Could Eli Lilly (NYSE:LLY) Become the First $10 Trillion Stock?

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0:26Emmet:Welcome to Stock Club, the podcast where we find and discuss stocks that anyone can buy, many of which we believe will go on to grow your wealth. This week, we're going to talk about a stock that could be the first$10 trillion business. And for reference, it's worth about one billion dollars today so we might be looking at an already ginormous business in plain sight that's going to 10x in the next few years one one billion or one trillion oh yeah one trillion sorry okay thank you mike exactly into a trillion is really impressive it's not a bad return i think that i think that's called a thousand buyer no sorry i'm getting confused these big numbers they they get me confused but you're right it could 10x over the next few years and it's not one of the magnificent seven so folks get thinking before we dive in in fact what i think i'll do is i'll tease a few clues for you mike and then our audience can play along first but before we go there let me welcome you back from america mike where both you and i spent last week how are you feeling you're just in the door literally from New York via Beoritz is that correct uh well Beoritz via New York yeah I'm in literally 10 minutes so if I'm a bit um slow moving or unreactive in this podcast you'll have to forgive me a small bit but uh no it's great like look you can be tired for a day we'll get over that but uh no it was really cool it was really cool to see the conference in Baltimore see a bit of America I hadn't seen and then obviously go back to new york see small heads eat way too much drink too much um yeah it was a good time really good time i think i gained more week in more weight in my one week in america than i have in any other one week period of my life because everywhere we turned was the most delectable heavy delicious food in abundance in a kind of an all-you-can-eat setting yeah the famous baltimore crab cakes which are good oh yeah actually mike you and i took a trip to what's it called the lexington the world famous lexington food world famous lexington market yeah yeah it wasn't so world famous that i ever heard of it before but they certainly claimed or or after i'm not sure what i have what i have dubbed it as world famous it was nice yeah it certainly yeah i don't think it fully deserves the attention of the world but the right the crab cakes we both agreed were pretty special yeah yeah the city is famous for crab cakes i mean if you're going to be famous for something what better than crabs made into a cake like like we can we've got a blank canvas folks what do we want to be famous for crabs that are made in so we have we had a 30 dollar crab cake each we dropped 60 bucks and two crab cakes with plastic forks and sat on a makeshift bench thinking this just a spectacle it was a spectacle i was skeptical when i was looking at them but uh no no in fairness we both agreed they were worth every last penny so yeah folks get yourself to the lexington center in baltimore for a crab cake lovely all right you're uh yes you're taking the lead on this show you're doing heavy lifting after yes after my travels yeah exactly already i know your brain is a bit fuzzy because you came home via Biritz as opposed to via New York.

3:58Emmet:You were in New York. I write back and forth twice.

4:08Emmet:Yes. Well, I'm going to hijack today's podcast to talk about a stock that, as far as I recall, you approved and wrote up for a stock in a month service some time ago. But that notwithstanding, and with no groupthink whatsoever and i mean that literally was one of the three stocks that bill mann pitched at investicon to buy and hold forever um and then was one of the 10 stocks that porter stansbury pitched at his ranch last week as a significant holding in his permanent portfolio so two great stock investing thought leaders independent of each other said that this business is going to go on to even greater things and there's something that we heard porter say which i thought was really smart and i think is worth repeating here in the podcast and it was this if you had to bet which book do you think would still be in publication in 30 years from now a 2026 bestseller or a book that's been in publication for the last 100 years which would you choose and I think everybody would go with the latter option if a book has been in print for 100 years irrespective of its best-selling status it's more likely to be still in publication in 30 years from now so when you bring that thinking that logic and that fact into the world of investing if you find businesses that are 100 years old they have bedded down some superior processes products services and experiences that we can take i guess higher reliable guess will still be around in 30 years so that is the first teaser for this business but i'm going to tease you mike with five facts and our listeners to see if they can guess what business I'm going to talk about.

6:03Emmet:Okay, the first fact is it was 150 years old this year, in 2026. It was founded in Indianapolis in 1876 and to Porter's point about a book in publication for the last century is likely to still be in print, as it were, in the next few decades. Okay, so that's your first clue i'm surprised by that it's obviously you know gone through a number of iterations as a company if it was around 150 years ago oh yeah i often think about nokia the now former god of handsets mobile phone handsets they were the crown prince of handsets for mobile phone for ages but their history is one that went through lumber they used to fell trees and make paper and then moved into rubber and plastics and cables and routers and scooters and then eventually ended on phones and now they continue again and they're going through a renaissance and that is a very nice example of a business that just kept pivoting but i'm not talking about nokia today i'm talking about a trillion dollar giant okay second clue mike it helped and this is going to really close in the beam with it helped transform diabetes care a century ago because it introduced the world's first commercially available insulin in 1923.

7:25Emmet:Do you know the company I'm talking about yet? Well, I do because I think there's only like three or four trillion dollar companies that aren't in the Magnificent Seven. You're right. You're right. So, okay, don't ruin the surprise because I want our listeners to keep... All right. Third clue to our lovely listeners. It pioneered a biotech milestone. In 1982, our company introduced Humulin, which is the world's first human healthcare product made using recumbent DNA technology. So for those who are news tuned in in the early 80s, some of our early listeners might. And I presume, I'm pronouncing that correctly, Humulin, H-U-M-U-L-I-N, Humulin.

8:10Emmet:So that was the third clue. The fourth is, it's the company behind Prozac, the famous antidepressant which was first launched in Belgium in 1986. So the company that brought a sprinkle of synthetic joy or reduced the amount of depression in the world is the company I'm going to talk about today. And my fifth and final clue is this is, and this is the one that's most likely going to reveal the name, two of its headline medicines share one ingredient. Monjaro and Zepbound both contain trisoplatide, which is introduced for diabetes and chronic weight management, respectively. So, right, Mike, you can unveil the name of this trillion dollar behemoth.

9:02Emmet:It's Eli Lilly. It is Eli Lilly. I did a lot of reading on the plane on the way home about the business. And I spent most of yesterday diving into the company. And I thought, especially as you've just gotten off a plane, it might be fair for me to do a little bit of talking about this business that has been in everybody's line of sight. Now, whether or not you've ever been a patient of one of their products is a different conversation. But everybody knows Eli is one of the giants. And I'm sure we've all taken an Eli Lilly product at some stage without even realizing it, you know, over the counters, pills or creams or you name it.

9:40Emmet:But this is one of the joints. So I thought I would build a story a little bit, as I used to do in the old days when I talk about a stock. It was founded, as I already mentioned, in Indianapolis in 1876 by Colonel Eli Lilly. And obviously I didn't mention that as it's a bit of a giveaway. It's like, okay, what company am I talking about? It was founded by a guy called Eli Lilly. It's like buzzers all around the world are hit. Not the most difficult quiz, but no, no, it's not easy at all. What drinks company called Coca-Cola makes Coca-Cola. Well, it's Coke. Yes, correct. So in 1923, as I already said, Eli introduced the world's first commercially available insulin.

10:23Emmet:And now a century later, it has reshaped or been one of the. the principal reshapers of treatment for this age-old problem of obesity, which has plagued humankind increasingly. So I would think over the last 10, 20, 30, 40, 50 years. So that history, Eli's history, offers a really useful starting point for investors. Lilly has already demonstrated that a medical breakthrough can become a business that lasts many, many generations. Indeed, 150 years. And the question today is whether it can repeat that achievement on an even larger scale. And I think that the ambition that they have really requires some perspective.

11:08Emmet:So Eli Lilly's equity today, it's market cap, which is the total number of shares that have been issued, multiplied by the share price, which gives a very, very, very rough and ready ticket price if you wanted to buy the entire business, which isn't quite correct. But it is a$1.1 trillion business today at the very last day of September, which means that a tenfold increase would bring it up to an$11 trillion proposition, which is quite, quite the journey. There's no other business out there even nearly that big. But the fact that we had someone pitch it to us, someone who's got a great degree of success in the past and a former Porter Stansbury required, I think, me to go in.

11:52Emmet:What were you going to say, Mike? This episode is brought to you by Google Chrome. You think you know a browser, but Gemini and Chrome, that's new. It can help you with practically anything on the web, like restoring a vintage motorcycle from a 50-page restoration block, or finally break down that long article you've had open for weeks. Gemini and Chrome is here for it. Ready to make anything online make sense? There's no place like Chrome. Check responses set up required, compatibility and availability varies 18+. well no i was just saying like as in when you're getting to the the law of big numbers and you're talking about adding 10 billion in market cap or 9.9 billion 9.9 trillion in market cap does get pretty serious very quickly doesn't it you know like the equivalent of adding that much value yeah you're adding two nvidia's on top of what eli lily already is which is it's crazy but And it's at the helm of what could be the most universal line of treatment ever in terms of the weight loss drugs and retratutide.

12:58I can never pronounce that. There's too many R's in it in a row. The GLP. The GLP-1. Their answer for the GLP-1, which is just kind of blue pass, Novo Nordisk, and it looks like it's only building on its lead from here on out. that market is going to get competitive, I suppose, is the only thing. Oh, you're so right.

13:16Emmet:Oh, you're absolutely right. I mean, it's an extraordinary destination. It's not just a 10-bagger. We are discussing it becoming, if all else remains stable, by far the biggest company in the world. It is already one of their biggest companies in the world and has joined the Trillion Dollar Club. And indeed, we've done, there's been about 350 episodes of Stock Club. I can't believe it. But in the early years, if I recall, I think we only did it once a month, maybe even once. Then we kind of moved to once every two weeks and then it's a weekly podcast. But my point is that I think the podcast started about eight or 10 years ago.

13:54Emmet:And in one of those early episodes, I was naive enough to say, I don't know if I live to see a$1 trillion enterprise. Absolutely ridiculous. I have a very good memory for all the things I've said that were crazy and all the good things that were crazy right. But that was one of those ones where, as I was saying it, kind of believed it at the time. But now we have a whole host of trillion dollar businesses. So I've given up on me thinking where the glass ceiling sits. So to say a 10 or 11 trillion dollar business seems a bit far fetched. Well, my track history of calling as big as big can be is wrong.

14:33Emmet:But it really, as you said, is huge. It's not just a 10x. It's building a trillion on top of a trillion on top of a trillion. So it is really mind-blowing and market-bending dynamics at play in over 20 years. But those dynamics have just been upended recently. Like, as in SpaceX has lost and added a trillion dollars of market cap in the space of, what, six weeks? Yeah, yeah, that's right. you know it's like the sheer volume that's happening on the stock market today was unfathomable when you were first talking about on the podcast and the abnormality of a trillion dollar business um so like we're just we're playing in a completely different sandbox i feel like we are at this modern market it's just nuts to scale and i don't think uh bill man our porter stansbury kind of gave a buy when when there maybe i don't think bill actually said look it's a 10 bagger and waiting but he certainly said it's a magnificent investment for long-term buy and hold and porter did say he believes it can be become the first 10 trillion dollar business so when i was playing with the numbers i just said 20 years like can this happen in the next 20 years because for most people well for every person that's a very significant percentage of their lives um but a tenfold share price gain requires an annual compound of approximately 12.2 percent excluding dividends so we're talking the realm of uh the average return of the s p 500 when i started investing 30 years ago or yeah 30 years ago it was around 11 percent um as the years have gone by and numbers have been refined and whatever like we're now talking about the s p 500 returns compounds an average of about nine and a half to ten percent per year so to say that eli might generate 12 and a 12.2 percent compounded per year implicitly suggests that will outperform the s p 500 on a very sustained basis 20 years is a sustained basis and the investment case you know depends on this sustained growth over decades, supported by successive generations of medications.

16:48Emmet:Because as we know by any business, you can look at what they do now and very often it has little bearing in what they're going to be doing in a whole generation from now. Now you can take... And you can multiply that by 10 when it comes to pharma and you've got the patent clips and everything as well. Entirely. You can look at Kraft Heinz and go, yeah, well look, Heinz ketchup will be the same in 20 years and take a reliable bet absolutely of course it will you could look at aviation say yeah well ostensibly people will be getting in a tube that goes above the clouds and land but the actual vessel we could take a guess of how planes are going to develop and if you look at the 747 not a whole lot has changed since it was introduced in the 70s but when as you said you look at businesses that are predicated on leading the leading edge and pushing the boundaries of what that specific technology can deliver.

17:39Emmet:Eli is a kingpin. It is very often a first mover, despite its size. But we cannot just look at Manjaro and go, it has Manjaro and therefore for the next 20 years it's going to grow. Absolutely no way. That story is changing almost as fast as AI. I mean, when we first spoke about GLP ones, was Novartis was the... Novo Nordisk. Novo Nordisk. Of course. Novo Nordisk. They did. They had the monopoly. And you was a name. They let the door open and Eli Lilly busted through. And really, Novo's been suffering since. It has indeed. And we were talking about, you and I were talking about that in a taxi in America.

18:23Emmet:But today's growth in Eli Lilly provides a pretty good foundation. that like the direction of travel is good so let's just start from now so in the second quarter of 2026 just ending in summer there eli reported revenue of 23 billion dollars which is up 48 percent year on year we see companies valued at just a couple of billion that cannot and will never do 48 percent revenue growth so we're talking about a sprinting elephant like an already giant business running like an athlete um and monjaro and z-bound contributed about nearly 15 billion of that 23 billion uh when you combine those two medications and the management raised the full year guidance to 85 to 85 85 to 87 billion dollars and basically these figures demonstrate that Lily's metabolic medicines have already achieved giant, massive, unheard of commercial scale, as if we didn't know that already.

19:33Emmet:But the underlying need extends far beyond today's assets to keep growing. So when you just look, I was diving into the World Health Organization. They estimate that 890 million adults adults were living with obesity in 2022 and that figure is a historical population estimate and it's not a kind of eligible or paying customers you mean when you look at what's the population of america is it 350 million it's close to that yeah it's always be 30 through 40 million something like that in europe is something like 450 million i don't know but we're talking when we talk about 890 million people we're talking about a lot of people who will never have the good fortune to live in an area where that drug is available or affordable and that's just kind of where we are now but it does illustrate the scale of the disease of the problem of obesity like we're not too far from a billion of the earth's seven or eight billion people are struggling to get within the envelope of healthy weight and that is a joint opportunity and even reaching a small modest proportion of that population can create a much much larger treatment market market provided medicines become affordable and accessible and indeed suitable for long-term use so that's kind of the bedrock the market opportunity which has a spread on the bell curve based on all those things.

21:12The argument is like there's never been a drug with a wider potential patient pool.

21:18Emmet:That's true. I heard, was it Scott Galloway recently said something about, oh, they should put Manjaro in the water. I know he might have been joking, but I don't think he was. He's not a comedian. No, he's not. He's not funny anyways. He's definitely been intentionally. That was funny, Mike. You saying he's not funny was quite funny. he's definitely being intentionally glib but i think what why so there's definitely naysayers and there's people talking about glp1 drugs being like you know there might be a reckoning down the line and like side effects and whatever else but for someone who has properly suffering from obesity the long tail effects of that are so detrimental to your health oh yeah the risk reward of not being obese anymore just completely outweighs so so much yeah um and that's why this drug has just taken off like wildfire like and then unfortunately i suppose it's gotten stigmatized from people taking it who don't need it like you're talking about like in hollywood and yeah that's right celebrities and whatever else but just the health benefits of going from obese to not obese cannot be understated when it comes to like just like all-cause mortality any kind of like any kind of uh heart issues diabetes obviously like across the board it is just it's completely revolutionary to someone's health so that's that's where the kind of focus should be instead of like i don't know you see like i know it's becoming more and more prominent um like the kind of super skinny celebrities now and like is in has these glp1 weight loss drugs brought in this new wave of heroin chic um becoming popular again but in terms of a drug that is like genuinely helping and saving more and more lives every day it's hard to look past it I was reading about a competitor, another competitor bubbling up, and I think it was called Rata, R-A-T-T-A.

23:30Emmet:Have you heard of it? It's the hot one in Hollywood at the moment. Now, I stand to pick up. Is that just short for Red Track Through Tide, which is Eli Lilly's next generation of weight loss drugs? So exactly. It's the hot it's the hot price. It's still as far as I know, it's still in phase three and isn't out the door. It's definitely commercialized, but I'm not sure if it is. But yeah, it's benefit. It's on the way. It's on the way. Anyway, the next chapter. So if the first chapter of growth realized that there's a joint market opportunity, the next chapter could be driven by convenience. so um in april 2026 the fda approved fanjo which is lily's oral medication i always have a problem pronouncing these drugs f-o-u-n-d-a-y-o foundio what do you think will we go with that yeah hey what the heck your guess is as good as mine i know i know and it's funny i i can pronounce a drug and podcast on it and then find i'm talking to a doctor and i'm like I've been pronouncing this all wrong.

24:42Emmet:Let's just go with family. Yeah. OK. Sounds good. I'll just put it into the Irishness. OK. But anyway. So that's their. That's Eli's oral medication for qualifying adults with obesity or overweight issues. And it can be taken without food and water restrictions that is generally associated with other oral alternatives. And a daily tablet offers another option for people who are reluctant to use injections. uh and that is just which is interesting actually um how novo clawed back a bit of ground against yeah that's right was that their um their oral treatments were doing actually slightly better yeah nobody likes an injection and to be honest some people know it's absolutely terrified of it i don't have the figures but i wouldn't be surprised if between 12 and a half to 25 percent of people are would actively avoid taking one of the glp ones because they have to inject themselves a lot of people just don't like the everybody's used to taking pills so you're absolutely right they did claw back a bit of ground based on the tablets and commercially it's an opportunity to expand the number of patients willing just willing to start um and that expansion of course will depend on more on more than preference prescribers need confidence in safety and effectiveness and patients need tolerable treatment and then insurers need evidence that spending delivers worthwhile health benefits and there's a chain of yeah if but if but if but yeah yeah i tell you what if you were if you were in the health insurance business and the life insurance business you would have every single one of your customers on one of these that's a very good point because it reduces all all as you said all call calls mortality yeah i was talking to a pal of mine who's a heart surgeon and he said that when somebody comes in who is uh very obese i think the term used to be morbidly obese i don't even know if that's a correct expression anymore that that surgeons will generally let out a sigh because they know they're in for a tougher time as a surgeon that of course they will keep they'll do as good a job as they would have done with the next patient but your chances as a patient going in for surgery carrying a lot of weight is not good nobody wants weight look you and i mike are big tall guys i would i would hasten to call either of us heavy but i'm pretty sure you as a runner and i as a runner can feel the difference when you've just lost a few kilograms when you go to run so imagine that when you're talking about serious weight loss the entire body system just improves but the strongest come back to Eli the strongest bull case for it actually achieving a 10x growth in the next 20 years assumes a strong bull case in the progress across all the three things I just said the market and the ease and the insurers but i reckon uh that easier administration could widen access of course and improving evidence could encourage reimbursement and together those two things click and developments could turn a rapidly grown category into a far more established part of healthcare like it's just yeah like the system has accepted it i know i can count in ireland four people I know are on GLP one they're either on those epic or uh Munjaro and uh and I've had the conversation with these four individuals and they uh one of them will drive up to northern Ireland and go across the border to Warren Point to buy their medication where it's much cheaper and other was very reluctant for various different reasons to do with their health care and the provision but the point is that people are trying to work around the system that isn't geared to just support it if you're an asthmatic and you bring your son or daughter into a gp they'll hand a prescription to you or that child for an asthmatic inhaler and the system is geared to make sure they have it in their hand as soon as they need it whereas that still isn't quite there i think it's quite an interesting market for uh new things because we're not at the center of the bell curve which is America the coast of America so we figure things out very effectively I might add but when you see things smoothing out in Ireland you can kind of see where first world mass market adoption is is uh I would say a given um but look all of that is lovely and fine but Eli is also developing the medicines that could follow its current leaders so uh uh ratitude ratitude rata what what do we call it we'll call it we'll call it we'll call it retta okay so that is indeed Eli's experimental once a week injection which is being developed for obesity and type 2 diabetes and related conditions and it it has three hormone receptors and I think Porter was talking about this when he was up on the stage at his farm he there's three hormone receptors there's our good friend on this podcast the glp1 there's the gip and there's glucogen which is involved in appetite and blood sugar and energy use and that's why it's called a triple agonist and eli's existing monjaro and z-band activate two of those three receptors where rata adds this uh glucogen activity and the aim is to achieve greater weight loss and broader metabolistic benefits so there's been really positive late stage trial results and the potential for this to be the next killer product for lily is high although of course with any drug commercial successes is uncertain um it is remaining investigational um and i think the phase three results and a planned US submission to the FDA is in for the first quarter of 2027.

31:00Emmet:But if what I was reading is true, there's a whole bunch of the Hollywood elites who are getting their hands on this sooner. And what they like is that it doesn't give that drawn effect that the first generation of GLP ones gave. I think people who don't want to say overused it, but those people who needed it less, you can see a look. This episode is brought to you by Google Chrome. You think you know a browser, but Gemini and Chrome? That's new. It can help you with practically anything on the web, like restoring a vintage motorcycle from a 50-page restoration block, or finally break down that long article you've had open for weeks.

31:36Gemini and Chrome is here for it. Ready to make anything online make sense? There's no place like Chrome. Check responses set up required, compatibility and availability varies 18+. There's an Olympic face. Very real thing. yeah and uh drawn out kind of um almost skeletal uh it doesn't look right it's it does not look

31:57Emmet:right i mean there's one particular celeb who springs to mind i won't say any names because we're all people i don't want to drag anyone's name into muck but it just looks so so wrong um but anyway the thing is as well if you go through extreme weight loss and this was discussed at the conference was that there would be muscle loss along that with that yeah so down the pike it'll be the next generation will be drugs that combine the grp ones and then the the extra hormones you mentioned there and adding that with something that'll manage to keep muscle along with it so it is it's kind of crazy really that how fast this industry has developed and obviously it's developed so fast because the money is there so the opportunity is there so that's where resources go but um yeah it's going to iterate on itself and it's really like as in ozempic and um ozempic and monjaro which is eli lily's monjaro monjaro yeah and then zetbound is there yeah kind of they're all the other one yeah yeah so ozempic and munjaro are going to be kind of seen as dinosaurs yeah soon enough it's so true it's like the iphone one when it came out we all wanted it now if we look to if you put it beside your iphone 20 or whatever we're on you'd go the that's that's a really old-fashioned banger and i do think you're absolutely right once you see something going to the mass market it won't take long for iterative improvements to come wave after wave after wave and it's the muscle loss i think i discussed a company on this podcast about a half a year ago called wave who are very very very very high risk they are still in phase two and as far as i can recall they were looking at another glp1 equivalent that apps that caused your muscles to grow so you look like some kind of greek adonis you shed the fat in your muscle I was like, I'll take some of that.

34:02Emmet:Thanks very much. But, you know, anyone who's filed for a drug and everyone is like, yeah, me, I filed for drug. Anyway, or at least watched a company filing for drug approval. No, it's anything but assured. It could look like it could cause you to levitate and it's the greatest thing ever built. But the FDA process is thankfully very, very comprehensive and proven. and it's the world standard for making sure that drugs that go into humankind have been as close to fully proven as safe and effective. But the strategic significance of the possibility of giving Eli another major treatment option is huge.

34:42Emmet:but sustained leadership like we're talking about which would be required to 10x will require repeated improvements in efficacy and tolerability convenience patient outcomes reimbursements uh social cred you name it like there's so many things in in in the stack before you go for a drug you don't want to be the first one to take a drug you want to know you want the doctor saying hey look i've loads of people on this and and it's great it's great but another element that is mucho importante which is my spanish my my my spanish for very important mucho importante are the factories like these factories are huge september on september of this year like uh what are we at but you and i are recording 30th of september uh last week 21st week in a bit ago 21st September Eli broke ground on a 5.6 billion dollar Houston Texas manufacturing site intended to produce active ingredients for foundio the one that we're not pronouncing correctly uh the oral weight loss drug I was talking about and a whole bunch of other medications like again when you think about barriers to entry we talk when you go to business school and you look at any company go Well, what are the barriers to entry?

36:04Emmet:In other words, what keeps new competitors away? Well, factories and the ridiculous standards to which these things need to operate, just like fab, fabrication of wafers. Everybody knows Intel or NVIDIA factory is the cleanest thing on earth. Well, drug factories are pretty close or as close. So they are dropping serious cash on building the factories to build the drugs to give to the people. And this project, the new one out in Houston, Texas, it's a project that forms part of a$50 billion US manufacturing push. Yeah. And that will be the real advantage is the capacity, the production capacity.

36:48So even if competitors do come to market, no one will have the scale of Eli at all, nor close.

36:54Emmet:And anyone who has taken a drug that works and they feel or see or enjoy the benefits, they even quiver when if they're heard, oh, we'll put you on a, what's the one when it goes off patent? A generic. A generic. You're like, no, I don't want anything except the thing that I take because it works. And that is a very, it's a very real factor. I'm sure there's people listening to this podcast who take something. And if the pharmacist said, hey, look, this is the exact same, they would take pause if it was an important medication in their life. So Eli Lilly being written on the box actually matters.

37:33Emmet:And so they're dropping 50 bill on factories to do that. So these investments are clearly made for future capacity, as you said. And they should not be mistaken for production that's already available. But they do show the scale of management's commitment to supplying a much, much larger market like that 890 million person maximum opportunity that I discussed at the top of the podcast. But my point is that if they execute this well, that capacity could create a really durable advantage. Discovering an effective medicine is one challenge. And boy, it's a challenge. Producing it consistently for tens or hundreds of millions of patients is a whole other challenge.

38:22Emmet:Manufacturing expertise, regulatory compliance and record keeping and all the stuff that goes with running a factory like this and reliable distribution uh it's just massively complex each teeny element in it link in that chain requires human and machine and learn learnings that like expertise that's beyond our understanding here on this little podcast of ours but greater scale could also help eli lower production costs which i think is inevitable once these factories are belting out the medications at a rate of knots you can only assume that the cost per unit goes down which gives it more room to broaden access to that wider market opportunity while still maintaining margins or profitability and return will depend on demand eventually justifying the huge upfront 50 billion capex price tag of all these factories okay so put that there a 20-year story such as the one that i'm trying to build also needs growth beyond obesity because to 10x from a 1.1 trillion dollar thing also requires more than just your next wave of glp ones and uh eli have an alzheimer's treatment called kisunla k-i-s no kisunla k-i-s-u-n-l-a kisunla yeah i'm gonna go with that And they have, I'm just going to call it their Alzheimer's treatment.

39:57Emmet:And it illustrates the ability to compete in a completely different therapeutic area. The conversation is all about the human scourge that is obesity. But if you or someone you love has Alzheimer's, it's a bigger problem, arguably, than obesity. So the FDA approved their Alzheimer's treatment. Now, the FDA approved it for treatment initiated in patients with mild cognitive impairment or mild dementia due to Alzheimer's disease. And it offers another commercial opportunity, although diagnosis, treatment delivery, and I presume safety monitoring make adoption complex. And I might also say that when you read a drug as being tested for a mild version of the problem, like some mild cognitive impairment or mild dementia or mild whatever, you've got to presume that it has the ability to address moderate or advanced stages of the condition because they start at the lowest end, like the thin end of the wedge.

41:09Emmet:Humira, the blockbuster that came from AbbVie, which is now a super blockbuster, it's been in human circulation for 20 years, was initially introduced for one of the many drugs, the diseases caused, it's a TNF inhibitor. So it was a drug either brought in to treat rheumatoid arthritis or something like that. But all the illnesses from that, from having too many TNFs, tumor and anikosis factors in your body, such as psoriasis or ankylosis monoliths or all these other things, they were also fixed by this drug. So my point is that when you see a drug is being brought in to address a specific problem, you can be sure that these blockbuster drug manufacturers know that there is a much broader, indeed, halo effect that is probably going to come down the line.

42:02Emmet:So what would the tenfold destination required financially? Because that's really because we're talking. I mean, we are not talking a small thing, an 11 trillion dollar drugs company. Well, consider an illustrative 2046 scenario. Annual revenue of$1.1 trillion, a net profit margin of one third, and a valuation of 30 times earnings. They are all big things that produces approximately$367 billion in annual profit and an 11 trillion equity valuation. that if so many terms and conditions apply, it's crazy. It's like one of their drugs on the TV adverts in America. But starting from the$86 billion midpoint that I spoke about earlier on the podcast as the current revenue guidance, sales would need to compound at about 13 to 14, about 13.6 % annually for 20 years.

43:08Emmet:And that doesn't sound completely unreasonable to me, but they are demanding assumptions and definitely they're definitely not management targets nobody out there has said that so for our listeners it's not like oh the eli team i've said they're going to compound their their their sales at something like 30 no they'd never said that this is the emmett savage uh postulate show and fair play to them if they had 20 year targets because very few companies actually do but to get there to get to 10x in 20 years eli requires global adoption at an unprecedented scale like never seen before scale it needs successful replacement of aging products it needs massive contributions from other therapeutic areas like cognitive decline as an example and it needs strong profitability despite competition of which there is a lot and there will be far more especially when we talk about this.

44:08Emmet:So there's so many ifs and buts behind that 10x in 20 years. The assumed earnings multiple is also something to consider. At 20 times the same earnings, the valuation falls to a paltry 7.3 trillion. I don't get out of bed for less than 10 trillion. But pricing is already a big obstacle. Like Eli's Worldwide realized prices fell 13 % in the second quarter but volume increased 60 percent so that was the bite of that price fall was obviously compensated by distribution so growth therefore depends on selling substantially more medication over time reimbursement negotiations uh competing treatments and patient expiry all will put further pressure on economics and uh then of course there's other things that we can't even imagine like maybe safety setbacks or patient discontinuation or unsuccessful research they are everyday things that happen in the world of drug discovery and distribution so the tenfold case before i shut up uh ultimately rests on eli lily becoming a much larger uh repeatedly innovative supplier of essential medications and its current products will indeed finance further research and factories and internal reach and this that and the other but 20 years gives uh gives the time for this to happen uh for investors i suppose to wrap it the compelling possibilities that today's obesity franchise becomes the foundation for generation after generation of growth so the things that we spoke about with our limited knowledge mike and our limit my limited ability to even pronounce some of the things I'm talking about is is just the springboard so we are looking at a business that requires an extraordinary outcome so uh that's that's Eli for you and as I look at its graph right now it's incredible everyone loves a graph conversation from Emmett Savage it's the broadcasting highlight of the world so I'm going to give to you now folks um if we take the year ending we're talking revenue here folks the year ending december in 2017 18 19 20 kind of the same it was flat it was something between 20 and 25 billion for those four years then some action started to happen for the next four years went up a little bit okay so by the same time we came to december 2023 sales had grown to about 34 billion up from about 20 billion in 2017 but then it's growth growth growth the next three years 2024 25 26 and the last 12 months 20 it's just been up up up up up so we really see the business has taken the wind has gone into the sales the share price has followed uh share price is up about 400 in the past five years which is also known as a five bagger so we're looking at a business that has has been spotted it's done something extraordinary and some of the people we respect and whose opinions we deeply value are saying it's i can't say only just begun but there's a lot more to come so that's eli lily and i certainly think from a risk perspective if you're going to invest in pharma you got to think despite its size it's lower in risk because of the structural advantages as it has.

48:06Yeah, and not only that, but like you were investing in the future and it is the clear market leader in glp ones and the next generation of that too yeah yeah that goes such a long way um so yes you're paying up i think you'd be paying like something like 40 times earnings right now but yeah that's um it's big dollar that gets a lot that is it's expensive but that gets a lot more attractive once you extrapolate those figures out so yeah look it's a fantastic business i zigged when i should have zagged um last year maybe 18 months ago um thinking that you know this market was clearly big enough for two people and that novo had a great chance of recovering hasn't done that should have should have just played it simple instead of thinking i'm too clever for this game and gone with the momentum and gone with eli instead i would be sitting a lot prettier than my novo