Invest Like the Best with Patrick O'Shaughnessy
· Patrick O'Shaughnessy
[00:00:00] S0: I want to spend a little bit of time at each, maybe not all five, but at least four of the levels to let you explain what you're seeing and learning, especially from your perch as an investor. One of the things that I think makes you so unique is that ultimately you're trying to make money on all this stuff and you're doing so with extreme care and precision and a very sophisticated team and lots of data. There's money on the line here. You're not someone that is reading something and trying something. It comes out on a scoreboard. And I want to start with GLP-1s because it's obviously the thing everyone understands the most, it's visceral. Maybe to begin would be for you to tell us what specifically you're seeing in '25 and '26 that is so exciting. These things have been around for a little while. People were starting to get on them earlier than that. What is the inflection? And then I want to get into the actual mechanics of how it works. The one that's about to come out next year, which seems maybe even more revolutionary than semaglutide and tirzepatide. What happened recently that has you so extra excited about them?
· Alex Karnal
[00:00:00] S1: Maybe one of the things most people don't realize is that there are a couple of different injectable GLP-1s that are on the market today. And we have some of the first orals that are coming to the market now and more that are coming. These medicines exist at lots of different doses. And I think one of the most interesting discoveries that I made over the past year in just looking at all of the data that we get to consume as investors, I wanted to know the answer to – Wall Street is very focused on the next GLP-1 having more weight loss and more weight loss and more weight loss. And I'm sitting back and thinking to myself, I don't know if that's the right focal point. One of the most interesting findings from diving into the data is people are not solving for this massive bazooka. People are solving for something that helps them to lose some weight, stabilize and be there. I think that's really interesting because what that means to me is that what people really want is something that's going to give them a health advantage, but it's going to be incredibly tolerable. And what we find is that as you go higher and higher in doses, the unintended consequence of that is – yeah, you're going to have more weight loss, but there's going to be a whole host of other side effects that come with it. That is different than in most medicines where we're trying to maximize the efficacy of the medicine, really where the Wall Street mind typically tends to go. What people are maximizing for here is like, how do I get on these things and then stay on them? So that to me was one of the big unlocks for 2025 was this idea that people want to protect themselves. If you marry that with the next big discovery from 2025, is that typically the way medicines are commercialized is you have big pharmaceutical companies – Eli Lilly, Novo Nordisk – that have armies of sales reps that are out everywhere. Calling on doctors, making sure they know about their medicines, pitching the attributes and why they're the best in the class, and why there's no other option that their patients should be pursuing than their medicine. And as you can imagine, that's a very capital intensive exercise. It's a very human talent intensive exercise.
· Alex Karnal
And what we saw, interestingly, is that Eli Lilly, pretty early on last year pushed more aggressively into a non-traditional way to get these medicines into the hands of people. They added to their legions of salespeople a digital front end in Lilly Direct that allowed people to get a prescription from their doctor and go get the medicine direct from Eli Lilly. It was one of the first big insights that the consumers want to be able to get these medicines themselves and not have to go through traditional means to get them. As you fast forward towards the end of '25, what we started to see was that, oh my goodness, more than half of the new people joining are coming in directly. So hold that with a third point that comes from 2025, which was all sorts of theater and dramatics around compounded GLP-1s. What we learned from the compounded GLP-1s was that not only do people want something that's going to defend them and be tolerable, not only do they want something that they can get through all the frictions of the system and just hit a button and have it come to their homes – a real consumer-like product. But price matters a ton. Through most of 2025, the average monthly cost of a GLP-1 was north of $400 or $500. Thanks to our administration, those prices are coming down, and I think that's really good. And it's particularly good because what we learned from the compounded versions of GLP-1s was that there is massive price elasticity in this market. Compounded GLP-1s cost about half as much per month as the traditional approved GLP-1s by Lilly and Novo. We were collecting data that was suggesting to us somewhere between 15% to 20% of the market that you couldn't capture through scripts was actually flowing through groups like Hims and Hers and other sources where people knew they wanted the benefits and wanted to be proactive about their health. They wanted to get these GLP-1s, but they couldn't possibly afford $400 or $500 a month. But they could afford $200, $250 a month. So to me, that's profound because you've got a compounded version that hasn't gone through any clinical trials. You know nothing about the manufacturing, but you know that these medicines are so important to your health that you're willing to take the risks – not only the safety risks of the medicine, but all these risks of these unknowns of where this is even coming from.
· Alex Karnal
And because you can afford it, go take it. So I left 2025 thinking to myself, oh my goodness, we're finally starting to see people step up and vote with their feet. They said, I want the benefits of these medicines. And now you get to 2026 – and this is the absolute game changer. In 2026, we now have an oral version of Wegovy, and this medicine has launched over the last couple months. We are seeing every week the oral version of Wegovy is setting record after record after record. And you might think, yeah, of course, who wants to inject themselves once a week for the rest of their life? I don't really think that's what's driving an almost 4x relative launch cycle for the oral Wegovy versus the most recent injectable launch, Zepbound. People that want these medicines, at the lowest end of the curve, that doesn't cost 500 a month, it doesn't cost 250 a month, it costs $150 a month. And so now we've seen at the lower end of the curve, if we get to an $1,800 a year cost, these medicines fly off the shelves. And to put that in context, prior to the launch of the oral Wegovy – just a few months ago, the GLP-1 market was moving at about 200,000 reported new scripts per week. 200,000 new people getting on these medicines per week. The most recent data that I looked at this past Friday says that that has now moved from 200,000 a week to 300,000 a week in just a few months time. We have to take these incredible learnings from the commercialization of GLP-1s, and the most logical conclusion is that people are ready and people do want to go and be proactive. And arming them with the stack that can help us to all live an extra decade, really focusing hard on what does it take to close that gap between invention and impact. When I say this trillion-dollar revolution, what that means is this trillion-dollar reduction in our annual healthcare spend. And I think that that's really possible now.
· Patrick O'Shaughnessy
[00:00:00] S0: I want to spend some time explaining what is actually going on with this class of drugs. Starting with semaglutide, sort of the single-acting, going to tirzepatide, the dual-acting, going to the triple-acting one that will be coming out this year or next year. Can you do your best to explain what this thing is and what it does? I think people's original conception was, it's a drug I take and I lose weight. I think you have a really interesting way of explaining and understanding these things as maybe the most important modern drug. So it seems worth spending some time just explaining literally what it is and what the science progression has been and where you see it continuing to go. This isn't static.
· Alex Karnal
[00:00:00] S1: A lot of people don't realize these medicines have actually been around for 20 years. Some of my first exposure to GLP-1 as a drug class actually happened in my early days entering the industry as a young biotech investor back in 2005 with Amylin Pharmaceuticals, having what we thought at the time was the most miraculous breakthrough. GLP-1 is a hormone that our bodies naturally produce. The problem with this naturally produced hormone is that once it's produced by our bodies, it only lasts for about two minutes before it's gone. So if you just pause there, what does that mean practically? Okay, if you were to take human GLP-1 and we would be injecting it, we'd have to inject ourselves 30 times an hour for the rest of our lives to get the benefit of what we can today with either one pill a day or one injection a week. The science behind moving from a protein that lasts for two minutes to a protein that can last over a week is a dramatic transformation. So what's good about that is it is a hormone that's already in our bodies and it's a medicine that we've got data on for over 20 years. And so we know a remarkable amount about it, not just because it's been around for 20 years, but it's now been in millions and millions of people. What happens is when we eat food, at some point that food makes its way to our small intestine. And when food gets to our small intestine, it's what triggers the release of GLP-1 in our bodies naturally. That GLP-1 molecule travels all over our bodies. It interacts with receptors in our stomachs that helps to slow the digestion of food. It also interacts with receptors in our brains that help us to feel fuller longer, to feel satiated. The combination of those two mechanisms of action are what allow us to turn off the food noise. It allows us to seek out and consume far fewer calories than we've ever done before. In addition to that, it does an important role in regulating the production of our insulin. It interacts with receptors on our pancreas that triggers the release of insulin. It plays a big role, in not just having that sugar not affect our vasculature, but also making sure that that sugar is not destroying our kidneys. The mechanism and the science behind it is actually pretty well elucidated. Biologically, we know how it's produced. We understand all the different places in the body that it interacts.