WEBVTT - Weight loss drug boom—opportunities & risks 0:00:00.560 --> 0:00:03.280 We'd like to interview you about how we can make 0:00:03.400 --> 0:00:06.560 Shared Lunch better. We've got a survey happening right now 0:00:06.680 --> 0:00:09.399 and we'd love your feedback. It just takes a few minutes, 0:00:09.560 --> 0:00:11.879 and if you're a New Zealand resident, you can go 0:00:11.920 --> 0:00:15.040 on the drawer to one of six fifty dollars Charisi's gifts. 0:00:15.480 --> 0:00:17.920 The link is in our show notes right now. 0:00:27.440 --> 0:00:30.280 Sura, and welcome to this episode of Shared Lunch, where 0:00:30.280 --> 0:00:32.640 we lift the lid on the weight loss drug boom 0:00:32.760 --> 0:00:36.360 in the US. It's been big business for pharmaceutical companies 0:00:36.360 --> 0:00:39.040 for a while, but how do investors know if it's 0:00:39.080 --> 0:00:43.000 a fad or weather this promise. I'm your host, Halen Madison, 0:00:43.600 --> 0:00:46.879 and I'll be discussing this with doctor Deborah Lambe, global 0:00:46.920 --> 0:00:49.559 Equities analyst at Milford Asset Management. 0:00:50.200 --> 0:00:53.960 Investing involves risk you might lose the money you start with. 0:00:54.400 --> 0:00:58.200 We recommend talking to a licensed financial advisor. We also 0:00:58.240 --> 0:01:02.120 recommend reading product disclosure dot douments before deciding to invest. 0:01:02.680 --> 0:01:05.560 Everything you're about to see and hear is current at 0:01:05.560 --> 0:01:06.560 the time of recording. 0:01:06.760 --> 0:01:09.000 Great to have you on the program. Dead after your 0:01:09.040 --> 0:01:09.880 trip to America. 0:01:09.959 --> 0:01:12.760 Yeah, it was much warmer in the States. I actually 0:01:12.760 --> 0:01:15.840 spend quite a significant portion of the time in Vegas, 0:01:16.160 --> 0:01:18.480 so it was about thirty five degrees when I was there, 0:01:18.480 --> 0:01:21.920 which was really nice. A bit of a shock to 0:01:22.000 --> 0:01:24.520 come back to the cold, rainy Auckland, but hopefully it 0:01:24.520 --> 0:01:25.640 doesn't last too long. 0:01:26.280 --> 0:01:28.720 Wind to hear now, deb let's start with what you 0:01:28.840 --> 0:01:31.640 do at Milford and the reason for your trip to 0:01:31.640 --> 0:01:34.679 the US, which I understand included seeing a number of 0:01:34.720 --> 0:01:36.000 pharmaceutical companies. 0:01:36.959 --> 0:01:39.600 So at Milford, I'm in the global equities team, which 0:01:39.640 --> 0:01:43.240 means I'm not looking at companies in New Zealand or Australia. Rather, 0:01:43.280 --> 0:01:46.600 I'm focused on listed companies that are based in the US, 0:01:46.760 --> 0:01:50.080 in Japan, and in Europe. And you mentioned my trip 0:01:50.120 --> 0:01:52.320 to the US, so traveling and getting on the road 0:01:52.840 --> 0:01:54.880 is an important part of what we do. And I've 0:01:54.920 --> 0:01:58.080 just spent two weeks, a pretty well win couple of 0:01:58.120 --> 0:02:01.000 weeks in the US. The first thing days I visited 0:02:01.040 --> 0:02:04.680 seven cities and drunk much more coffee than is probably 0:02:04.720 --> 0:02:08.400 healthy for me. And then the trauff itself comprise of 0:02:08.680 --> 0:02:11.680 a few independent days where I've visited companies by myself 0:02:12.480 --> 0:02:15.040 and then visiting two conferences, so one was a global 0:02:15.120 --> 0:02:18.240 bio Farmer conference, and then one was a global healthcare 0:02:18.280 --> 0:02:21.400 investing conference, and I guess you also asked why is 0:02:21.440 --> 0:02:23.359 it important to do this? So when I go and 0:02:23.440 --> 0:02:26.800 visit a company and talk to the management team, I'm 0:02:26.880 --> 0:02:29.160 going to be testing the assumptions that I have about 0:02:29.200 --> 0:02:32.360 the company. So is what we believe about that company correct, 0:02:33.120 --> 0:02:35.160 looking for risks that we may not be aware of, 0:02:35.240 --> 0:02:38.760 and then also thinking about how is the management team 0:02:38.919 --> 0:02:42.040 thinking about opportunities and then also challenges that it's facing. 0:02:42.520 --> 0:02:46.239 And it's not just about visiting companies that we already 0:02:46.280 --> 0:02:49.200 invest in, but it's also about visiting companies or hearing 0:02:49.200 --> 0:02:51.799 from companies that might be a new company to invest in. 0:02:51.880 --> 0:02:53.920 So it's a great source of new ideas as well. 0:02:55.520 --> 0:02:58.160 Now it'd be good to actually put in context the 0:02:58.200 --> 0:03:01.639 size of the pharmaceutical industry in the US. I mean, 0:03:01.680 --> 0:03:05.480 the numbers are eye watering from Australia and New Zealand's perspective, 0:03:05.840 --> 0:03:09.639 but also maybe the future and the potential that this 0:03:10.639 --> 0:03:11.520 sector has. 0:03:11.639 --> 0:03:15.440 Yeah, So the pharmaceutical industry itself in the US, pharmaceutical 0:03:15.480 --> 0:03:19.320 industry itself is it's massive. So more than five hundred 0:03:19.360 --> 0:03:22.080 billion dollars per year as the size of the industry, 0:03:22.400 --> 0:03:24.760 which that to kind of put that in context, that's 0:03:24.760 --> 0:03:27.560 bigger than the GDP of countries like Austria and Norway, 0:03:27.880 --> 0:03:31.640 and that's more than twice the GDP of US here 0:03:31.680 --> 0:03:34.920 in New Zealand. And then if you think about, though, 0:03:35.320 --> 0:03:37.920 of course, the US technology industry, that's a whopping one 0:03:37.960 --> 0:03:41.040 point seven trillion, So it's smaller than that, but it 0:03:41.160 --> 0:03:44.480 is for something that's essentially mostly selling small white pills, 0:03:44.520 --> 0:03:47.640 it's pretty big numbers. And then you also asked about 0:03:47.640 --> 0:03:51.440 I guess like future growth. So the pharmaceutical industry itself, 0:03:51.480 --> 0:03:54.280 it's forecast to grow about five percent per ADDAM through 0:03:54.280 --> 0:03:57.080 to twenty thirty and that's driven by a few factors, 0:03:57.080 --> 0:03:58.960 but one that I would really call out is this 0:03:59.480 --> 0:04:02.720 aging population and changing demographics that we have. And that's 0:04:02.760 --> 0:04:05.320 not just in the US, but that's also here in 0:04:05.400 --> 0:04:08.920 New Zealand. And so if you think about our population 0:04:08.960 --> 0:04:13.520 of people over sixty, that's forecast to double by twenty fifty, 0:04:13.840 --> 0:04:15.920 and then the number of people that are aged over 0:04:16.000 --> 0:04:19.640 eighty that's actually going to triple by twenty fifty. So 0:04:19.680 --> 0:04:22.440 that means a much greater proportion of people that need 0:04:22.520 --> 0:04:25.359 medicines for their chronic conditions and also to manage their 0:04:25.440 --> 0:04:27.200 quality of life. I suppose two. 0:04:27.279 --> 0:04:30.480 With medicines. One thing investors really need to think about too, 0:04:30.480 --> 0:04:33.560 if they're looking at such sectors is that it takes 0:04:33.560 --> 0:04:36.640 a while for a medicine to be developed and go 0:04:36.720 --> 0:04:38.960 through all the tests and the regulation, et cetera. 0:04:39.440 --> 0:04:42.039 That's exactly right, and that pharmaceutical industry itself, and for 0:04:42.120 --> 0:04:44.800 me is an investor learning about it, it's quite a 0:04:44.880 --> 0:04:48.599 kind of complicated industry and for companies itself, getting a 0:04:48.640 --> 0:04:51.839 medicine on the market is both time rechieving and expensive. 0:04:52.279 --> 0:04:54.600 So to have a medicine approved for use, it has 0:04:54.640 --> 0:04:58.320 to go through phase one, Phase two, phase three clinical trials, 0:04:58.560 --> 0:05:02.360 and then the approval proceeds, and that's very expensive, and 0:05:02.400 --> 0:05:05.279 I think from memory it costs around two billion dollars 0:05:05.279 --> 0:05:08.520 per drug that's approved on average. On average, it takes 0:05:08.560 --> 0:05:11.280 about ten years. And then also if you look at 0:05:11.279 --> 0:05:14.000 that whole process, a lot of companies fall out, a 0:05:14.000 --> 0:05:16.119 lot of companies, a lot of medicines fall out along 0:05:16.120 --> 0:05:19.760 the way. So around only seven percent of molecules that 0:05:19.800 --> 0:05:22.839 start at phase one make it all the way through 0:05:22.880 --> 0:05:26.120 to phase three clinical trials, and then of course, once 0:05:26.120 --> 0:05:28.560 you have that medicine approved, so the regulator gives it 0:05:28.600 --> 0:05:31.160 a tick, it says that it's safe and effective in patients. 0:05:31.600 --> 0:05:33.559 Then what happens is is that it's given a period 0:05:33.600 --> 0:05:37.200 of loss of exclusivity on the market. And what that 0:05:37.279 --> 0:05:40.560 means is that copycats can't come in and copy the medicine. 0:05:40.760 --> 0:05:43.640 But that only has a finite life, and so after 0:05:43.839 --> 0:05:46.799 that's on average ten years, and so after ten years, 0:05:46.839 --> 0:05:50.279 what happens is then other companies can copy that molecule 0:05:50.360 --> 0:05:53.240 and produce what's called a generic medicine. So then at 0:05:53.320 --> 0:05:55.840 that point in time, then what we see is the 0:05:55.880 --> 0:05:59.080 price of the drug falls rapidly, so normally to the 0:05:59.080 --> 0:06:02.920 tune of seventy percent in and revenue from that molecule 0:06:02.960 --> 0:06:05.760 falls away. So that means that farmer companies here on 0:06:05.800 --> 0:06:09.200 this kind of wheel of having to make new drugs 0:06:09.400 --> 0:06:11.920 which then have a period of exclusivity and then that 0:06:12.000 --> 0:06:14.960 revenue drops right away. So for drug companies to continue 0:06:14.960 --> 0:06:18.200 to grow, they have to be continually innovating and have 0:06:18.279 --> 0:06:20.320 medicines coming through that pipeline over time. 0:06:20.680 --> 0:06:25.159 Gosh, quite a juggle then actually jumping into weight loss drugs, 0:06:25.200 --> 0:06:27.760 I mean they have been talked about a lot. There's 0:06:27.800 --> 0:06:30.240 a fair bit of hype. Why do you think it 0:06:30.360 --> 0:06:31.799 has sort of struck a cord? 0:06:32.200 --> 0:06:34.039 Yeah, and this is this is a really interesting one. 0:06:34.040 --> 0:06:36.080 And one of the companies that I actually visited on 0:06:36.120 --> 0:06:38.520 the trip was Elight Lilly, which is one of the 0:06:38.600 --> 0:06:40.800 leaders in the weight loss in the weight loss race, 0:06:41.360 --> 0:06:43.680 and there's been heaps of focus on the weight loss 0:06:43.680 --> 0:06:48.000 phenomenon recently, despite the fact that weight loss medicines have 0:06:48.040 --> 0:06:50.680 actually been around for quite a long time, and so 0:06:50.720 --> 0:06:53.760 they were initially developed for use in diabetes to help 0:06:53.800 --> 0:06:57.200 people manage their weight and blood sugar levels. But what's 0:06:57.279 --> 0:06:59.960 driven the excitement over the past kind of twelve months 0:07:00.400 --> 0:07:04.600 is new research that has shown that these medicines provide 0:07:05.080 --> 0:07:08.400 benefit not just in people who have diabetes, which is 0:07:08.440 --> 0:07:11.920 around five percent of the population, but also in people 0:07:11.960 --> 0:07:14.960 who are oh weight or obese, which means that the 0:07:15.920 --> 0:07:18.080 pool of people that can use them jumps from that 0:07:18.160 --> 0:07:22.200 five percent to thirty three percent of the population. And 0:07:22.240 --> 0:07:24.600 then the other really important thing that's been shown in 0:07:24.600 --> 0:07:27.920 these clinical studies is not only do these medicines provide 0:07:27.920 --> 0:07:30.880 a benefit in terms of the weight loss, but also 0:07:30.960 --> 0:07:33.800 they provide other health benefits. So if you take these 0:07:33.840 --> 0:07:36.360 medicines for a period of time, it will reduce your 0:07:36.440 --> 0:07:39.000 risk of heart attack, it will reduce your risk of stroke, 0:07:39.080 --> 0:07:41.800 it will reduce the progression of your kidney disease, it 0:07:41.840 --> 0:07:44.920 will reduce the pain if you have arthritis. So it's 0:07:44.960 --> 0:07:48.240 the combination of now proving out that it's a much 0:07:48.400 --> 0:07:50.960 broader pool of people that can benefit from them, and 0:07:51.000 --> 0:07:54.800 then also that the benefit extends beyond that of weight 0:07:54.840 --> 0:07:55.600 loss alone. 0:07:56.040 --> 0:07:59.000 What about, though, if you stop taking these strikes. I mean, 0:07:59.000 --> 0:08:02.520 they've got all those other aspects and benefits by the 0:08:02.600 --> 0:08:04.760 sounds of things, But do you have to stay on 0:08:04.800 --> 0:08:05.560 them forever? 0:08:05.800 --> 0:08:07.840 And yeah, this is a really good question, and it's 0:08:07.840 --> 0:08:11.560 actually something that invests a debating, But what the trials 0:08:11.560 --> 0:08:14.760 show so far is that to your point, to keep 0:08:14.800 --> 0:08:17.960 the weight loss off, you have to stay on these medicines. 0:08:18.120 --> 0:08:20.720 And as soon as you stop taking the medicine, slowly 0:08:20.760 --> 0:08:23.640 but surely, the weight comes back on. And so they're 0:08:23.680 --> 0:08:28.080 self administered injections, and they essentially work by making you 0:08:28.120 --> 0:08:31.040 feel full and suppressing your appetite. And so when you're 0:08:31.120 --> 0:08:34.560 no longer taking them, that means that you basically you 0:08:34.600 --> 0:08:37.840 don't feel for that fullness your appetite comes back and 0:08:37.880 --> 0:08:40.800 then slowly but surely that weight will just come back on. 0:08:41.760 --> 0:08:43.840 What about the side effects? So this seems to be 0:08:43.960 --> 0:08:46.320 always side effects for drugs no matter what you take. 0:08:46.559 --> 0:08:48.960 Yeah, I think that's true. And so there is side 0:08:48.960 --> 0:08:52.680 effects with these medicines, but so far the evidence is 0:08:52.720 --> 0:08:55.760 that they're generally pretty well tolerated and the main side 0:08:55.800 --> 0:09:00.319 effects are things like nausea, upset stomach and that kind 0:09:00.320 --> 0:09:02.679 of thing. But there hasn't been anything so far that 0:09:02.720 --> 0:09:05.360 would be a really risky side effect that people have 0:09:05.440 --> 0:09:06.360 to be worried about. 0:09:06.679 --> 0:09:10.120 Given these new weight loss drugs, I mean, how much 0:09:10.320 --> 0:09:13.440 weight can you actually lose on them? And also what 0:09:13.640 --> 0:09:15.520 is the bar for obesity? 0:09:16.200 --> 0:09:20.640 So currently all the research has been done on people 0:09:20.640 --> 0:09:22.800 that have a b ANDI over twenty seven, so that's 0:09:22.800 --> 0:09:27.439 classified as overweight or obese, so they're not for you 0:09:27.600 --> 0:09:30.079 some people who are a normal weight or a healthy 0:09:30.160 --> 0:09:32.360 or a healthy weight range, which is be in eighteen 0:09:32.400 --> 0:09:34.560 to twenty four. And then what we see is if 0:09:34.600 --> 0:09:37.960 you take these medicines for a year, on average average 0:09:38.000 --> 0:09:41.160 person will lose between fifteen to twenty percent of their 0:09:41.200 --> 0:09:44.560 body weight. So if you take Novo Nordics ozempic you 0:09:44.640 --> 0:09:48.240 lose on average fifteen percent and Eli Lilly's medicines interesting 0:09:48.320 --> 0:09:51.800 are slightly more effective and you'll lose an average twenty 0:09:51.800 --> 0:09:54.400 percent of your body weight. And what we're seeing is 0:09:54.440 --> 0:09:57.120 that next generation versions of the drug that are currently 0:09:57.200 --> 0:10:01.880 in earlier clinical trials, they're showing a similar safety profiles 0:10:01.960 --> 0:10:04.600 but losing more like twenty five percent of your body weight. 0:10:05.200 --> 0:10:07.440 So what about in this part of the world, can 0:10:07.440 --> 0:10:09.760 you actually get hold of these medicines or is that 0:10:09.880 --> 0:10:10.600 some way off? 0:10:10.760 --> 0:10:13.560 Yes that so so far, what we've seen is that 0:10:13.640 --> 0:10:17.960 Novo Nordous medicine ozempic that has been approved for use 0:10:18.400 --> 0:10:22.120 and both diabetes and obesity. But Eli Lindity's medicine so 0:10:22.240 --> 0:10:25.120 far has just been approved for use in diabetes but 0:10:25.200 --> 0:10:27.480 not yet obesity, so the company is going through that 0:10:27.559 --> 0:10:31.000 approval process now. And then another thing that's important to 0:10:31.080 --> 0:10:34.120 keep in mind is that even though they're approved for 0:10:34.280 --> 0:10:37.400 use here and in Australia, they're not yet funded. So 0:10:37.440 --> 0:10:39.760 in New Zealand it's not funded by FARMAC. So that 0:10:39.840 --> 0:10:43.160 means that if you are prescribed that medicine, you are 0:10:43.160 --> 0:10:46.360 paying out of pocket cost yourself to take that medicine 0:10:46.360 --> 0:10:50.160 and those are expensive, so around one thousand dollars per 0:10:50.200 --> 0:10:52.800 person per month just to take the medicine. And then 0:10:52.840 --> 0:10:54.640 the other factor to layer on top of this as 0:10:54.720 --> 0:10:58.120 well is that there's been massive global shortages of the medicine. 0:10:58.360 --> 0:11:01.200 So in Australia been able to get their hands on 0:11:01.240 --> 0:11:03.439 a little bit of supply, but here in New Zealand 0:11:03.720 --> 0:11:07.439 there's been very little, if not any, people able to 0:11:07.480 --> 0:11:08.240 take it so far. 0:11:09.840 --> 0:11:12.360 And what about the pricing. If the supply and demand, 0:11:13.040 --> 0:11:15.560 wouldn't it go up and you'd be paying more again? 0:11:15.880 --> 0:11:18.680 And that's it's kind of interesting because in most markets 0:11:18.679 --> 0:11:23.120 you would expect that really high demand with a constrained supply, 0:11:23.440 --> 0:11:26.280 that you would see prices go up, especially in the 0:11:26.320 --> 0:11:29.800 short term until more supply comes online. But in the 0:11:29.840 --> 0:11:34.079 farmer market, when the drug is approved, prices are negotiated 0:11:34.160 --> 0:11:36.640 at that point in time and so they're set and 0:11:36.679 --> 0:11:39.040 then what you see is over time, generally the price 0:11:39.040 --> 0:11:41.600 of medicines actually will come down a little bit over time. 0:11:42.000 --> 0:11:44.880 So this means maybe while we're supply constrained in the 0:11:44.920 --> 0:11:47.200 near term, that prices will be able to stay a 0:11:47.200 --> 0:11:51.040 little bit higher, so there'll be less pricing pressure over time. 0:11:51.320 --> 0:11:54.200 But we still expect the overtime prices will come down. 0:11:55.920 --> 0:11:58.560 Now, deb you're a medical doctor, you aren't practicing at 0:11:58.559 --> 0:12:00.760 the moment. I think you've been out for about seven years. 0:12:00.800 --> 0:12:03.640 But what do you think would you be prescribing these 0:12:03.679 --> 0:12:05.080 medicines given what you know? 0:12:05.520 --> 0:12:10.080 Yeah, so seven years it's time does really fly. But 0:12:10.200 --> 0:12:12.320 I would say so based on what I know. Mine 0:12:12.360 --> 0:12:15.280 understanding is there's a really good basic evidence to show 0:12:15.559 --> 0:12:19.160 that these demonstrate good health benefits and people over a 0:12:19.160 --> 0:12:23.200 sustained period of time when they take them, and also 0:12:23.400 --> 0:12:25.959 also basically that the risks are pretty are pretty small. 0:12:26.000 --> 0:12:29.720 Side effect profile is good. So I am with the 0:12:29.760 --> 0:12:33.000 caveat that I'm not currently practicing. I see Nobodyson why 0:12:33.040 --> 0:12:34.080 I wouldn't prescribe these. 0:12:34.440 --> 0:12:36.800 Now, let's look at some of the companies involved in 0:12:36.840 --> 0:12:40.120 this weight loss drag race, if you like. There's some 0:12:40.120 --> 0:12:42.840 some pretty big ones and some pretty big numbers. As 0:12:42.880 --> 0:12:45.920 we've just discussed, it'd be quite good too to see 0:12:46.040 --> 0:12:50.920 how their share prices have performed given this new theme, 0:12:50.960 --> 0:12:51.440 if you like. 0:12:52.080 --> 0:12:54.160 So, the two main the two main leaders in the 0:12:54.160 --> 0:12:57.840 weight loss race are Eli Lilly, Who's the US company 0:12:57.840 --> 0:12:59.920 that I visited while I was on my trip. And 0:13:00.040 --> 0:13:03.960 then also there's a Danish company called Novo Nordisk, and 0:13:04.040 --> 0:13:06.960 that is a Danish company. And so what we've seen 0:13:07.080 --> 0:13:09.040 is that all of this information, all of this new 0:13:09.080 --> 0:13:11.840 information has driven really strong share price performance over the 0:13:11.880 --> 0:13:15.200 past year. So shares an Eli Lilliar up around ninety 0:13:15.320 --> 0:13:18.080 two percent I think last time I checked, and then 0:13:18.120 --> 0:13:20.880 shares a Novo Nordisk up around seventy percent. So it's 0:13:20.920 --> 0:13:24.560 been pretty stellar performance. And it's also meant that these 0:13:24.600 --> 0:13:28.480 companies they are now pretty big companies. And so to 0:13:28.480 --> 0:13:30.640 put it into context, if you look at the size 0:13:30.640 --> 0:13:33.719 of these two companies combined and then you compare it 0:13:33.880 --> 0:13:36.880 to all one hundred and eighty one companies that we 0:13:36.960 --> 0:13:40.120 have listed on our New Zealand Stock Exchange, these two 0:13:40.160 --> 0:13:43.920 companies are worth more than thirteen times all of our 0:13:43.960 --> 0:13:45.320 listed companies combined. 0:13:45.760 --> 0:13:49.360 At the same time, the prices might be high, I'm 0:13:49.400 --> 0:13:52.160 not sure whether you've looked at the price to earnings ratio, 0:13:52.240 --> 0:13:56.160 which is obviously what investors use as a sometimes fairly 0:13:56.160 --> 0:14:00.120 blunt instrument to understand whether you're getting valued that but 0:14:00.120 --> 0:14:02.840 there's also they're also spending a fee bit of capex 0:14:03.080 --> 0:14:07.360 or capital to actually bring these medicines to market, aren't they? 0:14:07.920 --> 0:14:10.200 And so I guess on the pe ratios, if you 0:14:10.280 --> 0:14:14.200 look at what Eli Lilly is trading on relative to 0:14:14.480 --> 0:14:17.960 Novo Nordisk, relative to other farmer companies, these are on 0:14:18.240 --> 0:14:22.720 eyewatering multiples. So they are pretty they look optically pretty expensive. 0:14:23.040 --> 0:14:25.960 They do have a great growth opportunity ahead of them, 0:14:25.960 --> 0:14:28.040 but to your point, they are also spending a lot 0:14:28.400 --> 0:14:32.080 and the kind of manufacturing of these is very complicated 0:14:32.520 --> 0:14:35.680 and I think combined, by twenty twenty eight, it's expected 0:14:35.720 --> 0:14:38.840 that they will spend around fifty billion dollars on capex. 0:14:39.360 --> 0:14:41.840 And so one of the debates that investors are kind 0:14:41.840 --> 0:14:45.640 of thinking about is are the shares getting overvalued? Because 0:14:45.680 --> 0:14:49.440 while the growth opportunity is very exciting, there's no I guess, 0:14:49.480 --> 0:14:52.440 in my mind, there's no debating the opportunity. The key 0:14:52.440 --> 0:14:55.120 debate is really the valuation and then how much of 0:14:55.160 --> 0:14:57.760 that is reflected in the valuation of these shares. 0:14:57.960 --> 0:15:00.720 Now we've talked about valuation in terms of thinking about 0:15:00.720 --> 0:15:03.200 investing in the sector, and there's probably a number of 0:15:03.240 --> 0:15:06.240 other things that investors need to think about. There's the exclusivity, 0:15:06.400 --> 0:15:09.240 that's the time it takes to actually get a medicine 0:15:09.240 --> 0:15:12.560 to market. Are there other issues that have been brought 0:15:12.640 --> 0:15:15.080 up with this new theme if you like. 0:15:15.360 --> 0:15:18.840 Yeah, and I think with these farmer companies specifically and 0:15:18.880 --> 0:15:24.040 the weight loss opportunities specifically aside, putting valuation aside, the 0:15:24.160 --> 0:15:28.960 key questions would be priced. So how long will the 0:15:29.000 --> 0:15:31.800 price stay at one thousand dollars per person per month? 0:15:31.840 --> 0:15:35.320 And what will the price be in twenty thirty and 0:15:35.360 --> 0:15:37.840 then what will the price be when other competitors bring 0:15:38.160 --> 0:15:42.240 their products to market because competition is on the horizon. Also, 0:15:42.320 --> 0:15:45.320 another debate is will people want to say on these 0:15:45.360 --> 0:15:48.520 medicines for life? Because as we know, you stop taking 0:15:48.520 --> 0:15:52.040 the medicine, the weight comes back on. That's a massive 0:15:52.040 --> 0:15:55.440 commitment for someone to be taking either an injection currently 0:15:55.840 --> 0:15:58.600 every week for a month or an oral pill for life. 0:15:59.240 --> 0:16:01.560 And the third is given the high price point of 0:16:01.600 --> 0:16:05.680 the medicines currently, will governments and house systems want to 0:16:05.800 --> 0:16:07.560 pay for them? Will be able to pay for them? 0:16:07.560 --> 0:16:09.440 Because if you think about it, if it's one in 0:16:09.560 --> 0:16:13.080 three keywis a classified as overweight or obese so could 0:16:13.160 --> 0:16:17.280 benefit from these medicines and effort costs currently one thousand 0:16:17.280 --> 0:16:19.320 dollars per person per month and you sum that up, 0:16:19.400 --> 0:16:22.960 that's a massive cost for our healthcare system. So the 0:16:23.000 --> 0:16:25.200 price kind of it's like where does the price land 0:16:25.320 --> 0:16:27.640 and then how does that impact the proportion of people 0:16:27.680 --> 0:16:30.640 that are on the medicine are kind of key debates 0:16:30.680 --> 0:16:31.960 that investors are focusing on. 0:16:32.200 --> 0:16:34.680 Another thing I think investors probably need to think about too, 0:16:34.840 --> 0:16:36.920 is are they a one show pony. I mean, hopefully 0:16:36.960 --> 0:16:39.400 a pharmaceutical company has got a few strings to its 0:16:39.440 --> 0:16:43.360 bo For example, Eli Lilly, I think is also getting 0:16:43.440 --> 0:16:47.880 an Alzheimer's drug towards market production, aren't they? 0:16:48.080 --> 0:16:50.640 Yes? Yes, And this is it's a key difference between 0:16:50.920 --> 0:16:54.880 Novo Nordicic and Eli Lilly. Is Novo Nordicic is currently 0:16:54.960 --> 0:16:59.320 it's basically solely focused on diabetes and weight loss medicines, 0:16:59.560 --> 0:17:03.040 whereas Eli Lilly is a much more diversified company. So 0:17:03.120 --> 0:17:05.080 not only does it have its weight loss medicine, it 0:17:05.080 --> 0:17:09.440 has gone Alzheimer's medicine coming. It also has an oncology portfolio. 0:17:09.480 --> 0:17:12.480 So they are quite two different companies when you think 0:17:12.480 --> 0:17:15.560 about what sits in them and then the Alzheimer's opportunity. 0:17:15.800 --> 0:17:19.520 That's something that investors have been pre focused on for 0:17:20.160 --> 0:17:24.840 a while now. There's currently two main companies, so Eli Lilly, 0:17:24.920 --> 0:17:27.840 and there's also a US company called Biogen, which has 0:17:27.880 --> 0:17:31.439 been kind of like vying to get in the Alzheimer's market. 0:17:32.200 --> 0:17:35.400 And Biogen has had a few controversies along the way 0:17:35.480 --> 0:17:39.160 with its Alzheimer's medicine. The first was approved back in 0:17:39.200 --> 0:17:42.879 twenty twenty one, and this was controversial because it was 0:17:42.960 --> 0:17:47.200 the first disease modifying Alzheimer's treatment, and so that means 0:17:47.240 --> 0:17:50.400 that it works to reduce the progression of the actual disease. 0:17:50.880 --> 0:17:54.320 But the approval was controversial because it just showed improvement 0:17:54.359 --> 0:17:57.159 in the scans of brains of people with Alzheimer's, but 0:17:57.240 --> 0:18:00.760 it didn't actually prove that it improved their symptoms. And 0:18:00.760 --> 0:18:02.520 so there are a number of people that actually resigned 0:18:02.560 --> 0:18:04.800 from the FDA, which is a regulary body on the 0:18:04.800 --> 0:18:06.439 bottom of that. On the back of that, and then 0:18:06.440 --> 0:18:08.840 they were also very criticized because of the high price 0:18:08.920 --> 0:18:11.960 point that the medicines were priced at at that point 0:18:12.000 --> 0:18:13.840 when they were approved, which I think from memory was 0:18:13.880 --> 0:18:17.159 around fifty six thousand dollars per person per year, So 0:18:17.520 --> 0:18:21.480 that's much higher price than the weight loss drugs, for example. 0:18:22.440 --> 0:18:24.920 But then so Biogen they've got a new CEO's coming. 0:18:25.040 --> 0:18:27.760 They've since had a subsequent version of the medicine that's 0:18:27.800 --> 0:18:31.760 been approved that does show improvement in symptoms of people 0:18:31.800 --> 0:18:34.560 with Alzheimer's disease. And then also what we've seen is 0:18:34.560 --> 0:18:37.119 that they've cut the price dramatically. It's still expensive. I 0:18:37.119 --> 0:18:41.320 think it's maybe twenty six thousand dollars per person per year, 0:18:41.720 --> 0:18:44.639 which is a lot, but it's come down from that 0:18:44.680 --> 0:18:45.640 fifty six thousand. 0:18:45.920 --> 0:18:49.760 Fascinating. I think Alzheimer's and the drugs and the race 0:18:50.280 --> 0:18:53.160 is probably a whole episode in its south dev which 0:18:53.200 --> 0:18:56.200 I think we'll probably come back to just getting back 0:18:56.240 --> 0:19:01.879 to manufacturing these pharmaceuticals. Has AI had much of a 0:19:02.240 --> 0:19:04.760 place here in terms of speeding things. 0:19:04.560 --> 0:19:08.240 Up, So this AI kind of in farmer companies and 0:19:08.280 --> 0:19:11.359 in drug discovery. It's been a topic that investors are 0:19:11.400 --> 0:19:15.240 kind of increasingly focused on and increasingly excited about. And 0:19:15.280 --> 0:19:18.199 one of the key kind of themes or takeaways I 0:19:18.240 --> 0:19:20.359 would say that I really noticed when I was in 0:19:20.400 --> 0:19:23.479 the US is just how excited companies are about the 0:19:23.560 --> 0:19:26.359 use of AI and drug discovery. Because we've already talked 0:19:26.359 --> 0:19:30.320 about how time consuming and expensive it is to develop 0:19:30.400 --> 0:19:33.680 new medicines. And what we've seen is that the developments 0:19:33.720 --> 0:19:38.600 in AI mean that you can develop new molecules around 0:19:38.760 --> 0:19:41.240 ten times as fast, or so, you can design new 0:19:41.240 --> 0:19:44.520 molecules around ten times as fast, you can run simulations 0:19:44.520 --> 0:19:48.280 on those molecules around a hundred times as fast. And 0:19:48.320 --> 0:19:50.680 then there's this new concept, which I think is pretty interesting. 0:19:50.760 --> 0:19:52.760 You've heard of the concept of a self driving car. 0:19:53.080 --> 0:19:56.280 There's this new concept of a self driving lab. And 0:19:56.359 --> 0:19:59.600 so what this means is that you have AI and 0:19:59.640 --> 0:20:03.400 then you robotics, and so you use AI and robotics 0:20:03.440 --> 0:20:06.080 together and they drive the cycle of kind of prediction, 0:20:06.280 --> 0:20:11.240 experimentation and analysis, which means that you can iteratively identify 0:20:11.280 --> 0:20:14.680 new compounds which you then run experiments on, which then 0:20:14.720 --> 0:20:17.159 mean that the whole process is much faster and then 0:20:17.200 --> 0:20:19.800 importantly more cost effective for companies. 0:20:20.200 --> 0:20:22.760 Gosh, So do we have any idea how much that 0:20:22.800 --> 0:20:25.480 would speed things up? We talked about ten years before 0:20:25.960 --> 0:20:29.280 being the time that it can take, I think for exclusivity, 0:20:29.280 --> 0:20:31.160 but I think you know, when you've got a medicine 0:20:31.560 --> 0:20:33.800 in the wings that can take even longer, can't it? 0:20:34.000 --> 0:20:35.880 Yeah, And I think it's I think it's probably too 0:20:36.040 --> 0:20:39.600 early yet. To put an actual number on how much 0:20:39.600 --> 0:20:41.920 it could speed things up. But I think what we're 0:20:41.920 --> 0:20:44.000 seeing is more and more companies are talking about it, 0:20:44.160 --> 0:20:46.880 more and more companies are using it in their drug 0:20:46.920 --> 0:20:49.680 discovery process. So I think over time we'll be able 0:20:49.720 --> 0:20:53.399 to get a better sense of how much time it 0:20:53.600 --> 0:20:56.919