch in time horizon you are invested in your own health for your whole life， but your insurance carrier is not there invested in your health for your plan life with them exactly so what is the exception the exception is if your carrier is the us government so lets talk about Medicare and medicaid is a whole different discussion that involves states and is unbelievably fragmented so were just not actually talk about it right now but lets talk about Medicare so Medicare is through the us federal government it is a health insurance for people who are over 65 basically the us federal government funds that plan with taxpayer dollars and so a whileback， which is actually not that long ago just like twenty years ago Medicare did not cover prescription drugs at all Medicare part d was passed into law in two thousand took effect in two thousand 6 it allowed Medicare to cover drugs， not just hospital and doctor visitors part a and part b so today part d interestingly enough is legally prohibited from paying for waitloss， and it is specifically called out that is legally prohibited there have been effortstochangethis， but there was a bill introduced in twenty thirteen that basically has never been passed to try to get through interesting i dont know of this was a result of the fen fen debacle thats part of it， but i think a lot of it is really just this stigma of like well， you really should be taken care that yourself you really should be making lifestylechanges yeah！
i could see the argument of like why is the whole tax payer base covering you know people who should just be exercising more yeah even though like its definitely， been proven that that is not the case its not there fault totally！
the Wall Street journal has is great quote the scientific foundation for treating obesity as a disease rather than a lifestyle problem was solidified in the MID199S when researchers discovered that fat tissues released proteins that act as hunger and fullness signals to the brain this system is out of balance in people with obesity making it more difficult for them to lose wait and for those who do lose wait there are biological mechanisms making it hard to keep it off， so what is so interesting about Medicare is that we will all end up on it one day when we retier and we get off of our private insurance so it does mean the government is left holding the bag with our health for the long term so there are really two parties with aligned interest for us to stay healthy ourselves an uncle sam and for us its actually quite hard to look out for longtermentrice because the feedback blue is too long so like i go out and drink even though im gonna have a hangofor the next morning and thats only a twelve hour feedback loop like lots of times you make long term bad decisions so the question is can oncall sam fix that problem in some way well， it is far too earlyto say whether these recent glp ones are actually miracledrugs that massively reduce the complications leader in life and David you mentioned theres research being done to figure out it might reduce hard attacks meaningfully in strokes in liverinkidneydisease but if all of these things turnout to be the case， the American taxpayer has a huge benefit and investing earlyto keep all of our healthcare builds down leader in life yep so i dont specific proposal im not saying the government should pay for every single person in the country to be on osampic well have to see where the studies kind of Nat out on the benefits of these long term things and taking the sort of moral thing aside of like does everyone deserve a miracledrug if it exists even， if there is no economics around it， it might just be ripositive for Medicare to do this if everyones gonna need knee replacements and hip replacements and diabetes。
treatment and amputations and cardiovascular interventions right that is kind of the crux of the uh broader sociedall debated issue here is obesity leads to such a huge amount of comorbiities and disease and healthproblems in issues and yeah thats even just talking about the medical system let alone everything outside of the medical system that it leads to and is it worth a certain amount of both risk in terms of the drugs and cost in tax on society to save those expenses later thats the question here right！
so last thing to say here pairs are scared and rightly scared of how much it will cost them in the short term if they do start covering these drugs 40 percent as we keep saying of the population today as obese and the list price of these drugs is over twelve dollars per person per year so insurance companies employers Medicare they literally dont have the budget right now to fund all the demand for these drugs so even if we had all the supply so theres a lot of uh intentional slowrolling and campaign to try to get people to look at other interventions first before， these drugs given how colosily a expensive it would be right away yup！
which might be a good time to talk about elie and other companies out there that are also bringing dlp one drugs to market yes， please tell me about precipitite 哈哈哈 yes， so obviously other big farmer companies have not just been completely ignoring this incredible development slash cache cushier that has emerged in nova northclient elie now has a glp one diabetes approved treatment on the market under the diabetes brand name monjaro that seems to be as if not more effective as simple died in terms of waitloss when used for obcity entercipitite is basically the same its a glp one receptor agonist。
but it is also a gip， which theyre basically bundling two hormones together that act in concert to be certainly a little bit more effective on waitloss from the earlytrial data。
but also potentially more effective on helping your body produce insulin as well so thats showing great promise it was approved in the us for diabetes treatment in may 2022 and approval just came recently in November 20234， official FDA sanction Waitloss use case under the marketing name Zepp bound so look for that in twenty twenty four oh， what this really shows though between he like Lily in Novo and other companies that are almost certainly gonna get into the glp one business i think this is gonna be like insulin all over again where this is gonna be a series of product improvements and companies will drive innovation and increase supply i mean the demand is so huge out there that manjaro can be a huge hit or sampiting wegavi will continue to be huge hits other companies getting into the game will be huge hits Novo has next generation GLP one drugs in the pipeline themselves Kaggersema is the big one that theycurrently working on that they think will be as good if not better than what Eli Lily has with tercibutived， so i think were basically just assuming that everything continues to be proven safe in the long run wekicking off a new supercycle here in pharma development around these compounds just like played out with insulin over the last sentry yep。
and it really also just goes to show like it was time multiple of researchers arrived at similar ideas concurrently， which we see over and over again in the world， Uber and lift is sort of our modern cononicalexample sell your connectivity plus， gps plus iPhones sort of made it possible to do something for the first time， multiple parties were arriving at the same time to do that and i think science had sort of just arrived at a place where multiple parties could develop similar things side by side and so now theres certainly a catch up race among other pharmaceutical companies who werent doing this to now try to get into it and see if they can compete totally otherthings to know about these glp onedrugs today for diabetes i try to basically figure out from asking around what are people actually paying for this like what are most people actually paying cause less prices of drugs as we discussed earlier is stupid at least in the us yeah， yes， so there are a lot of reports of people paying somewhere in the neighborhood of three hundred dollars a month after insurance as their actual cost and to corroborate that a different way to arrive at that number one person told me that it is common for most employers to put between a twenty to fifty percent copey on these drugs so at a thousand dollars you know， thats two to five hundred dollars so on the one hand its still very expensive three to four thousand dollars out of pocket per year thats probably like my entire out of pocket healthcare spend in an expensive year you know， thats a big price tag， but on the other hand if thats the thing that changes your life that could be seen as an easy choice now its easy for us sitting here to say something like fax theres a lot of people that dont have that kind of cache to spend on something that could potentially change their life so theres definitely a meaningful access problem not just the supply constrain on the manufacturing side， but even at a highly subsidized rate from insurance， a lot of people still cant actually afford the drugs the last thing i want to say on the current state of glp ones is that nodeherence is a bigger issue with these drugs than many other drugs that have come before it theres some research that points out that as many as sixty eight， percent of people roll off it after a year and part of this is related a price or changing insurance that doesnt cover it or that its hard to find since theystill supply constrained or maybe there are side effects that a doctor is not sort of like staying on top of with you so you just get fet up in your like screw this time off， but a lot of employers in insurance companies are sort of waving their arms around and say why are we covering this expensive thing when people dont even stay on it and all the benefit goes away when they get off of it or at least you know percent of the benefit goes away in your waityouuse backup， so there are some very real things to figure out id making sure that you can prescribe these glp ones in a way that come with an offhandpe you understand and manage the side effects and make all the behavior a lifestyle changes that you sort of need to to make them be effective and sustainable interesting i didnfound that about nonadherence yeah， they came up in a bunch of teams calls there must been some hedgefun investor trying to dig into building a model of not adherence into their dcf well， before we go into analysis， there is a little bit of catching up to do on the insulin market because we kind of left it as hey， its still twenty two percent of uh revenue in novos business and you know big three companies uh， cinopy and Eli， Lily and Novo really compete here and theyviterated become great products over time well， one thing that we didnt talk about is the complete destruction of how attractive it is to operate an insulin business and this is super recent so if you would have asked any of these companies ten years ago， how durable is this revenue stream and how durable are the prophets from the revenue stream they probably would have told you that its pretty durable because we have things like a delivery peng mechanisms that we keep improving over time that are proprietary that give us surprising power that we keep revising the formulation so we keep getting the ability to patent new things its kind of difficult to manufacture because it is develop from living cells so were not just pouring chemicals into a vat we do have to do some complex work to produce the insolence so somebodys not just gonna waltsinhere and figure it out and that was a pretty widely held view and one of the reasons why i think these companies thought they had so much pricing power， which they got in troublefor so one thing that happened was a big controversy of her pricing that we talked about in 2021， us officials alleged that novel nordesk increased prices more than 60 percent between 2001 and 2019 in lockstep， with competitors to the detriment of diabetics now novel of course denied this and they pointed out that the net prices had actually decrease since 2017 so very convenient that they just talked about the last two years of that eighteen year accusation so my readinto that is yeah prices were really rising and yeah we all thought we had a lot of pricing power and we dont want to dig too much into it now if you look at the last five years and especially the last two， the opportunity to sell insulin for a profit has basically completely fallen apart so youve got regulation that came in after the public outcry so theres real price caps on what you can sell insulin for now Bio similar also came in biosimilar are effectively what people call generics but for the category of drugs that involve live cells rather than mixing chemicals together， so traditional drugs have generics and biologics have biosimilar biosimilar insulin became a thing and so a lot of the prophets just got completely arbatraged away and glp ones are here so those are reducing demand for insolent to those three things in a last like five years or so created this complete perfect storm for insulin to be a super on attractive business interesting。
obviously as were shown throughout this story its not like nophone or disk planted that way however， this is really did the great benefit right because of all the insulin manufacturers， i maniguess elidly was first to market with tlp ones， but nova really created the true glp one market and were the ones to really benefit from these earlier years。
while the competitors are catching up in many ways they disrupted it just in time in someways you could say wow， its so courageous of them to come in and disrupt themselves but on the other hand its like the headphone Jack right was it courageous or today see the writing on the wall that eventually were not going to make any money from insulin and so its time to really start putting our foot on the gas on this thing where we could have bigger market differentiated profitability i kind of think it was a happy accident that the timing worked out， but there are different ways to look at it yeah！
i certainly didnfind anything in my research that suggestiss was anything， but a coinstance yeah！
itinteresting to think about the fact that these companies thought that bio similar is werenjust gonna walt sin and you know eat their launch in arbitroas， all the prophets away overtime the market for insulin became sufficiently large that they just had a target on their back the prize became worth it as we talked about in the Nvidia episode modes are only sufficient if the castle is sufficiently lame to invade otherwise， the castle becomes better you need a bigger mode in nine 99 i think it was elisold 7 hundred million dollars of insulin America nine 9 by 2017， just two other products sold 2 point 6 billion dollars in America yeah， two of their insulin products yeah 7 hundred million to two point 6 billion its just an illustration of how large and how interesting that revenue stream became for other people to go after todaily alright， should we get into power were kind of there anyway， wekind of an analysis land here yeah！
lets talk power and uh for folks who are new to the show this is borrowed from our great friend Hamilton Helmer and his wonderful book seven powers worry talks about the meansby， which a company can achieve persistent differential positive returns？
versus their competitors in an industry yeah or put another way how to be more profitable than their closescompetitor and do so sustainably so the seven powers are counter positioning scale， economies switching costs network， economies process， power branding and cornered resource so the first thing i want to say is we are in the pharma industry and so the one that has a blink red light around it is cornered resource yes！
this is a patent driven industry yes！
nova nordesk has the patent on some a glue tide until twenty 32 and this is an industry where when you have the pattern and you are able to make an end of one drug and you know were not quite seeing an end of one drug here but its an end of two drug you get the profits and frankly the crazy thing is when you look at some of the analysis， the prophets of operate within two years of your pattern going away now that was from the previous era before biologics， so now that things are harder to copy because the molecules themselves are more complex than they require growing living tissue more engineering yeah， that would fall more under process power and frankly scale economies because it requires more capital。
but right now like historically pharma is a pattern driven corded resource industry yup i think how this glp one kind of supercycle is going to play out if it continues and whatdigising about the insulin history and the analog to that its looking like its going to be like this ever stacking waves of patentable innovation in product innovation happening here so like yes， the seventlutede pattern will expire in 2032 but if cagrasema theyre new kind of next generation， GLP1 product shows the promise that they think itll have then thatll be a new pattern cycle starting then and then theyll develop the next generation and itll play out again just like insulin。
but yes absolutely resource for sure yep the patterns arent just on the molecules they also pattern delivery mechanisms and so they keep changing delivery mechanisms you basically have the scenario where doctors dont really want to prescribe the old thing and so when you introduce a new novel form of a Penn oftentimes， doctors will say well thats the thing we need to be prescriving now and so theres like a brand that gets built around the most current thing thats patented even if its not that much better than the old thing and you know， theres a lot of people in farmer that are gonna get mad at me for that characterization， but in addition to padding molecules delivery mechanisms also provide defensibility yep yup！
yup！
one question i had was there might be like contractual things that entranch relationships to like when you get really big and this would be a scale economy are there contractual relationships with formularies that sort of entranch you and make it so that even if someone else comes out with something similar to treat any given condition and your pattern isnt defendingyou because its a different molecule well， sorry， youve locked up a distribution channel with the pbm and getting on the formula in such a way that like good locked anyone else yeah！
i think that falls in the scale economies yeah， which for sure also apply here yeah， i think really on three sides on the rnd and research side yes！
that is incredibly capital intensive of two point three billion dollars a drug yep production side as weve talked about for much of the episode and then also here on the go to market side you cant just you know Waltz into these markets right and the gigantic Amat of rnd it literally is two point three billion dollars to bring a drug to market on average you need to make a lot of profit dollars on any given drug to benefit you dont necessarily need scale of patience。
but you do need scale of dollars in order to outrun the fix costs of rnd yep i think we can say theres no network economeshere pretty safely， and i think we can probably also say theres no branding although ozembic has become such a buzzword oh！
i think there actually is normally there isnt but thats one of the breakout things about ozempic is there actually is brand power the first time i heard about manjaro was eighteen months after iheard about osampic and i was like oh， it must be some kind of knock off you know， this my first time studying pharma i was like oh， its probably something crappy thats trying to ride this same wave， but isnactually the breakthrough molecule and like the studies show manjaro helps you lose more wait and has a very similar mechanism plus another mechanism that together work but like most people dont know that most people know i read on the covering York times that osampic is a breakthrough and i heard about it at the oskers because a joke was made on stage Jimmy game always talking about it yeah！
yes， i think for the first time and it happened a little bit before， but for the biggest time in a while hosempack has actual brand power yeah！
i mean theres like tylen all etc of but like yeah， its entering that category i didnmission on that front to when we very first started talking about potentially doing this episode a number a month ago i thought the same thing you did about manjaro about we govey i was like oh， that must be a graphiknock off i did a cursory amount of research and i was like holy graphits the same drug from the same company like im an idiot its like literally the same thing。
its literally the same thing often in the same doses its technically a higher dosage but you can get many different dosage levels of either drug alright！
and not only that it is the one that is supposed to be forwait loss， but youre right osampack has become this brand name yeah！
vitamin o were as or the others all sorts of Ivan reading the osetbox of readit for a while to prefer those i bet you found some fun stuff in there totally switchingcosare a thing switchingcosswith any drug are a big thing because once you find something it works for your you， you never change like ive been on city in hydrclaire ide for myologies for fifteen years i think itzertec and like no im not trying anything else it works why would i try something else yeah and especially in this case where in the vast majority of patience？
it does seem that if you stop treatment。
you will regain the wait yeah thats one of the worst things about it， i will also throw in network economies oh！
id said i thought there was none， but i want to hear your case for it well。
so i think most the time in farm others none， but without sempec， so i think theres two ways in which glp ones used for waitloss resemble consumer tech products uh one is a tight feedback loop when i start taking lippitor， i dont like physically notice anything about myself despite the fact that something that is potentially very dangerous to me has become less dangerous with collastrall when i lose weight， i immediately notice like if i lose what six pounds in the first month， there is a super tight feedback loop there and so in the same way that zinga created these feedback loops for mobile Gaming， and that sort of psychology has been used in all tech consumer products now to create these gratification loops that totally exists with those empek the second one is what i think is a network economy you kind of become a walking Billboard hmm yeah， theres a little bit of a tabu around sort of saying im taking osempack but people know you lost wait it has almost like a sharable ozembit can go viral in a different way than most pharma describes going viral i totally agree with you。
i would push back a little bit in the classification i dont think this is actually a network economy i think this is just incredible word of mouth marketing because i dont think other people actually get a benefit from you taking osampic yeah！
but i mean literally you become a walking bill board like it is a obvious word of mouth marketing i guess the only one would be like the tab you think if im taking those epic and im ashamed of extreme the first person if a million more people start taking it， then it is actually better for me right if Elon Musk tweets that hes taking it we govy yeah！
but again its the safe thing right！
not to mention ribalsis thats the new oral one theyve figured out how to make some a glue tide a once a day pill if you prefer taking that to a once a weekly jection its a little bit weird because you have to take it on an mtstomic and then not eat for thirty minutes afterwords but it dont like needles i believe it is also not quite disaffective as the injectable version huh， but still it is amazing feed evengineering that they created an url version of this and this is the kind of stuff that no nortis is so good at its all these decades of researching how do we make this stuff break down differently in the body because it the issue with the glps is it cant get absorbed into your bloodstream by you putting it in your mouth and then it going into your stomach and you know hitting at the harsh environment of your stomach so like figuring out how to make something go from your stomach into your bloodstring for a sustained period of time right protect the molecule enough right that is sort of the novomagic yep wow！
theres a lot of power here i think the only one we havent talked about yet is counter positioning， which is interesting you know， maybe you can make an argument at the beginning there was because this could disrupt the insulin market！
but i dont really think so yeah and counter positioning basically always exists in the takeoff phase and never exists later， i think that we keep kind of finding that pattern over and over again is in comments dont really counter position startups counter position yup yeah， i think in the world of healthcare there is a ton of power for basically any company that we would study because the returns over and over over again keep going to these incomments they keep getting bigger and i know biotech investing and startups is a thing and there will be new disruptions on the horizon， crisper and genus seltherbees and things like that but the last thirty years at least of healthcare has consisted of returns to scale。
which would indicate lots of power yeah and itbe interesting to explore healthcare broadly and specifically biotech more on the show my sort of arms length understanding of the industry is that where startups primarily are doing drug discovery and then they get acquire by the big companies for go to market yep thats right or they do a deal of some kind of distribution deal but a lot of the economics of that deal are eaten up by the big pharmaccompany as the distributor。
which really theyre not the distributor the pbm handles making sure that the reimbursements are there are so doctors will prescribe them and the wholeseller distributors handle physically moveingthedrugs but when you do a quota quote distribution deal as a biotech company with a pharma its because the pharma has the relationship with those two other parties to ensure that you actually can be available a prod scale and really this model all started going back to genentec and Elie and June tech ended up getting acquired by Rosh。
but it was that partnership of 依赖 Lily being the goal to market for genetec in insulin that started this whole you know start a big farm！
a partnership yep alright playbook！
playbook lets do it so the first one that weve hit a few times but is just worth putting a fine point on is concentration the focus of this company is unbelievable 85 percent of their revenue is dedicated to metabolic disorders they are the second largest market cap pharma second only to 依赖 Lily its crazy there are that focused， but they have an ability to be that large by market cap it is worth knowing they arent in the top ten pharma companies by revenue in fact， there twentyif wow， i didnrealize they were that low yeah no its a multiples thing part of the reasonwhy there Europe biggest company is people are very optimistic about their future and about their ability to be profitable。
and the future not just make a lot of revenue but it continues to blow my mind that they have had the huge success that they have had with how focus they have stayed you know its funny i was thinking the same thing is my main playbook takeaway from this one it reminds me of our Sequoia capital episodes a few years ago and sequoias kind of historical classic Montera the done Valentine ethos of target big markets find a big market target it and then like stay focused on it for decades in decades in decades and thats the story of a lot of companies weve covered here but this is such a pure play example of that like one disease right one drug area for a hundred years and now a second drug area that came out of that first drugarea well。
but for sixty years， it wasnactually that interesting of a market thats a crazy thing like nineteen 201980 it was type one diabes， which again absolutely incredible for the world that they took children who had a death sense that gave them life and they got to live basically a full life but was type one diabetes actually， this colossol Mega interesting market no not at all yeah something changed yeah absolutely youtotally right what did Charlie mongertell us， he said there are many times in a lifetime where you know youre right and you know youre really have an investment thats gonna work you may even find it fiveyears after you bought it your own understanding gets better and i think thats basically what happened with the novenordesk foundation they realized oh， my god this isnt just a service were doing for the world this is one of the most important markets in the world totally right its so funny i mean obviously we werent in the room as these conversations were happening。
but from reading the history it feels like they understand it more than management at the time management was like kind of too close to idn thinking you know industry wisdom we need to merge consolidation is happening and they really no theres this incredible wave that we are riding here lets keep compounding you should share the stat on the size of the endowment oh， yes， so um i can cant believe we havent talked about this yet Novo holdings， which is the vehicle by， which the foundation holds their sticks in deva nordesk and nova sims there are sort of assets， under management and does the endowment of the foundation is worth a hundred and twenty billion dollars， which makes it the single largest charable foundation in the world over two x larger than the gates foundation， which is number two unbelievable this unbelievable and through nova holdings it is actually now become one of the largest inmost active lifesciences in biotech investors in the world two they hold venturesticks in eighty plus other companies， thats on top of giving out lots and lots of grants to life sciences around the world and fulfilling the foundations mission have been its just while were bearing this so deep in the officer， but like this is the largest charable foundation in the world thats wild now its interesting that it qualifies is that because yes！
that is totally true on the other hand a hundred and twenty billion dollars is pretty neatly just a little bit larger than a quarter of nova nortis market cap and so like the vast majority of that hundred and twenty billion is there ownership of nova nordesk so its not like oh my god they spat off a hundred and twenty billion dollars in cache that theyinvesting else were no so if you know， Jeff beisos decided to put his what does he have like nine percent of Amazon decided to put that into a foundation and call it charitable suddenly that would be the most charitable foundate or you know up there yes correct， but the pointstance its still pretty cool yeah， while were on the topic of the foundation before we keep going in playbook it is worth pointing out that there are formally defined objectives of the foundation and those objectives do not include growth， so its kind of amazing that they have grown the way that they have the dual mission now is stability and supporting scientific and humanitarian causes so what is stability？
mean i suppose it means like ensure the longgevity and duration of nova， nor desk as a company， but itinteresting when your stated mission is stability and this humanitarian cause that is a byproduct you could end up being this incredible market leader， innovator， super high growth company to yeah in on the point of mission novonordisk as a stated mission that is not just about supplying treatment， its about a radiating diabetes， and so there was A2014 paper that came out that suggested a real cure for diabetes using stem cells things out of Harvard and at the time the novel nor this chief medical officer replied we feel a responsibility for trying to prevent or a radicate diabetes， and if that means the dissolution of novenordesk that would be fine ihaving such a hard time rapping my mind around like is that actually true is all of the behavior of the executives actually in service of duringdiabetes even if it means that there revenue would go to zero isnt that at odds with the idea of stability of nova nordesk that quote was from 2014 did you say yeah so previous industration so to speak and Pre glp once becoming really huge its very easy for them to say that now cause they could eradicate diabetes now and still be your appslargest company dispaced on opc alone but from talking the folks from the outside my senses i think that is as true as it can be in a corporation。
yeah！
i also found a stat that in the last six years， 4 billion dollars of grants have been distributed， so i was little tall and cheek about like well， jeeis most that is their ownership of nova nordesk， but like that is a lot of outflows to research and i i think importantly that research often supports what nova dartist the corporation wants to go do and so its nice to have a close relationship with researchers yes！
there is a cycle here yes！
which rolls up to the mission of stability but yeah， they deserve to be applauded for the reinvestment certainly。
it is a unique structure in the corporate world and one that is set a huge impact on the companys history yep OK？
while we are in corporate structure land alignment of incentives is pretty interesting among management i dont know if you look into this at all， but there executives are not meaningfully incentivized by stock price performance hmm？
itisy no， i didnt look at this at all yeah！
so they are sort of forced to think on a different time horizon than if your compensation came primarily in the form of stock options and you wanted to you know make the stock go up in a three to five year window， so executives on board members are not given stock options as a part of their compensation and when you talk with folks in the industry， the employees reportedly have lower compensation than their counterparts and other companies and i couldnfigure out of that was like a Danish versus， American thing， or if they intentionally try to repel the idea of mercenary employees and attract missionaries but it would seem that there excellence in pioneering diabetes medicine is really mission driven theres a what they call there renumeration policy， which requires all board directors to hold stock you know youre not getting it as your comp but yourequire to hold it， which i think is kind of a similar idea to what berksher haltheway has of hey， we should have um sticks not carits and in berkshiurs case， theres no dno insurance for board members you actually have to own the liability of the companies actions yourself to be on the board， so they they take it seriously but in novos case， its hey， you dont get the carrot of big piles of free equity in our company yeah！
you gotta go by the stock yeah！
you have to actually be a align with the owner so you get the fruit， the appreciation or the punishment if it doesnt do well？
yep， i suspect is probably both i do think Danish culture plays into this to you it is a much much more socialist country than America and actually， um， hewatching interviews with lot of she talks about this and sometimes shes asked about it of like oh he didnt you get rich on basically， inventing GLP one and shes like no ive never asked for a race in my life im a socialist but look at what weve done for the world yeah！
its pretty crazy now the question is does that thinking lead to the glp one breakthrough other farmer companies certainly didnt make these investments in these decisions on these timehorizons and so theres a reasonable narrative that it was actually Norvel Nordex focus and their time horizon that led to the decades longed work to actually bear fruit i mean some a glutid isnt out of nowhere it was built on all the work they went into learning tides since the early 九十 incorporated all the clever ideas they had previously developing longer acting insolence and things like that there is a reasonable narrative of is there long time horizon and are focused there ability to learn from doing the same thing well in iterating of over a hundredyears theyactually led them to find this breakthrough when others didnt yep。
the keypoint is longterm focus and if you can do that as we have shown time and time again on this show you can create something great if you do that is not like you will create something great you still gotta get lucky and also be doing the right things in the right areas but if youve gonna build something really really big you gotta have that long term focused mindset yeah！
OK， there are a few unexplored areas that i think are interesting to know about healthcare as a hall and about nova or desk that i want to talk about here in playbook one of them is a shift that novel has done here to broad populations with relatively inexpensive drugs vs otherpharma companies and i know youre gonna be alergic to the idea that i just told you a thousand dollars is an inexpensive drug， but the crazy thing here isnt just that the revenue when the focus is so concentrated its concentrated in an area that other companies shade away from Pharma over the last couple decades shifted away from these Maas population drugs to specialty drugs and these are often to treat specific forms of cancer or rare childhood diseases with supernarrow populations and huge price tags and to put numbers around that were talking like total market size of a couple hundred thousand people or fewer as few as like three hundred people and these superrare or Finn diseases occasionally these diseases are so rare and the treatment is so you know life changing or life giving that the treatment like one dose of the pill or one infusion of the therib or whatever is can be measured literally in the millions of dollars so it gets far more extreme than a thousand dollars a month its understandable why the other pharmacunties went there for a few reasons and this is a little bit of a walk through history， but its been a while since we saw a breakthrough in a massmarket drug， really the last one that we can point to is statense， which was to treat collastral i dont know thirty years ago is really when that whatkind of the thing， hiv and hepc are examples we can point to but again！
its been a while those are small markets compared to obesity well！
compared to obesity， but they still qualify as large population when youtreating millions of people with something well， a you can have a different pricing structure like you can have much cheaper drugs but b like？
you can just affect a huge swap of the population you know its not like wediscovering an antibiotic or a cure for polyo every other year these days in fact， the all timers researchers have really been trying， but the trials have just been disappointing， and so we had this great hay day thirty years ago of small molecule drugs that you could manufacture relatively easily by mixing chemicals， but after those patterns expired and these could be manufactured by othercompanies as genericson sold everyone for cheap， we really havendiscovered something like that sense， so thats why the shift has really gone and of course， we have a new technology to do it to but really shifted to buy a logic the complex proteins that are you know harder to manufacture and i think a way to summarize that is a lot of the low hanging fruit has been picked 嗯哼， compounding this problem just because this is healthcare and you compounding every problem different type of compoutding yes， the way that FDA approval works is that you get a label for a drug if you can prove with the right degree of statistical significance that the benefits outwaytherisks a and that you are better than current alternatives by some measurable amount so conditions with existing alternatives are harder to get approval for um another factorpushing to rare diseases a hundred percent going back to the piece that Alex wrote he references this idea of the better than the beetles problem like what if it was a requirement to be releasing a a new pop song in the market that it was better than he should or better than here comes the sun you have no innovation like if course not right right， so the rule both make sense and you understand why once we hit some minimum level of treatability for something youre like jez is the juice really worth the squease there anymore right no you go work on something that youactually likely to get approved for and make your billions of dollars of rnd worth it and your years in years of clinical trials recruiting all the people for the study and by the way， these studies have just gotten so insanely expensive to run and you know its not just the studies that cost money but if you just look at the cost to bring a drug to market in 153， it cost 40 million dollars for an approval and thats an inflation adjusted figure today it averages two point five billion wow！
wow！
wow！
well！
i dont know its easy to be kind of like disolution with why would i go after something large population if theres something else that treats a large population good enough！
right well！
thats it just it where is you look at almost every other market out there if its like a big market theres insame capitalist incentives to go make a better mouse trap for it right its super true so this leads into this uh another playbook theme Pharma is the most classic example of the venture business its super highrisk， its super highreturn if it works and the winners need to subsidize all the failures and in fact， its even more sort of severe than typical venture capital because a lot of the research can take over a decade of investing before the winners bear any fruit it all so everyone was like oh my god figma spent four years writing code before they shipped a product like four years oh！
four years thats nothing yeah！
theres no mvp in semeglue tide like lets put a couple billion to work and then well check in a couple decades， later and see if weve changed the world and obviously， there are stage gates along the way， but you know its adding a zero or two to the venturebusiness to be honest i think that the most illustrative stats on this are that the top decial are pharmaceuticals are what matters for the prophets so if you look at the pipeline of a hundreddrugs that enter clinical development 10 actually make it to market and one providesget this halfthe prophets one drug oh！
grab wow， the initial part of what you just said jives with our math earlier the ten percent make it to market i mean thats a power law right there right ten percent of the ones that make it to market provide fifty percent of the profits most drugs this is also crazy stat even after they are approved do not earn back there rnd costs i mean this is another dynamic showing why the market forces led to consolidation in this industry like you just need to be so large and have the capital resources to pull all the risk of these drug pipelines thats exactly right yeah！
you need to actually be able to pull risk or have some differentiated way versus all your other competitors of being more likely to create a hit OK！
no other disk yeah！
you will not be a successful farmer company without blockbusters and even then blockbusters might not be enough wow， nuts all right， so now were into like healthcare as a whole land so ive some commentary on this im very excited about this i think this is going to be a new chapter of acquiredbecause theres a lot of stuff to dive into here and will still never understand it all but its fun learning so i think everybody is aware in some sense that for every dollar that we are investing into the healthcare system were getting less and less incremental utility out people complain all the time that has a percentage of gdp， which by the way is something like seventeen eightpercent， which is not right our healthcare system cost us 17 18GDP that goes up every year and the quality of care goes down or life expectancy goes down， so everyonesort of like heard some variation of this problem before on the surface things appeared to be broken yeah， the 10 七 point 3 percent of GDP that healthcare costs you should just know as a baseline that in nineteen sixty that was five percent of gdp this isnt like gone up a little bit this is like you know one of the biggest line items for the entire country used to be fairly dominimisson is now enormous so you you should expect a lot of your healthcare system givewhat a costs on the one hand this is really bad and like theres a zillion people to blame for it so its hard to blame one individual or one company and so its a little bit of like a tragey comments where were on throws their arms up and says well， im gonna go do the best i can and you know make sure im OK because i i really dont know like who to point to and be like this system is efed up for this reason me you can blame ola goply you can blame regulatory capture you can blame too many middlemen to hivehertles to get new drugs on the market but on the other hand like you would sort of expect this i mean a lot of the low hanging fruit is picked， so it seems like its gonna require more money to go eke out more rewards people always make fun of pharma with this thing they call air rooms， law， which is more slaw backwards and the idea is like pharma for every nexgeneration gets more expensive， but like semiconductors also require huge amounts of rnd and just because were getting that speed up every eighteenmonths have you look that uv its an order of magnitude more expensive， every generation to be able to make processors like that， so i think thats a little bit of a false equivalence i totally understand why especially in heavy industry， it should be more expensive to get marginal benefit out once you have already picked the law hanging fruit so ive， a little bit of push back on the healthcares getting worexpensive， were getting less out of it the thing that isnt good is that the average life expectances have actually declined in America at the last few years despite the fact that were spending more money， so its not just that our marginal dollars are earning us last its that were putting more money in and life expectance is actually decreasing and unfortunately its kind of outside the health systems control its a lot of like mental health related stuff overdocing on drugs a lot of things impacting the length of life are you know cutting sixty years off of people slice when they are young， which obviously will massively affect the data one otherthought on this though so from 1850 on word we got these huge increases in life expectancyeverydecade if you look at these charts， its astonishing youre like wow， theres like a miracle drug every year， or theres a miracle process， or theres people are washin there hands， or theres indoor bathroom， or whatever is， life expectances is getting way better， we were like curing infectious diseases that killed kids all the time but once we got， those mostly covered at least for the sort of big large population ones so we got adbiotics and insulin and all this if you spend money to help a 75 year old live to 80， it has a much different effect on the data than helping a ten year old live to be 75 once you compound that with a low hanging fruit of course， is gonna be really expensive to figure out how to make that 75 year all live to be a especially if theres a big fragmentation of disease。
yeah， its also exponentially harder to get that five extra years of life， because youfacing twenty different morbiles out there right！
we rarely are getting the silver bullets like we did with antibiotics its gonna be 2 point 3 billion dollars over here to cure this form of Melanoma and its going to be two point three billion dollars over there to cure this form of pincreatic cancer its just gonna i think just gonna keep getting more expensive to cure the more fragmentedsmall population things i think theres a reasonable question of like what do we do about that is a society now thats on the benefit side there might be some massive cost reduction side like you could imagine some technology comes along that makes strong development way cheaper or makes us able to like massively collapse the time and dollar spend on a clinical trial by using ai or something or there might be wasted collapse cost 12X somewhere in the healthcare system， but the current state of affairs is not very free marketing so its harder to imagine that happening vs otheregosystems the way it happens in tech yep， a couple other just like fun things that i heard from people during research， which i think are just like interesting problems to think about the health system that was created over the last sentry was really designed to treat acute an infectious diseases if you think about our healthcare system as it existed a hospitals where you go in when youre sick doctors that you see， when youre sick surgeries you have when you have， an issue pills that you take when you have an infectious disease data biodics that you take you look at the chart of life expectancy the people that design that system and solve the acute infectious disease problems should just hang up a big mission accomplished banner itwork is amazing right we made it to the moon human quality of life is just unbelievably high， and theres very little uncommon today on the list of things that will kill you versus 1850 completely different set of things so the next frontier than is chronic illnesses and they catch up with us later in life and theyre basically on detectable for like the first fifty years or the first thirty years， i mean obesity leading to diabetes or cardiovascular healthleading to heart attack and strokes these are very different things to treat and require a very different way of thinking of regulating of paying for you Donwanna wait until people are sick to treat it because that its too late and so in many ways this entire old system that we created that consumes eighteen percent of our gdp may actually not make sense in this new world of treating the things that are more likely to kill us now， which is chronicillnesses right hmm， i dont really know to do with that i think its a pretty interesting hey！
you did so much more of this side of the research than i did you get a sense in talking to people like that transition is happening or no well its so hard and healthcare cause theres so many buzzwords like theres a thing called valuebased care。
which in a sense it makes sense its like we should have to pay for every little intervention someone does we should pay for them helping me cure the thing you dont pay for the interventions pay for the outcome and so then that forces the right sort of thinking all the way up the value chain of how can we deliver a quality of service in the cheapeus way possible to achieve the same outcome， which is like how free markets work right， but in healthcare the way everything gets build is on a cospasis which web talked a lot about cost plus pricing and the dangers of that on the show so i mean to the extended the valuebase care stuff helps no i dont hear the solutions all right well listeners you get inspire i did hear one credible push back against why is healthcare getting so expensive as a fraction of gdp we use a lot more health care people just have a lot more life bettering interventions be it from doctors， from pills， from facilities than we did in a long time ago and so like i dont know i had two surgeries a few years ago， one of which was an acl surgery and like a whole bunch of pt and in nineteen eighty what i have had those maybe the pt probably aworse surgery because the procedures were worse back then in nineteen fifty what Ive had acl surgery at all no ipriges limparound the rest my life there really is just actually a lot more care delivered now than theyre used to be ah man i mean even like gosh this is so close to home i mean for me and Jenny and my family have talked about this on the show before。
but Jenny and i both have 盯 atic cancer predispositioned mutations so you know the amount of screening that we get and then for family planning with you know having our daughter and other children in the future the amount that we have used the medical system as very healthy， thirty somethingsthroughout our life would not have been imaginable a few decades ago so i like yes， i totally buy that all right were kind of drifting in the value creation value capture here because wemaking sort of sociable judgements around uh you know are the economics worth it do you want a formally enter that section of the show lets do it maybe to start you know on this segment of the show we talk about for a given company how much value do they create in the world versus how much the capture and lets start nearly with novonoredesk itself what do we think click value creation vs valuecapture undeniable that over the hunter plus year history of this company it is created incredible value for diabetics and now for a much broader population than just diabetics so the creation amount is large it is also undeniable that is a half trillian dollar market cap company on call it 30-40 billion dollars of revenue highly highly profable revenue the day of also captured a lot of value well。
a lot of people talk about does the pharmacector overearn this is sort of the way people talk about this and on other episodes that weve done theres far less of a value judgment were kind of like yeah company should go be as profables they can be my god visa make so much money and like at a little bit toningcheek， but it healthcare it sort of different because theres an expectation that you sort of start from a place of public good， and then when healthcar companies earned too much money， you sort of look at it and youre like oh， i dont i like that， which is so interesting right its a very different starting place than i think a lot of people tend to look at businesses but one thing that is true is that these businesses require a tremendous amount of investment and so just mere lylooking at their margins is stupid i alluded to that earlier， but like of course， they have highgrowth margins for the things that they actually end up selling rather than killing they should right thats not taking into account all of the research that they did over the past all the research cosmos are below the line costs and all the failures because they never sell those drugs， so you basically have to say well all the margin dollars they earned from the winners both have to cover all the fix cos rnd of that drug， but they also have to cover all the failures of every other druck so when you actually look at their return on invested capital numbers roi c theyare not throughthereof theyre like thirteen percent industry wide but hold for novel for a second， its totally online with other industries like trucking broadcasting electronics when you sort of look at the federal data on it， i mean the fact that on the blockbuster drugs， the companies earn a ton of money is not the whole picture the picture really is like as an industry are they overearning no， they kind of used to until like two thousand but nowadays， the Ric numbers are just actually not that interesting and in fact， some would argue that as pharmacits， lesson less efficient capitalist should just not allocate their dollars there because theres literally not enough incentive in the profit dollars that you get to earn from your drug after its patented for many years like should you actually index the pharmacector probably not me its a little better than other sectors， but not necessarily enough to take the sector risk of putting all your dollars there well youmakeme feel better about my career choices here the work in tech now novel nordesk on the other hand massively outperforms there peers and has been really interesting trend where Ric for pharma as an industry over the last fifty years has declined， but the variance between companies has increased and so novel far out performance the median pharma company in terms of return on invested capital， but theres companies a way under perform to， and itinteresting that the good companies are getting better and the bad companies are getting worse while the whole industry declines in its ability to producerreturn yeah！
ha so interesting i mean im tempted to save from this whole episode that the moral the story here is focus on longterm focus， but i feel like we need to uncover this industry more and herefrom focus in it if there were always true， why are there not more？
novos out there right it may also be playcompounding games in big markets mean itvery clear even if not intentionally that a lot of novos historical work lead to them understanding something important better than anybody else and i think they might have locked into how important it became but play compounting games yeah， pretty interesting i mean pharma as a whole of the medical pi only active is about thirteen percent of revenue i really would have thought with all the hate toward big pharma that it would be higher thirteen percent of revenue in the healthcare industry yeah yeah， so that means eighty percent of healthcare revenue is not going to farm uh right if you could trade never having drugs again or never having doctors again， which one would you pick wow！
thats a good question i hadnt thought about that its of course， kind of a farcical right its totally particle you know i think about my scenario and you know Jenny and my scenario like which both together for sure yeah of course。
it is but do you think drugs only provide thirteen percent of the value to all of healthcare？
no certainly not its crazy definallymore than that especially incrementally if the investments were making going forward in improving humans and are quality of life， some amount of it comes from amazing new surgeries， some about of it comes from amazing new medical devices， but someone of it does not come from new administring of billing practices or the four middlemen in the middle the equation right the improvedability to move a drug from place， a datplace b and come up with yet another cleverway to build out the formula so it moves money from this pocket to that pocket hospitals if you back out the drugs， they prescribe hospitals are twenty eight percent of the revenue in all of healthcare， which is large， but hospitals provided craft on a value professional services like doctors offices are twenty 6 percent they also provide a lot of value do both of them provide together for times as much value as the breakthrough drugs do i mean for 给 health insurance the administrative cost of health insurance are 8 percent of a very！
very， very large number yeah， right， yeah， i mean that。
said like the ministry of costs of health insurance are within spitting distance of pharma and pharma i will say like whois taking any risk in this whole ecosystem its only pharma yep whois taking risk to innovate and make anything better everyotherbeta hospital makes or that an insurance company make this probably Gonna pay off this is actually pretty interesting if you look at the net income of a pharma company， unless it take the biggest one or a very large one fizer super spikey even another diversified updown， up， down， up， down some years they make very little profit some years they make a lot of profit that is what you should expect from someone who is taking risk trying to innovate sometimes they succeed sometimes they dont you look at an insurance company and by the way lets define insurance company insurance company is someone that in the good years collects money， and then in the bad years they have a big loss and hopefully they collected enough money， such that they can still make some profit after covering the losses like a hurricane hits the insurance company has a bad year does that ever happen if you look at the net income of the big insurance no yeah！
this is no surprise here but like healthinsurance in the us is not insurance its access its a hundred percent right？
so we just had the single greatest healthcare crisis in the last several decades with covid and what happened to the prophets of the big healventures they stayed flat or group so i mean we aren here on acquiredto davenize people for making money or for being capitalist but i do think we should call a spade a spade the health insurance companies are not actually insurance theyre not actually holding the bag as the funder of last resort when calamity hits its the government， so really its the taxpayers the biginsurance companies and the pbms make good prophets in the good times but the taxpayer funds the bad kinds i would be kinder here to the middle bed of the industry if i thought they were innovating and taking risk the way that the drug companies are， but the incredible consolidation that happened about insurance and pbms and i mean frankly even the hospitals and pharmacies to like theres either local monopolies in the hospital case or kind of a three race ollegally in every other part of the value chain that really is just obfiscated and insulated profits so what you tell me is that pharma are the guys in the area they are out there trying things exactly no matter what value judgements you want to place on them or anyone else and there are years where from away out earns and frankly novenordesk has way out earned many of their peers many years in a row and its like a very fine question to ask of like does any healthcare company deserve to have such phenomenal returns on invested capital like noven or discuss but there are many players in the ecosystem for whom it is obvious to me that they should not be as large and not be as profitable as they are i got no arguments here all right team nova， yes， and frankly team Pharma at least relative to its a reputation i think there are many players in the healthary industry that have a fine reputation and they probably deserve a fine reputation， but its weird to me want a terrible reputation pharma has when there are the ones innovating and trying to massively effect the trajectory of humans。
yep， and i think thats why you know a lot， a scientist， including at the lata， many of downmost folks， at northern nordesk， and gets why they work there yep！
alright， so finally to wrap this section listeners this is all very very complicated every time i was tempted to say well xyz party or xyz mechanism is stupid， which i probably did too much on this episode i discovered a very rational argument for why that thing exists and why it isnall that bad， which is a little bit matdoning to research and also explains how the system in America ended up the way that it did today yep to close value creation value capture there is sort of an interesting thing that everyone should just new to on and try to square the circle people feel like drugs cost too much， and they dont understand how much theyre going to cost and theyre upset because they cant get drugs that they want they think theyre being extorted in some way this is patience generally shareholders in farmer companies， feel like theyre actually not making that much money if you look at the whole industry， theyreturn noninvested capital is maybe slightly better， but pretty much on part with other industries so square that circle its pretty weird right bareball David and we can be reasonably quick in this sense uh i think weve hit a lot of these points along the way yeah！
i mean to me where you for nova nor disk specifically， i think its pretty simple rglp ones the next supercycle if yes！
that is the bwcase right even if lilies， manjaro and setbound are like。
i think theylike thirty percent cheaper they might be better but they can both make a ton of them and all of them will get pulled off the shelves right away there is room for everybody here and the barriers to entry for everything we talked about to competing in this area are very very high so like there will be a number of competitors including elie but there will be plenty of demand and prophets for everyone thats the both case and Barry cases for any variety of reasons be it uh health， risk or lack of efficacy or you know whatever longterm this is doesnt play out or doesnt play out on the same multidecade longtimeline that insulented yep i think that is exactly the right way to put it for some numbers。
which i think are interesting and just sort of to illustrate if semigluetid becomes truly a mega block buster， an example of this is humira by abv that generated two hundred billion dollars in lifetime sales since Humera was approved for eleven different indications across this whole spectram of inflammatory on auto imundisorders so it turns out you actually dont need a deep pipeline if you have a drug that you can be profitable on where theres not a lot of competitors for it， your pattern actually gives you a good amount of room you build， a brand around it you get approve for a ton of indications that all have large populations i mean there is such a blockbuster that for a decade it doesnmatter how deep your pipeline is or how diversit is you just win and like theres a chance that with something to zipitive both Lily and nova nordesk have that for the next decade yep and dicky plus with further innovations and iterations that are going to come yeah， Elie Lily has this one on the pipeline called retateretried that is a triple agonist that adds yet another hormoned of the mix so i think assuming that Novo stays sort of neck and neck with elies Lily as they both keep coming coming out with better and better versions that this could be the next humira or potentially much bigger than humira and adding the defentability is an open question for how many years but at least the next decade， yep one other downside that i think you dont point to specifically， but you sort of meant in saying theres some unknown downside to this there are some earlystudies that are showing that you lose more lean muscle mass when youre on a glp one that if you were just doing diet an exercise when youlosing wait normally， you lose like 25 percent lean muscle and these earlystudies are showing a something like forty percent， so that would be a baircases that we learn a couple years or now like oh man this is actually， we worse for some set of people that could lose wait through diet and exercise but if your obs， its still probably better to lose weight even if a disproportion amount of it is lean muscle mask but i think there sort of this open question of like is there a boogie man in the closet like that or is that a significant enough bugman to really change things？
yeah！
its probably also worth mentioning quickly here before we wrap you know， one potential bugman that is out there people of talked about is suicidlethoughts as best as we can tell from the research， it seems like thats not a major risk with these drugs based on the broad population studies you know， certainly thats what nova norsis says regulators have not indicated that that is an actual issue but that narrative is out there and we dont go to the episode and not mention that that could be one of these buggy men for these drugs yep alright well as much as i dont like leaving it there i think we have beat this horse and we should do something fun like carvouts yes， carvouts lets do it for a new folks to acquade and since its the top of a new season here we do this for fun at the end of every episode yep so i have two oh great ido two one is a something that my wife got me as a Christmas present！
which is the knock scale tracer to and this is i think a Columbus Ohio company it is a running vest and some lights that are rechargeable with usbc and waterproof and so at super lightweight it fits really well perfect for Seattle i know i weared on all my winter runs when im outwalking the baby now oh you set me a followwhen you are all lit up and i was like wow， then is really invested in some gear its pretty hard to hit you when your this lit up it also has a optional light you can buy that clicks into the front thats basically like a headlight but you wear sort of on your chest you not really feel it when youre running with it but you do light up the whole road in front you so when you live in a place like i do that is dark from three 30 pm to eight， thirty am its a great way to get outside and be seen nice i bet we will have a lot of folks in Denmark that are interested in that yes to our Danish friends and our Swedish friends is Spotify i highly recommend this product yeah！
nice！
i thats one all right two is a recommendation from friend of the show Ian Mccormick he text me and said i listen to the holiday special i have a show recommendation for you go watch drops of god on apple tv plus， im three episodes into it and it is awesome it is like woo thrilling its a little bit unapproachable if you dont like subtitles， because it takes place in France and Japan and so parts of it are in French parts of it in Japanese， in parts of it are in English and so you have to read subtitles for the majority of it but it is a beautiful story about wine and family and love and its got some very unexpected twists interns and drama to it so i highly recommended oh fun sounds like apple TVs got some good shows these days ive been liking it yeah nice well！
i have two give you a big thank you because over the last couple weeks since your recommendation i have read the book wool， which is the first in the series that is the silo series on apple tv plus because im more of a book guy than a tv guy and it is awesome book is so good uh new addition to my favorite SCI Fi box and sci fi series itfunny ibeen holding off on reading the book cause i dont spoil the show too much， but i hear it actually devates pretty significantly from the show i wouldnt be surprised by that having now read the book im excited to uh dive into the rest of the series OK， my carvouts Ive get two the first one is a funtimely in person carvout its my guest carve out for my wife Jenny searferciscoballet where she works is Premiere Inga new work at the beginning of the season this year January 26， here in San Francisco is the premiere new ballet called mirmortals and this is pretty cool she is like you gotta talk about this on acquire it is about ai and it is a um pandoras box anality for ai super cool the music is composed by the British dj floating points so its like super modern ballet coreography from a great open cupping coreograph nsfbis Gonna do after parties in the opera house after should be like a supercool event so Jenny and ill be there i think will be there on opening night January 26 that runs through February first for listeners Dave and Jenny lived in caddle and Jenny was involved in the ballet up here and i went to a event held you know where the ballet performance and its immensely cool to be in there with the performers and at the place where they perform at in a party setting like i highly recommend it for any the before after stuff to yeah， Bali is such a cool art form because of all the classcalar forms its the most young and model you know like these dancers are at leads theyre like nfl level， at leads or what they do and you know theyre young and so there is this like new life in it relative to i think a lot of other classcalerforms so anyway， i love it and obviously this jeddings whole life in career thats one two on a some holiday travel flates i think recommended by an acquired listener actually， i watched the blackberry movie uh have you seen this yet no！
but i canfulleave its Dennis from always sunny i know its so good！
its really really well done i just watched it， because i was on the flight news， on the entertainment system， and i said yeah sure whatever all give the subtrilic i dont know rim blackvery yeah， but its really really well done i really enjoyed it its hilarious its also like a good business story its a good example of a uh， we get asked all the time of like oh， can you guys cover the like a failed company or you know a causionary tail and um its hard to do an acquire because a lot of these companies are still going and rim is still going！
but blackbird is a good one because you like its super obvious that they failed theres no argument about that one although did you just see the uh ad on keyboard you can get for your iPhone oh no someone tab you to physical keyboard so for you die hards out there who were crackberryheads you miss the clicks you miss the clicks i think its actually called clicks maybe oh nice with that we have a bunch of people to think who massively contributed to this episode its been fun doing more and more of this recently so i think wekeep doing it to a huge thankyou to the pillpack founders tj Parker an Eliot coin for being so generous with their time and having conversations yeah！
pillpack supercal company that got acquiredby Amazon a few years back right for over a billion dollars something like that and became Amazon pharmacy。
which i actually know some people that use and rave about it also thank you to the founder of cover my meads and and health Mats Gantland they founder of Blink health Jeff Chaken， the CEO of jp Morgans healthcare are Morgan health its name is dan mendlesin had an awesome conversation with him and the other folks i mentioned to kind abounce some ideas around that we were thinking about as what are the main points that we really need to hit in this episode good friend of the show Kate carams who spent her career at various pharma companies and finally thanksalso to some of my favorite reading materials to prep for this out of pocket the newsletter from Nikeo criton on very approachable fun way to read about the healthcare industry a shareholder letter from Tom Willians whos a friend of the show and a portfolio manager at fidelity yeah， Tom is great some blogposts from the drug channels institute that were publive that i thought were great some very helpful dms with ashwean varma who pointed me to a lot of the great information about the profitability or frankly lack there of are the returns on invested capital for former industry hes actually， a medischool student and former locks capital associate so hes got a foot in both the capalist and the medical camps and a truly incredible longform read on GitHub by Alextelford i think that helped frame my understanding of how we got here in drug development better than really anything else i read so thanks Alex for that to with that are huge thank you to jpmorgin paymentsservice now and vanta you can click the links in the shownotes to learn more sign up for notifications of when new episodes drop acquire data fam slash email you can also get our followups and the corrections and teasers at what the next episode will be ack two you should go check it out it is where we do follow up interviews when we have topics were more interested in perhaps， we do that for healthcare or just ceos or investors that we want to talk to look in any podcast player after you finish this episode come discuss it with us set acquiredit data from slash slack and if you want any that suite acquiredmerch go to acquireddatafm slash store in fact， i am wearing the t shirt now so who yeah check it out with allistnerse Wes next time well？
see you next time who got the truth。
