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The first time was ca 1999, when I thought Amazon had the possibility of revamping consumer behavior in the US. I bought some (then sold some first when I realized I had no idea what the price should be, in the absence of, oh, net profits, and the rest a few years later when it seemed as if AMZN was forever an accounting house of cards: there's only so long you can sell things at a net loss before gravity catches up.) I did buy back some when AWS arrived on the scene. Made some money, not a lot.

The second time was when Apple came out with the iPhone in 2007. With a sixteen- and fourteen-year old son in the house, my unbidden first thought was: Another societal game-changer....they're going to sell a zillion of these things. I bought (then donated the shares to a nonprofit I chaired after a quadruple).

Now it's the GLP-1 agonists.

Despite the run-up of the last few years, I think we're at the inflection point of the curve, and that the use over the next couple of years may be constrained principally by manufacturing limitations. There's increasing anecdotal rumbles that the Ozempics of the world have benefits for everything from arthritis to hypertension to diabetes to almost any immune-mediated disease, and I strongly suspect in a group of 100 insured overweight adult Americans (which is to say, maybe 120 insured adult Americans), six of them may be on it this year, twelve next year, sixty in five years and ultimately only topping out in as many of them who can be persuaded into a weekly injection.

Bad things can, of course, still happen. Here, I also have a strong sense of deja vu: I was in my training when a class of drugs called the HMG CoA reductase inhibitors were first being tested. Given their mechanism of action I was wary of potential long-term liver toxicity at least, and thought they would mature to be at best a niche drug.

I was wrong. They're now called "statins" and it seems like anyone over 40 has a prescription for one.

Getting back to the GLP-1 agonists, there are five in the US right now. Clinically interchangeable, as near as I can tell:

Dulaglutide, "Trulicity", approved by the FDA for type II diabetes (DMII, the very common adult type). Mfr: Lilly

Exenatide, "Byetta", for DMII. Astra-Zeneca

Liraglutide. "Saxenda" for obesity; "Victoza" for DMII. Novo Nordisk.

Semaglutide. "Wegovy for obesity; "Ozempic" for DMII Novo Nordisk .

Tirzepatide (slightly biologically different from all of the above; doubtful significantly different I think) "Zepbound" for obesity; "Mounjaro" for DMII. Lilly

So it looks like Lilly and Novo Nordisk are ahead, with four of the five drugs (and seven of the nine approvals) between them. Others may follow, but there's hella firs-mover advantage embedded in this group already.

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In addition to a very large amount of Berkshire Hathaway in my core retirement nut, there's also the $2,000 IRA I opened in 1986? 1987? I moved it all to BRK about 15 years ago, and it's now around $45K. It's earmarked for nothing at all, and will probably either be passed to my heirs or possibly as a discretionary expense a long time from now (blowout extended family vacation in ten years?)

Anyhow, Jim has just convinced me ( https://www.shrewdm.com/MB?pid=474517153 ) that BRK is most likely to sit there for the next year or so. While I'm leaving the core retirement nut as-is, that may be the final straw for this discretionary IRA.

So the next step is to look at Lilly and Novo Nordisk, mostly for big hidden snakes under rocks. Barring that, I might soon just split that $45K into these two, then shut the vault on it for five years or so.

So I'm putting down my marker, and inviting y'all to come on back here on, say, July 1 2029, and see how I did predicitng that 50:50 LLY:NVO would not be substantially inferior to 100 BRK over that specific five-year period.

Unless some unexpected long-term toxicity rears its head. It happens, even in the FDA era (look up terfenadine in Wikipedia). In that event, no blowout vacation, and I take them all out for ice cream instead. That would be ok; I like ice cream.

--sutton

So the next step is to look at Lilly and Novo Nordisk, mostly for big hidden snakes under rocks. Barring that, I might soon just split that $45K into these two, then shut the vault on it for five years or so.

So I'm putting down my marker, and inviting y'all to come on back here on, say, July 1 2029, and see how I did predicitng that 50:50 LLY:NVO would not be substantially inferior to 100 BRK over that specific five-year period.



I am temporarily out of Berkshire, and I share the short term pessimism about the likely returns from Berkshire in the next couple of years. However, I would take the Berkshire side of the Berkshire vs LLY:NVO bet in a second.

Unsurprisingly, the dramatic success of Lilly and Novo Nordisk has opened the floodgates for investment in these drugs, and there are a ton of them coming. Novo Nordisk has the most popular single agonist (semaglutide), and the most popular double agonist (GLP and GIP receptor agonists) at bet, tirzepatide, and they have a great triple agonist (GLP, GIP and glucagon agonist), retatrutide, with even better results and that is close to approval. But there are a lot of competitors with drugs that are coming, and I don't think having the first one (semaglutide) will help Lilly very much if a competitor comes up with one that is as effective but has slightly less side effects.

And surprisingly, semaglutide has been around for awhile, and only has patent protection for another 18 months. After that, watch out for a flood of generics, and Novo will have to cut its price a lot to keep market share. At $641b in market cap, and at 49 times earnings, Novo is priced for a lot of growth that may or may not happen. And that's not counting the fact that accidents happen - you give the example of the statins that ended up being not too toxic, but look at another example, the fen-phen drug that Wyeth produced, that looked like it would be a homerun until 5 years after its introduction, when cardiac valve problems completely dissolved the franchise.

Lilly's tirzepatide (Mounjaro) has patent protection until at least 2036, so it is not as vulnerable, but at its $847 market cap, at 131 times earnings, Lilly is priced as though their profits will rise quickly for a long time. That might work out, but if you can get cheap generic semaglutide in a couple of years, can Lilly still charge $1000 a month for a slightly better drug? Maybe they will make it up on volume, but there are a lot of risks here. Look at what happened to Pfizer's lovastatin (Lipitor) after patent protection ended in 2011 - still the most popular statin and a very profitable drug, but sales went from $13b at the peak (2006) to less than $2b a year after patent protection ended in 2011.


Which one could be a homerun like Amazon or Apple? Definitely LLY/NVO - Berkshire is not going to be up 10 times, 10 years from now. But there is also a huge downside that is also possible for these 2 drug companies whose value is almost entirely supported by semaglutide and tirzepatide. I wouldn't be at all surprised that Berkshire is up 20% in 5 years and LLY/NVO are down by 50% - in fact, that may be the most likely scenario.

dtb

Unsurprisingly, the dramatic success of Lilly and Novo Nordisk has opened the floodgates for investment in these drugs, and there are a ton of them coming. Novo Nordisk has the most popular single agonist (semaglutide), and the most popular double agonist (GLP and GIP receptor agonists) at bet, tirzepatide, and they have a great triple agonist (GLP, GIP and glucagon agonist), retatrutide, with even better results and that is close to approval. But there are a lot of competitors with drugs that are coming, and I don't think having the first one (semaglutide) will help Lilly very much ...


Sorry, I mangled those 2 sentences.

To be clear, Novo Nordisk has the first successful drug, the single agonist (targeting the GLP-1 receptor) semaglutide, including its commercial formulations, Ozempic (and Rybelsus, for the tablet form) for diabetes, and the same drug, with a slightly different dosage (2 mg instead of 2.4 mg), is branded as Wegovy for the weight loss indication.

Lilly has the slightly more effective drug tirzepatide, a double agonist (a single molecule targeting both GLP and GIP.) It is also marketed under 2 names, Mounjaro when it is for diabetes, and the same drug (with the same dosage levels) is branded Zepbound when it is for obesity.

(This is mostly marketing: nothing prevents doctors from using these drugs interchangeably, and in popular use, we mostly hear about Ozempic and Mounjaro, whether the speaker is talking about diabetes or, more likely, obesity. The medically and scientifically preferred nomenclature is to use the generic or nonproprietary drug names, semaglutide and tirzepatide in this case.)

So Novo has the first hugely successful diabetes/anti-obesity drug, with patent exclusivity expiring in 18 months, and Lilly has the second, more effective drug, protected until 2036. Novo's loss of leadership to Lilly is an example of how the first-mover advantage only takes you so far. Lilly is well-positioned with what may turn out to be the 3rd blockbuster, the triple agonist retatrutide (targeting GLP-1, GIP and glucagon receptors), but the field is developing rapidly, and there are sure to be competitors from all the major drug firms.

dtb

DTB: good points, and both ones I considered for my initial post. I didn't because I thought I was bumping up against the TL;DR threshold. Besides, I was hungry.

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First, the easier one: phentermine/fenfluramine. About the only thing it had going for it was a catchy name ("phen/fen") and a completely wide-open field from the outset i.e. no magic weight loss pills out there.

...the fen-phen drug that Wyeth produced, that looked like it would be a homerun until 5 years after its introduction, when cardiac valve problems completely dissolved the franchise

However, I disagree that from the provider trenches it ever truly looked like a home run. Yes, it was prescribed by a few providers (for a lot of patients). My recollection was that locally it was principally written for by a TV doc and a midlevel who later went into property development. 'nuff said there.

But for the large majority of primary care docs, the drugs looked scary from the outset (when no one was yet suspecting the mitral valve issues). Short term weight loss? Via a blood-pressure-increasing stimulant? Nontrivial risk of drug dependency (not weight loss dependency, but amphetamine-like dependency)? Summary: no careful, excellent docs that I knew routinely prescribed it. Crickets.

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Second, what could be a thesis-level post: drug patents.

My impression goes something like this: every time a new drug class comes along, there is an initial molecule or two, then a bunch more, at which point Darwin steps in and ultimately leaves maybe three. Elapsed time from growing clinical enthusiasm (not development pipeline) to maturity - maybe fifteen years +/-.

In the last two generations, unique new drug classes following this script have been: beta blockers; ACE inhibitors; histamine antagonists (e.g. cimetidine); protein pump inhibitors; calcium channel blockers; benzodiazepines. Widen the definition and timelines a bit and you could add halogenated anesthetics, cephalosporins and...you get the idea.

And yes, half or more of the patent protection clock may have run out by the initial surge of enthusiasm, arguing for backing the second drug out of the gates.

But there is obviously enormous in-house economic pressure on the drug companies to modify their own molecules to come up with a unique patent for a just-different-enough successor. In this, they have the in-house expertise as well as the trial support team to get a newly-patented successor molecule to market as less toxic, more efficacious, and/or approved for a new indication...while the patent-protection clock gets reset.

It will be a bit of a swamp. But, it's going to take awhile for Lilly to stagger, I think.

I absolutely wouldn't commit to this for ten years, but if I commit at all it won't be less than two years, and probably around fiveish. Or fourish, or sixish. And if during that time, NVO staggers while BMS or ABBV or MRK or whoever comes up with something clearly better, than I'll probably get into the vault just long enough to switch horses (and metaphors)

This could go on, but at this point I'm starting to bore myself. Never a good sign.

--sutton

Where did the money come from? This is a critical question that always needs to be asked.

Amazon

At first the money came from bookstores, late from goods retailers, and later also from grocery retailers. This doesn't include the new line of business called AWS (that also draws in external money). So, all the money came from external sources and created a new industry ("online retailing").

Apple

As the iPhone gained popularity, the money came from all over the place. Anything in the audio realm. The cellphone businesses. Anything in the digital music business. Almost the entire camera industry. Later new businesses (the Apple watch) drew in money from the watch industry. All from external sources and created two new industries ("smartphone" and "apps" and maybe part of "cloud"). A little bit of the money came from inside sources as the iPod was essentially killed by the iPhone, but they did manage to create the iPad that added some new business (with the money coming mostly from outside sources).

Pharma (GLP1)

These are rapidly gaining popularity. And the effects are reduced medical care and reduced other pharmaceuticals. So the money is partly coming from external sources (doctors and hospitals) but some of it, maybe a lot of it, is coming from internal sources. If pharma sells $500B of GLP-1 stuff, it is entirely possible that they will sell $200B+ less of their other stuff. That would mean that 40% of the money is coming out of their own pockets (products).

good points, and both ones I considered for my initial post. I didn't because I thought I was bumping up against the TL;DR threshold.


I'm sure I hit that threshold all the time, but people are free to stop reading if they want, so I've never let other people's boredom stop me.


...the fen-phen drug that Wyeth produced, that looked like it would be a homerun until 5 years after its introduction, when cardiac valve problems completely dissolved the franchise
========
However, I disagree that from the provider trenches it ever truly looked like a home run. Yes, it was prescribed by a few providers (for a lot of patients). My recollection was that locally it was principally written for by a TV doc and a midlevel who later went into property development. 'nuff said there.

But for the large majority of primary care docs, the drugs looked scary from the outset...


This was my experience also: a lot of mistrust by GPs, and that turned out to be prudent. Still, apparently there were 77 million people who got the drugs before sales were stopped in 1997 (although only 6 million Americans).

I doubt these problems will apply to the GLP/GIP/glucagon agonists - there's a chance, but the probability is small. But what if you can get a $75 shot of semaglutide every week, instead of paying $1000 for Mounjaro? How many insurers are going to go along with that? I think that is the big risk, along with the flood of competing me-too drugs that are coming from all the companies jealous of LLY/NVO's success. I wouldn't be surprised to see Ozempic/Wegovy/Mounjaro/Zepbound continue to do well, but I don't think they will be able to keep increasing their revenues at the current pace when there is a fight for market share at the high end and cheap generics at the low end.

dtb

Update: I went ahead and did it

On July 11, I sold x shares BRK.B @ $411 (P/B ~1.62) and with the proceeds purchased approximately equal amounts of LLY and NVO

Parameters are:
- hold for at least two and no more than five years
- reserve the right during that period to change holdings to different pharmas, as long as the rationale remains GLP-1-agonist-based.
- then cash out and repurchase greater-then-x-shares BRK.B with the proceeds

As Shrewd'm is my witness.

I'll report back in July 2029, or when I throw in the towel, whichever comes first

-- sutton

(Also: here's a good review of competitors/generics in the pipeline, as well as a few important patent expiration dates that appeared in The Guardian a few days after my initial post: https://www.theguardian.com/business/article/2024/... )

On July 11, I sold x shares BRK.B @ $411 (P/B ~1.62) and with the proceeds purchased approximately equal amounts of LLY and NVO

Parameters are:
- hold for at least two and no more than five years
- reserve the right during that period to change holdings to different pharmas, as long as the rationale remains GLP-1-agonist-based.
- then cash out and repurchase greater-then-x-shares BRK.B with the proceeds

As Shrewd'm is my witness.

I'll report back in July 2029, or when I throw in the towel, whichever comes first


I looked at these 2 drug makers again today because Novo reported a 'disappointing' trial result for its new drug with the not-very-catchy name CagriSema. Cagrisema is a combination of 2 drugs, the GLP inhibitor semaglutide (the generic drug sold as Ozempic or Wegovy or in pill form as Rybelus), along with another, newer drug called cagrilintide, which is a dual amylin and calcitonin receptor agonist, so it works (or it was thought that it would work) by a different mechanism.

The trial results show that that combination 'ONLY' got people to lose 22.7% of their weight after 6 months, whereas greedy Mr Market had expected 25% weight loss. This means that it's probably not much better than semaglutide, their existing drug, and probably not as good as Lilly's drug, tirzepatide. Novo shares plunged 20%, while Lilly shareholders rejoiced and sent shares up about the same percentage initially, though by the end of the day, LLY had given up most of its advance.

So as we can see in the table below, after about 5 1/2 months, Berkshire has pulled into a pretty substantial lead.


So here's where we were after 5 months:

		2024-07-11	   2024-12-20		
	stake	  $/sh	  shares   $/sh	   new stake  % change
BRK.B	 $40,000  411.00  97.32	   453.60  $44,146     10%
LLY	 $20,000  930.75  21.49	   768.48  $16,513    -17%
NVO	 $20,000  140.67 142.18	    85.01  $12,087    -40%
LLY&NVO	 $40,000 			   $28,600    -28%

So Berkshire is up 11% so far, with the GLP makers down 28%. This is despite the fact that Lilly and Novo have done well with their drugs this year, with a roughly 20-25% increases in sales, and they have worked hard to make enough to meet demand, a good problem to have. But Lilly still had a price earnings ratio of 83, so they better keep growing a LOT if they want to justify their share price. Novo is priced much lower, at 28x earnings, which is completely justified, I think, as its semaglutide drugs will come off patent already in 2026, and its drugs have not performed quite as well as Lilly's GLP-1/GIP dual agonists (Mounjaro and Zepbound).

I still think there will be lots more competition from other drugmakers in the next few years and it will be hard for them to sustain the price of their drugs and thus their current share price. But 6 months is way too soon to judge who's right.

Regards, DTB

Yup. Agree (or at least nolo contendere) with all your points, but will reinforce one and add another:

But 6 months is way too soon to judge who's right.

Expanding on why I chose 24-60 months as my parameters: I think the two-year lower bound allowed for expansion of the market with increased FDA approvals and more pressure on insurance companies to fund as the data continued to pile up (here's my additional point: Lilly's Zepbound/tirzepatide just granted authorization for sleep apnea this week, a condition with very limited other therapies), and for pipeline issues to work out (e.g. the autoinjector bottleneck).

I still think there will be lots more competition from other drugmakers in the next few years and it will be hard for them to sustain the price of their drugs and thus their current share price.

The five-year upper bound was with an eye to your point of patent expiration/emergence of competitor drugs and generics. But I think the first-mover advantage that LLY and NVO have will slow down in a period measured in years, not a few quarters: they have the pipeline, as well as in-progress looks at their clinical trial data.

Besides, I don't think I can pretend to see much further than two years out on just about anything. The risk of one or all of these drugs having an unsuspected Achilles heel is nontrivial, as is unexpected success of a non-LLY/NVO oral substitute.

Nonetheless, having the reigning champion a half-lap ahead only a short time after the starting gun certainly reinforces my putting down only a percent or two of my BRK on this.

You may well be right, or maybe not come mid-2026 to mid-2029 (and I get to choose the exit day). We'll see.

--sutton

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