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#FinanceDaily: Walgreens earnings, Obesity Drugs, MosaicML acquisition
Recorded: June 27, 2023 Duration: 1:29:39Space Recording
Short Summary
The conversation primarily revolves around healthcare, obesity drugs, and the pharmaceutical industry. Discussions include the impact of obesity drugs like Ozempic and Munjaro, the role of insurance companies in covering these medications, and the broader implications for public health. The conversation also touches on the challenges of innovation in healthcare, regulatory issues, and the influence of pharmaceutical companies. Additionally, there is a brief mention of a significant acquisition in the AI space, highlighting the ongoing interest and investment in artificial intelligence technologies.
Full Transcription
I'm going to be upsetting a lot of people today with my commentary around obesity drugs.
This is, Hey, Michael. How you doing?
Good, Ariel.
Good, good. How's my audio coming through?
Good.
Awesome.
There we go.
By the way, doesn't everybody love how in the last 24, last few days, people have gone from being experts in Russia,
to now being experts in depression.
I've been seeing a bunch of different tweets about depression
and how you can treat depression with ketamine.
Has anybody actually read the studies?
Probably not.
Let me see if I can get Scott up here.
Oh, Scott had to jump off.
All right.
Let me just bring people up.
We're going to do a little biotech roundup today too.
Here we go.
Let me get...
The Wolf all streets up here and get them going.
Hold on.
It's as if people on Twitter just love being experts in everything.
And I'm guilty of that, of course, but it's kind of interesting.
All right.
Let's give us one more minute, and then we'll have everybody up.
Man, the market's reacting negatively to this Walgreens story.
Holy cow.
Surprising.
Let's give me one more second, and we will, yeah.
Walgreens down nearly 8%.
Holy moly.
Yeah.
I guess the consumer is not as good as we thought they were.
All right.
Here we go.
All right.
Let's just get started with the Walgreens story,
since it may not be as interesting to folks,
but I still think it's worthwhile.
So...
Hold on.
Let me just, I'm going to post this in the nest.
I have a tweet ready to go.
So Walgreens this morning slash interesting topics, especially around AI and around biotech,
but it's going to be very, hold on, it's going to be a little bit contentious.
So I want to hear where the population has to say, hold on here.
Okay, so I put it in the chat.
Everybody can see it.
Walgreens slashes its earnings guidance because of lower consumer spending.
They're the first one to say it this week in terms of the pharmacies, but expect this to continue.
They slash their full year earnings guidance to $4 from 405 down from its previous forecast.
This is the more...
This is the important thing.
So it's essentially they said, hey, this full year guidance is going to be $4 versus $450.
So I know it doesn't seem like a lot, but that's like, you know, 10% plus below expected.
And they also missed their third quarter earnings.
Rosalind Brewer, the new CEO, she said that they're going to have to do a ton of cost cutting to improve profitability.
And it's really...
because they went all in on COVID vaccines and testing and that world is far behind us.
And so, you know, they bet on that.
Also, their retail pharmacy chain is doing much worse than before.
And, you know, then they had expected in the money that they had put into it,
their retail pharmacy chain also lowered its guidance.
The retail pharmacy side also lowered his guidance by about 20%.
And so earnings per share was $1.00.7.
Revenue was $35 billion.
So it actually came in above expectations.
But the overall earnings miss has now led to Walgreens.
dropping by nearly 8% in pre-market.
And I would not be surprised if it actually goes even deeper.
You know, there's been this funk in the market in the last week or so
around consumer and how everything's going to happen.
And consumers, is employment going to get squeezed?
Are we going to start seeing consumers actually making some of these moves?
And so I'm kind of curious to hear,
why do you think the market's reacting so poorly to Walgreens?
Is it just because...
they're bearish on the retail pharmacy side, or is there a general consensus on consumer?
Mickle, were your thoughts?
I think one reason might just be because Walgreens is one of those stocks where a lot of people maybe went to thinking, hey, even if there is a recession, people are still going to be buying pharmaceuticals and stuff like that.
So this might be people who thought that was kind of a safety play, kind of rushing out now seeing them finally getting hit along with some of the other stocks that they kind of got away from because they thought those were the riskier stocks.
Now they're seeing Walgreens get hit and that was supposed to be the safe play.
And what's interesting is that unlike other players, Walgreens has not actually acquired a care delivery company.
watch out for that. So what I mean by that is all of these grocery chains and all of these
retail players have been making acquisitions. And I'm going to walk through some of them so that
people know CVS bought Oak Street Health, which does Medicare Advantage healthcare. So there
are actual doctors that are delivering care. They also own Minute Clinic. Um,
You know, Walmart bought me MD, which was a telehealth play.
We saw Best Buy by current health.
I know it's crazy, but Best Buy is now delivering care through the Geek Squad, which is crazy.
You know, we've seen all of these retail companies acquire...
Amazon bought one medical.
So we're seeing all of these retail companies
and these care delivery companies coming together.
Walgreens has been involved with Village MD,
but they've never acquired a care delivery company
and they don't have care delivery figured out.
And that, to your point, Michael, is way more recession-proof.
right than anything else and what's happening and i think that's why the market's reacting so poorly
is what's happening is that we're seeing diversion of of pharmacy to the ones that own so if you are
a cbs and oak street health has a patient where do you think those those meds are going
Oak Street is owned by CVS.
Where are those meds going?
They're going to CBS.
They're not going to Walgreens.
Now, if the patient chooses to go to Walgreens, sure.
But in reality, patients will go where their doctor says.
And by the way, this is the craziness of that entire industry.
Guess who's in bed with CVS?
It's a CBS Health includes Aetna, one of the largest insurance companies in America.
And so you've seen...
that the consolidation that's occurring is killing Walgreens.
They're getting squeezed out because they're so reliant on the consumer side of the business.
So as the consumer discretionary goes down, you're kind of screwed.
So I'll walk you through all the different companies that are coming together.
CVS.
Etna, Oak Street Health.
They're one company.
By the way, also, carbon health has significant investment from CVS.
So that and care mark.
So I'll walk you through who all those people are.
Oak Street Health and Carbon Health are care delivery companies.
So they actually see the patient and diagnose the patient and treat the patient.
Owned by CVS.
Aetna is the insurance company that the patient uses to get their health care paid for, owned by CVS.
Caremark is the pharmacy benefit manager that determines where the meds go and what the pricing is.
of the medication owned by CVS.
And then CVS, obviously, the retail pharmacy where the patient can get the medicine.
Now, you tell me, how is, first of all, how is this not, like, completely not allowed?
How is this legal?
And then, two, when you have that, how does Walgreens compete without having all those pieces?
Right.
that's that's what's happening right now so i have a feeling that if walgreens continues to have
earning misses look out for acquisition targets and look out for uh walgreens to make some major
moves the reason why walgreens hasn't made moves is because there was a really big shift in their
culture after the theranos debacle and so they've been a little bit scared to work with other companies
I know this from just like my own personal experience, but also it's pretty well established that Walgreens has a much higher bar for partnership than CVS.
Who's just like, they're working with like lemonade health.
They're working with everybody.
They don't give a crap.
It's kind of interesting.
David?
Yeah, so when you say how can they compete, they can't. And that's why, you know, I look at that 200-week moving average as a sign that the market or a stock is in a bare market. Walgreens drop below its 200-week moving average. And the fourth quarter of 2018 has never been back above it.
It's been on a downtrend and a bare market for like for multiple years now.
And CVS has been above it that entire time.
And it's just now pulled back down just a little bit below it here this year into
2023.
All everything else has been so bullish CVS has actually been actually in a bear market itself.
And so like Walgreens can't compete and its share prices.
reflected that. And
part of the reason why it's so bearers today is
I mean, it's in a bare market, it's in a
downtrend. Any time
you have any kind of negative news in
a bare market, the stock's
not going to like it. And that's what
you're seeing today. It's not a good stock
right now. Yeah, it's hard to win
in the current environment where when
you're seeing vertical
consolidation across all of these
grocery chains and retail
pharmacies for
us to see Walgreens suffer like this kind of as a reminder that pure plays in health care are really hard to execute at scale.
You kind of have to have scope creep into other parts of the business because you become too reliant on a different partner and that partner may get acquired.
Right. So all of these patients with Oak Street Health, which, by the way, was acquired for 10.6 billion.
And all of these patients that were with one medical, which was acquired for 4.6, 4.8 billion, 4.8 billion.
All of them are either getting now getting their medicine.
Now, I can't prove this, but are being, you know, likely you're going to get their medicine from either CBS if you're Oak Street or we're going to see it with...
with one medical with Amazon.
Also, by the way, we saw ChenMed,
which is another big player in the space,
have a big partnership with Humana.
And Humana is aligned with other insurance companies.
And so it's just we're seeing all of this like incestuous,
sort of stuff, which is very characteristic of healthcare. But if you're looking to David's point,
just at the technical analysis, it seems bearish from a fundamental, this is actually a space
that I know way too much about, unfortunately. And so, and it's like something that I study
like crazy because I run a care delivery company and, you know, we partner directly with some
of these players. And so, you know, to me,
This issue is like a real issue that Walgreens is going to continue to suffer.
Of course, it's not financial advice, but this is the reality currently of the system,
which is to succeed in healthcare, you have to have all the pieces figured out long term at scale.
Otherwise, you're going to get pushed out.
And that's what's happening to Walgreens right now.
Cody, I know you're in healthcare as well.
Any thoughts on this?
Are you bearish on Walgreens as well?
Cody, are you there?
Sorry, I'm here.
I'm still getting ready this morning.
Dakota, I can't hear of you.
Is it me or is it everybody?
Same. I can't hear me either.
Yeah, no worries.
You know, did anybody else want to talk about this?
Otherwise, we're going to go to our big story.
Yeah, yeah.
Actually, I wanted to jump in.
So, you know, like, you know, Michael Porter, Professor McPhorter, you know,
Harvard Business School, like talks about and competitive strategy.
Like when you see consolidation, it just, you know, signifies often a mature industry.
I think, Donish, you basically laid out the sort of the case for consolidation.
which is interesting to see, you know, with, you know, Oak Street and CBS and these other things that are happening.
Very large acquisitions, you know, one medical was kind of at least for for me, not in health care out of the blue, which is interesting to see.
I guess the question is like where, like in the U.S. we get derided by other countries as, you know, having.
you know, a dysfunctional system.
It's one that does encourage
like employment at continuous employment
at large companies, so I will give it that.
But I guess Donish or others,
I mean, where, where do we see
Where do we see like this getting better, right?
Because unfortunately, I think regulation makes it tough.
Regulation is working against, you know, this entire industry when it comes to innovation.
You have new players like one medical that try to innovate on the whole like, you know, waiting long for doctors, you know, by giving a sort of premium service.
I think some questions around that.
But I'm just not sure.
I mean, if the innovative players get sort of snatched up and don't seem to make a big difference in the fundamental problems in the industry.
Yeah.
which I guess we could even define what are the fundamental problems, right?
Probably too much cost to do too little might be my simple way of putting it.
I'm not sure like how this gets better, right?
Especially shrouded as it is in regulatory, you know, issues.
So, yeah, it's unfortunate.
We're innovating so much in AI and other places, but healthcare and building things seem to just,
require a lot of capital,
some of it perhaps completely unnecessary.
So I just don't know how it gets better here in the U.S.
So the thing that makes healthcare interesting and different
is that the consequences are so high, right?
And so, you know, at Facebook, as you know, Eugene,
the at least the public, the external moniker,
the thing that people used to say about Facebook
is move fast and break things, right?
If you move fast and break things in healthcare,
what ends up happening?
Well, patients can die.
Patients can get sick.
You can actually hurt people, right?
It's an inelastic good.
And when people are really sick,
they're willing to pay whatever it takes to get healthier.
And so you can't just move fast and break things.
You also, the other side in healthcare, we always say first do no harm.
So you have to like balance this huge issue of move fast, break things and first do no harm.
And you've got to find the right middle ground between those two.
That's number one.
Number two.
I actually think that, you know, as you know, with Michael Porter's work, he was talking about horizontal consolidation.
He did bring up vertical consolidation, but it was in a different context.
Vertical consolidation across the entire supply chain.
is it represents a completely different issue and usually is a bad thing for for an industry just like horizontal consolidation is but the difference in healthcare is that the players are so big and there's so little regulation against healthcare players that we're going to continue to see this issue can happen but there's just too much money in the system.
And the other day, I was like, hey, why are we seeing all this consolidation in health care?
And we're seeing all this consolidation in healthcare.
And there's no antitrust legislation.
It's because often the local, and I've mentioned this before, but the local representative in your district,
It has to count out to the healthcare system
because they're the largest employer in that market.
Everybody blames pharma,
but we don't blame the awful, awful legacy healthcare system
that sits in your community.
You know, and that healthcare system needs reform.
Like, we need reform across all three big poles
of the medical industrial complex.
And we can't do that because they're all so symbiotic.
Like I was trying to explain, like health insurance,
owning healthcare providers, who also have, by the way, ownership over the PBMs or the pharmacy
benefits managers, they've essentially built a cartel that's working with each other and the
patients losing in the end. So, you know, healthcare can get innovation. It is possible. And by the way,
it's going to happen at the most ridiculously fast rate over the course of the next three or four years.
You know, when you look at different crises, they always breed
innovation but one medical was not an innovation one medical was a better experience you can call it
innovation they just like made nicer looking doctors offices and got you in faster and doctors had
smaller panels they didn't actually fundamentally innovate anything if anything teledoc was a much
bigger innovation than one medical was
And, you know, we're seeing that, like, in terms of actually affecting the underlying infrastructure
and actually affecting the unit economics and being able to disrupt at a lower price,
instead of you going, instead of the health plan paying, you know, the same amount for just a nicer doctor's office,
the health plan, again, disruptive innovation happens at a lower cost price, right?
So Teledoc's cost to the health plan was way lower.
Now, Teledoc stopped innovating.
That's what happened ultimately.
But ultimately, I think that the virtualization and digitization of healthcare is actually going to be the next big step.
But to your point, and to kind of go back to it, innovation has been hard in healthcare, but what's really sad is the health insurance.
The health insurance companies are the ones that are willing to innovate at this point.
Whereas the providers, like the big health systems, they have what we call a heads in beds mentality.
Now, explain what that means.
It is crazy.
Like your big health system locally, they just want to put people and they think of their hospital as like a hotel.
And how do we get more people into that hotel staying overnight?
So it's a heads.
How many heads can we get in those beds?
And so they have no incentive to go upstream and actually reduce total cost of care because their business is fee for service.
They get paid for what they deliver.
And the more they make, the more...
the more the executives can take home.
It's an awful, awful business.
So they're the ones that get disrupted.
It's like perverse incentives, right?
And actually, I want to react just quickly that to few those
because, like, it's great to hear that there is innovation in the space.
But, you know, when you have those incentives, it's unfortunate.
Agreed on the one medical, like, you know, where's the innovation?
Right.
the service side, sure. But, you know, I think the thing is we need like a SpaceX sort of thing,
right? So it's similar. I love your analogy, by the way, the move fast and break stuff. I think
that exactly describes the fact that the issues and the stakes are really high. But if I were to ask
the question, it's like, well, you know, what does SpaceX do, right? So after Challenger, right,
the Challenger exploded in the early 2000s, like the cost to launch a kilogram in a space, you know,
shot up from like,
you know a steady something like 20 20-ish thousand u.s. dollars per kilo to you know multiples of that
right more than double i think right close to 60 000 per per kilo and space fix brought that down
to like a few thousand dollars uh you know uh to launch a kilogram in the space and that and the idea is to
like make it instead of 99.999 percent safe right because everyone's so scared because the challenger
and it blowing up they just like brought that down by like a
a percentage, right? I'm speaking very generally. I don't have the exact numbers. I've seen the
analysis a while ago, but basically it's like, you know, and that's the same with healthcare, right? Like, could we,
It's unfortunate because human nature, like, no, I want life no matter what, right?
The rocket can't sue.
The rocket can't sue with SpaceX.
The difference here is that the consequences.
It's so much bigger.
It's so much more people.
Exactly.
Exactly.
And 1% is like crazy in healthcare, just so you know.
The 1% is where everything gets done in healthcare.
And it's, these are people's lives.
Like, they didn't deserve...
any of this, you know?
And so it's like,
it's a little bit different than the technology.
That's the hard part.
This is why,
by the way,
so many people from the tech industry
that enter healthcare struggled
because they're like,
no, no,
but I have to try this.
Like,
of course I've got to try something.
And it's like,
you know,
the...
The issue is the incumbents made the system, right?
And so the system says, no, no, no, it has to be better than the incumbent.
And it's like, that's not how technology works.
You start worse and you overcome them because you're moving exponentially.
And that's why something like Teledoc took 20 years, by the way, to become like...
what they what they became and now they're back down below because they change all the incentives
just to go after them right and so like for example uh teladoc has essentially become a nothing company
and they didn't innovate they didn't continue to innovate but uh but yeah the healthcare innovation
side of things is very difficult it's it's incredibly hard earlier earlier you mentioned like
we need more regulations around
Were you talking specifically about pricing then?
Because, I mean, you're obviously aware that health care is like extremely regulated.
Any new technologies that come onto the market?
We need antitrust regulations.
That's what I was talking about.
That's what you're referring to.
Okay.
Yeah, we need to break up these monopolies and oligoplies.
Yeah, 100%.
Well, I think like, I think in some way, we've talked about this before.
Like the regulation is one of the things.
I'm not saying I have a perfect system in mind, but the regulation is one of the things driving the price up.
Because, you know, and you know this, like some of the big health companies with lobbyists tend to insulate their borders quite a bit in that preventing innovation, preventing startups by saying like, well, you know, like I think I've told the story in this room before, but I had a client who developed a, it's a life-saving wireless vital sign monitor.
and they had a smaller, slimmer version available, and it would be, you know, more helpful to patients.
It'd be faster to yada, yada, yada, all these great features, right?
And so I was like, hey, you know, why don't we push that to market?
Like, that'd be awesome.
I'd love to market that thing because that was my job.
He's like, yeah, well, we can't afford that.
Like, yeah, we know it's a better device.
We know it's fast.
We know, but we can't afford that because it's going to cost us another $2.5 million to file through the FDA.
Right.
So it's like, you know, what startup can disrupt an industry when their barrier to entry is a couple million dollars in the FDA?
And mind you, this is the same, this is the same FDA that approved like some of Theranos technology.
Well, so just to be clear, I would use biogen more than Theranos, since Theranos actually did not get full regulatory approval.
They were in the process.
Yeah.
but they were actually going through trials and got IRB and IND approvals.
But I was going to say that...
Yeah, but back in 2017, they did get approved.
I can't remember what it was for, but they did get approved.
It was not approved.
It was FDA approved, something like that.
I can probably find that.
Yeah, why don't you find that and share it with me?
Yeah, I'll look for it.
But I was going to say that ultimately, the big thing that you're referring to is more around regulatory capture,
where people use regulations through their advantage.
That can also be fixed.
but that doesn't mean that we just deregulate an industry that literally affects patients every day.
I'm definitely not. I'm definitely not saying that.
No, no, I totally understand that. I just wanted to clarify that.
Mickle, I know you're in the industry, so go ahead.
Yeah, I just wanted to comment on what would be that SpaceX moment for this industry.
And I totally agree with what you were saying about those other companies who claim to be innovating and really aren't.
In my eyes, a really promising space or a field for this space would be gene editing and gene reading.
And I really do see that one day maturing into kind of that space X moment for this industry,
where rather than just treating people for years on end and constantly giving them drugs to help them.
do better with the condition they have actually being able to cure their condition fundamentally.
And that's a place I'm personally really excited in this industry.
And I do feel like if anything's going to kind of be that space X moment for this industry,
it will have something to do with the underlying gene editing portion of it and actually
being able to cure these illnesses rather than just having people or helping people cope with them
for the rest of their lives.
Yeah, I could also not think about that.
Think about what just Mickle said.
That could also be the beginning of like I am legend.
And so like it is it is the most interesting.
Think about the level of,
like impact something so amazing could have where and I would say like you know think about like epigenetics
more than your actual underlying genes you could go in and turn so that people don't know this and
I'll stop with this because again this is too close to home so I can talk about this forever but I was
going to say that you know when you think about what happens with your body let's say that you're
somebody
who has a propensity for cancer, right, for lung cancer,
or actually much better than that.
Let's say you have a propensity for something like schizophrenia, God forbid.
And, you know, everybody else can smoke weed,
but when you smoke weed, it turns on,
it methylates or acetyates,
a specific portion of your genome that then kicks in
and you actually get this issue.
What if you could then turn that back off?
Like, imagine what that would mean for patients all over the world.
That would be, like, incredible.
But then imagine what else could happen.
How do you even study?
How do you even get started with that?
You'd have to work all the way from animal studies and go really slowly through up the chain.
And by the way, this is becoming really difficult and harder and harder because
because of things like CRISPR and other technologies that, in my opinion, could end the world or make it incredible.
We have no idea.
People are scared of nuclear issues, but CRISPR is way scarier.
Yeah, one thing cool, too, is just the idea of how much AI is actually impacting this.
I remember reading some reports by Kathy Woods, Ark, Invest, and it was just talking about how the
the cost of actually reading an entire genome has fallen some crazy amount like 90% over the past 10 years.
But if every single person out there when you were born, you could have a full readout of your
entire genome and already know every single condition you were predisposed to, it'd be so much
easier to treat people in the long run. Me personally, I had some random health issue pop up 15 years
after I was alive, but I've had it my entire life. And I think the idea that
We weren't able to know that prior to, for the last 15 years, it's just crazy.
And I do think stuff like that's going to change and allow people to get the care they need a lot earlier,
which ultimately should have an impact on bringing down costs for everyone.
Because obviously, if you catch things earlier, I think we can all agree on this,
then you can have a lot more time to treat people the right way.
Yeah.
And so I wanted to talk about this.
It's actually a good transition, Michael, into this blockbuster drug.
From Eli Lilly.
That does go.
I'm on that point, though.
I wanted to hear you respond off that point because earlier you called some of these medical companies, the cartel.
And so, you know, will Mickles kind of will those lower costs come?
Can we lower costs with that cartel?
I would like to know what you meant about the cartel, too, because I think I see a lot of that as well.
I agree 100%.
Yeah, so we can go into this a little bit, but I did want to get to like this crazy news that's happened in the last 24 hours, which I think will shake up the pharmaceutical industry like crazy.
even though it's coming from Eli Lilly.
But what I meant by the, just to remind people,
we have three big polls to the healthcare system.
And again, this is like my area of research and even my company.
But what the three polls of the healthcare system in the U.S.,
if you were going to, I mean, there's way more than three.
But let's say that there's three big ones since there's been so much consolidation.
It's the insurance companies.
On one end, it's the healthcare systems
or the care delivery arm of our healthcare, our health system.
And then you have the third one, which is the pharmaceutical companies.
And all three of them are working in cahoots,
and they're essentially working together
slash against each other and it's getting worse and worse and worse and along the way the patient's getting screwed.
So that's what I was trying to say in terms of the cartel of it.
The hard part is that our regulatory agencies that are supposed to break these things down or have been unable to do so,
largely because of the issues around who ends up leading these organizations.
They either come from health systems or they come from pharmaceutical companies or they come from insurance companies.
So, you know, you're asking them to cut off their own arm.
And by the way, there's nothing stopping people from coming in, becoming a regulator for a few years and going back and become a consultant to one of those companies.
And we don't have any systems to stop people from doing that.
And so this is, again, where I think there's a huge opportunity for there to be common sense regulation where it says, hey, if you're the commissioner of the FDA, you can't help consult for a pharmaceutical company the year after.
Like, this is not super complicated stuff, and it can be done in an effective way.
If you are the administrator for CMS, you can't consult for health systems or health insurance companies.
Like...
By the way, that happened.
Seema Verma is a consultant currently.
You can Google it. It's crazy. It's crazy.
And so Seema Verma, who is the healthcare administrator under the Trump administration,
is currently consulting for health insurance companies.
Like, how is that legal?
Why don't we actually do something about that?
That's insane.
I mean, that's the Wall Street model, right?
I mean, every single regulator, every single person who works at any of the agency
that are regarding the Treasury, etc., or a revolving door to Wall Street...
I mean, that's literally the reason that private citizens become, quote, unquote, public servants in this context.
It's to go get a better job and more connections.
But the question really is, you know, is that something that we can do?
Because the difference here is we know, for example, during the Trump administration, again, it's not just about the Trump administration.
I just want to show it as a context because he was so anti-establishment.
But yet even he was unable to fight this crazy cartel.
So, which is just the way it is.
You know, and as you know, I'm not super pro-Trump to begin with.
But that's not why I'm using it.
I'm literally using it because, you know, he talked about draining the swamp.
And even he struggled with that specific swamp.
So during his time that there was a drug from biogen that was approved that was an Alzheimer's drug.
Did you guys hear about this Alzheimer's drug?
It's crazy what happened, Aduhlm.
So Aduhlum, by the way, pharmaceutical companies find a very special way to make drugs really hard to say.
But Aduhlm is a drug that was...
that was an Alzheimer's drug that essentially behind closed doors,
there was collusion between the FDA and the drug company.
And by the way, a bunch of people have been quote unquote fired since then about this.
And there was a whistleblower.
But they literally approved a drug for Alzheimer's,
which if you have a family member with Alzheimer's, this is like infuriating.
But they approved it with really poor data.
The advisory council that actually makes approval decisions said this should not be approved.
And they still approved it because they were in cahoots with leadership at the FDA.
And by the way, they were trying to get CMS to cover it or Medicare to cover it for the elderly, for older adults.
And Medicare was like, no, we're not going to cover this.
And ultimately, the whole thing came out.
It was all over the news.
But it tells you about how our regulatory agencies need significant reform.
And, um,
And this will become even more important as we start talking about this obesity issue,
which I know that people have very strong feelings on, but I have very good counters to your feelings.
So I'm going to say it in a special way so that I can get people to get upset.
And as people get upset, we can kind of talk through it.
Because this is a critical conversation that's happening in the U.S. right now.
Okay.
which is around what happens with these obesity drugs.
So I'll start with where the first shot was fired.
The first shot was fired when one of, in my opinion,
one of the most preeminent obesity medicine physicians,
Fatima Cody Stanford, who by the way, ironically works at Harvard,
she went on 60 minutes and she talked about obesity as a disease.
Many people, she's a black female.
She's a well-known physician.
You might recognize her when I mentioned it.
She went on, and it was all over the news.
Everybody talked about it across everything where she said, hey, obesity is a disease.
And most of obesity is actually hereditary.
It comes from how your parents eat.
It comes from your genetics.
It comes from all of these other things.
And many people took that as, well, hold on, people still have agency.
They can still lose weight.
Look, I lost weight, right?
And so all of these things, and people always get really upset about this.
Literally weeks later, the OZempic craze began.
Everybody here knows somebody who lost a bunch of weight being on this medicine, which was
Ozmpic, which is literally a shot you take.
And as you take that shot, you start losing weight.
Now, of interest, when you stop taking this shot, you gain the weight back.
So essentially you have to be on this shot forever to keep the weight off because pills don't
teach skills, right?
And so literally you stay on this shot forever and now they've turned, again, since it is a disease,
it has now become a chronic disease with a chronic medication.
The difference here is OZempic is expensive as hell.
It's a really expensive drug.
And so now the big question we have to ask ourselves is, okay, where do we go from here?
Well.
Well, we have Wagovi.
We have OZempic.
And by the way, they're being used off-label.
And then you have Mujaro, which is the first medicine that, you know, Peter Atia and other people are saying, hey, it's a better quality med than OZempic and Wagovi.
And then you have Eli Lilly come out.
And Eli Lilly, so all those drugs, by the way, had pretty similar efficacy.
And then Eli Lilly comes out with a phase two trial that says, hey, Retta True Tide.
Reda True Tide makes you lose 20% of your weight after a year.
And the average weight loss doesn't just end at 48 weeks.
So they're thinking about doing a longer study so you can just keep losing weight if you stay on this drug, which by the way is really important because all the other ones plateau.
And so for somebody who is truly obese, losing 24% of your weight can have significant metabolic effects in a positive way.
So now we have to ask ourselves this really hard question, which is should insurance companies cover this?
And Eli Lilly is making the bet that this is going to be their blockbuster drug.
By the way, it is going to be a blockbuster drug.
And obesity medicine is not going anywhere.
This is the future.
I'm letting you all know.
You can have all your feels about it.
But ultimately, this is the future.
You know?
And so...
So I wanted to first start with, should we be, should we have coverage of these medicines through insurance?
And I will remind you that we cover for a bunch of other things that are, that happened because of people's decisions.
For example, if you smoke your entire life and you get a lung transplant, nobody says, well, you know, he was a smoker.
We really shouldn't do this.
You know, people have to pay consequences for their decisions.
If somebody drinks their entire life and gets cirrhosis and they get a liver transplant,
no one ever says, you know, that transplant is really expensive.
They should have just not drank, right?
By the way, when people get diabetes and they're on insulin, we don't say,
hey, we shouldn't cover their insulin.
They should have thought better before.
It's just not the way that we work in America.
And of course, we have to have a discussion around our food in this country.
But, like, of course, it's a big issue.
33% of kids are obese in this country.
One out of three kids is obese, which is crazy if you think about it.
And it's because everybody's freaking throwing Hawaiian punch at their kids and throwing candy
at their kids.
But...
But I'm not judging here.
My point is just that, you know, we have like an underlying problem.
But in the interim, should we really tell these people like, no, no, no, you know, while you're working on your diet, let your heart suffer, let your lung suffer, let your pancreas suffer.
It's sort of like a shouldn't we go to the root of the problem, which is cure their underlying obesity?
And so I wanted to bring this up.
I know that I've been very direct about my opinion.
I don't think it's any, no one should be surprised by my opinion after what I just said.
But I wanted to bring this up because I'm letting you know that from a financial perspective for everybody that's listening, guys.
Guys, this is not financial advice, but these drugs are blockbuster drugs.
They're bigger than cancer drugs.
They're bigger than diabetes drugs.
These are bigger than heart failure drugs.
This is going to the source of the disease.
Ozempic is sold out off the shelves.
I'm going to say something and people are going to get upset.
Every single person that you know that has suddenly lost weight in the last year and a half,
I assume that they're on OZempic before I assume they did anything else, which is kind of fucked up if you think about it.
But like I just assume, like, you know, on TV, I don't know.
I don't know if people have lost all this weight naturally.
I bet they haven't.
But a bunch of people on TV are getting skinny.
A bunch of people you're seeing in politics are getting skinny.
I wonder why.
It's interesting, isn't it, that the timing of it all.
So people that have not been skinny for 30, 40 years are now suddenly becoming skinny.
You've got to ask yourself some questions here.
But Justin, I'll go to you because I know that you've messaged.
Oops, you just cut out.
I want to make sure you do me about this a little bit.
Yeah, I lost him as well.
Yeah, he cut out.
He's back.
Well, I think I know what you're justin.
We're one of you about to jump in because Adonish, we keep losing you, buddy.
They're cutting in and out.
Is that better?
Yeah, I think you're good. Try again.
All right. No, I was going to say, Justin, I know you and I have had some conversations about this offline.
If you're comfortable, I'd love to get your thoughts on.
One, is this a good thing that we have these obesity drugs now?
And then two, should they be covered by Medicare?
Should they be covered by insurance?
Because that technically comes out of everybody else's pocket, right?
Yeah, I mean, that's a really good question.
And...
I think if you were to bring up, like, you know, OZempe and say, hey, here's what it does.
Should this be covered?
My initial reaction would be, of course, not.
But hearing your reasoning for it, which is, hey, you know, FYI, we already cover lung transplants for lifelong smokers and COPD treatments, stuff.
that that's like, you know, connected to lung cancer, I don't know.
I'm not a health person you are.
But, you know, hearing you go down that explanation,
justifying why maybe it should be covered,
if I was in charge of making these decisions,
I'd be like, oh, I mean, that is probably...
That's a logical outcome and a logical conclusion, right?
Like, I'm scared to death of drugs.
And I, you know, I think, like, probably like you, that should be a last resort.
Health, healthy first, habit first.
Drugs is a last resort if those other things can't.
can't work. But one of the one of the things, because my brother's also a physician and one of the
things that kind of scratches his head is he's like, you have a lot of people on Medicaid, Medicare,
Title 19, and they'll come in and he'll say, hey, you know, here are some recommendations. We need to
change these things because you're basically killing yourself doing this. And
And they're like, yeah, no thanks, I'm good.
And he goes, so he goes, they are literally burning the candle at both ends.
We're paying money, collectively.
We're paying money to have them trashed their own body.
And then we're paying money again to bring them back from the brink.
And so, yeah, it is a, it's a huge problem, but is a solution, and maybe someone has a
counterpoint to this.
So I'd love to hear that.
But is a solution like incentivized,
incentive insurance like Medicare Medicaid Title 19 like hey you know you can't afford your
health care that's fine we as a society are going to help you but in order to do that there are
certain very simple straightforward metrics you need to abide by like if we're going to do this
this certain procedure if we're going to do ismpic if we're going to do xy and zee you do need to
commit to these three
lifestyle choices so that society is paying for this.
So technically that check is not your money.
We're paying collectively.
So we collectively expect you to do a lifestyle change.
I don't know if that's something we can request or if people have a counter opinion to that, but I'd love to hear that.
interesting uh go you know one one thing i would i would say is um you know if if you just look at
eli lily stock over the last six months it's up 40 percent it's gained over a hundred and
70 billion in market cap right so uh i think you know we're we're sitting we're watching the
blockbuster movie come out but
A lot of this has been in expectations in the stock price today.
Yeah, but one of the differences with biogen.
Darren, I'm sorry.
I want to clarify one thing, which is it's not gone up because of this drug.
It's gone up because of Munjaro.
By the way, the other big weight loss drug that everybody's been talking about at the
post-Ozempic drug, that weight loss drug is also Eli Lilly.
Sorry, Darren.
I just wanted to clarify that because most people don't know that Munjaro is also an Eli
Lily drug.
Go ahead, Darren.
Yeah, and, you know, as somebody that was talking about, you know, biogen pre-Alzheimer's drug, right? One of the reasons, so that stock was different than maybe, you know, potentially what you'll see in the price action in Eli Lilly, because that jumped 30% literally overnight.
you know, you had alluded to it earlier, but with biogen, you know, that was really a market
surprise that wasn't priced in because of some of the reasons that you had mentioned prior, right?
Where...
You know, it was it was approved or rubber stamp approved based on, you know, insufficient data.
And, you know, the wide adoption into, you know, various distribution channels like Medicare didn't actually take hold, right?
And so I would say that this process of approving drugs, you know, is a long process.
A lot of the time it is.
uh priced into the stock as it goes through clinical trials as it's approved by the FDA and
and such and so you know these
types of drug approvals aren't usually like a gold mine that you find overnight.
This is something that takes a long time and this is something that's for long-term investors.
So Eli Lilly has been kind of a standout stock, really outperforming a lot of the other, you know, constituents of the index.
I think based, you know, in part because of these blockbuster drugs that have really high expectations.
Yeah.
Yeah, and go ahead, David.
I'll let you jump in before I jump back in.
Go ahead.
So I was just going to ask, you asked the question of whether we should pay for,
whether the insurance company pay for.
So I'll ask a couple of questions for a lot of you who know a lot more about this than I do.
And one of them is the examples that you mentioned about alcohol and tobacco,
about like transplants, those weren't chronic treatments.
Right.
And you're saying that this drug is, well, at least, you know, it's expected.
We can talk about emphysema, David.
What about emphysema or COPD?
But, but, but, you know, again, this would be a chronic thing.
And then yet, so how do we handle that?
Because that would, this would be a far bigger scale than emphysema, right?
A far, far bigger scale.
And then number two, how do we handle the food industry?
which also has its hand and the obesity epidemic,
because that would just keep basically producing,
the food industry would just keep producing people who would need this drug,
this chronic treatment, and ramp that price up.
So those would be the questions I would have.
I mean, again, we couldn't just solve.
I mean, what do we do in the interim?
That's the point that I'm making.
Of course, we need to figure this out.
There's no doubt about that.
that. But what do we do with the interim? We just tell people, hey, we have a drug that can help you
lose weight, but we're not going to offer it to you because, or we're not going to cover it by insurance.
By the way, if you don't fix the weight, what ends up happening? You get diabetes. You get heart
disease. You get heart failure. But we're willing to treat those downstream diseases,
but we're not willing to go upstream and treat the underlying disease. I feel like that's just
foolish and bad business.
Like, that's just stupid, in my opinion, because ultimately, if you can treat the underlying disease and you don't get those chronic disease, just so you guys know, metabolic syndrome leads to tons of downstream diseases.
And so, you know, I just want to, I want to caution against, you know, of being pennywise and pound foolish here.
And I think that that's sort of the underlying challenge.
Matt, go ahead.
Yeah, isn't Ozypic?
Well, the weight loss portion of it is off-label still, I believe.
I could be wrong about that.
That's correct.
That's correct.
So you've got to have one of those downstream diseases to even qualify for that theoretically.
Now, obviously, it's been used.
Well, until Monjaro.
Manjaro, that is not going to be the case.
And technically, I'm sorry, just one other.
Technically, you actually don't need one of those downstream diseases to qualify for the coverage decision.
The coverage decision is made by the insurance company independently.
So the intended use or the indication for use from the FDA does not always correlate with what CMS or an insurance company decides to cover.
Those are two very separate...
processes unless you're a breakthrough drug, which is a whole new FDA classification that they just
started. But I just want to be clear that the coverage decision from insurance companies. So like,
for example, there are certain oncologic drugs, like, you know, certain drugs for cancer
that are used off-label that are the off-label that are covered by insurance. It happens all the time.
And that's kind of where I was going.
That's one of the, you know, you can debate whether it's a good thing or a bad thing about our system.
You know, you will find the insurer that will cover that if that's something that you need.
I guess the flip side of that is in our system, generally speaking, coverage isn't provided by an employer plan,
so it's not just so easy to enter the marketplace necessarily.
So I don't know, that made anything clear or just clear as mud.
but that's an interesting part of our system, I feel like.
That's how they like it.
Go ahead, Amy.
Yeah, you know, this might surprise a lot of people who know my background because I used to run a fitness Instagram account, and I am a marathoner, and I also used to teach PE to kids.
So I'm very much a pro-self agency, take responsibility for your fitness, for your health type of person.
But I also have to say through my experience, and it was actually the pandemic that opened my eyes to this the most.
I do think there is a genetic and more importantly, an environmental component to obesity that cannot just be corrected for with dietary and lifestyle changes.
And I saw it the most with kids when I was teaching PE.
The year that the kids came back after the pandemic, after the lockdowns, these kids are like five years old.
And there are kids that across the board, we saw that the kids had reduced gross motor skills, just across the board.
And this was due to a massive external event that had happened across the globe.
All these kids were basically shut inside of the homes, apartments, whatever, for long periods of time.
And we saw a loss on their fitness level.
And it's the same thing with the food industry.
We have the food that we have and the kids are eating it.
And by the time some of these kids are six, seven years old, a lot of them are already obese or on the path to obesity.
And by the time that they become adults, you know, if you have a drug that can help them, like you said, if there is a drug available that can help them get to a place where they can lose enough weight to maybe even feel comfortable enough to walk into a gym.
Like, why would you deny them access to that?
I know, and this is, I know it's really controversial and I know there's a lot of people in the fitness industry that are just so stuck on its personal responsibility.
We don't want to give people shortcuts.
We don't want to cheat the system.
You can't cheat the system.
But I kind of see it the way you do, Donish.
I think if this is something that can help people, and especially with what I've seen with how it develops so young with kids,
If they've been struggling with this for their entire lives, why would you not give them something that could help them?
And why would we not cover it when as a society, I think we failed a lot of people with our food industry, with our health and fitness education.
Why not give them this?
Yeah.
So counterpoint, it's not just about the weight, though, right?
Because if we're eating unhealthy and we have sedentary lifestyles and we're taking Ozempic to keep the weight off,
that doesn't make us healthier, right?
We may look healthier from the outside because we've lost the weight,
but we are still shutting down critical systems in our body that our body needs to run.
So, I mean, again, I don't want to be, I'm not a medical researcher by any strategy.
So actually, interestingly, I want to give...
Go ahead.
I guess just to put a period on it, what are the long-term consequences of a drug like this?
Because we've certainly seen many other drugs like PPIs that have long-term consequences that were like, you know, 10, 20 years in, we're like, oh, crap, it's doing that.
Wish we would have known that before.
Yeah.
What's really interesting is we always have to compare apples to apples, right?
And so the long-term consequences of obesity are increased risk of cancer.
Right?
We know that colorectal cancer.
Increased risk of diabetes.
Increased risk of pancreatic disease.
Increased risk of pancreatitis, specifically not pancreatic cancer.
Don't worry.
You know, increased risk of...
heart disease, increased risk of heart failure,
all of these metabolic disease downstream issues,
you know, becoming insulin dependent, all of these things,
then those diseases each has increased risk of other things.
So like the downstream effects of obesity are so broad
to what Amy was saying, and we've got little kids
that are going through this.
And so I do want, and again,
one out of three kids in this country is obese.
I think, I can't remember, please don't quote me on this,
but actually I'll look up the number.
But it's like somewhere around 20% of kids are like morbidly obese, something crazy.
And so when you're talking about these like crazy numbers, we have to, of course, talk about the food side of things.
But, but, you know, I'm going to next go to, there's two big things, right?
One is the role of the insurance companies in all of this and the coverage of insurance from insurance companies.
So Eli Lilly, the underlying...
assumption here is that when
Eli Lilly gets FDA approval for these drugs
that insurance companies are going to cover for it.
It's actually not the case. We don't
know if they're going to do it. And the reason
behind that is because, again, because of the fact that
we don't have a single-payer
healthcare system, even if we had
privatized providers, so like
like physicians and doctors and independent practices,
we still don't have one pair.
We have all of these different insurance companies
that make individual decisions
unless they're either forced to by the government
or whatever to cover something.
But if you think about it,
the average person stays with their insurance
for about 18 months.
which is nuts.
Think about how crazy that is.
So the average person stays for 18 months.
These drugs may not lead to cost savings for two or three years.
And so it's in this weird sort of window where the insurance companies don't have a financial incentive to cover the cost of these drugs.
Because they, imagine they spent all this money on OZempic expecting that it would reduce the cost for diabetes, reduce the cost for whatever or whatever.
And ultimately, it ended up not...
reducing costs for them, but for their competitors.
They don't want that. That sounds like a really bad business, right?
So ultimately, the insurance companies may not cover this,
especially in the commercial population, which is less than 65,
because they don't see the ROI or the return on investment in the time horizon we're talking about.
So that's actually like a huge issue right now in terms of coverage.
Even though OZempik has been out, a lot of insurance companies don't cover it.
And so the only people that can afford it are the rich folk.
Right.
which is even worse.
Imagine how much more worse that is,
that the people that, by the way, obesity is way higher
in people of low socioeconomic status.
Amy can tell you kids that are poorer
tend to be fatter.
It's just the way it is.
It's an awful thing to say, but it's the truth.
So the people that are getting this
are rich celebrities,
and they're able to get access to this
when everybody else isn't.
And so if we don't figure out a solution to this,
essentially the rich will become skinny
and the poor will become fat
and it'll just continue
because they're not fixing the food in the system.
So there's this like underlying issue, which is like, you know, how do we make sure that it's actually helping everybody if there is a drug out there?
Because we are denying effectively if you don't cover it through insurance, you're essentially saying to that mom that, hey, you're not going to get access to this.
Go ahead, Eugene.
Yeah, I mean, you know, I...
I think what I hope and wish versus what I think will actually happen, I think are different.
I mean, to push back a bit on some of the things, and I've appreciated the perspectives of actually
everyone here because I've learned quite a bit.
But it's like, you know, I mean, there are differences among populations.
So I don't want to say this is a hard and fast rule, but like largely obesity, modern obesity
problem is a is a modern rich world country, developed country problem.
largely. I don't think it's entirely true depending on some of the populations, but generally
speaking, that's true, right? You go to a lot of these poor countries. You don't have an obesity
problem. When you do, it is related to things like the updated food issues, right? Like the fact
that we're living more sedentary lifestyles.
And, you know, you go back in time and people were, you know, not nearly having as many problems with these.
Now, life expectancy was lower. There were other issues. You know, when you see industrializing countries in across Europe, which were the first to, you know, become modern industrial countries, you know, they started developing obesity problems like hundreds of years ago, right?
I mean, you kind of see at least some of the studies, they were a little less, you know, rigorous than they are today. But, you know, I would posit.
You know, I mean, the thing that I think is more healthy is, hey, let's practice discipline.
Let's do these things.
I think Amy talked about that.
But, you know, unfortunately, that's just...
you know, I mean, the easier problems like, you know, shooting yourself up with something is just, I guess, the way modern society is going to cope with the ills that modern society creates.
And I think that's just, I think it's a bad trend.
And I'm not sure how reversible it is.
But, you know, you know, I earnestly lament that that's the fact.
Modern society has created this problem.
And now we're using drugs to try to fix that problem.
I mean, it just doesn't seem right.
Like, what about old-fashioned discipline and just, you know,
you know, other things.
I mean, it's much harder in the modern times
when you have issues like with the food system
and other things. But yeah, yeah, man.
I mean, it's unfortunate that we've gotten to this point.
I think it's only going to get worse.
And layer on to that, the fact that
like, I think one of the
at least it used to be this way.
I hope it's changed, but one of the number one expenditures on SNAP benefits is soda.
And so, again, it's another example of earlier the community,
spending a lot of money for people to buy this stuff,
and then they go for publicly, public benefits to get the problem reversed.
Right.
Now, you know, I don't know if a lot of people buying this actually know it's bad for them,
but that just comes back to the food companies.
The reason they're lobbying to be included in these benefits is because it's making a lot of money for them off the taxpayer.
Yeah, I know. Thank you for joining us.
What are your thoughts on this?
Hey, guys. Great conversation.
I've been having this debate myself, and so I actually had a question about,
for the doctor here.
So there's been a debate about sort of losing weight, old school way,
versus the quick way of some of these GLPs.
My question is around metformin.
So more than one in three American adults have pre-diabetes, insulin resistance.
And of those with pre-diabetes more than 80% don't know they have it,
and the main sign is usually being very overweight.
Yeah.
I know from experience.
And so I'm really curious about why metformin isn't used more as a first-line treatment
to decrease insulin resistance.
It's not a weight loss drug, of course, but metformin does.
often result in weight loss because you get your insulin under control over a long
enough period of time. Metformin is also incredibly cheap and incredibly safe and it's been around
for a very, very long time. I've also been a user of it. And so I'm really curious. I've been
talking to people who have been starting to take some of these drugs like on Jairos, Zempic.
I know it's using different names around the world, but I'm really curious when I speak to them, a
A lot of them often have an underlying insulin issue, which is really easy to diagnose on a blood test.
And yet they haven't been prescribed a metformin.
So I'd be really curious for your thoughts.
Yeah.
So one of the challenges that occurs, so I'm actually, just so this is completely TMI, but I'm on low-dose metformin for longevity.
So I'm a big metformin person.
Happy to talk about that offline, but I take it for longevity.
What I was going to say was...
Can you briefly explain what that means?
because i don't know i actually don't know i'm trying not to justin uh but uh oh sorry uh no so
essentially uh metformin in multiple studies has been shown uh to increase health span so there's two types
of life's life you know longevity sort of targets one of them is living just longer like how many years can you
live
And then another one is how long do you have a healthy life?
And that's called health span.
So lifespan is the how long you live.
Health span is how long you live healthy.
Metformin specifically in low doses for even for healthy people has been shown to increase health span.
One, I think it's largely because Metformin is being tracked so much, Anna.
Anna, I don't know how to say your name.
Just want to make sure I say it correctly, since I have like a long sounding name.
The latter is correct.
Is it Anna?
Yeah, thanks.
Yeah, okay, perfect.
So Anna, you know, metformin should be used earlier in the course of disease.
Unfortunately, your average primary care doctor doesn't think that way.
And so it's just something where using it off-label has not become in vogue yet, even though we know that it affects insulin resistance.
So what we're talking about with, and this is becoming like a healthcare show, but, you know, what we're talking about with insulin resistance is,
you know, the way your body processes insulin changes with the level, uh, which with,
with obesity or maybe causative for obesity. We actually don't know if it's like the symbiotic
thing that's happening. So,
You know, as you, as you get older in general, your ability to process insulin goes down.
And so there's, oh my God, I'm going to go to too much detail.
Maybe offline, I'm happy to answer this question in much more detail.
But there's something called glute four receptors that go inside the cell instead of sitting on the surface of the cell.
And so your glucose response changes completely.
And that affects the ability for your body to use insulin effectively.
So you end up having a lot of sugar just floating around.
Okay.
So, taking a step back, should metformin be used earlier in the course of insulin resistance?
Sure, there's a lot of data around that.
Anna is absolutely right.
There's a lot of data around that.
Metformin doesn't come without risks as well, but it's a pretty well-tolerated disease, a tolerated drug, probably better than GLP-1s.
The reason why GLP-1s are becoming so in vogue is because the dramatic nature of the weight loss.
You know, and again, remember that we need coverage.
I'm sorry?
Everyone loves a quick fix, of course.
So, with the rates, if you look at the rates of white loss and not, that's not untrue.
Let's just say that that's pretty true.
That's the American way.
Yeah, if you look at it, I've lived in the U.S. for quite a while, but if you look at the rates of weight loss on white form and it, it's much slower, but it is the longevity of it is, it happens over a few years.
Yeah.
And the more important thing is that you don't, you may not need to be on it for the rest of your life.
Right.
Right.
Like you can learn skills along the way because it happens slower.
The GLP ones, the biggest issue in my opinion is that you can't take it as a transitionary drug that you, you know, unless you are learning the skills.
you know, unless you're learning the skills directly
about how to keep the weight off.
So it's one of those big challenges in my opinion,
which is there are other ways to do this.
No one's saying there aren't other ways.
But if there is a way that can prevent somebody,
like the best example, if people are familiar with Verto Health,
literally they use a high fat keto diet to reverse diabetes.
That works incredibly well.
And, you know, we know that things like Weight Watchers and others work really well.
Hilariously, Weight Watchers just acquired a company that does telehealth for OZMPIC.
So, you know, even they're real at Noom.
with their system, they just acquired, they just started doing GLP therapy.
And so all of these companies, all of these wellness companies that you all know of,
that are household names, they're all getting into the OZMPIC business.
And this, what I'm, you know, I'm going to tell you, if you ever want to, you ever want
to predict anything, imagine the obesity industrial complex that is coming.
Every pharmaceutical company is spending a ton of money
trying to figure out what the next big weight loss drug is.
By the way, whoever comes with a pill instead of a shot,
a trillion dollar business.
Whoever figures out how to do it.
And by the way, no one has an incentive to build one
where when you stop, people stop...
you know, people don't gain the weight back.
Because they, you know, ultimately, they have different financial incentives.
And we just have to be honest about that.
They have no reason to make a drug that you take it for three months.
You lose all the weight and then you keep the weight off.
That is not the goal.
That will never be.
I mean, no drug company has an incentive to make a drug that eventually allows you to drop it, right?
Right.
I mean, I don't know.
I think the answer is one where people do have an incentive.
Sorry, the margins on Metformin versus the JLPs are planets apart.
So my thinking and answer to that question myself was,
or use that word a lot, incentives, follow the money.
I mean, they're just, these companies won't make that much money on profit margins on Metforman.
Oh yeah, because my foreman is, I mean, it's again like that same conversation that we had with
You know, things like early treatment during COVID.
I mean, this is like all, it's just the same conversations, which is, by the way, hilariously, you guys want to hear something crazy?
I have looked at the studies myself.
Ivermectin actually does not have good outcomes, but you know what does have good outcomes with COVID?
Metformin, Anna.
That's the only one of two drugs, by the way, metformin and fluvoxamine, both of which were generics.
And yet nobody talked about them, even though they had actual impact on early treatment with COVID.
The third one is steroids.
Like, we actually knew certain drugs that worked and nobody talked about it.
Instead, everybody got, you know, like the overly fixated on this other drug that, by the way, had no outcomes.
And had hydroxychloricum, which had four outcomes.
We had other drugs that actually worked.
Isn't that because to get emergency authorization for a drug, there has to be no current solution?
Hilariously, that is not true.
So that is the biggest lie.
I'll walk you through.
It's not that it's not true.
Yeah, so actually, this is, again, this is the challenge of me being a doctor and also doing a finance show is because we always go down these rabbit holes.
But I was going to say that steroids were used for the treatment of, and fluoxamine and metformin, all three of them were used for treatment, early treatment.
It's just because some people, guys, everybody has incentives.
Right.
The people that were pushing these drugs had built entire businesses around it.
Do you know how many millions of dollars these doctors made by pushing Ivermectin and owning the pharmacies that were pushing these?
Like millions of dollars.
The other side of it, why weren't they talking about drugs that actually work that were, by the way, generics like metformin and fluvoxamine, both of which had better outcomes.
There was multiple studies that showed that they worked better.
And by the way, your average doctor wasn't using them either because everybody got so fixated and took sides.
Anyways, I don't want to talk about it too much.
But what I'm saying is this actually, a bunch of people were making money on both sides.
A bunch of people were building their careers on both sides.
This is the awfulness.
And who lost the patient?
And so when we talk about all of these treatments, we have to keep remembering that ultimately,
you know, I bet you the last people that get access to these obesity drugs are the people
that actually need them.
They can't just, they get coverage for these obesity drugs.
Medicaid will be the last group to offer this obesity drug.
because I could cover this obesity drug because they'll make excuses they'll do this they'll do that
and in reality it you know it's poor young kids there are the ones that are going to suffer from
the long-term consequences of this more than anybody else and yet they're going to be the last
ones to get coverage and and I think that's what's incredibly upsetting which is we keep talking
about personal accountability but how is a child supposed to take personal accountability for what they eat
you know like and and should a child suffer because the parent doesn't have good behaviors in the home
and there's there is a genetic component to it uh there is no doubt about that it's not all genetic
Fatima is not 100% right.
And I recommend people watch that.
She walked through the data.
I thought it was, you know, she knows that it's not like the world's strongest data either.
Because it's correlation.
She's trying to make a causative argument when there's just correlation.
And she said it was hereditary, not genetic, which is important in many ways.
Since hereditary is both environmental and natural and genetic components.
And so, you know, when we're thinking about these obesity drugs, and I'm going to,
I know that this is probably annoying for people that listen to us every day for the news,
and I'm happy to do it.
But I had to talk about this because this obesity industrial complex is building.
I'm telling you right now, no one is going to stop this.
And no one's going to stop this from happening.
This is here.
Again, everybody that you know that's losing a shit ton of weight is on these drugs.
And they're allowed to be on these drugs.
Why not?
And so, you know, and honestly, we just have to come to terms of the fact that this is the new chronic disease that people are going to go after.
And I'm happy that they're going after obesity instead of diabetes and the downstream issues.
I think it's going to be very interesting.
Patrick, I know you have a chart for us on Eli Lilly.
I think earlier Darren was saying that all of this stuff has already been priced in.
Is Eli Lilly already priced in with all of this news?
Or are we going to see a lift from all of this news?
What are the charts telling us?
Well, look, I didn't even know there were news.
So just the fact that we're talking about today and people, all this news is coming out,
you know how I am a little bit.
Is this contrarian news?
But sometimes, you know, you get bullish news and the price still rockets upward.
So my reflex is...
just pop up the chart.
And what's great about the L.I. Lilly chart, I have data.
That company has been there since 1970, guys.
I didn't know that company exists that long.
So it gives us a lot of data points.
And I put at the bottom, I put a 10-year rate of change.
So 10-year rate of change is wherever you are today, how much percentage gains you did
from 10 years previously.
And there's these cycles that.
I amnitated the entries.
1985 was a great entry of a great base.
1995, another great entry.
Then the last two great entries for LA Lilly was 2012,
where it did a 12-year base, like that was the one to buy.
2018 after a two two three year consolidation but this thing has been rocketing the 10 year
rate of change is above all time highs so over 50 years it's never been it's yielding now 820
so if you would have bought this thing 10 years ago you'd be up eightfold and while the chart
right now if you bought in 2018 it's still a hold it hasn't broken down it's trending beautifully
above when you're moving average
Somebody on the sideline listening to you guys and saying, oh, man, I want to get in on this, this great news.
This is not the low risk, high reward entry.
It's just not.
But if you're in, it's not a cell.
But if you're on the sidelines, this is definitely not a place I would want to enter.
Even just as three-month return is over 40%, which is a very, very high mark for the stock.
Again, just a small time period of three months, it's just in the last few months, it's rocketed way above its 200-day moving average.
Way up there.
Exactly.
If I would have zoomed in, exactly.
The distance you are away from your moving average should be a formal godge.
It's easy for anybody, guys.
Just pop in an indicator distance from moving average.
And Jesus, if you're far away from it, eventually there's a return to mean either the price corrects all the way down or the price just sideways and lets the moving average catch up naturally.
Fascinating.
So it sounds like if you've got it, hold it.
If you don't have it, this might not be the best point of entry.
Just want to confirm.
Exactly that.
Look, it's kind of sad a little bit.
You want to believe you want to buy in the story.
But if it's not getting you a two, three-year base to properly reset those moving averages
and for people to start forgetting about Eli Lilly, what they do, that's the entry points.
That's where you want to get in, right?
The last entry point was at $95.
Right.
Now, it is where it is now. So it's, look, unless you're, somebody could probably day trade this, but if you want to buy and hold this for five, six, eight years, look, this is not the, you want this to consolidate a little bit more of that before you get a shot.
Yeah. Interestingly, biotech companies do behave very differently, right? Patrick, I mean, then the rest of the market, just because of the fact that.
The news around clinical trials, clinical trial results usually lead to like very significant bumps in price or drops.
How does that factor into your decision making?
I'll tell you one thing. I could have done a chart.
Look, Eli Lilly, I see the data points. I've looked at like in tons of charts.
It's tracking the US stocks capital flows. Then after that you want to see, do I hold LA Lilly or the SPX index?
But seriously, look, during the 70s, LILA was going down. What was going up, gold, silver, oil, all that stuff.
Eli Lilly went bonkers from 83, 85 all the way to 2000.
Who cares about like their drug releases?
It was rocking upwards.
What else was rocking it upwards?
Capital flows into growth stocks.
Then it went sideways from 2000, all the way 2012.
What was going up during that 10 year?
That was gold, silver, oil.
There's these cycles happening over and over.
So while...
you might think it's those drug releases.
You could have a great blogbuster drug release in the bear market.
And like, look, tell me, Eli Lilly, did I have any blockbuster drugs in between 2000 and 2012?
I'm not sure.
Exactly.
But the price went nowhere.
It drifted sideways, like nowhere for 10 years.
So capital flows override these headline news, definitely.
Interesting.
Hold on.
David, do you agree?
Do you agree largely with Patrick's analysis that it might not be the best time to get in?
No, I would, I mean, like you was saying, it is right now 25% above its 200 day moving average.
That is a high watermark.
That's a high watermark for the stock.
It's two standard deviations away from its 20 year linear regression.
So linear regression is the best fit trend line.
Just to be one standard deviation is a pretty good bullish trend.
Be two standard deviations above that linear regression on such a long-term basis.
I mean, it's, it is fair.
It's got a lot of stuff priced into it.
And so, I mean, you can buy it.
You can, you can buy it.
You just...
you would want to be underweighted right you you wouldn't want to put a lot of your portfolio
relative to what your benchmark would already have it allocated to it you would you wouldn't want to
put a lot into it you can have some exposure you could try to hedge against that exposure
there's a lot of ways you can hedge against an exposure like that but but there are
much, much better times to overweight into a stock like this.
And now it's not that one of those times.
Interesting.
All right.
Well, I think we've covered this.
Sorry, Patrick, you have something else to happen.
I'm happy somebody's agreeing with me.
Usually I talk and it's like silence.
And now I'm happy like there's some activity there.
Patrick, I always agree with you.
Come on now.
But I was going to move on to our last story of the day.
This is probably the most.
a surprising one for me in terms of the pricing of this acquisition.
But for people that are not paying attention,
Mosaic ML, which has been around for what, a couple of years,
with like 60 employees got acquired for over a billion dollars.
This is like an Instagram style acquisition by data bricks.
And I don't know.
I don't know how to feel about this.
It seems like it was...
overpriced, but I can be convinced otherwise since Mosaic ML is doing some really interesting things.
For people that are not aware of what Mosaic ML is, it's a competitor to Open AI.
It's been around, again, you know, it was bought for about 1.3 bill.
It's been around for, I think, a year and a half.
I'll double check. I'm just pulling up the story for myself, my notes.
So...
Yeah, it was founded two years ago.
It has 62 workers.
For some context, they were acquired for $21 million per employee.
The deal was announced yesterday.
And...
the basic core of the valuation is being derived by the fact that data bricks,
which has been, you know, has been around for 10 years,
wanted to enter the super hot current AI craze.
And, you know, the craziest part about this for me is that I don't even know,
and maybe somebody here knows why this acquisition makes sense for data bricks to pay this kind of number.
Is it that Databricks was worried about what's happening in AI and how it affected its business?
What justifies paying that much per employee for a two-year company?
And is anybody here familiar with Mosaic ML and willing to kind of give the bull case for Mosaic?
If not, I'm going to jump into it.
Eugene, are you familiar with this deal and your thoughts?
Yeah.
Yeah, I mean, I think it's kind of similar to, well, I'd say first off, that everyone's saying, hey, you know, like AI is way too overhyped.
Sure, yes, but if you get the right exit, then I'd say, you know, in the end, that's, you know, it's justified in the sense that you get the exit, right?
regardless of whether those exits are overhyped or not, right?
I mean, like, Instagram is a good example.
I'd say, you know, Instagram and WhatsApp are slightly different because they had slightly low.
I mean, WhatsApp was even, was even crazier in the sense that it was, you know,
bigger number acquisition-wise, but they only had, you know, between 10 to 20 employees.
I think it was like 14 or 16 or something.
I'm sure it's out there somewhere.
That's just what I recall.
But I think if you're able to get these kinds of,
exit, you know, and you think about like the value that WhatsApp and Instagram, of course,
you know, Facebook meta had to pour lots of money into them, but think of the value that
these have generated, you know, over time, Oculus, which I was part of also, I was actually,
you know, an employee there. I'm not sure as much. I think there's more money put in with
less return, at least for now. We'll see, you know, time will tell. But as the place to these,
I mean, you know, we saw with the, you know, the mistral AI raised, the $150 million
year of raise that happened. I think it was like a week or so ago. Um,
a little more at like a 200 something post.
You know, it's like there's just like a small,
currently there's unfortunately a small amount of people that can do
these sorts of,
that these sorts of things, right?
And unfortunately where the value accrues, well, first off, there's,
Some people estimate between 70 to 100 people in the world that can, you know, for example, do the things that the three mistral AI founders are.
And apparently those three people are among those 70 to 100 people.
In our AI space, you know, we talk about that entire dissect. Is that true? Is that not?
And how quickly will people learn?
So there's definitely a talent squeeze, right?
Because there's not a lot of people who've done this and trained, for example, trained LLMs.
Um, though, even though ironically, this is in theory, you know, available to anybody, right?
I mean, a lot of this stuff can, can actually be done by anyone around the world with an internet connection.
Um, it's just that, you know, there's just a concentration of folks in places like deep mind, for example, et cetera.
So, uh, kind of what you're saying.
And the reason why, you know, mistral race no much is it's like a first mover kind of play.
And usually first mover advantage is not something we think of.
Usually it's like the second or third movers, uh, that, uh,
usually end up winning.
But in this case, there's a belief among investors that there's this arms race in a short amount of time to establish yourself in a dominant position.
And, you know, I think we're seeing moves like this sort of affirm that that belief is holding true among big players.
Whether that will be true or not, I think is the question or whether, you know, some of these models will just end up going, you know, devolving into, you know,
you know kind of the lowest common denominator i mean right now for example if you were to train a
model for stability i and a lot of people actually doing this on the side you can train
you know like for example i'd say like stable you know uh uh some modifications of stable
diffusion one that led to stable diffusion two and two one you know you can buy these models
and sell these models if you're an engineer that that wants to do this you can sell for a few
hundred thousand dollars right that's not a lot of that's not a lot of money um
you know, I mean, it's a lot of money for an individual person just like doing this kind of kind of on the side of your side job, but it's, you know, like, you know, I mean, stability is acquiring some of these models, these checkpoints and stuff where, you know, a few hundred thousand dollars a pop and so people are making a side living out of this.
If you know what you're doing.
Um, so it's, it's interesting because the, the tools are actually pretty easily accessible.
Probably anyone here can start to access them, but, you know, there's a belief that there's a talent squeeze, uh, which currently there definitely is.
So that, uh, maybe is a high level. Um, yeah.
Yeah, sort of high level thoughts around.
The CEO of this company, Rao has been around for like seven years.
He sold a company to Intel, an AI chip company.
And, you know, I think you're probably seeing a scarcity of senior engineers and
entrepreneurs in this space, you know, many of whom have just started looking at over the last
couple years.
And this guy's been doing it since, you know, for the last, it looks like seven, eight years.
you know, it was obviously, it looks like they over, overpaid, but if they can justify it on
the back end, and there's a lack of talent in the space, perhaps they're paying for that.
I mean, this company raised $37 million in 2020, one, you know, $67 million last year and just
sold for $1.3. I mean, this guy, he looks like he's a pioneer in the space. You know, he started out
in, you know, under, in.
In the database space, understanding relational databases, and then he was into neural networks,
and went from neural networks and built this LLM platform.
I think there's just a lot of capital chasing very few opportunities in the space.
And, you know, it's just every VC trend just ends up being, you know, every VC firm chasing the same trend.
And, you know, that's probably part of it as well.
But it is a very, very high acquisition price.
But I think there will be a number of AI companies focused on different verticals, right?
Like if Bank of America needs to replace its entire customer service fleet,
you could do that with an LLM.
And with Moore's Law, you potentially could see something similar with the speeding up of networks
so that they can address and replace jobs in different verticals.
So, you know, that's kind of how I'm thinking about.
I think there's a lot of capital chasing a very small number of companies.
And in VC, this is what comes out of it.
Yeah, but what's really interesting is Shaheen Fershi mentioned, and this is interesting, both data bricks and Mosaic ML had the same backing, which was Lux Capital, which is fascinating also in terms of like just the overall view of this, which is, look, Lux has some insider info on what's going on in Mosaic.
They know the situation of data bricks. I wonder if they brokered the deal to Jay's point. Is this one of those situations where...
Mosaic is solving some unique problem that Databricks is facing,
or is Databricks looking to improve their own valuation
before making the big play to go public?
Go ahead, Michael?
Yeah, when I first saw this, it reminded me of actually Snowflake, who just did something pretty similar.
And I thought it was pretty interesting because when I first saw Snowflake do it, I thought it was just them jumping on the AI trend.
But the one thing I will say, which I think is pretty interesting, is Snowflake is actually using it to query their own data and make it easier for users to actually interact with their interface or rather than having to know all these different.
prompts to get the data out of Snowflake, they can just ask one of these language modules.
So I wonder if Data Bricks is kind of looking to do a similar thing to compete with Snowflake on
that front. Now, I know their businesses are pretty similar, but I could see in my own job
how that would be really nice rather than having to query data through these prompts to be able
to just go through a language module. So I'm wondering if they're looking to do a similar thing
in that sense.
Yeah.
Yeah.
Yeah.
You know, the point on the VCs, by the way, like, this is why it's important to have good VCs, right?
Because they can do lots of things for you.
You know, I'd say in the Oculus, you know, the Oculus acquisition, for example, right, Facebook acquiring Oculus for, 2.3 billion on the on the surface, $3 billion when you can count the count the earn out.
You know, it's.
you know, it was pretty, pretty great.
I mean, there weren't that many people there.
It was around 70 or so at that time.
And the, you know, I mean, it was, you know, Andrescent A16Z led the series B.
So like 75 million series B.
And, you know, it's, you know, Mark Andreessen has been on the board of Facebook since 2008, right?
So just, you know, if you're running a company, it's, you know,
you know, it's an example where good VCs can, can help you out for sure, you know,
because they always have visibility into the portfolio.
Yeah.
One thing I will say is it's a double at sword having one of those VCs on because if you
happen to be one of the companies where they're not doing these things, people see that as a red flag,
which is another sort of bigger nuance about this.
But, but.
Here's what I'm going to say. What I'm going to say is, in my opinion, there is a ton of hype in this space.
It's hard to tell what's real and what's not. And I think that ultimately, these types of deals, especially, you know, largely stock deal, this was not an all-cash deal.
You know, they can overhype the market like crazy. And we just have to be thoughtful about the fact that, look, if you're investing right now,
Don't follow the hype.
The hype is usually priced in.
If you follow the hype, you're going to miss on the next thing before it happens.
And remember, if you're hearing about it, there are experts in the space that have been talking about it for weeks and months.
You're going to be the one that buys at the peak.
Remember Web 3.
Remember when you bought that stupid shit coin.
Remember that every time you're about to make another decision.
Yeah, I'm talking to you. You specifically who's listening. Stop buying stupid things just because other people are buying it. FOMO is how people get killed. All right, on that wonderful note, love you all. We'll see you tomorrow morning at 8 a.m. Eastern. Thanks, guys.
