S&P Global Inc. (SPGI) Earnings Call Transcript & Summary

Hello, everyone, and welcome to today's webinar. My name is Melissa Otto, and I am the Head of Visible Alpha Research and S&P Global Market Intelligence. I'm thrilled to be a moderator for today's session, GLP-1 Drugs at a crossroads analyzing the market dynamics and growth potential. Before we dive in, I have a few housekeeping reminders. All engagement tools are resizable and movable so feel free to adjust them for optimal viewing on your monitor. We want this to be an interactive session. While we may not be in the same room, your participation is key to making this experience engaging. We encourage you to submit your questions throughout the presentation. [Operator Instructions] If you're joining us for the replay, please use the request demo link found under the related content widget to reach out to us. You can also access our webinar replay portal to revisit this session and others on demand. This webinar features close captioning in English. To activate it, simply click the CC icon in the media player. At the conclusion of this session, a brief survey will appear, completing it will take less than a minute, and your feedback is invaluable to us. It helps us understand what aspects of the webinar you found engaging, identify areas for improvement and gather suggestions for topics you'd like us to cover in future sessions. Now please note that the activities of S&P Global Market Intelligence are independent and separate from S&P Global Ratings, S&P Global Ratings maintains a separation of analytical and commercial activities. So thank you for joining us today. I am pleased now to introduce our panelists, Simon Baker and Rajesh Kumar. Simon Cohead's the global biopharma research team at Redburn Atlantic and has been covering the pharma sector since 2001 across sell side and buy side. Simon holds a first-class degree in chemistry and a PhD in organic chemistry both from Imperial College, London. He's also a CFA Charterholder. Rajesh Kumar joined HSBC in 2007 and is Head of Life Sciences and Healthcare Equity Research. Prior to joining HSBC, Rajesh worked in the drug discovery industry as a scientist, Rajesh holds a Master's in industrial chemistry from IIT Kharagpur. Thank you, Simon and Rajesh, for being here with us today. We're very lucky to have your insights and to engage in this dialogue. Now let's get started.

Good morning, good afternoon, everyone.

In the next 45 minutes or so, our main goal is to provide an exploration of the range of used and estimates on the GLP-1 commercial opportunity. We plan to explore the potential total addressable market for obesity drugs and the growth trajectory in the U.S. and abroad. We will also go through some of the valuation assumptions versus Visible Alpha consensus. Let's kick off the discussion with a 2-minute overview of the GLP-1 space. Simon, let's start with you. Are you cautious or bullish on your outlook.

Thank you, Melissa, and good morning, good afternoon, everyone. I would say cautiously optimistic, probably a little more cautious than some others in the market. The opportunity is clearly enormous globally. The question is how much of that demand can be satisfied both in terms of how much product can be supplied into the market. But more importantly, we think from -- in terms of thinking about the addressable market size, is the ability of payers to pay for this. And that for us is the important consideration here. We know the opportunity is enormous in the U.S. We know it's enormous around the world. Somebody is ultimately got to pay for this, and there will be a balance point between demand from patients and capacity from payers to satisfy that. So I would say, overall, we are optimistic, but temper that perhaps with a little bit of caution.

That's great. How about from you, Rajesh? Do you have a different view?

I think Simon has beautifully summarized it that you have to be cautious about forecast, especially when they pertain to future, right? At the moment, trouble we have is you've got 2 of the leading players, Lilly and Novo, who are putting capacity like it's going out of fashion with the assumption that there are close to 1 billion patients who are obese, overweight and will potentially require -- a section of this will potentially require treatment, which will -- should put the $120 billion to $150 billion. I don't know people have different estimates, but the numbers, clearly, if that assumption is true, could be higher than $120 billion and Simon asks a very pertinent question. How do you pay for it? Because at the end of the day, the money has to come out of somebody's pockets. The way we think of it is as these companies build out the medical outcomes data, at the moment, we only have cardiovascular outcome on Wegovy, but as you start adding more, at the moment, I mean you're spending $1.2 million or something like that to save a heart attack, right, the patient on a bed. By the time you add chronic kidney disease, HFpEF and other indications, the risk reward balance and reimbursement access might start improving because the knock-on effects of reducing obesity on broader health care can be quite meaningful. So the unlock of that reimbursement potential remains quite crucial for this market to be at $120 billion, which gives consensus happily put across in the models. I know the GLP-1 market on BA consensus is a much bigger number, $195 billion, but it has some pipeline assets and the risk adjustment and they're not all additive. So yes, longer answer, but yes, some of the nuances there.

As you were speaking, we had a question come in from one of our guests. How do you expect the rebate landscape for obesity drugs to evolve in the coming years?

I start on that. In a word dramatically, at the moment, the list price for Wegovy is about $1,320 a month. We think that the rebate is around 40% to 50% at the moment. If we look at the U.K. market, which is almost entirely private pay, the net price that people are paying in that market is effectively an 85% rebate. Now I'm not suggesting that's where we're going in the U.S., but that's clearly a large and attractive market for Lilly and Novo and they are happy to sell at that price point there. So I think over time, it's going to fall significantly. And it comes back to the opening point I was making that there is this notional capacity of the system to pay and that is a dynamic between price and volume. So as the volume goes up, the price will go down. And we think it will at some point, equilibrate at this unknowable level. And that definitely means that the price point has got to come down further in the U.S. And I think that's a natural process in a 2-player market, as we've seen already, there's already been an increase in rebate since these drugs launch. But as we get additional products in there, that will force that lower through selective formulary positioning. So yes, I wouldn't want to make a definitive pronouncement of what level and what year, but I think there is still quite significant room for rebates to increase over the coming years.

I would imagine that what you really need that rebate pathway to unlock is more medical outcomes data. Basically, the more outcomes data you start adding, you can start making the case of what is the value of obesity reduction? I mean just weight reduction itself can be interesting, but you add cardiovascular benefit, the economics of reimbursing becomes more attractive, and you thought adding other indications god help us if we add Alzheimer's to it. The health care logic of not paying for it becomes weaker and weaker. So I think the clinical data will help make the case, but also as far as from a labor market lens, let's not forget who ends up paying for these, these are employers, right? And if you think of the age band you're paying for, you're talking about people who are over typically 35 years of age. It can be different. But if I look at the demographic split of the population. And if I look at the duration and a typical American workers stays in the labor force in that age bracket, you're talking about 8 to 10 years. If you're looking at younger people, younger employees, you're talking about 2 years, right? So if you are paying for their obesity medication when they're younger, the benefits accrue potentially to the next employer. But if the benefits are clear, especially on the cardiovascular or chronic kidney disease, all the ancillary indication side. And then if you have your employees working for you for 8 years, the benefit is most likely to accrue to the employer who has paid for that, right? So I think it's a negotiation between the employers, the employees, the payment system and the pharmaceutical companies, it's a complicated negotiation.

Yes, indeed, thank you for that. Let's have a discussion a little bit about the actual market size versus consensus. Based on Visible Alpha 2032 bottom-up market size consensus, GLP-1s are expected to be $195 billion. From your perspective, where are you coming out on these assumptions? And what do you think will drive that?

Yes. And I think it's interesting that you've talked about the GLP-1 market in totality rather than just obesity. I think that's an important way of looking at it because there is an overlap if you're giving Ozempic to a type 2 diabetic with a BMI of 35, what are you really treating? Are you treating diabetes? Are you treating obesity? Are you treating both? And so there's a bit of a crossover there. It's not off-label usage. It's sort of multimorbidity treatment. So I think thinking about the whole thing together makes a lot of sense, and we can then talk about obesity a bit later. In terms of those overall numbers, $195 billion, that's a little higher, I think, than we've got, not appreciably so when one takes diabetes and obesity together. We can discuss the moving parts within there, again, looking at those numbers. And these are risk adjusted, I assume only Melissa. I wouldn't disagree wildly with any of those figures. I think maybe we may be slightly high on orforglipron, but -- and I think also the other thing worth pointing out is within each of those numbers, the range of underlying estimates is pretty broad. So that $195 billion overall, if you looked at the highest and the lowest forecast there, there's probably quite a lot of spread there more so than we see in most categories.

No. And I tend to agree with Simon's assessment that it's so out in the future. There are so many moving parts. It's very difficult to be certain. But I think geographically, you have to think about where the largest opportunity fits. And I think this is where Simon and I have a slightly different take on the market. Our fundamental view is the largest driver for this market is the U.S. and reimbursed channels are potentially how this market would be driven. Simon, you see it slightly differently, isn't it?

Yes, I think -- a little bit. I mean, the U.S. is clearly a very important market, but consensus tends to split down about sort of 75-25 U.S., Rest of World. Well, in terms of the patient disposition, obviously, the vast majority of the patients are ex U.S., but the capacity of the U.S. market to pay is higher. So we think if anything, there's probably there may be a little bit too much weight put on the U.S. market because if one thinks of the obesity element of that $195 billion, let's say, it's $120 billion then that's probably $80 billion in the U.S., if not slightly more. We think maybe at a lower price point the U.S. -- the ex U.S. opportunity might be slightly underappreciated. And I come back to the example of the U.K., where there are about 0.5 million people on Wegovy or Mounjaro entirely private pay at the moment. Well, that's -- I mean that's a $1 billion market and makes it one of the biggest categories in U.K. pharmaceutical history. And that's just one market and the U.K. is what, 3% of the global pharma market. So if one looks at other private pay options in markets around the world. Maybe there's a bit more to be had there. So perhaps that 75-25 split could be a little more skewed towards the ex U.S. opportunity?

Yes. And there's some interesting points -- did you want to say something, Rajesh?

Yes. Just the way we think of it is the earlier point Simon you made a reference to that. The rebate gross to net will increase for both all these products and you potentially are looking at net prices close to in 5 to 7 years' time, close to [ $3,000 to $3,500 ] and you're talking about sort of 20 million patients, including diabetes, obesity and other indications on an annual basis, getting you to USD 80 billion market size. That's how we see the market evolve. But obviously, there are ranges around it. And depending on whether you look at my teams Amgen MariTide forecast. Lilly's orforglipron all the analysts have their own different view like you debate that all the time. So there are many moving thoughts. But the gross to net piece and the volume balance sort of leave us in a -- with a view that U.S. potentially will remain the biggest sentiment driver for the market. And then obviously, there are a lot of other markets. Yes, that's the only thing I wanted to add.

Thank you. No, that's great to hear. I think let's take a moment, engage what our listeners think about the U.S. obesity market. I think right now, let's run a quick poll. In your view, how big is the U.S. obesity market? What do you think? Can we show the results? Interesting. So we have sort of more tempered views and more bullish views, super bullish views. I'm not sure what the sense about the U.S. market. What do you think? It looks like 43% are coming in over $150 billion, that's a pretty bullish assessment versus your $80 billion.

That's a little higher than we have. So I can understand why people think that because there is -- I mean, the market opportunity is enormous. I mean if you were to treat the U.S. adult obese population, you could get -- I think when we did the numbers, you could get to $150 billion after, I think, about 9 weeks, let alone a year. So the opportunity is huge. It then just comes back to this question of affordability. It's interesting that $150 billion approximately is the oft-quoted figure for the cost of obesity to the U.S. market. So I've often heard people say, well, if we simply transfer that cost into drug therapy, then it's a net neutral impact. It's a nice idea. The challenge there is that the cost of the therapies is extremely easily identifiable. The location of the costs from the impact of obesity are very diffuse, they're not well quantified. And also they don't sit in the same bucket as the person that's paying for the drug. So there's a mismatch between who benefits and who pays. But I mean, it is -- if the money were to be found, then $150 billion is not a crazy figure at all and would still be a relatively low percentage penetration. The question is, can we find the money.

The only thing I would add to that and absolutely on point, Simon that without the money it's all spreadsheet exercise. I can take any 2 numbers and multiply and get a market size, and it would make no sense. But when I think of the demographics of obesity, and I'm thinking about where people are obese, what are the age bands where prevalence of obesity is greater. I know there's adolescent obesity rising and all of that. But in terms of that treatment is being seek, you're looking at an age band, where if you look at the employee population and you look at how long those people are employed with both employers, I think you can start making an argument that the cost of obesity and the accrual of benefit of that obesity can come down to the same employer if you're targeting employees with a certain degree of tenure. And that's not going to happen in a macro economically cyclical weak backs. You need a bit of steady macro environment for 2 or 3 years for that to truly unlock, but that unlock will come by a stronger labor market, I think, rather than elsewhere.

We have a question from the audience. So do you expect the GLP-1 drug to be offered as a pill instead of the current syringe application? And do you think this is potentially a catalyst for the U.S. obesity market?

Yes, it's a really interesting -- sorry Rajesh. Yes, go ahead. Okay, so...

I was just saying there are GLP pills coming in the pipeline anyway. Simon, I shut up.

Sorry about that. Yes, it is important because there are -- the other element to this beyond who's going to pay for it is -- who's going to make it? And the problem with the current therapies is scalability. So as we know, Lilly and Novo both announced very, very significant CapEx plans in order to build out that capacity. But ultimately, once you start putting therapies in devices, then the scalability gets impeded, a tablet per se in terms of formulation is indefinitely scalable. There is a consideration on actually making the active ingredient, and that isn't infinitely scalable at all. But it's certainly a lot easier to scale the market and satisfy that need practically leaving aside the financial considerations with the tablet. Also for some people, a tablet is a preferred route of administration A lot of people don't like needles. I'm not sure it's an overwhelming argument because, I mean, nobody likes needles, but face between one needle per week and 7 tablets per week, there's a convenience balance there. So we don't see any mass switch when we get comparable or therapies. There is also the question of not just using these drugs to lose weight, but to maintain that weight loss, is it more likely that people would prefer a tablet when they're stabilizing their weight past the initial induction phase on losing it. And that's very much a nascent area. There's been very little work done so far, Lilly has an ongoing study there, but it's probably likely that people would be more comfortable with a maintenance pill than a maintenance pen.

Just adding to that, when I look at the clinical data so far on oral, if I look at orforglipron from Lilly or oral sema so far, the bit that stands out for us is the discontinuation rate versus a control arm, right, from the clinical data? And there's clearly a tolerability issue with the oral therapeutics. So for orforglipron, which is a true small molecule which Lilly are trying to bring to the market. Manufacturing wise, it looks like it's quite scalable. It's a small molecule chemistry it's unlike a peptide manufacturing relatively even a mere chemist like me can think about it. You don't need to be a super biologist to think about these things. But the trouble you run into is if you stop seeing a compliance issue. First, compliance issue comes from 7 pills a week versus 1 injectable, but also the efficacy to get to the level of efficacy you need to get the same kind of weight loss as an injectable, you're probably talking about a tolerability trade-off. And that balance is difficult, which is why the market has to be segmented, right? The next pill, which comes with another 20% weight loss or 22% is not going to wake up anyone, right? We already have tirzepatide, we already have CagriSema, we already have Wegovy, which give you quite a nice profile of weight loss. You also get semaglutide, you do get the cardiovascular benefit. The question is how do you differentiate the next-generation therapeutics. Could it be once monthly, could it be a thing as Simon said, induction with an injectable and then maintenance of weight loss with an oral. Or countries which don't have a cold chain, maybe oral is the only route where the cold chains are not as reliable. In those geographies, you can potentially target the market with oral. So I don't think this is going to be a market where one size fits all. It's going to be a segmented market. And it might be segmented in multiple ways, especially because when I look at the companies we cover, be it Roche or Astra or Merck in the U.S. Roche, everyone sort of coming up with their own strategies on how they will break into the market. So this is going to be an evolving market.

Yes, absolutely. Let's use that as a segue and dig into the actual GLP-1 drugs themselves. And I think we'll start first with the major marketed GLP-1s and their outlook, semaglutide, tirzepatide. What are your thoughts on those?

Yes. I'll kick off there. I mean, let's start by saying they're all really good. I mean I'm just about old enough to remember the early days of the obesity drug market. I mean this is one of those classic 30-year overnight success that if we go back to the 1990s with fen-phen, a low weight loss heart valve defects, drug gets pulled in '98. And then, a couple of years later, we had Roche Xenical, low efficacy, unspeakable side effects. And then we had a string of drugs, which were struggling to meet the FDA's pretty modest hurdle of 5% weight loss. So what we see now is worlds apart from where this category began. And if we think about semaglutide and tirzepatide, on the face of it, tirzepatide, is the "better" drug in terms of efficacy, sort of 22%, 23% weight loss versus 18% for semaglutide. It's probably worth remembering that in both cases, that number is an average of effectively 0 to minus 50, and we've seen the data for tirzepatide that the range of individual responses for the patient is nothing to almost excessive. So that classic phase of individual experiences will vary is a fair point here. The problem is that the whole debate not just amongst -- within the market, but also amongst prescribers and patients is distilled down to that percentage weight loss number that if you are trying to lose weight, you want the product that loses you the most weight -- the one with the biggest number on the box that currently is tirzepatide. As Rajesh says, this market is going to evolve. Not everybody needs to lose the same amount of weight. Not everybody has weight loss alone as a consideration. There might be cardiovascular factors, renal, hepatic and so on and so forth. So it's going to evolve. There will be lots of opportunities within this enormous potential TAM for different players. But at the moment, yes, it's kind of a bit of a monothematic reduction down to -- it's the percentage weight loss number. And on that, the market, the payers -- certainly the physicians and the patients have decided that Lilly has the edge slightly.

What do you think, Rajesh?

I think Simon has beautifully summarized how the market reads the situation, right? It's boiled down to one number percent weight loss, right? And I cannot imagine therapeutic being developed with one dimensional target. And if we look at the SURMOUNT trials with tirzepatide you saw most of the patients were titrated up to the highest dose in those trials. When you look at CagriSema where patients are given flexible dosing options, right? In REDEFINE 1 only 57% of patients went to the highest dose and REDEFINE 2 61% or something like that went to the highest dose. So when we look at REDEFINE 4, which will compare CagriSema with tirzepatide, Lilly versus Novo, how many patients actually go up to the highest dose on tirzepatide remains to be seen because that's a flexible dosing. Now if you look at the prescriptions data, you can get a sense that not every patient in the real world is going to the highest dose on tirzepatide. So even though the clinical trial weight loss is greater on tirzepatide, right, than semaglutide. If you look at the patient access numbers, semaglutide is leading, if you look at the capacity in terms of manufacturing that comparable. If you look at type 2 diabetes plus obesity, semaglutide is still leading, the incremental prescriptions are leading on tirzepatide, but the compounders on tirzepatide have gone away earlier and also was Ozempic is a better-known brand name so compounders have persisted there and they will go away in the U.S. later. So I would not rush to call it that a single metric has won. I'm sure Simon is not calling that as well. He's just observing how the market is reading it. But I think a more nuanced understanding of the market will evolve as we get REDEFINE 4 readout next year, especially comparing Cagri and tirzepatide.

So just bouncing off of that point, how do you interpret the recent misses from Lilly, Mounjaro, minus 3% versus Visible Alpha consensus, Zepbound minus 7%. Simon, do you want to take that?

Yes. I'll go first. I mean you could argue that a 3% -- and I won't call it a miss, but a 3% variance between actual and estimate for a drug like this in launch phase is pretty impressive. So I wouldn't say that's much of a cause, certainly on Q4. Q3, there were a few more specific issues. And then as you see earlier on, we were wildly wrong in the other direction. So the usual caveat supply that the launch trajectory of any drug is a little bit more volatile than steady state. This is not any ordinary category. So I would certainly caution against any extrapolation positive or negative from these relatively early quarters of performance. There were a lot of factors in here, technical things around rebating, but it really comes down to the real-time supply/demand dynamic. When we talk about drug shortages that's not what a drug shortage normally is, a drug shortage is the manufacturer cannot manufacture the drug period. What we're seeing here is there an ability to manufacture as much as is needed at a particular point in time. And that creates some movement. And particularly as we go forward, the 2 companies are adding capacity at slightly different rates. Lilly will add more capacity this year than Novo that's been disclosed by both companies. I suspect maybe Novo will add more next year as the Catalent capacity comes online. So you're going to see some volatility there. And I think reading too much into that is probably pushing it a little bit.

Okay.

On the broad grown-up way Simon has analyzed the situation, I agree with. That's the broader picture. But unfortunately, the covering analyst on the morning of Lilly results said the numbers are amiss. Nobody is smiling, right, especially if you are above. Reality is, if I look at the half yearly number for Lilly, you sort of got anywhere between $900 million to $1 billion, you can make an estimate there of inventory channel -- inventory buildup, which we saw destock in the next 2 quarters, more than any of us had expected or the company's guidance had anticipated. And that destocking in my head, I'm just squaring it with the prescriptions data. I mean, we have not got a very clear on sort of why that destocking is happened, right? But we do understand there was a degree of destocking and for a drug, which is in shortage and demand is growing at a pace of nought, why should you see any destocking at all, especially when you're going into new geographies. And actually, that's the big bear question, which I mean none of us who are anywhere close to being bullish are really asking what is the true market size of this, you've listened to numbers, $80 billion, $120 billion, people have some of the numbers, which are fantastic. But the 2 companies are adding capacity like if I look at the next 3 years, it's going to be close to over $50 billion of capacity added across all the companies who are building out in the space. So everyone thinks it's a big market. So why are we getting destocking at such an early stage of launch, there could be multiple explanations. First could be...

Is there risks for overstocking, Rajesh? Excuse me, not overstocking -- over capacity.

No. So destocking, why would you get a destocking if the market is so much bigger and growth is coming through. One could be because there are multiple doses through a cold chain and multiple -- different doses have different demand at different stages of patients being adopting. So if we know that the prescription data shows not a lot of patients go to the highest dose on tirzepatide, then maybe the inventory turn at the wholesalers or the highest dose was not big enough. And because it's in the cold chain, that was destocking, right? That is slightly easier way to understand and the market remains strong in that case. But there's also a possibility we all have to consider what if the market is not that big. And they'll only know with time whether the market is big enough or not, right? So we can't just rule out the -- we can't just work with an assumption the market is that big without empirically testing it. And the profit warnings come in 3. Let's see if the next quarter if fine for Lilly. And then they'll know whether or not it was a temporary aberration as Simon put it or a symptom of a bigger problem.

Absolutely. Well, in the interest of time, let's move along to the upcoming pipeline for GLP-1s and their outlook. I think we have CagriSema and orforglipron. Could you maybe talk a little bit about where you're coming out versus consensus? Right now, Visible Alpha peak consensus is around $37 billion, $38 billion for both, but we do recognize that there is a significant distribution in terms of those estimates in the overall market. What are your thoughts there? Maybe Simon, do you want to kick it off?

Yes. And also, there's another subtlety to the CagriSema number that it kind of stems to reason that the better CagriSema is the lower the Wegovy number will be and vice versa. So I think there's, again, partly explaining the range of forecast there, some people are, like ourselves, effectively considering CagriSema to be incremental revenues on top of the existing Wegovy numbers. So the 2 together, where we're fairly similar to consensus is composed of a Wegovy number where we're higher and a CagriSema number where we're quite a bit lower in the sort of early 2030s. But yes, the range of estimates is broad on both of them. And I suspect it's getting a bit broader on CagriSema because there is a -- since the REDEFINE-1 study in mid-December, there's a lot of questions just as to exactly what the profile of that product is. It feels like it's a better drug potentially than Zepbound. But unfortunately, that hasn't really been shown in the studies as yet. So there is -- as Rajesh alluded to earlier, there was additional studies ongoing to try and tease out what profile is of CagriSema. Yes. And as you could see, yes, the numbers have come down. And the next data point, which will probably have some impact on that, to say the least, is the upcoming orforglipron data, which could be relatively soon. That's a little cleaner in terms of consensus because Lilly doesn't have a cannibalizing product against orforglipron. This is really about expanding their obesity footprint, be on the injectable space. And even so, the range of estimates is enormous there. What's important there is not just profile, but it is this question of scalability that Rajesh talked about. If we really want to treat the world for obesity, leaving aside the small matter of financials, we're going to do it with a tablet. We're not going to do it with the drug in a device. So it's crucial from that point of view, and we should get a better idea on the profile very soon there. It is about both tolerability and efficacy. And I think there's probably a little more consensus and a little more optimism on efficacy with tolerability the general low selectivity of a small molecule versus a peptide means there's probably a broader range of concerns around that. But having said that, the data so far orforglipron does look pretty clean.

Yes, if I look at CagriSema, I'm ahead of consensus. I do not REDEFINE 1 and 2 failed as the market seems to have drawn a verdict around it. The devil is always in the detail. In this case, the detail is if I look at the weight loss profile, we have not yet seen what was the fat loss versus muscle loss? What was the HbA1C control. All of that will be presented at American Diabetes Association this year where there will be a bit more clarity in December -- in June and then REDEFINE 4 first quarter next year is the big moment where we learn CagriSema versus tirzepatide because at the moment, our analysis and anyone can do this analysis not very complicated. Just look at the efficacy work as placebo-adjusted discontinuation rate, tirzepatide and Cagri look very comparable on that. But if you just think about how many patients went to the highest dose in Cagri versus tirzepatide trials, you should be able to get to a point where you conclude that Cagri is likely to be better therapeutic. I will not refer to the mechanism of action being a structural biology drug design guy, mechanism always fools me because I get overenthusiastic about the science. I'll drop any discussion on the mechanism side of it. But when I look at CagriSema consensus peak sales, people have sort of cut their numbers down to -- depending on which year you're looking at. But if I look at CagriSema consensus 30 is about $20 billion of revenue. And I do think in the high efficacy market, this can be quite a differentiated product. But if you can see the muscle loss to fat loss ratio to be in the right order, then we sort of end up with our $26 billion of peak sales estimate on Cagri versus when I look at orforglipron, I do like the small molecule chemistry. I do like the fact that since Lilly have got it from Chugai, they simplified the manufacturing, the chemistry they can scale it up. I think it's down to a less than 10-step process on manufacturing. In terms of opportunity set, I quite like the orforglipron opportunity set, but when I look at the clinical development plan, I'm left a little less convinced about it because I don't even see an outcome study in the clinical development plan. And I do not think that getting reimbursement without an outcome study is going to be an easier thing. So my true estimate on orfor is towards the bearish end of consensus range. Don't get me wrong, I do like Lilly and Novo both, but it's just on these 2 assets, I seem to have different views on consensus.

Yes, I hear you. Let's start to wrap this up a bit so we can save a little bit of time for Q&A from the audience. In terms of relative positioning of Lilly versus Novo, could you talk maybe about how all of this comes together in your valuation assumptions, particularly versus where consensus is?

Do you want me to start?

Yes. Go ahead, Simon.

Please go ahead, Simon.

I think it's a question of sort of perception versus fundamentals in terms of positioning. There is a view in the market certainly in the near term, that Lilly is better positioned than Novo that there was a view that there was -- that Zepbound has greater momentum than Novo because of the greater rate of capacity increase or the perception that it's a better drug rightly or wrongly. And then on the flip side, there is the CagriSema disappointment that we had been December more recently and the fact that while Lilly has a clear small molecule or opportunity here. Novo is yet to do that. It has all versions of its existing drugs. But it doesn't have an equivalent of something like orforglipron. So the market has decided that the wind is in Lilly sales at the moment, and that's evidenced by the performance of stocks. But overall, I mean they're both well positioned in a market where demand probably does exceed supply. It is unusual for a pharma category where brand manufacturer cannot satisfy supply. We don't normally see that. So they're both in a strong position really. It's that issue about relative to expectations? And just to touch on what Rajesh was saying about CagriSema. CagriSema did not fail. And that study was undeniably positive. It hit its endpoint, where it failed and disappointed was against al expectations. The market had predetermined that success was defined as 25% weight loss, and it didn't do that. It did the same weight loss as Zepbound. And then when we had REDEFINE 2, we had identical performance from both drugs. So it is a drug which is equivalent too. It's just not the hope for superior products. So I think the positioning probably is solid for Novo, but the perception is that it's more solid for Lilly at the moment certainly.

On orforglipron, I know Novo will never admit, but I think Novo would have wished that they own orforglipron. It is a great asset and Lilly getting it from Chugai probably was a coupe. They've done very well out of that. Novo has a PHB1 mechanism, I'm pretty sure Simon referred to one you love earlier. I think which we all remember with horror, the PHB1 mechanism has not convinced anyone, but you still have Amycretin from Novo, which is coming later. So valuation in therapeutics is both an art and a science. And the traditional way people sort of look at valuation and therapeutics if they look drug by drug and they do DCF of the drug, sum it up and all of that. I obviously have to do that because that's how people value these things. But also on a very simple level, if I think of what multiple I'm paying for Novo for next year. I'm paying the same multiple I'm paying for other therapeutic companies, which are half the growth to 2030 and have a patent cliff around 2032, '33. So the share price is telling me that the market thinks Novo has got a patent cliff in '32 and its earnings fade after that. Or Lilly, I'm paying twice the multiple for 4 years of additional growth without the patent cliff. So the market clearly thinks Lilly have got a meaningful advantage over Novo, a much more meaningful advantage than any of us can discern based on what we know as of today. So in that respect, let's say, another company Novartis, right? You're paying 13x for almost a quarter of the growth Novo can give you between now and '30. AstraZeneca, it's not a quarter of growth, but you're paying the same multiple. But if you look at the EPS numbers of Astra versus Novo and Novo has 0 adjustments. Astra has got quite a few adjustments, right? So at the end of the day, the market is actually paying a premium for Astra on an underlying basis over Novo. So that tells you all you need to know about valuation, the positioning of the market is extremely bearish and noble...

Yes, I think we're going to need to wrap it up, Rajesh. Thank you. I think we're going to move on to one more call before we wrap this up and close out from our terrific speakers today. I'm going to open up the poll right now. If you would like to follow up from the Visible Alpha team about the underlying data shown from today's discussion, please use the pop-up poll to let us know your interest, and we'll reach out with more information. So we'll just take a moment for that, and then we'll close it out. Unfortunately, we've had so many questions during the entire event that I'm not sure we're going to have too much time at the very end, maybe we'll have time for one question. Okay. I think it would be great if we could just get like a minute each from each of the speakers. Rajesh will kick off with you. Just your closing comments about the space and the key takeaways you want to leave the audience with today.

Simon, should I start first?

Rajesh, yes, I did take it over to you. Did you hear me?

Sorry about that. Yes. So the 3 things I would like to highlight. Number one, we are potentially at the start of a very large growth journey for both Novo and Lilly. Point number two, there are quite a large number of moats, be it manufacturing, the rebates or clinical data these companies are building out, which others might have to replicate if they want to break into the market. And the question everyone -- point number three, the question everyone is asking is how big is the market, is it $120 billion, $200 billion, $1 trillion. The risk we have to consider and we have not considered is what if this market is not that big at all of Simon's point, how much can we actually afford to pay for these things? And that's the third point I would like to make. So Simon, over to you.

Thank you.

Yes. Thanks, Rajesh. I mean, my kind of sort of mesh a little bit there. I mean it's probably uncontroversial to say that the peak size of this market is somewhat larger than it is today. But it's worth remembering that the journey from today to then is not going to be in a straight line. We've already seen surprises along the way. And the way this market evolves, will be -- will definitely have a number of surprises along the way. Also, I would add one thing we can also be certain of is the market in 2030, 2031 will not look the same as it does today. That would require every drug in the category in development to fail, which is likely as we're succeeding. The truth will lie somewhere in the middle. So exactly what the market looks like in 2031, again, has a degree of uncertainty. So it's all about managing the enthusiasm and the optimism around the size of the market and tempering that with the visibility we have on that figure. And arguably, 6, 9 months ago, the market wasn't doing a particularly good job of that, and things got a little bit carried away. What we've now had is -- and this is kind of exactly analogous to what we're seeing in AI is just a little bit of a pause for breath, not a sort of reputation of this being a big market, but a realization that it's not completely clear where we're going and how we're getting there. And that's, I think, better balanced now than it was when Novo was twice the price 6, 9 months ago than it is now.

That's very interesting. I think we'll take one question from the audience before we wrap up today. So we're really at time, but I just want to make sure that the audience feels heard, I'm going to take the question. How long can continued innovation keep pushing out the patent cliffs. So maybe just a quick remark about the patent cliffs would be great. Rajesh, I'll go to you.

Yes. I think innovation matters. And as we discussed, the market will stratify into high efficacy category, cardiovascular, chronic kidney disease, maybe even Alzheimer's who knows. We'll have to look at the data. But -- so the innovation has to come in what are the features drug offers, but also bear in mind, as my August spec salesperson always reminds all my clients and he's also worked with Simon. So Simon knows him very well. That -- it's all about commercial, right? At the end of the day, you've got manufacturing capacity and a paywall, which will act as significant moats for anyone trying to break into the market by the time we hit 2032, where semaglutide patent cliff comes for Novo and Lilly. And that moat or that barrier to entry will be as important as any clinical data in my view. Simon?

Yes. I think in terms of innovation, there's still a long way to go because the debate, as we said earlier, has been focused very much on the quantity of weight loss. Over time, we need to move that towards quality. Would I prefer to lose 25% of my body weight, where half of it is muscle or would I prefer to lose 15% where it was all fat. I think the answer is pretty clear there. And also questions around further improving tolerability. So there is plenty to go there. I would just echo Rajesh's comment about patent cliffs. I don't actually think there is a patent cliff on this for the reasons that I just suggested. The capacity investment required by the generics industry to manufacture these molecules at the likely peak scale way, way exceeds their financial capacity. So come '32 and the semaglutide patent expiry, do we expect a huge rush of generic Wegovy into the U.S. market. No, because I can't see who produces it. So it's a slightly curious market that not only the branded manufacturers incapable of fulfilling demand, the generic manufacturers are incapable of substituting the branded supply. So that in itself creates less of a pressure because there isn't a cliff as such, I don't think. But there's still plenty, even regardless of that, there's plenty of need for innovation here as we think a bit more about exactly how these drugs are functioning.

Thank you very much. Well, we certainly covered a lot today. You can revisit today's material as we've recorded this session. Tomorrow, you'll receive an e-mail with a link to access the replay at your convenience. And the slides will also be available in the related content widget. We would like to also remind you that S&P Global recently acquired Visible Alpha, which provides sell-side models and granular drug consensus estimates, click the link in our related content widget to learn more. And then I would also just like to extend a very special thank you to our guests, Rajesh and Simon for a terrific discussion today about GLP-1. Thank you so much, and thank you for joining. We will now close the webinar.

You're welcome. Thanks very much.

Thank you very much, Melissa. Thanks, Simon. Bye.