$1 Trillion Monopoly: 3 Biotech Trades With 10:1 Upside
Summary
Main Pitch: The guest presents three perceived pharma monopolies centered on obesity and metabolic disease: Eli Lilly (LLY), Madrigal (MDGL), and Rhythm (RYTM).
Eli Lilly (LLY): Bullish on Lilly’s once-daily small-molecule GLP-1 pill as a true economic monopoly with scale/manufacturing advantages over protein-based competitors; potential to drive massive cash flow and a path to multi-trillion valuation.
Novo vs. Lilly: Novo’s oral approach is described as cost-inefficient, risking margin destruction, while Lilly’s chemical pill is cheap to make and scalable; Lilly is investing heavily in new factories to meet likely demand.
Madrigal (MDGL): Rezdiffra (fatty liver/NASH) is a once-daily pill already commercial, scaling rapidly toward multi-billion sales; limited competition with rivals facing efficacy, safety, and potential black-box warning issues.
Rhythm (RYTM): MC4R “hunger switch” pill (in partnership with LG Chem) targets a different pathway than GLP-1; in Phase 2 with large upside if Phase 3 succeeds, potential to become a substantial competitor or M&A target.
Market Outlook: Obesity and related conditions represent massive, underpenetrated markets globally; Medicare and broader coverage dynamics could further expand eligible populations.
Opportunities: Portfolio approach within the theme—LLY as a large-cap core, MDGL as a mid-cap growth, and RYTM as a higher-risk/high-reward binary outcome.
Risks: Clinical and safety risks remain (especially for RYTM in later trials); manufacturing scale-up and supply constraints are execution risks; competitive pipelines exist but face technical and economic hurdles.
Transcript
Would you like to invest in a monopoly? Yeah, me too. How about three of them? That's what we have for you today. Three pharma and biotech monopolies. And I've got two of the most brilliant guys on the planet to talk about them. My co-host John Engel and our guest, my old friend Dave Lashman. So, let's not delay. Get out your pens and pencils. You're going to write some ticker symbols down. We've got 10 to one upside potential here for you. Okay. So, let's do it. Let's talk with Dave Lashman. Let's do it right now. Dave, welcome to the show. Good to see you. >> Same here, Dan. >> And John, welcome as well. John and I are going to uh do our best to get all the good info out of you that we can today. Um, I noticed that before we get going though, I noticed something here. We're going to talk about u you know GLP-1 drugs and and weight loss. You've been covering this longer than anyone I personally know. Um you've been doing it what six years and and the first time I really started taking it seriously was like three years ago. Um, I had a an analyst that I interviewed at the Stanbury uh conference in Las Vegas and he was like, "This thing is going to be so huge, but you were already on to it three years prior to that." And I'm curious what happened in what was it 2019 maybe? While walking to go meet this guy, I passed about 700 doctors in line to go to a lunch session sponsored by Novo Nordisk for their ompic drug. And I'm like, I don't know what that is, but 700 doctors are voting with their feet to find out about this one thing, and they're not all going to get in the room, and they're not all going to get free lunch. There's literally like a river of humans trying to go into the session. So it turned out that Ompic if you use it at double strength triggers massive weight loss. And this was a cardiology conference years before at a card cardiology conference in the US called the American Heart Heart Association meetings. >> A doctor told a joke which was look this drug is the best we can do unless we can get people to lose weight. And everybody laughed like there's literally no way to get heart patients to lose weight. And this was the breakthrough. So we saw it in August 2019. We started covering it in November 2019. As soon as the trial data had had come out, we were already tracking it. So we were at ground zero. We knew that the existing drug at double strength would trigger massive weight loss. >> And here we are six years later and it's practically the only these are practically the only drugs anybody wants to talk about. like it's like there are no other drugs now. All right. So, um I want to get into this. You've got three drugs to talk about today. Um starting with with weight loss drug and and you you maintain that you have actually not just three drugs but three monopolies, three honest to goodness, you know, monopolies which is really rare in the world. Let's let's dive in. Let's start with the first one, which is a weight loss drug. Um, Lily's weight loss pill. What's the big deal? How is this a monopoly? >> What's confusing to investors, and it's because their marketing departments want you to think so. Every drug is a monopoly because every drug has a patent, which gives it economic exclusivity. But if I build a statin drug and you build a statin drug and John builds a statin drug, we're all going to go after the same patients. So even though we have a legal monopoly, we don't have an economic monopoly because we will set prices against each other. It's not what the market will bear, right? >> It's how low can you go. You will cut price to gain market share. John will cut price against you to gain market share. Then I will cut price against John to gain market share or maintain it. we end up with some sort of equilibrium where none of us make money or we make trace amounts of money, right? >> Nowhere near what you make in in monopolies. And the easiest proof of that easiest easiest easiest proof of that is that if a drug has a direct competitor, its price goes up 3% a year. If a drug does not have a direct competitor, its price goes up 9% a year. Why? because because it can. >> Yeah. >> Right. >> So essentially you get pricing control and not only the initial price but as you ramp year after year after year like no one who takes a drug is going to not take the drug for uh you know basically a eight or nine% increase. They're still going to take the drug. They're just going to eat it and call it inflation. But >> drug inflation runs about 5%, but it's more than double that for drugs that have a monopoly. What makes weight loss different is that it's just so huge, >> so to speak. Um >> I know, right? So there's easily a 100red million American adults who are obese. >> Wow. >> I know. >> Dan, you're the exception. I Yeah, I want to say I was going to say that's massive. Again, the puns are just are going to come hot and heavy here. Again, they're hot and heavy. Okay. I just I can't stop myself. It's You can't avoid the puns. But a hundred million blows me away. I did not know that. Yeah, there's some effort to sort of redefine the US so numbers can be higher, but the 2023 2024 numbers of a of 100 million seem seem fair and conservative compared to where else we can go. See, like if you have a BMI of 29.5, then you don't have a BMI of 30, but it could already screw up your blood work. M >> uh you'll get metabolic syndrome. So your body is acting as if you're obese. Even though technically by skin surface area to height, you might not have hit a threshold. Your blood already hit that threshold. So conservatively, it's 100 million Americans for the market. There's probably 150 million Europeans >> who are also obese. So it's a quarter of a billion people who face critical health challenges from excess weight, >> right? A quarter million people in countries. >> Quarter of a billion people. >> Yeah. With with huge amounts of money to spend. >> And I don't think that market is fully tapped yet. Right Dave? We've still got a lot of growth to come. Mostly because for some of these drugs, they're not covered under um Medicare. Correct. Unless they're approve unless they're taking it for a different reason, not specifically for weight loss. >> Yeah, it's a push me pull you. There's a there was a change in Medicare like two weeks ago. >> In in general, everybody's resistant to paying that price. >> Yeah. >> So, when it was in shortage, Medicare wasn't picking it up. I think that Medicare will pick it up for certain conditions, but if you're morbidly obese, >> above a BMI of 40, you're going to have so many health conditions, you're going to qualify, >> right? >> So, that's like a someone who's 5 feet tall and 290. That's heavy. >> When you should be a buck 50 and you're at 290, >> right? You may be overweight. >> You may you might just be. So, but but I could imagine I mean correct me if I'm wrong here, but you know if you're like you say if if if it's 40 is the cut off, let's just say and you know you're at 38 or 37. >> The cut off's more like 30. >> Oh, the cut off really >> 35. >> Okay. >> Yeah. 30 would be overweight and 35 would be obese >> and 40 would be morbidly obese. >> All right. So, but I'm thinking about you know the cut off for um for like Medicare coverage like when you have some you know conditions that are obviously caused by your weight but which which are severe and can be treated by you know losing weight. So therefore >> um >> so I mean the the the answer that's right in front of us that we're not talking about is type two diabetes. So type 2 diabetes grows handinhand with the American and European obesity epidemics when you have such a massive amount of excess fat tissue. You feed it and as you feed it, you only have one pancreas and you have just way too much circulating sugar for the amount of insulin that you can create in your pancreas. And so you get into sugar abnormalities in your blood and that triggers a disease called type two diabetes malitis and these drugs started as type two diabetes drugs but it turned out that they also triggered massive weight loss. So, as a type two diabetic, you can get on these drugs and get them covered. >> Mhm. >> In addition to now what? Sleep apnea and um there's another one that was approved recently, right? Uh cardiovascular. >> I mean, we know that weighing 290 when you should weigh 150 is kind of hard on your knees. >> Yeah. >> So, there's been some pretty good studies on knee osteoarthritis. So fat tissue is inherently inflammatory >> and so it can reduce the inflammation by reducing the fat beds. Plus guess what every step does not mean 290 pounds into your knee. So it will soon win approval for osteoarthritis if it hasn't yet. >> All right. But >> overall, >> yeah, >> overall the health benefits to your heart are also significant. So I think it's one approval for cardiovascular benefit. It's about 20%. 20% reduction in heart attacks or strokes in a year if you're on these drugs. >> I think that's important because that expands the market potential for that drug. Whereas most people think of it as just an obesity drug, it's not. You know, it it has benefits in other areas as well. All these diseases are are comingled. They're they're related, right? >> Yeah. And I mean, in Europe and in Japan and every other developed country, including Canada, except the United States, they own a patient from cradle to grave because there's only one healthcare provider. Okay? So, they already recognize obesity as a condition that deserves treatment. In the US, it's more like an auto repair shop. Uh, if you're not broke, we're not going to fix you. >> So, you have to think of some way that someone's broken in order to go intervene to fix them. It's not preventative medicine. It's therapeutic medicine. >> So, everywhere else they already recognize obesity is a treatable condition that has long-term health consequences and they just treat it. >> Yeah. >> Because it's better to treat it early. In the US, people tend to stay even on their work healthare plans for about four years. So each medical insurance company can kick it down the road and make some other medical insurance company cover these patients for when they're really sick. >> All right. So I'm I'm sold I'm sold on weight loss drugs. Um, but what you're telling me is that um, you know, Lily has a a a effective monopoly, like a real economic monopoly on the weight loss pill. And of course, right away, my first thought as an investor is, are you telling me nobody else is working on a pill form of this? >> The current drugs all are proteins and they all fit a pocket in your GLP-1 receptor to look like natural GLP-1. And that's how they work. They regulate your blood sugar. It turns out that there's also GLP1 receptors in your brain. I call it the winter switch. >> So in winter, you have to burn fat to stay warm in the northern hemisphere or in the southern hemisphere in the winter. You have to burn fat to stay warm. And that switch, we used to think it was a side effect. But when you're on these GLP drugs, your resting heart rate goes up by five beats per minute. And it means you're literally running hotter and it also is an appetite suppressant in your brain. So between appetite suppression and running hotter, that's why you lose weight. The problem comes because all these injectable drugs, all these GLP1 proteins, people only stay on them for about a year. And when you get off them, you do not have a higher metabolism and your appetite, which was always there, is there again. So, one big breakthrough that Lily has done with its new pill is pick up patients after they stop the injectable drugs as a maintenance regimen so that it's a once a day pill you can take whether or not you've had anything to eat and you will essentially continue to lose weight or at least maintain. So, the six-month study that they just did was gain back two pounds after you lost 32 pounds, but it's stable. It's basically a stabilizing force and you get out of injections. And we know medical insurance companies don't like to pay for the injectables. In the US, we pretend that obesity is entirely a matter of will and not a slippery slope. Like as you gain weight, you exercise less. As you exercise less, you gain weight. As you gain weight, you exercise less. Right. >> Yeah. >> So these drugs can short circuit that, but only if you stay on them. If you get off them, you're in trouble. So bounce back is fast and furious. Without these drugs, the control study basically gained back 25 pounds in six months. In six months, they gained back 25 pounds on average. And if you're on the drug, you gain back about two pounds, which is really a rounding error >> because it's not 10,000 patients, it's a couple hundred patients. So, >> okay. So, >> so this this idea of a one daily pill, >> yeah, >> is very promising. Here's what investors miss that I'm going to tell you, >> okay? >> So that you know the average dose that people take of ompic is about two milligrams a week. That's what they inject of ompic or regovi. It's the same drug. Two milligrams a week. Novo can turn that into a pill. Novonortis can turn that into a pill by adding it to vitamin A. So, it's absorbed into your gut instead of being an injectable, but they need 25 milligrams a day. Okay. >> Whoa. >> So, that's 175 milligrams instead of two milligrams. >> Whoa. And just because it's taken a different route, is is that the whole >> Because your digestive system digests things including protein, so you can use them as building blocks. So if you eat a protein drug, it's ridiculously inefficient. Like the cheat code is added to vitamin A, >> but it's not a great cheat code. It destroys your manufacturability by a factor of 100. And economically, the opportunity cost is Novon Nordis could either sell 100 prescriptions of OMIC or one prescription of their new Wiggovi pill. They're giving up 99 patients worth of revenue and we think the entire enterprise is at a loss. Like they can say that their marginal costs are less if they just transfer over completed completed drug. >> Yeah. >> But you can only play accounting tricks for so long. They've already Novo Nordisk has already made profit warnings for next quarter even though they're launching their own weight loss pill. >> Like it's because they lose a hundred patients worth of revenue for every prescription that they fulfill. It's an insane strategy. And the only reason that Novo is doing it at all is because they're so afraid of what Lily has. So, what Lily has is a chemical pill that you can make for a for a dollar and sell for $20. >> I think it's important to to sort of explain to people, Dave, what the difference is between a small molecule drug and a and a protein drug because th this is a big point. I think people need to hear this >> so they understand it. So, Novo Nordisk has a pill. It's gone through clinical trials. It's approved, correct? The pill is approved recently. >> Yeah, it started sales two weeks ago. >> Lily is is is on its way to approval, but it hasn't gotten approval yet. But there's a difference between the these two pills. And I I think you need I think you should concentrate on that and explain that just one more time so people hear it. It's and it's the key is the difference between a small molecule drug and a protein drug and how you make these drugs really is is the key to understanding that that value that Lily brings. >> Yeah. I mean we can simplify it almost easier. Every pill is a chemical and every injectable is a protein except Novonisk's new wevy pill where they're trying to attach the protein to vitamin A but it gets digested. >> Okay. Like in a world without Eli Lilly's pill, it might make medical sense if you could charge a hundred times more for it, >> but you can't charge a hundred times more for it. >> So it doesn't >> I think that's the key. >> Yeah. So I I I looked it up before we before we spoke today because I thought this was such an important point. I was hoping you were going to touch on it, but I think on average to make a small molecule drug is 10 times to 12 times cheaper than it is to to manufacture and make a protein drug. So that that's that's some serious cost savings, right? That means they could sell their pill for cheaper than Novo and just cut them out of the picture basically. >> There we go. That makes the that makes the sort of, you know, science plus economic connection for me as an investor. Now, right now I have a clear >> that's straight up. But when you take the protein drug and you need a hundred times more than it, it's a thousand to1 ratio. >> Every time Novo sells any of its pills, it's losing money. >> And anytime Lily sells one of its pills, it's making money. >> Like Lily's not putting out profit warnings. >> They're building five factories to make this pill. They're building one factory to optimize the process and then they're going to step and repeat it with four factories. Until 2020, the largest factories ever made for in biotech was a $500 million factory. That's as big as they could possibly ever get. Okay. Lily spending $50 billion on factories. >> Okay. Yeah. >> So, they're going to make the reason they're putting $50 billion into factories >> is they'll make hundred billion a year on these pills, >> right? Yeah. Massive return on investment. Okay. This this this is making sense to me now. and and the um I you're going to tell me that um how whatever this process is that Lily has to make this um just called a chemical pill like >> exactly >> nobody else is doing this. That's that's the monopoly. Nobody else is doing this. >> Yeah. RO is closest. They're five years behind and that means that they have all the risks and all the expense of running large-scale clinical trials. >> See, unlike genetically perfect, genetically identical laboratory mice, every person is different. So when you test a drug in 100 people, you can find a one in a 100 side effect. When you test it in 10,000 people, you find much less common side effects, but a 10,000 person cohort prepares you to sell it to 10 million or 100 million people. You kind of know what side effects might be out there, but it's really risky. If there's enough people that have a side effect, you can't can't sell the drug. So RO has all its risks in front of it and it's five years behind. Lily's finished all its trials. I saw data in Vienna. I saw data in Chicago and my scientist went off to New Orleans and saw some more data. That's it. That's the entire pivotal data for Lily's pill. >> We went in person to see if there were side effects. And there's nothing that you see in the pill that you don't see in the injections. And it's no more severe than what you see in the injections. So once you started weight loss pills, you can stay on the same GLP path and your body's already adapted to the changes and then there's basically no more side effects. So this is a once a day pill that in established users of injectables after you have a higher dose to lose weight. When you move this to the maintenance therapy, this will be as big as statins except they're not generics. Lily's Lily hasn't priced it yet because it isn't fully FDA approved, but all the approval trials met their they hit their efficacy and they hit their safety. So they're going to get approved. Okay. So, this is this is worth massive amounts of money. And we talked before we hit hit the record button. I think we said Lily has a $620 odd billion dollar market cap. >> They're at 926 billion. >> 926. >> So, it's essentially a trillion dollar company. >> Yeah. >> Right. >> So, how do you can this move the needle in a trillion dollar company is the question, right? for an investor. >> I mean, I can even get you to bend on this one. So, imagine that they sell a hundred billion dollars worth of the pills technical name is Orphag Lipron. >> It doesn't have a brand name yet because it's not FDA approved. Lily knows what the brand name is, but they're not telling anyone. >> They're printing off, you know, buy Or now, whatever it is, right? I don't know what the brand name is, but Orphagon, if they sell a hundred billion of it at 90% margin, that drops to bottom line. >> Yeah. >> So, if they start making 50 billion in free cash a year, how much would you pay for 50 billion in free cash a year? >> Yeah. All right. >> It's It's more than price to earnings. >> You're saying 50 billion more, right? >> Yeah. So if the market prices is is 20 times that's you know you're you're doubling you're doubling the market cap >> it >> that's the answer you know there's a double there's a potential double here that's the answer >> right and and um that kind of matches what I said I was on uh Porter stage last year and I called this a safe triple when it was at 600 billion Mhm. >> Which also predicts that this drug will take Lily to a to be a$ two trillion dollar firm. >> Yeah. >> I mean, I don't think it'll get there until the drug launches and they can make enough of it. >> Mhm. >> But there will be massive demand for this drug and until the four factories are up and running, they'll be supply constrained, but not demand constrained. >> That's funny. I remember you. >> So, you got time. You got time to buy Eli Liy. I can't buy it because I cover it. >> You can buy it, >> right? Okay. Um I remember you. It's funny because I remember when uh when you when the when the injectables were at a similar stage and you were telling me about the demand and they've got to build factories and they've got to make more and um and here we are again with a whole brand new extremely wide mo product. It sounds like um >> yeah, you know, there's a fun aside. Nova Nordisk wanted to compete with Eli Liy in Pill World. >> So, they know that if you get high on marijuana, you get the munchies. And there's this particular brain receptor that where cannabis lands and it's the canabonoid receptor. Okay. Well, Novon Nordisk spent a billion dollars to buy a drug that would hit the canabonoid receptor but turn it off instead of on. The idea was that it gave you the unmunchies >> and then you would lose weight >> which kind of worked in mice. >> Okay. >> But in people um gets you high like of course it gets you high. It's cannabis. >> Yeah. >> So they spent a billion dollars to prove that they could develop a pill that would get you high. >> Right. get you high and still not have the munchies. I mean, that's that's got some value, doesn't it? >> No, because uh it's narcosis. Like, it's hallucinogenic, right? >> And even in early trials, people couldn't find their car in the parking lot, >> which is bad. >> That is bad. But let me >> That's considered a side effect. >> So, we're getting into another area that I that I don't want to spend too much time on. I want to move on because you got two more of these, but I've always had a slight philosophical issue with this. Just the idea that people are going to be on these drugs for ever now, maybe um and rather than, you know, certainly some substantial portion of the population of obese people could could get rid of the weight and improve through exercise and diet. like there's there's some willpower involved to some degree, isn't there? Um, and I just wonder, you know, a lifetime of of being on a drug like that, it's a it's an odd, you know, take drugs and be healthy. It's just it's a bit of an odd message. I don't know. >> Maybe. >> See, you are a special person in that your commute is from where you are sitting now to the books that are behind you. >> Yes. uh one of us on this call has to drive to work >> and when that person uh drives to work they are trapped in a car in traffic twice a day. So their exercise opportunities are limited. The way that we've built our culture where you commute to work, >> which is true for at least 90% of us who are in the workforce still, >> you you you commute to go sit in a cubicle and then commute home, >> right? So the opportunities in normal everyday life are actually quite limited. 120 years ago, 125 years ago, >> Mhm. >> 1900, the year 1900, 90% of the US population lived on freaking farms, >> right? >> They didn't have to invent exercise. They had to go milk Bessie. >> Yeah. >> And going to milk Bessie meant rounding Bessie up, pulling on her teeth, filling up a wooden bucket, and then carrying the full wooden bucket back to the, you know, ice box. >> Yeah. >> Like, >> no, I hear you. I think there's a better way to describe the benefits too because I've thought about that a lot too, Dan. >> I I think, you know, if you think about how we how the health care system is structured in the US, you know, we all share um health expenses as as a as a group, right? So, the healthier we can be as a group, the less expenses we potentially have. I'm sure there's studies out there that will indicate, you know, there's an economic benefit to having healthier people over time. And I think this is a pill that, you know, on its face, it might be used, you know, as a glamour drug or something, but for people that actually need it, that can become more healthier people in the long term, I think that saves society, you know, gives society a benefit as well. >> All right. Well, we wanted to spend plenty of time on that one because it's like the world's obsessed with it. But let's move on. Um, you've got two more of these monopoly drugs that you want to talk about, Dave. So, um, tell me about, um, something I never think about and rarely even hear about, which is Magical's fatty liver treatment. >> So, thanks, Dan. Fatty liver disease is a consequence of obesity, but it's not a traditional fat bed in, you know, layered under your skin. >> It's actually fat being absorbed by your liver and having nowhere to go. So your liver adds more and more fat. >> It adds so much fat that liver cells don't touch other liver cells. So it's not working as a filter and the cells are slipping away from each other because there's a fat cell in between. So then they add connective tissue so your liver doesn't turn into um a dropped jello pudding. So you not only lose liver filtration ability but you change the nature of your liver. >> Okay. So you change Wow. Okay. >> You can you can get kidney diialysis. There's no liver diialysis. If your liver fails, you die. If you get a liver transplant, you live. That's rare. You got it from someone else. So you have to be on anti-rejection drugs for life. Mhm. >> It's a pretty traumatic surgery. It's wicked expensive. It's also dangerous. >> And because you're on anti-rejection drugs, which turn down your immune system, >> any colds can kill you. It's not a good play, right? So, liver transplants are very rare. >> And liver is not a small organ either, is it? I mean, it's like >> it's it's it's occupies quite a quite a cavity, doesn't it? >> It does. So the idea to cut fat and connective tissue that's come into your liver is is has been promising. So in 2016 we saw like a feeding frenzy among biotechs to buy up drugs that treat fatty liver disease. >> Six in a row failed. The seventh one didn't really work and the company kept pressing the FDA. It's like, look, nothing treats this. And the FDA is like, and your drug doesn't either. >> Neither do you. Yeah. >> And along came drug number eight, which is Madrical's drug. And Madrical's drugs actually a once a day pill for fatty liver disease. >> Mhm. >> You can use it alongside the weight loss drugs. You can even use it alongside the new weight loss pill from Lily. >> So Madrical's pill is called Resifa. Madrical is a tiny company. We followed it from phase two trials because their drug worked and we could see it. We stayed with this company through its phase three trials. Our copyriters enjoy marketing schemes. This drug while we own it went up 250% in one day. >> Whoa. >> 250% in one day. >> Yeah. >> Because its phase three is worked out. >> Wow. Since that time, Resifra has become a billion dollar drug from Madrical. It's not backed by Fizer or Bristol Meyers. Just Madrical selling this once a day pill. >> It's worth 330 million bucks last quarter. >> It's already at 1.2 billion. By the end of 2026, it'll be a two billion dollar drug because it's safe and it works and it's a once a day pill for fatty liver disease. And the alternative is that your liver fails and you die. So, it's a highly promising compound. >> There's one pill in development that can try and compete with it. The other pill, which is still in development, triggers weight gain. >> Do you know what people with fatty liver disease do not need? >> Yeah. Yeah. I mean, I guess I guess the disease is so bad, you know, maybe you'd go ahead with something like that, but that that that strikes me as a non-starter. As soon as you know that, what you know, you just don't want to spend another penny on it, right? I mean, it's um I just I just want to, you know, sort of scope out the idea of competition. Um and that sounds like you're telling me that's it basically. >> Yeah, John knows this as well. There's a protein drug >> that might treat the worst off patients. When you're at the moment where you need a river liver transplant and you're waiting, >> there's a protein that'll treat stage four patients. That protein is still about two years from the market. So even for stage four patients, there's literally nothing. It's a complete open field. Madrical is the only player >> because these patients are acrewing more fat in their liver. You can put them on weight loss drugs as well. But the once a day pill is an easy add-on. And you know, it's worth a billion bucks standing still. >> Yeah. >> As it ramps, it'll just keep ramping. >> Okay. Yeah. Another medical is an 11 billion firm, but it's already selling more than $1.1 billion worth of a pill >> that costs pennies to make and sells for something like $35,000 a year. >> Wow. >> John, you're >> Yeah. So, it's a >> Yeah. I was just going to mention >> I was just going to mention I I think it's worth mentioning the um the competitive threat in this case too. It's also a potential drug with a blackbox warning. Correct. You might you might want to explain that to people as well. >> Yeah. I mean the other drug that triggers weight gain had to its trials had to stop for for liver damage. So, it restarted when when it when and if it succeeds through its phase three trials. If it gets approved, it'll get approved with a blackbox warning. >> Okay. So, for for listeners and me, um, a blackbox warning is something that comes from the FDA that says, you know, halt or what what exactly is it? >> I mean, it sort of decimates sales because it warns doctors who would prescribe it that there's a side effect that's bloody nasty. So right now patients in the trial for the rival drug, the rival pill, >> have to go in every six weeks for liver screening, like that's just not practical, right? >> Yeah. No. Yeah. Okay. >> So Madrical Madrical is going to have a lock and we think that Madrical and Lily's Pill will be paired in the future >> and >> Whoa. Yeah. >> Yeah. So if Lily's pill could be worth a hundred billion dollars, Madrical's pill could be worth $10 billion. It's currently worth $1 billion at at an 11 billion firm. >> If it starts selling 10 billion worth of product, >> Mad has massive legs. >> All right, so huge upside there. That might be of the three. And let's let's get into the next one even just to make sure we cover it um while we have time. um of the three um you know 10x is like is that the biggest upside? >> It's it's it's a lot of upside. Okay. You know I've I've done this current newsletter for >> 10 years and we've had three tenaggers. >> All right. >> We've had three times that we've had >> of the hundred stocks we picked, three of them went up 10x. >> Nice. >> Because we like to have less risk going in. Mhm. >> If I wanted to pick, you know, 10,000 penny stocks, I might get seven that go up, right? >> But I had to buy 10,000 penny stocks and get slaughtered all the time. >> Yeah. >> Like we only go into a position if we think there's a 10 to one reward to risk ratio. >> Okay. Um that sounds good to me. Uh you know, that's definitely speaking my language. But let's talk about this. Um and then maybe we can do a little summing up at the end here. Um the next one that you want to talk about is from Rhythm Pharmaceuticals. Have to admit I don't follow biotech and pharma because like you know I don't have the science gene or whatever and and um I've never heard of rhythm. So um what's what's the hunger switch pill? Once upon a time when we tried to figure out the genetics of weight loss, there appeared a fat yellow rat. In all these mice that seemed to be identical, one was yellow and really, really big. >> Okay. So, what was wrong was that it wasn't getting melanin, which makes us tan, or it gives dark skin dark skin. So, the fat yellow mouse had a melanin disorder. It turns out that in humans there's four melanin receptors. The ones that matter for current purposes are one, which is the skin darkening one, and four, which controls hunger. Okay. So, if you can selectively hit four, you can control hunger. >> That's interesting. That's a cool tidbit. I like knowing that. That's going to make me sound smart at parties. >> Exactly. So, Rhythm developed based on studies from University of Berkeley a protein drug to treat genetic obesity. These are kids that are like eight that weigh 200 lb at eight. >> Oh, that's sick. >> Right. So, you know the pain one to 10 scale. How do you feel 1 to 10 your pain? Right. >> Answered it many times. >> Yep. There's a there's a equivalent one to 10 self-reported hunger scale. Okay, >> these kids run at about a nine, >> so after they eat, they're hungry, >> right? They literally their parents literally have to padlock their refrigerators. Like standard treatment is to padlock your refrigerator. >> Okay, there may be an opportunity there. >> Right. So, Rhythm developed a drug to hit MC4R to control the hunger switch. It's FDA approved, but it's a once daily injectable. So, as a once daily injectable, it can't compete with once weekly injectables. >> And it's more precise. It's actually a different switch. It's hunger itself. It's not raise your base heart rate and it's not um it's not the same kind of winter switch where you're ready for winter like GLP1. It's a completely different path. >> Okay. >> Okay. >> But in their IPO, in their perspectus when Rhythm went out, they've tested this in general obesity, which is me and whoever's next to me in the doughnut shop, right? not these genetically nailed kids. >> Yeah. >> And it works. It works in general obesity because it triggers your hunger switch >> and it turns it off and you're not hungry. >> What question am I about to ask? Doesn't it compete with with uh you know GLP1 right away as soon as you tell me that? >> Yes, but >> yes, but >> yes, but it's a different way. So technically it could be additive, >> right? >> Okay. I see. But it's also it's a monopoly breaker. >> Like if Lily has a monopoly on this on this pill and nobody else has another pill that seems to work, >> then we get to Rhythm Story. So LG Chemistry, which is LG, the ginormous Korean conglomerate, something like 15% of the Korean economy. Samsung is like 25% of the Korean economy, >> right? >> South Korea. And then another 15% of the South Korean economy is LG, >> right? >> Okay. It's a massive firm. Well, their chemistry department developed an MC4 drug, but they didn't know what to do with it. They've never run human clinical trials. They don't know what sort of side effects can be triggered. They don't know anything about it, right? So, they partnered with Rhythm to make a once a day pill that does the same thing as the once a day injection. So, they moved to a chemical pill. It's already in phase two trials and this is the most potent challenge to the GLP1 hundred billion dollar industry. And if the pill works through phase three, it's a $50 billion product. $50 billion product. Right now, Rhythm is a seven billion dollar company. >> Nice. >> So, huge upside. Currently, there's something like 60 GLP-1 drugs in development from everyone and there's two drugs in the world for MC4R and Rhythm owns the first one and Rhythm owns the second one. Wow. Okay. Yeah. So, I want to own all of these. I want to own like Lily sounds great, you know, and a doubling of the market cap, but I really just want to own Madrical and Rhythm like yesterday, >> you know? Doesn't have risk because it already has a billion dollar product that's FDA approved. rhythm al although it treats these genetic diseases >> um it kind of rose because investors don't study biotech like rhythm market cap rose because investors said wait that's a weight loss company and it's like it's completely different it's completely different >> right >> because it's a once a day injectable for genetic obesity right >> but this pill is completely a gamecher. If this pill works, I think that Rosh or Bristol Myers or Novartis will figure it out eventually. >> Sure. >> And probably buy Rhythm up. >> Mhm. >> So, I don't I can't say it will go up a 100x because Rhythm has no marketing department. They have no direct to television advertising budget. >> Right. I see. >> Right. They're gonna get a big pharma partner or they'll get taken out one way or another because it's too lucrative if it works. It's just too big a prize. If your neighbor is growing gold >> Yeah. >> and silver >> and building a sidewalk with gold and silver coins and they go on vacation. >> Yeah. You're going to go next door. Yeah. >> Like it's it's literally too valuable. So, it's an intriguing technology >> and it has one competitor and the competitor is so ridiculous, Dan, I have to tell you about it. >> All right. >> It's a company called Palatin. Okay. Remember how I said the melanin one receptor is bad and the melanin 4 receptor is good? >> They have a melanin one receptor drug. It's approved for female uh suppressed female sexual desire. It's FDA approved. You can only take it uh up to eight days a month or you get permanent skin darkening. Permanent skin darkening. >> Okay. >> Okay. It has a blackbox label that says don't take more than eight times a month. Okay. So, Palatin said although we have an MC1R drug, we kind of along the way hit MC4 as well. So, let's develop it as a weight loss drug. They ran one short trial. They triggered they used it once daily. is once daily more than eight times a month. >> Sounds like 30 times a month to me. >> So, they're triggering permanent irreversible skin darkening >> in patients and it's like it's not going to work. The FDA is not going to let you do this. >> No. No. So they're this small company is claiming like to have a weight loss drug and it doesn't take much objective reasoning to go like that is never going to work. >> Okay. >> So right now 60 drugs are being developed to hit GLP-1. There's one injectable that rhythm for MC4 >> and one pill that rhythmones for MC4. And the pill data looks pretty good so far. Like the phase two data looks pretty good, >> but they still have to run phase three trials. They're still a few years out, >> right? I was going to say when you say if it works, where are we? So you're saying three years, we'll know if it works. >> In three years, they'll be able to sell it. >> Mhm. >> As we see the current data come out, we'll know whether or not it works. But until you run larger scale safety trials and repeat the positive trial, you can't win approval to put a drug in people. >> Okay. So, you know, if it works, you know, some substantial time before you can sell it. Um, when do you like is there a is there a um, you know, a when it works date for you or you're just kind of is it a wait and see how how long it takes? >> They're in phase two, Dave. Where are they right now? >> They're in phase two. Okay. >> So, their first target >> Mhm. >> is essentially people who've been in car accidents or had brain surgery for some reason or another >> and are missing the part that would control their hunger. >> Okay. >> Um so that's about an 80,000 person cohort globally. It's not very common, but you can sell the drug for a lot of money, >> right? So, they're chasing that first. >> Okay. >> But if it works in them, it will work in everybody else. >> They're still humans, right? >> Yeah. >> So, we'll get good data in 2026 to confirm whether or not it works. >> I see. >> But it won't become an obesity pill to rival Lily. >> Gotcha. >> Probably till 2029. >> Yeah. They they'd have to run a phase three trial, right? They wouldn't they wouldn't go for >> Yeah, >> that's >> okay. And so the ne then the next question becomes, all right, we get through we get through phase two, we're in 2026 and it goes out to this, you know, group of folks from, you know, who had accidents and and you know, as you've told me, they're human. If it works in them, works in everybody else. But then they have to do a third trial. I mean the market has to get wind, you know, the market has to know what you just told me, right? The the market has to know that. So from there it becomes what's the risk in the trial? What's the risk in that final trial? >> This drug hits MC4 a 100 times more than it hits MC1. >> So the known side effect is that uh white folk get tan if they're taking it. >> Okay. Um, but as you get into more and more people, we don't really know what unusual and rare side effects could occur. That's the risk, right? >> The other risk is we have a very good handle on how much Lily's pill helps you. And if this pill doesn't help as much, then it will have a competitive disadvantage. >> Right. >> I see. Okay. But at some point, Lily's pill is going to go generic because it's patent will expire and this company's patent has five more years of life where it would be the only branded product that works for weight loss. So >> I see. And patents are what? 20 years. >> 20 years from when you start your phase one trial. Oh wow. >> Before you put it in people, you have to own rights to it because the FDA establishes that you have to have the ability to manufacture this drug or why are you bothering and why are we bothering letting you put it in people? >> I see. >> So, you know, 10 years of trial development and then 10 years of sale and then you're pretty much done. Got it. Okay. So, it sounds like um it sounds like there's, you know, there's more there's clearly more risk here. And um but the rewards are pretty big. Rewards are rewards are massive. Like when you take all three of these stocks together, aren't they? I mean, it's just like hundreds and hundreds of billions, trillions of dollars, really. These are this is a massive trend. >> Yeah. And you know what? Dave gave a great way to diversify within that trend too, right? He's given you he's given you a big name. He's given you a a >> midcap name and he's given you sort of a your classic biotech binary outcome type of >> type of type of pick. >> Right. I like that. >> I see that. I see that now. And and you're right. It's uh >> Yeah, it's the Yeah. I mean, I don't pick my own stocks. I like that my readers get to take advantage of what I find >> because they're the ones who pay me to go around the world, you know, to go to Vienna to watch Eli Liy present its data in front of thousands of scientists >> and me, >> you know, it's a really cool John's gone on these trips with me as well. >> It's it's really cool to see science sort of happening >> or at least medicine, emerging medicine. It's it's fun to track this >> and I like doing it for my readers. So, I can't really take advantage of this. And my this is my December issue. And what we covered is the safest biggest company in the world is safer and bigger than anyone knows because Nova Nordisk is making a lot of noise about a drug that's going to put Nova Nordisk out of business. I don't know why they're doing it. They're doing it because they're afraid of Eli Liy. But Eli Liy is the smart play. And then Madrical is is a billion-dollar drug from a company you've never heard of. >> Yeah. >> Is ridiculous. Like an average investor who finds Madrical will be very happy with the results, >> right? >> Yeah. >> And for people who have high risk tolerance to find out that there's another way for, you know, if you can get your head around this idea, Dan, a contrarian. I know this might be a foreign word to you. Yeah, maybe not. >> Rhythm's like a really cool contrary play. It's the place that nobody's looking, >> right? >> Yep. >> Yeah. So, >> very very cool. >> Um, it makes but but as John said, it makes me want to own and and what you just said too, it makes me want to own all three. It makes, you know, it's like a little mini uh, you know, biotech pharma portfolio, you know, complete with like a massive cap major. Um, and, you know, like John said, massive cap, midcap, and then a binary outcome, smaller cap, uh, it's it's kind of perfect. And it just before when I was saying that that this the potential here is massive. It's already massive. But I guess what I mean is, you know, this has like changing the several aspects of the global economy kind of potential. You know, one of the guys who I talked to a few years ago, they were already talking about how United Airlines was saying, "Huh, we're going to save x amount of dollars on jet fuel in a few years. You know, we need to pencil that in." and you know and whatever else um happens when people lose a lot of weight and you don't have to transport that weight. You know, automobiles, whatever. All kinds of transportation modes is just like one one effect. You know, what people eat and how they go, you know, when they go out to eat and what the the food trends in the in the restaurant industry look like from here on out is another thing. I mean, it just this seems like one of the biggest um you know, biotech or pharma or whatever trends of my lifetime like what was bigger what what's as big as this before this? I I I honestly don't know. >> So, here's why these are here's why these three pills are different. >> Okay. >> Okay. >> Everyone is stopping taking the injectables because they're injectables. They're stopping taking them. Yeah. So all these, oh, fuel, fuel will change, airports will change, cars will change, you can put less air in your tires. None of that shit's true because people roll into these drugs, they roll off them, they gain the weight back, and they're back where they started, >> right? >> So, what kind of maintenance therapy can you give people so that they actually improve, right? Mhm. >> A once a day pill, a once a day pill that saves their liver, which had been damaged because of obesity, and then recovers, and maybe a different approach to hunger. Like that's it, right? Like these three, >> like everything we've seen from GLP1s, that's the opening act. >> This is the real deal. These pills are the real deal. No one sees them coming. Wow. No one sees it coming in terms of like the effect on market cap and and market value which is amazing. I mean you know to find I have to say uh your focus on you know 10 to one riskreward potential is um it's enviable. We don't what what what I do in my newsletters we don't always find that kind of stuff. You know we we're often good with three to one or so. Um and and I know a lot of folks, a lot of traders and investors, they're like, "Hey, 3 to one riskreward and I'm excited, you know, but 10 to one is um is huge." So, thank you for bringing >> I mean, that's our goal. >> Yeah. Well, sure. No, but it's the it's it's more than it's your goal, but it's your orientation and it's it's credible though, right? Because you found some already and you've proven your ability to find them and we don't expect you to find them every 10 minutes. But the point is the potential is there and you're capable of finding it. It's exciting. That that alone is extremely exciting. Like somebody tells me, you know, I want to find hundred baggers. I'm like, yeah, you and everybody else. As long as you can wait 40 years for them, you know, you're in business. But a a credible path to, you know, these 10 to1 risk-to-reward setups, uh, is very exciting to me is what I'm saying. >> Yeah. You know, you said that Mr. market already knows this, but the truth is like our colleague who's still alive but is no longer working with us named Steve uh used to buy the biotech index, >> right? Because everything's in there and it's all perfectly priced. It's like that's not remotely true. >> Yeah. >> Right. In the biotech index, there's some biotechs that we know will fail like Novo's new pill >> or in Mantiva's pill that >> requires liver screening and makes you gain weight. Mhm. >> Or Palentin's pill that makes you permanently get skin darkening. >> Right. >> They're all in the biotech index. We're We're sorting out the good from the bad. >> Yeah. >> That's what we're doing, right? >> Yep. You counseledled me away. I was talking about the biotech index, you know, two or three podcasts ago when you when you were talking to me and you counseledled me against that. I'm very grateful for it. Um, anytime somebody can say can just, you know, um, give me a nice razor so that I don't have to worry about something and think about it again, I'm grateful. So, and you did that for me with the biotech index. So, I'm I'm we're at a that this is the time for our final question, right? We've we've covered these three amazing stocks here, um, you know, Lily, Magical, and Rhythm, and summed them up nicely and given people a reason to own all three of them. So, it's time for our final question, which is the same for every guest, no matter what the topic, even if it's a non-financial topic. So, and it's just for our listeners benefit. If you could give them one takeaway, one thought um that you'd like to deliver to them today, what would that one takeaway be that you'd like them to have from this? >> Lily's pill is a hidden monopoly. Novo Nordisk is buying ads to say that their WGVI pill is is available, but Nova Nordisk cannot afford to make its own drug. Lily's Pill is the promise that we've all been waiting for. >> Wow. Okay, that's powerful. Lily Spill is the promise of this of these weight loss drugs that we've all been waiting for is what you're telling me. >> Yeah. Fizer keeps trying to buy weight loss drugs and Fizer CEO constantly goes we're going to split a hundred billion dollar market with Lily and then their drug fails. Then they go like we bought a new drug and we're going to use this drug and split a hundred billion dollar market with Lily and then that drug failed and now they bought a third drug and said we're going to split a hundred billion dollar drug with Lily. It's like, "No, you're not Fizer because your drugs keep failing. >> The drug that's going to come out that's going to do everything is Lily's. You know it. We know it. Everyone knows it." >> All right. Well, um, thanks for being here, Dave, and thanks for, um, for helping me out, John. I I am not a scientist. I need I need a guy like John around if I'm going to talk to a guy like Dave. >> Yeah. >> Hopefully that was helpful. >> All right, man. Thank you. Thank you both for being here. Um, I have learned and I know our listeners have learned a great deal and we will hopefully talk to both of you again real soon. >> Cool. Thanks. Thanks, John. Thanks, Dan. >> See you guys. >> That was a lot of fun. I always have fun talking with Dave Lashmmet. And thank goodness I was smart enough to bring John Engel along to help explain it all for me. Uh that was a a great education, a mini education on weight loss drugs. And we got not one, not two, but three ticker symbols. We got Eli Liy LLY. Massive opportunity there and a nice big cap safer company, right? Then we got Madreal with 10 to one potential. Dave told us amazing. And then the riskier pick was Rhythm, which is RY TM. That's the ticker symbol for that. So, we got three great ways to play weight loss drugs. It's a massive trend. Over time, it's going to be worth trillions and trillions of dollars. I I really do think it's going to change the global economy. And these three drugs, you you heard Dave Dave said, especially with what Lily's doing, this is finally the real promise of weight loss drugs delivered in a once daily pill and it's a technology that no one else has. Everyone the competition is behind or they have a product that is just not going to get it done. So that's super exciting. plus these other two opportunities to do, you know, slightly different things in weight loss um with huge potential returns there. Really exciting. And it's exciting to me and I hope to you because honestly, how much do you know about biotech? How much do you know about pharma? You heard Dave talk, you know, don't buy the biotech index. get a guy like Dave on your team, you know, read Stanberry Venture Technology and and use those picks, right? They're much more intelligently chosen than just throwing money at the biotech index. And I recommend index funds in my Ferraris Report newsletters. I'm not saying they're bad. I'm just saying in this particular case, you can definitely absolutely do a lot better, right? So, we got Lily, Magical, and Rhythm. Really exciting stuff. Okay, so one more time, Lily, ticker symbol LLY. Madrical ticker symbol MDG L. And Rhythm, ticker symbol R YTM. I hope you enjoyed that as much as we really, really truly did. And don't forget to like, subscribe, and sign up for our free e-letter. Opinions expressed on this program are solely those of the contributor and do not necessarily reflect the opinions of Stanbury Research, its parent company or affiliates.
$1 Trillion Monopoly: 3 Biotech Trades With 10:1 Upside
Summary
Transcript
Would you like to invest in a monopoly? Yeah, me too. How about three of them? That's what we have for you today. Three pharma and biotech monopolies. And I've got two of the most brilliant guys on the planet to talk about them. My co-host John Engel and our guest, my old friend Dave Lashman. So, let's not delay. Get out your pens and pencils. You're going to write some ticker symbols down. We've got 10 to one upside potential here for you. Okay. So, let's do it. Let's talk with Dave Lashman. Let's do it right now. Dave, welcome to the show. Good to see you. >> Same here, Dan. >> And John, welcome as well. John and I are going to uh do our best to get all the good info out of you that we can today. Um, I noticed that before we get going though, I noticed something here. We're going to talk about u you know GLP-1 drugs and and weight loss. You've been covering this longer than anyone I personally know. Um you've been doing it what six years and and the first time I really started taking it seriously was like three years ago. Um, I had a an analyst that I interviewed at the Stanbury uh conference in Las Vegas and he was like, "This thing is going to be so huge, but you were already on to it three years prior to that." And I'm curious what happened in what was it 2019 maybe? While walking to go meet this guy, I passed about 700 doctors in line to go to a lunch session sponsored by Novo Nordisk for their ompic drug. And I'm like, I don't know what that is, but 700 doctors are voting with their feet to find out about this one thing, and they're not all going to get in the room, and they're not all going to get free lunch. There's literally like a river of humans trying to go into the session. So it turned out that Ompic if you use it at double strength triggers massive weight loss. And this was a cardiology conference years before at a card cardiology conference in the US called the American Heart Heart Association meetings. >> A doctor told a joke which was look this drug is the best we can do unless we can get people to lose weight. And everybody laughed like there's literally no way to get heart patients to lose weight. And this was the breakthrough. So we saw it in August 2019. We started covering it in November 2019. As soon as the trial data had had come out, we were already tracking it. So we were at ground zero. We knew that the existing drug at double strength would trigger massive weight loss. >> And here we are six years later and it's practically the only these are practically the only drugs anybody wants to talk about. like it's like there are no other drugs now. All right. So, um I want to get into this. You've got three drugs to talk about today. Um starting with with weight loss drug and and you you maintain that you have actually not just three drugs but three monopolies, three honest to goodness, you know, monopolies which is really rare in the world. Let's let's dive in. Let's start with the first one, which is a weight loss drug. Um, Lily's weight loss pill. What's the big deal? How is this a monopoly? >> What's confusing to investors, and it's because their marketing departments want you to think so. Every drug is a monopoly because every drug has a patent, which gives it economic exclusivity. But if I build a statin drug and you build a statin drug and John builds a statin drug, we're all going to go after the same patients. So even though we have a legal monopoly, we don't have an economic monopoly because we will set prices against each other. It's not what the market will bear, right? >> It's how low can you go. You will cut price to gain market share. John will cut price against you to gain market share. Then I will cut price against John to gain market share or maintain it. we end up with some sort of equilibrium where none of us make money or we make trace amounts of money, right? >> Nowhere near what you make in in monopolies. And the easiest proof of that easiest easiest easiest proof of that is that if a drug has a direct competitor, its price goes up 3% a year. If a drug does not have a direct competitor, its price goes up 9% a year. Why? because because it can. >> Yeah. >> Right. >> So essentially you get pricing control and not only the initial price but as you ramp year after year after year like no one who takes a drug is going to not take the drug for uh you know basically a eight or nine% increase. They're still going to take the drug. They're just going to eat it and call it inflation. But >> drug inflation runs about 5%, but it's more than double that for drugs that have a monopoly. What makes weight loss different is that it's just so huge, >> so to speak. Um >> I know, right? So there's easily a 100red million American adults who are obese. >> Wow. >> I know. >> Dan, you're the exception. I Yeah, I want to say I was going to say that's massive. Again, the puns are just are going to come hot and heavy here. Again, they're hot and heavy. Okay. I just I can't stop myself. It's You can't avoid the puns. But a hundred million blows me away. I did not know that. Yeah, there's some effort to sort of redefine the US so numbers can be higher, but the 2023 2024 numbers of a of 100 million seem seem fair and conservative compared to where else we can go. See, like if you have a BMI of 29.5, then you don't have a BMI of 30, but it could already screw up your blood work. M >> uh you'll get metabolic syndrome. So your body is acting as if you're obese. Even though technically by skin surface area to height, you might not have hit a threshold. Your blood already hit that threshold. So conservatively, it's 100 million Americans for the market. There's probably 150 million Europeans >> who are also obese. So it's a quarter of a billion people who face critical health challenges from excess weight, >> right? A quarter million people in countries. >> Quarter of a billion people. >> Yeah. With with huge amounts of money to spend. >> And I don't think that market is fully tapped yet. Right Dave? We've still got a lot of growth to come. Mostly because for some of these drugs, they're not covered under um Medicare. Correct. Unless they're approve unless they're taking it for a different reason, not specifically for weight loss. >> Yeah, it's a push me pull you. There's a there was a change in Medicare like two weeks ago. >> In in general, everybody's resistant to paying that price. >> Yeah. >> So, when it was in shortage, Medicare wasn't picking it up. I think that Medicare will pick it up for certain conditions, but if you're morbidly obese, >> above a BMI of 40, you're going to have so many health conditions, you're going to qualify, >> right? >> So, that's like a someone who's 5 feet tall and 290. That's heavy. >> When you should be a buck 50 and you're at 290, >> right? You may be overweight. >> You may you might just be. So, but but I could imagine I mean correct me if I'm wrong here, but you know if you're like you say if if if it's 40 is the cut off, let's just say and you know you're at 38 or 37. >> The cut off's more like 30. >> Oh, the cut off really >> 35. >> Okay. >> Yeah. 30 would be overweight and 35 would be obese >> and 40 would be morbidly obese. >> All right. So, but I'm thinking about you know the cut off for um for like Medicare coverage like when you have some you know conditions that are obviously caused by your weight but which which are severe and can be treated by you know losing weight. So therefore >> um >> so I mean the the the answer that's right in front of us that we're not talking about is type two diabetes. So type 2 diabetes grows handinhand with the American and European obesity epidemics when you have such a massive amount of excess fat tissue. You feed it and as you feed it, you only have one pancreas and you have just way too much circulating sugar for the amount of insulin that you can create in your pancreas. And so you get into sugar abnormalities in your blood and that triggers a disease called type two diabetes malitis and these drugs started as type two diabetes drugs but it turned out that they also triggered massive weight loss. So, as a type two diabetic, you can get on these drugs and get them covered. >> Mhm. >> In addition to now what? Sleep apnea and um there's another one that was approved recently, right? Uh cardiovascular. >> I mean, we know that weighing 290 when you should weigh 150 is kind of hard on your knees. >> Yeah. >> So, there's been some pretty good studies on knee osteoarthritis. So fat tissue is inherently inflammatory >> and so it can reduce the inflammation by reducing the fat beds. Plus guess what every step does not mean 290 pounds into your knee. So it will soon win approval for osteoarthritis if it hasn't yet. >> All right. But >> overall, >> yeah, >> overall the health benefits to your heart are also significant. So I think it's one approval for cardiovascular benefit. It's about 20%. 20% reduction in heart attacks or strokes in a year if you're on these drugs. >> I think that's important because that expands the market potential for that drug. Whereas most people think of it as just an obesity drug, it's not. You know, it it has benefits in other areas as well. All these diseases are are comingled. They're they're related, right? >> Yeah. And I mean, in Europe and in Japan and every other developed country, including Canada, except the United States, they own a patient from cradle to grave because there's only one healthcare provider. Okay? So, they already recognize obesity as a condition that deserves treatment. In the US, it's more like an auto repair shop. Uh, if you're not broke, we're not going to fix you. >> So, you have to think of some way that someone's broken in order to go intervene to fix them. It's not preventative medicine. It's therapeutic medicine. >> So, everywhere else they already recognize obesity is a treatable condition that has long-term health consequences and they just treat it. >> Yeah. >> Because it's better to treat it early. In the US, people tend to stay even on their work healthare plans for about four years. So each medical insurance company can kick it down the road and make some other medical insurance company cover these patients for when they're really sick. >> All right. So I'm I'm sold I'm sold on weight loss drugs. Um, but what you're telling me is that um, you know, Lily has a a a effective monopoly, like a real economic monopoly on the weight loss pill. And of course, right away, my first thought as an investor is, are you telling me nobody else is working on a pill form of this? >> The current drugs all are proteins and they all fit a pocket in your GLP-1 receptor to look like natural GLP-1. And that's how they work. They regulate your blood sugar. It turns out that there's also GLP1 receptors in your brain. I call it the winter switch. >> So in winter, you have to burn fat to stay warm in the northern hemisphere or in the southern hemisphere in the winter. You have to burn fat to stay warm. And that switch, we used to think it was a side effect. But when you're on these GLP drugs, your resting heart rate goes up by five beats per minute. And it means you're literally running hotter and it also is an appetite suppressant in your brain. So between appetite suppression and running hotter, that's why you lose weight. The problem comes because all these injectable drugs, all these GLP1 proteins, people only stay on them for about a year. And when you get off them, you do not have a higher metabolism and your appetite, which was always there, is there again. So, one big breakthrough that Lily has done with its new pill is pick up patients after they stop the injectable drugs as a maintenance regimen so that it's a once a day pill you can take whether or not you've had anything to eat and you will essentially continue to lose weight or at least maintain. So, the six-month study that they just did was gain back two pounds after you lost 32 pounds, but it's stable. It's basically a stabilizing force and you get out of injections. And we know medical insurance companies don't like to pay for the injectables. In the US, we pretend that obesity is entirely a matter of will and not a slippery slope. Like as you gain weight, you exercise less. As you exercise less, you gain weight. As you gain weight, you exercise less. Right. >> Yeah. >> So these drugs can short circuit that, but only if you stay on them. If you get off them, you're in trouble. So bounce back is fast and furious. Without these drugs, the control study basically gained back 25 pounds in six months. In six months, they gained back 25 pounds on average. And if you're on the drug, you gain back about two pounds, which is really a rounding error >> because it's not 10,000 patients, it's a couple hundred patients. So, >> okay. So, >> so this this idea of a one daily pill, >> yeah, >> is very promising. Here's what investors miss that I'm going to tell you, >> okay? >> So that you know the average dose that people take of ompic is about two milligrams a week. That's what they inject of ompic or regovi. It's the same drug. Two milligrams a week. Novo can turn that into a pill. Novonortis can turn that into a pill by adding it to vitamin A. So, it's absorbed into your gut instead of being an injectable, but they need 25 milligrams a day. Okay. >> Whoa. >> So, that's 175 milligrams instead of two milligrams. >> Whoa. And just because it's taken a different route, is is that the whole >> Because your digestive system digests things including protein, so you can use them as building blocks. So if you eat a protein drug, it's ridiculously inefficient. Like the cheat code is added to vitamin A, >> but it's not a great cheat code. It destroys your manufacturability by a factor of 100. And economically, the opportunity cost is Novon Nordis could either sell 100 prescriptions of OMIC or one prescription of their new Wiggovi pill. They're giving up 99 patients worth of revenue and we think the entire enterprise is at a loss. Like they can say that their marginal costs are less if they just transfer over completed completed drug. >> Yeah. >> But you can only play accounting tricks for so long. They've already Novo Nordisk has already made profit warnings for next quarter even though they're launching their own weight loss pill. >> Like it's because they lose a hundred patients worth of revenue for every prescription that they fulfill. It's an insane strategy. And the only reason that Novo is doing it at all is because they're so afraid of what Lily has. So, what Lily has is a chemical pill that you can make for a for a dollar and sell for $20. >> I think it's important to to sort of explain to people, Dave, what the difference is between a small molecule drug and a and a protein drug because th this is a big point. I think people need to hear this >> so they understand it. So, Novo Nordisk has a pill. It's gone through clinical trials. It's approved, correct? The pill is approved recently. >> Yeah, it started sales two weeks ago. >> Lily is is is on its way to approval, but it hasn't gotten approval yet. But there's a difference between the these two pills. And I I think you need I think you should concentrate on that and explain that just one more time so people hear it. It's and it's the key is the difference between a small molecule drug and a protein drug and how you make these drugs really is is the key to understanding that that value that Lily brings. >> Yeah. I mean we can simplify it almost easier. Every pill is a chemical and every injectable is a protein except Novonisk's new wevy pill where they're trying to attach the protein to vitamin A but it gets digested. >> Okay. Like in a world without Eli Lilly's pill, it might make medical sense if you could charge a hundred times more for it, >> but you can't charge a hundred times more for it. >> So it doesn't >> I think that's the key. >> Yeah. So I I I looked it up before we before we spoke today because I thought this was such an important point. I was hoping you were going to touch on it, but I think on average to make a small molecule drug is 10 times to 12 times cheaper than it is to to manufacture and make a protein drug. So that that's that's some serious cost savings, right? That means they could sell their pill for cheaper than Novo and just cut them out of the picture basically. >> There we go. That makes the that makes the sort of, you know, science plus economic connection for me as an investor. Now, right now I have a clear >> that's straight up. But when you take the protein drug and you need a hundred times more than it, it's a thousand to1 ratio. >> Every time Novo sells any of its pills, it's losing money. >> And anytime Lily sells one of its pills, it's making money. >> Like Lily's not putting out profit warnings. >> They're building five factories to make this pill. They're building one factory to optimize the process and then they're going to step and repeat it with four factories. Until 2020, the largest factories ever made for in biotech was a $500 million factory. That's as big as they could possibly ever get. Okay. Lily spending $50 billion on factories. >> Okay. Yeah. >> So, they're going to make the reason they're putting $50 billion into factories >> is they'll make hundred billion a year on these pills, >> right? Yeah. Massive return on investment. Okay. This this this is making sense to me now. and and the um I you're going to tell me that um how whatever this process is that Lily has to make this um just called a chemical pill like >> exactly >> nobody else is doing this. That's that's the monopoly. Nobody else is doing this. >> Yeah. RO is closest. They're five years behind and that means that they have all the risks and all the expense of running large-scale clinical trials. >> See, unlike genetically perfect, genetically identical laboratory mice, every person is different. So when you test a drug in 100 people, you can find a one in a 100 side effect. When you test it in 10,000 people, you find much less common side effects, but a 10,000 person cohort prepares you to sell it to 10 million or 100 million people. You kind of know what side effects might be out there, but it's really risky. If there's enough people that have a side effect, you can't can't sell the drug. So RO has all its risks in front of it and it's five years behind. Lily's finished all its trials. I saw data in Vienna. I saw data in Chicago and my scientist went off to New Orleans and saw some more data. That's it. That's the entire pivotal data for Lily's pill. >> We went in person to see if there were side effects. And there's nothing that you see in the pill that you don't see in the injections. And it's no more severe than what you see in the injections. So once you started weight loss pills, you can stay on the same GLP path and your body's already adapted to the changes and then there's basically no more side effects. So this is a once a day pill that in established users of injectables after you have a higher dose to lose weight. When you move this to the maintenance therapy, this will be as big as statins except they're not generics. Lily's Lily hasn't priced it yet because it isn't fully FDA approved, but all the approval trials met their they hit their efficacy and they hit their safety. So they're going to get approved. Okay. So, this is this is worth massive amounts of money. And we talked before we hit hit the record button. I think we said Lily has a $620 odd billion dollar market cap. >> They're at 926 billion. >> 926. >> So, it's essentially a trillion dollar company. >> Yeah. >> Right. >> So, how do you can this move the needle in a trillion dollar company is the question, right? for an investor. >> I mean, I can even get you to bend on this one. So, imagine that they sell a hundred billion dollars worth of the pills technical name is Orphag Lipron. >> It doesn't have a brand name yet because it's not FDA approved. Lily knows what the brand name is, but they're not telling anyone. >> They're printing off, you know, buy Or now, whatever it is, right? I don't know what the brand name is, but Orphagon, if they sell a hundred billion of it at 90% margin, that drops to bottom line. >> Yeah. >> So, if they start making 50 billion in free cash a year, how much would you pay for 50 billion in free cash a year? >> Yeah. All right. >> It's It's more than price to earnings. >> You're saying 50 billion more, right? >> Yeah. So if the market prices is is 20 times that's you know you're you're doubling you're doubling the market cap >> it >> that's the answer you know there's a double there's a potential double here that's the answer >> right and and um that kind of matches what I said I was on uh Porter stage last year and I called this a safe triple when it was at 600 billion Mhm. >> Which also predicts that this drug will take Lily to a to be a$ two trillion dollar firm. >> Yeah. >> I mean, I don't think it'll get there until the drug launches and they can make enough of it. >> Mhm. >> But there will be massive demand for this drug and until the four factories are up and running, they'll be supply constrained, but not demand constrained. >> That's funny. I remember you. >> So, you got time. You got time to buy Eli Liy. I can't buy it because I cover it. >> You can buy it, >> right? Okay. Um I remember you. It's funny because I remember when uh when you when the when the injectables were at a similar stage and you were telling me about the demand and they've got to build factories and they've got to make more and um and here we are again with a whole brand new extremely wide mo product. It sounds like um >> yeah, you know, there's a fun aside. Nova Nordisk wanted to compete with Eli Liy in Pill World. >> So, they know that if you get high on marijuana, you get the munchies. And there's this particular brain receptor that where cannabis lands and it's the canabonoid receptor. Okay. Well, Novon Nordisk spent a billion dollars to buy a drug that would hit the canabonoid receptor but turn it off instead of on. The idea was that it gave you the unmunchies >> and then you would lose weight >> which kind of worked in mice. >> Okay. >> But in people um gets you high like of course it gets you high. It's cannabis. >> Yeah. >> So they spent a billion dollars to prove that they could develop a pill that would get you high. >> Right. get you high and still not have the munchies. I mean, that's that's got some value, doesn't it? >> No, because uh it's narcosis. Like, it's hallucinogenic, right? >> And even in early trials, people couldn't find their car in the parking lot, >> which is bad. >> That is bad. But let me >> That's considered a side effect. >> So, we're getting into another area that I that I don't want to spend too much time on. I want to move on because you got two more of these, but I've always had a slight philosophical issue with this. Just the idea that people are going to be on these drugs for ever now, maybe um and rather than, you know, certainly some substantial portion of the population of obese people could could get rid of the weight and improve through exercise and diet. like there's there's some willpower involved to some degree, isn't there? Um, and I just wonder, you know, a lifetime of of being on a drug like that, it's a it's an odd, you know, take drugs and be healthy. It's just it's a bit of an odd message. I don't know. >> Maybe. >> See, you are a special person in that your commute is from where you are sitting now to the books that are behind you. >> Yes. uh one of us on this call has to drive to work >> and when that person uh drives to work they are trapped in a car in traffic twice a day. So their exercise opportunities are limited. The way that we've built our culture where you commute to work, >> which is true for at least 90% of us who are in the workforce still, >> you you you commute to go sit in a cubicle and then commute home, >> right? So the opportunities in normal everyday life are actually quite limited. 120 years ago, 125 years ago, >> Mhm. >> 1900, the year 1900, 90% of the US population lived on freaking farms, >> right? >> They didn't have to invent exercise. They had to go milk Bessie. >> Yeah. >> And going to milk Bessie meant rounding Bessie up, pulling on her teeth, filling up a wooden bucket, and then carrying the full wooden bucket back to the, you know, ice box. >> Yeah. >> Like, >> no, I hear you. I think there's a better way to describe the benefits too because I've thought about that a lot too, Dan. >> I I think, you know, if you think about how we how the health care system is structured in the US, you know, we all share um health expenses as as a as a group, right? So, the healthier we can be as a group, the less expenses we potentially have. I'm sure there's studies out there that will indicate, you know, there's an economic benefit to having healthier people over time. And I think this is a pill that, you know, on its face, it might be used, you know, as a glamour drug or something, but for people that actually need it, that can become more healthier people in the long term, I think that saves society, you know, gives society a benefit as well. >> All right. Well, we wanted to spend plenty of time on that one because it's like the world's obsessed with it. But let's move on. Um, you've got two more of these monopoly drugs that you want to talk about, Dave. So, um, tell me about, um, something I never think about and rarely even hear about, which is Magical's fatty liver treatment. >> So, thanks, Dan. Fatty liver disease is a consequence of obesity, but it's not a traditional fat bed in, you know, layered under your skin. >> It's actually fat being absorbed by your liver and having nowhere to go. So your liver adds more and more fat. >> It adds so much fat that liver cells don't touch other liver cells. So it's not working as a filter and the cells are slipping away from each other because there's a fat cell in between. So then they add connective tissue so your liver doesn't turn into um a dropped jello pudding. So you not only lose liver filtration ability but you change the nature of your liver. >> Okay. So you change Wow. Okay. >> You can you can get kidney diialysis. There's no liver diialysis. If your liver fails, you die. If you get a liver transplant, you live. That's rare. You got it from someone else. So you have to be on anti-rejection drugs for life. Mhm. >> It's a pretty traumatic surgery. It's wicked expensive. It's also dangerous. >> And because you're on anti-rejection drugs, which turn down your immune system, >> any colds can kill you. It's not a good play, right? So, liver transplants are very rare. >> And liver is not a small organ either, is it? I mean, it's like >> it's it's it's occupies quite a quite a cavity, doesn't it? >> It does. So the idea to cut fat and connective tissue that's come into your liver is is has been promising. So in 2016 we saw like a feeding frenzy among biotechs to buy up drugs that treat fatty liver disease. >> Six in a row failed. The seventh one didn't really work and the company kept pressing the FDA. It's like, look, nothing treats this. And the FDA is like, and your drug doesn't either. >> Neither do you. Yeah. >> And along came drug number eight, which is Madrical's drug. And Madrical's drugs actually a once a day pill for fatty liver disease. >> Mhm. >> You can use it alongside the weight loss drugs. You can even use it alongside the new weight loss pill from Lily. >> So Madrical's pill is called Resifa. Madrical is a tiny company. We followed it from phase two trials because their drug worked and we could see it. We stayed with this company through its phase three trials. Our copyriters enjoy marketing schemes. This drug while we own it went up 250% in one day. >> Whoa. >> 250% in one day. >> Yeah. >> Because its phase three is worked out. >> Wow. Since that time, Resifra has become a billion dollar drug from Madrical. It's not backed by Fizer or Bristol Meyers. Just Madrical selling this once a day pill. >> It's worth 330 million bucks last quarter. >> It's already at 1.2 billion. By the end of 2026, it'll be a two billion dollar drug because it's safe and it works and it's a once a day pill for fatty liver disease. And the alternative is that your liver fails and you die. So, it's a highly promising compound. >> There's one pill in development that can try and compete with it. The other pill, which is still in development, triggers weight gain. >> Do you know what people with fatty liver disease do not need? >> Yeah. Yeah. I mean, I guess I guess the disease is so bad, you know, maybe you'd go ahead with something like that, but that that that strikes me as a non-starter. As soon as you know that, what you know, you just don't want to spend another penny on it, right? I mean, it's um I just I just want to, you know, sort of scope out the idea of competition. Um and that sounds like you're telling me that's it basically. >> Yeah, John knows this as well. There's a protein drug >> that might treat the worst off patients. When you're at the moment where you need a river liver transplant and you're waiting, >> there's a protein that'll treat stage four patients. That protein is still about two years from the market. So even for stage four patients, there's literally nothing. It's a complete open field. Madrical is the only player >> because these patients are acrewing more fat in their liver. You can put them on weight loss drugs as well. But the once a day pill is an easy add-on. And you know, it's worth a billion bucks standing still. >> Yeah. >> As it ramps, it'll just keep ramping. >> Okay. Yeah. Another medical is an 11 billion firm, but it's already selling more than $1.1 billion worth of a pill >> that costs pennies to make and sells for something like $35,000 a year. >> Wow. >> John, you're >> Yeah. So, it's a >> Yeah. I was just going to mention >> I was just going to mention I I think it's worth mentioning the um the competitive threat in this case too. It's also a potential drug with a blackbox warning. Correct. You might you might want to explain that to people as well. >> Yeah. I mean the other drug that triggers weight gain had to its trials had to stop for for liver damage. So, it restarted when when it when and if it succeeds through its phase three trials. If it gets approved, it'll get approved with a blackbox warning. >> Okay. So, for for listeners and me, um, a blackbox warning is something that comes from the FDA that says, you know, halt or what what exactly is it? >> I mean, it sort of decimates sales because it warns doctors who would prescribe it that there's a side effect that's bloody nasty. So right now patients in the trial for the rival drug, the rival pill, >> have to go in every six weeks for liver screening, like that's just not practical, right? >> Yeah. No. Yeah. Okay. >> So Madrical Madrical is going to have a lock and we think that Madrical and Lily's Pill will be paired in the future >> and >> Whoa. Yeah. >> Yeah. So if Lily's pill could be worth a hundred billion dollars, Madrical's pill could be worth $10 billion. It's currently worth $1 billion at at an 11 billion firm. >> If it starts selling 10 billion worth of product, >> Mad has massive legs. >> All right, so huge upside there. That might be of the three. And let's let's get into the next one even just to make sure we cover it um while we have time. um of the three um you know 10x is like is that the biggest upside? >> It's it's it's a lot of upside. Okay. You know I've I've done this current newsletter for >> 10 years and we've had three tenaggers. >> All right. >> We've had three times that we've had >> of the hundred stocks we picked, three of them went up 10x. >> Nice. >> Because we like to have less risk going in. Mhm. >> If I wanted to pick, you know, 10,000 penny stocks, I might get seven that go up, right? >> But I had to buy 10,000 penny stocks and get slaughtered all the time. >> Yeah. >> Like we only go into a position if we think there's a 10 to one reward to risk ratio. >> Okay. Um that sounds good to me. Uh you know, that's definitely speaking my language. But let's talk about this. Um and then maybe we can do a little summing up at the end here. Um the next one that you want to talk about is from Rhythm Pharmaceuticals. Have to admit I don't follow biotech and pharma because like you know I don't have the science gene or whatever and and um I've never heard of rhythm. So um what's what's the hunger switch pill? Once upon a time when we tried to figure out the genetics of weight loss, there appeared a fat yellow rat. In all these mice that seemed to be identical, one was yellow and really, really big. >> Okay. So, what was wrong was that it wasn't getting melanin, which makes us tan, or it gives dark skin dark skin. So, the fat yellow mouse had a melanin disorder. It turns out that in humans there's four melanin receptors. The ones that matter for current purposes are one, which is the skin darkening one, and four, which controls hunger. Okay. So, if you can selectively hit four, you can control hunger. >> That's interesting. That's a cool tidbit. I like knowing that. That's going to make me sound smart at parties. >> Exactly. So, Rhythm developed based on studies from University of Berkeley a protein drug to treat genetic obesity. These are kids that are like eight that weigh 200 lb at eight. >> Oh, that's sick. >> Right. So, you know the pain one to 10 scale. How do you feel 1 to 10 your pain? Right. >> Answered it many times. >> Yep. There's a there's a equivalent one to 10 self-reported hunger scale. Okay, >> these kids run at about a nine, >> so after they eat, they're hungry, >> right? They literally their parents literally have to padlock their refrigerators. Like standard treatment is to padlock your refrigerator. >> Okay, there may be an opportunity there. >> Right. So, Rhythm developed a drug to hit MC4R to control the hunger switch. It's FDA approved, but it's a once daily injectable. So, as a once daily injectable, it can't compete with once weekly injectables. >> And it's more precise. It's actually a different switch. It's hunger itself. It's not raise your base heart rate and it's not um it's not the same kind of winter switch where you're ready for winter like GLP1. It's a completely different path. >> Okay. >> Okay. >> But in their IPO, in their perspectus when Rhythm went out, they've tested this in general obesity, which is me and whoever's next to me in the doughnut shop, right? not these genetically nailed kids. >> Yeah. >> And it works. It works in general obesity because it triggers your hunger switch >> and it turns it off and you're not hungry. >> What question am I about to ask? Doesn't it compete with with uh you know GLP1 right away as soon as you tell me that? >> Yes, but >> yes, but >> yes, but it's a different way. So technically it could be additive, >> right? >> Okay. I see. But it's also it's a monopoly breaker. >> Like if Lily has a monopoly on this on this pill and nobody else has another pill that seems to work, >> then we get to Rhythm Story. So LG Chemistry, which is LG, the ginormous Korean conglomerate, something like 15% of the Korean economy. Samsung is like 25% of the Korean economy, >> right? >> South Korea. And then another 15% of the South Korean economy is LG, >> right? >> Okay. It's a massive firm. Well, their chemistry department developed an MC4 drug, but they didn't know what to do with it. They've never run human clinical trials. They don't know what sort of side effects can be triggered. They don't know anything about it, right? So, they partnered with Rhythm to make a once a day pill that does the same thing as the once a day injection. So, they moved to a chemical pill. It's already in phase two trials and this is the most potent challenge to the GLP1 hundred billion dollar industry. And if the pill works through phase three, it's a $50 billion product. $50 billion product. Right now, Rhythm is a seven billion dollar company. >> Nice. >> So, huge upside. Currently, there's something like 60 GLP-1 drugs in development from everyone and there's two drugs in the world for MC4R and Rhythm owns the first one and Rhythm owns the second one. Wow. Okay. Yeah. So, I want to own all of these. I want to own like Lily sounds great, you know, and a doubling of the market cap, but I really just want to own Madrical and Rhythm like yesterday, >> you know? Doesn't have risk because it already has a billion dollar product that's FDA approved. rhythm al although it treats these genetic diseases >> um it kind of rose because investors don't study biotech like rhythm market cap rose because investors said wait that's a weight loss company and it's like it's completely different it's completely different >> right >> because it's a once a day injectable for genetic obesity right >> but this pill is completely a gamecher. If this pill works, I think that Rosh or Bristol Myers or Novartis will figure it out eventually. >> Sure. >> And probably buy Rhythm up. >> Mhm. >> So, I don't I can't say it will go up a 100x because Rhythm has no marketing department. They have no direct to television advertising budget. >> Right. I see. >> Right. They're gonna get a big pharma partner or they'll get taken out one way or another because it's too lucrative if it works. It's just too big a prize. If your neighbor is growing gold >> Yeah. >> and silver >> and building a sidewalk with gold and silver coins and they go on vacation. >> Yeah. You're going to go next door. Yeah. >> Like it's it's literally too valuable. So, it's an intriguing technology >> and it has one competitor and the competitor is so ridiculous, Dan, I have to tell you about it. >> All right. >> It's a company called Palatin. Okay. Remember how I said the melanin one receptor is bad and the melanin 4 receptor is good? >> They have a melanin one receptor drug. It's approved for female uh suppressed female sexual desire. It's FDA approved. You can only take it uh up to eight days a month or you get permanent skin darkening. Permanent skin darkening. >> Okay. >> Okay. It has a blackbox label that says don't take more than eight times a month. Okay. So, Palatin said although we have an MC1R drug, we kind of along the way hit MC4 as well. So, let's develop it as a weight loss drug. They ran one short trial. They triggered they used it once daily. is once daily more than eight times a month. >> Sounds like 30 times a month to me. >> So, they're triggering permanent irreversible skin darkening >> in patients and it's like it's not going to work. The FDA is not going to let you do this. >> No. No. So they're this small company is claiming like to have a weight loss drug and it doesn't take much objective reasoning to go like that is never going to work. >> Okay. >> So right now 60 drugs are being developed to hit GLP-1. There's one injectable that rhythm for MC4 >> and one pill that rhythmones for MC4. And the pill data looks pretty good so far. Like the phase two data looks pretty good, >> but they still have to run phase three trials. They're still a few years out, >> right? I was going to say when you say if it works, where are we? So you're saying three years, we'll know if it works. >> In three years, they'll be able to sell it. >> Mhm. >> As we see the current data come out, we'll know whether or not it works. But until you run larger scale safety trials and repeat the positive trial, you can't win approval to put a drug in people. >> Okay. So, you know, if it works, you know, some substantial time before you can sell it. Um, when do you like is there a is there a um, you know, a when it works date for you or you're just kind of is it a wait and see how how long it takes? >> They're in phase two, Dave. Where are they right now? >> They're in phase two. Okay. >> So, their first target >> Mhm. >> is essentially people who've been in car accidents or had brain surgery for some reason or another >> and are missing the part that would control their hunger. >> Okay. >> Um so that's about an 80,000 person cohort globally. It's not very common, but you can sell the drug for a lot of money, >> right? So, they're chasing that first. >> Okay. >> But if it works in them, it will work in everybody else. >> They're still humans, right? >> Yeah. >> So, we'll get good data in 2026 to confirm whether or not it works. >> I see. >> But it won't become an obesity pill to rival Lily. >> Gotcha. >> Probably till 2029. >> Yeah. They they'd have to run a phase three trial, right? They wouldn't they wouldn't go for >> Yeah, >> that's >> okay. And so the ne then the next question becomes, all right, we get through we get through phase two, we're in 2026 and it goes out to this, you know, group of folks from, you know, who had accidents and and you know, as you've told me, they're human. If it works in them, works in everybody else. But then they have to do a third trial. I mean the market has to get wind, you know, the market has to know what you just told me, right? The the market has to know that. So from there it becomes what's the risk in the trial? What's the risk in that final trial? >> This drug hits MC4 a 100 times more than it hits MC1. >> So the known side effect is that uh white folk get tan if they're taking it. >> Okay. Um, but as you get into more and more people, we don't really know what unusual and rare side effects could occur. That's the risk, right? >> The other risk is we have a very good handle on how much Lily's pill helps you. And if this pill doesn't help as much, then it will have a competitive disadvantage. >> Right. >> I see. Okay. But at some point, Lily's pill is going to go generic because it's patent will expire and this company's patent has five more years of life where it would be the only branded product that works for weight loss. So >> I see. And patents are what? 20 years. >> 20 years from when you start your phase one trial. Oh wow. >> Before you put it in people, you have to own rights to it because the FDA establishes that you have to have the ability to manufacture this drug or why are you bothering and why are we bothering letting you put it in people? >> I see. >> So, you know, 10 years of trial development and then 10 years of sale and then you're pretty much done. Got it. Okay. So, it sounds like um it sounds like there's, you know, there's more there's clearly more risk here. And um but the rewards are pretty big. Rewards are rewards are massive. Like when you take all three of these stocks together, aren't they? I mean, it's just like hundreds and hundreds of billions, trillions of dollars, really. These are this is a massive trend. >> Yeah. And you know what? Dave gave a great way to diversify within that trend too, right? He's given you he's given you a big name. He's given you a a >> midcap name and he's given you sort of a your classic biotech binary outcome type of >> type of type of pick. >> Right. I like that. >> I see that. I see that now. And and you're right. It's uh >> Yeah, it's the Yeah. I mean, I don't pick my own stocks. I like that my readers get to take advantage of what I find >> because they're the ones who pay me to go around the world, you know, to go to Vienna to watch Eli Liy present its data in front of thousands of scientists >> and me, >> you know, it's a really cool John's gone on these trips with me as well. >> It's it's really cool to see science sort of happening >> or at least medicine, emerging medicine. It's it's fun to track this >> and I like doing it for my readers. So, I can't really take advantage of this. And my this is my December issue. And what we covered is the safest biggest company in the world is safer and bigger than anyone knows because Nova Nordisk is making a lot of noise about a drug that's going to put Nova Nordisk out of business. I don't know why they're doing it. They're doing it because they're afraid of Eli Liy. But Eli Liy is the smart play. And then Madrical is is a billion-dollar drug from a company you've never heard of. >> Yeah. >> Is ridiculous. Like an average investor who finds Madrical will be very happy with the results, >> right? >> Yeah. >> And for people who have high risk tolerance to find out that there's another way for, you know, if you can get your head around this idea, Dan, a contrarian. I know this might be a foreign word to you. Yeah, maybe not. >> Rhythm's like a really cool contrary play. It's the place that nobody's looking, >> right? >> Yep. >> Yeah. So, >> very very cool. >> Um, it makes but but as John said, it makes me want to own and and what you just said too, it makes me want to own all three. It makes, you know, it's like a little mini uh, you know, biotech pharma portfolio, you know, complete with like a massive cap major. Um, and, you know, like John said, massive cap, midcap, and then a binary outcome, smaller cap, uh, it's it's kind of perfect. And it just before when I was saying that that this the potential here is massive. It's already massive. But I guess what I mean is, you know, this has like changing the several aspects of the global economy kind of potential. You know, one of the guys who I talked to a few years ago, they were already talking about how United Airlines was saying, "Huh, we're going to save x amount of dollars on jet fuel in a few years. You know, we need to pencil that in." and you know and whatever else um happens when people lose a lot of weight and you don't have to transport that weight. You know, automobiles, whatever. All kinds of transportation modes is just like one one effect. You know, what people eat and how they go, you know, when they go out to eat and what the the food trends in the in the restaurant industry look like from here on out is another thing. I mean, it just this seems like one of the biggest um you know, biotech or pharma or whatever trends of my lifetime like what was bigger what what's as big as this before this? I I I honestly don't know. >> So, here's why these are here's why these three pills are different. >> Okay. >> Okay. >> Everyone is stopping taking the injectables because they're injectables. They're stopping taking them. Yeah. So all these, oh, fuel, fuel will change, airports will change, cars will change, you can put less air in your tires. None of that shit's true because people roll into these drugs, they roll off them, they gain the weight back, and they're back where they started, >> right? >> So, what kind of maintenance therapy can you give people so that they actually improve, right? Mhm. >> A once a day pill, a once a day pill that saves their liver, which had been damaged because of obesity, and then recovers, and maybe a different approach to hunger. Like that's it, right? Like these three, >> like everything we've seen from GLP1s, that's the opening act. >> This is the real deal. These pills are the real deal. No one sees them coming. Wow. No one sees it coming in terms of like the effect on market cap and and market value which is amazing. I mean you know to find I have to say uh your focus on you know 10 to one riskreward potential is um it's enviable. We don't what what what I do in my newsletters we don't always find that kind of stuff. You know we we're often good with three to one or so. Um and and I know a lot of folks, a lot of traders and investors, they're like, "Hey, 3 to one riskreward and I'm excited, you know, but 10 to one is um is huge." So, thank you for bringing >> I mean, that's our goal. >> Yeah. Well, sure. No, but it's the it's it's more than it's your goal, but it's your orientation and it's it's credible though, right? Because you found some already and you've proven your ability to find them and we don't expect you to find them every 10 minutes. But the point is the potential is there and you're capable of finding it. It's exciting. That that alone is extremely exciting. Like somebody tells me, you know, I want to find hundred baggers. I'm like, yeah, you and everybody else. As long as you can wait 40 years for them, you know, you're in business. But a a credible path to, you know, these 10 to1 risk-to-reward setups, uh, is very exciting to me is what I'm saying. >> Yeah. You know, you said that Mr. market already knows this, but the truth is like our colleague who's still alive but is no longer working with us named Steve uh used to buy the biotech index, >> right? Because everything's in there and it's all perfectly priced. It's like that's not remotely true. >> Yeah. >> Right. In the biotech index, there's some biotechs that we know will fail like Novo's new pill >> or in Mantiva's pill that >> requires liver screening and makes you gain weight. Mhm. >> Or Palentin's pill that makes you permanently get skin darkening. >> Right. >> They're all in the biotech index. We're We're sorting out the good from the bad. >> Yeah. >> That's what we're doing, right? >> Yep. You counseledled me away. I was talking about the biotech index, you know, two or three podcasts ago when you when you were talking to me and you counseledled me against that. I'm very grateful for it. Um, anytime somebody can say can just, you know, um, give me a nice razor so that I don't have to worry about something and think about it again, I'm grateful. So, and you did that for me with the biotech index. So, I'm I'm we're at a that this is the time for our final question, right? We've we've covered these three amazing stocks here, um, you know, Lily, Magical, and Rhythm, and summed them up nicely and given people a reason to own all three of them. So, it's time for our final question, which is the same for every guest, no matter what the topic, even if it's a non-financial topic. So, and it's just for our listeners benefit. If you could give them one takeaway, one thought um that you'd like to deliver to them today, what would that one takeaway be that you'd like them to have from this? >> Lily's pill is a hidden monopoly. Novo Nordisk is buying ads to say that their WGVI pill is is available, but Nova Nordisk cannot afford to make its own drug. Lily's Pill is the promise that we've all been waiting for. >> Wow. Okay, that's powerful. Lily Spill is the promise of this of these weight loss drugs that we've all been waiting for is what you're telling me. >> Yeah. Fizer keeps trying to buy weight loss drugs and Fizer CEO constantly goes we're going to split a hundred billion dollar market with Lily and then their drug fails. Then they go like we bought a new drug and we're going to use this drug and split a hundred billion dollar market with Lily and then that drug failed and now they bought a third drug and said we're going to split a hundred billion dollar drug with Lily. It's like, "No, you're not Fizer because your drugs keep failing. >> The drug that's going to come out that's going to do everything is Lily's. You know it. We know it. Everyone knows it." >> All right. Well, um, thanks for being here, Dave, and thanks for, um, for helping me out, John. I I am not a scientist. I need I need a guy like John around if I'm going to talk to a guy like Dave. >> Yeah. >> Hopefully that was helpful. >> All right, man. Thank you. Thank you both for being here. Um, I have learned and I know our listeners have learned a great deal and we will hopefully talk to both of you again real soon. >> Cool. Thanks. Thanks, John. Thanks, Dan. >> See you guys. >> That was a lot of fun. I always have fun talking with Dave Lashmmet. And thank goodness I was smart enough to bring John Engel along to help explain it all for me. Uh that was a a great education, a mini education on weight loss drugs. And we got not one, not two, but three ticker symbols. We got Eli Liy LLY. Massive opportunity there and a nice big cap safer company, right? Then we got Madreal with 10 to one potential. Dave told us amazing. And then the riskier pick was Rhythm, which is RY TM. That's the ticker symbol for that. So, we got three great ways to play weight loss drugs. It's a massive trend. Over time, it's going to be worth trillions and trillions of dollars. I I really do think it's going to change the global economy. And these three drugs, you you heard Dave Dave said, especially with what Lily's doing, this is finally the real promise of weight loss drugs delivered in a once daily pill and it's a technology that no one else has. Everyone the competition is behind or they have a product that is just not going to get it done. So that's super exciting. plus these other two opportunities to do, you know, slightly different things in weight loss um with huge potential returns there. Really exciting. And it's exciting to me and I hope to you because honestly, how much do you know about biotech? How much do you know about pharma? You heard Dave talk, you know, don't buy the biotech index. get a guy like Dave on your team, you know, read Stanberry Venture Technology and and use those picks, right? They're much more intelligently chosen than just throwing money at the biotech index. And I recommend index funds in my Ferraris Report newsletters. I'm not saying they're bad. I'm just saying in this particular case, you can definitely absolutely do a lot better, right? So, we got Lily, Magical, and Rhythm. Really exciting stuff. Okay, so one more time, Lily, ticker symbol LLY. Madrical ticker symbol MDG L. And Rhythm, ticker symbol R YTM. I hope you enjoyed that as much as we really, really truly did. And don't forget to like, subscribe, and sign up for our free e-letter. Opinions expressed on this program are solely those of the contributor and do not necessarily reflect the opinions of Stanbury Research, its parent company or affiliates.