Novartis CEO Vasant Narasimhan on Transforming a 250-Year-Old Company

We unlocked almost $180 billion of value. Took this company that was a conglomerate and we turned it into four companies. We had these other businesses, but it was never really the core of kind of who we are. We were misallocating capital. Spinning off companies sounds easy in retrospect. Actually spinning off three public companies is a massive, massive undertaking. You can rewind a disease or completely, in some cases, almost create a functional cure for patients. One of our sentinel patients was an individual in bed all the time, receives our cell therapy. Six months later, no sign of disease. I mean, this is extraordinary. Cell therapies and immunology alongside immune reset, bispecific, trispecific. That is going to be a whole renaissance for cell therapy.

0:00

When Vasant Narasimhan became CEO of Novartis in 2018, he inherited a conglomerate consumer health, animal health, vaccines, generics, devices. Over six years, he spun off three public companies and unlocked almost $180 billion of value. Today, Novartis is disease areas and three platform cell and gene therapies, RNA medicines and Radioligand therapies. One of their gene therapies, Zolgensma, treats children with spinal muscular atrophy, a disease that would otherwise be fatal by age 2. It costs over $2 million and it's reimbursed in 48 countries. Basant started his career doing public health work on tuberculosis in Peru with Paul Farmer and Jim Kim. That still shapes how he thinks about access to medicines. Today, A16Z general partner Jorge talks with Vasant Narasimhan, CEO of Novartis International.

0:45

So, Vaas, I want to welcome you Back to the A6Z podcast. Thank you very much for being here.

1:42

It's great to be back. Thank you.

1:46

Really appreciate it. Appreciate you making time. So why don't we start with just a brief introduction? So you are the CEO of Novartis. Novartis is of course one of the top 10 global pharmaceutical companies, has had major impact across a range of diseases, has major impact on patients around the world. But for the audience, maybe we start with that brief introduction. Can you give us what Novartis is in a nutshell and who Vaas is in a nutshell? Why don't we start there?

1:48

Yeah, absolutely, jorge. So Novartis, 250-year-old company that's really been a conglomerate for most of its history, but I think we'll talk about it. Over the last 10 years, we really focused it down as a pure play medicines company. We reach about 300 million patients around the world. We operate in over 100 countries over roughly $55 billion in sales, nearing 300 billion market cap. And we really focus on four core therapeutic areas, oncology, immunology, neuroscience and cardiorenal. And we're really into platform technologies. I've really tried to pivot the company into leading platform technologies myself. I'm a physician scientist by training. I grew up mostly doing R and D work and public health work at the company and with some business roles, became CEO in 2018. And in that period of time, we've spun off a lot of businesses focused on. I think there'll be a lot of what we talked about today.

2:17

Yeah. One of the things I loved about your background is the work you did as a student. So if I read your bio correctly, you did your thesis in multidrug resistance and tuberculosis patients in Peru.

3:12

That is correct, yeah. A lot of my time in medical school and shortly thereafter was focused on global public health. That's actually, I think, a lot of why even today I focus Novartis heavily into being a leader in neglected tropical diseases, access to medicines. But yeah, I worked with luminaries like Jim Kim and Paul Farmer. Multidrug resistant tuberculosis, access to antiretrovirals to patients in Africa. That was a huge part of my early development, early part of my career, and I try to take that forward now.

3:25

Yeah, and the reason why that stood out to me is my father's Peruvian, so.

3:53

Oh, really?

3:56

So that half of me thanks you very much.

3:57

Yeah, well, I spent a lot of time in Lima and it was amazing to work on that project. Absolutely wonderful.

3:59

Okay, so let's jump into Novartis and the work you've done over the course of the last eight years or so. One of the things you said in your Novartis in a nutshell intro is that you really shifted the company into what you call the Pure Play medicines company. So can we unpack that a little bit? What does Pure Play mean in your mind? And what does it mean to call a pharmaceutical company a medicines company?

4:04

Yeah, absolutely. So Novartis formed out of the merger of Sandoz and ciba geige in 1996. And the focus at the time was becoming broadly diversified in healthcare, which was common, I think, for many of the main players. So Novartis at the time, we were in consumer health, animal health, vaccines, Gerber baby food and nutritionals, pharmaceuticals. And so we had this pretty broad range of businesses. Then we acquired Alcon in 2009 and to get even further diversified. But I think there was a realization, at least as I started to Oversee R and D at the company, and then eventually became CEO. I really took the view that we would be better served to focus down as a pure play company, focus only on biopharmaceuticals and even within biopharmaceuticals, try to focus on therapeutic areas we think would really matter. And so what we did over the last years, we did really pretty radical rethink of the company. We exited our consumer health business, a joint venture with gsk. Now it's a standalone public company. We spun off Alcon, now standalone public company. We stun off Sandoz, standalone public company. We sold our Roche stake. And so we took this company that was a conglomerate and we turned it into four companies. And it's not, of course, perfect math, but when you look at it, I mean, we unlocked almost $180 billion of value by doing that. So I think the story worked.

4:24

And for you, like when you have to make that decision, you go from conglomerate to pure play. You have to jettison things that by definition are working. Right. You just described, these are standalone companies are doing well. How do you sort of decide where to cut and where to keep? Because when things aren't working, that's pretty easy. When things are working, it must be tempting to say, we can keep these together and we are bigger.

5:49

Yeah. And you know, the underlying logic to being diversified as a pharmaceutical company is you have these patent expertise and you say, if I can get in more stable businesses, that those businesses can kind of create, create a base of growth that will help you stem those ups and downs. That's the thesis. Right. And I think that was one reason why Novartis did this. But in actual fact, what I observed was we were misallocating capital. When you look at it, the return on capital, of course, varies tremendously between a consumer health business, a generics business, a device business and a pharmaceuticals business. And we were often forced to say we have to sub optimize the pharmaceutical business to invest in the other businesses. Or I'd have to say no to very good decisions for the Sandoz business to support the pharmaceuticals business. So I think there was this kind of strategic misallocation of capital. But then the second thing is you ask, what is a company fundamentally great? I mean, Novartis is, I think, really good at discovering and developing novel medicines. We had these other businesses we were investing to build them, but it was never really the core of kind of who we are. When you go to Basel, you'll see we have chemists and technologists, and that's really where I think we're most successful. So it kind of felt like the right cultural fit, right from a capital allocation standpoint. Of course, investors, as you know, prefer that they get to decide how to diversify. They don't want us to diversify. And so for all those reasons, it felt like the right thing to do. Now it took six years. Right. Spinning off companies sounds easy in retrospect. Actually spinning off three public companies is a massive undertaking, I can say from experience.

6:08

Well, and obviously remarkable in the evidence in terms of where things ended up. How do you think about the pure play move today in 2020, at a moment in time when there is a lot of sort of, I would say macro or megatrend towards consumer health? Do you think at some point it makes sense to expand back out from the core for you? Or is this. We are a medicines company and that's where we're going to sort of focus.

7:43

My instinct to say this is where we need to focus. I think we can look at consumer platforms to provide access to our innovation. But the way I think about it is there's already, and you know this well from all your investments already, so much that you need to undertake to be diversified with within the world of biomedicines, so many new technologies, and anytime you take on a new whole business area, you're going to distract the energy of the management team, the capital that you have to deploy, and also you have to learn a whole new space that you may not actually be very good at to really manage. So I think of it as how can we maybe use these consumer platforms or direct to patient channels to augment the core. But I don't see a reason at the moment at least, to really diversify. Too far away from that core biomedical effort.

8:07

Makes sense. And speaking of focus on that core, you highlighted four disease areas that the company is focused on. And then you mentioned platform technologies that you're very interested in pursuing and obviously in the service of discovering new medicines. If we can make one of these annoying sort of consultant matrices where you have the disease areas on one axis and you have platform technologies on the other, we've labeled the disease area axis. How would you label the platform technology axis?

8:53

Yeah, the way I think about it is obviously small molecules and biologics are the core of every large company of our scale. You have to have that. And of course, we've had those technologies for either 100 years, 100 plus years, or in the case of biologics, 50 years. But we focus on three core technologies. We focused on cell and gene therapies. First, we were the first company to have a licensed cell therapy, the first company to have an effective, widely used gene therapy with zolgensma. Second, we made a relatively significant investment in RNA therapeutics. We've actually now acquired multiple companies and we can definitely get to that. And then radioligand therapies. These are the three core technology platforms that we try to apply across those core therapeutic areas, hopefully to find better solutions for patients. And we're always asking ourselves, are those the right ones? Of course you could get into DNA editing, you can be much bigger on antibody drug conjugates. But at least for now those are the focus areas.

9:20

Okay, so let's take, if we could, let's take each one of those on starting with the cell and gene therapies, complex modalities, remarkable milestones and sort of patient impact that has been achieved through these. If you had to weigh in our cell and gene therapies punching above their weight or below their weight in terms of their potential because there have been setbacks, there have been challenges. So how do you sort of think about the complex modalities and where we are on the journey of being able to really exploit them?

10:18

You know this, this has been, been a tough one. I mean I right now punching below their potential. But I think it's going to change and I'll explain why. First when we talk about cell therapies, of course the focus after our initial discoveries and then other companies, Kite Juno, then later BMS and Gilead Bluebird also was in there successfully bringing forward cell therapies were primarily focused on B cell cancers. Right. And I think very successful, but the business was not hugely successful mostly because complexity, cost of goods, profitability challenges. Now I think what's really interesting is and we could have never predicted it, but because of the work of Georg Shett in Erlangen in Germany, we've suddenly learned that you can actually use these therapies to reset the immune system. And I think this is going to be a huge opportunity. Just remarkable when you look at this data sets as you know, I mean very rare that you see data like this. Very rare that you see you can rewind a disease or completely in some cases almost create a functional cure for patients with end stage immunological disease.

10:48

Yeah, these are the autoimmune diseases that have been sort of very life impacting chronic conditions that chronic debilitating, debilitating with very, very sort of bad options.

11:53

I mean I've, I've the, the story I like to tell is one of our, our sentinel patients was an individual bed in bed all the time, not able to walk his children to school. Receives our cell therapy, strong results. Two months, six months later, no sign of disease. Has gone from almost a near death situation to normal life. I mean this is extraordinary. This is like Lazarus like things. And so, you know, we've now taken that forward into four pivotal studies. We have I think six more programs in early stage clinical, other companies as well. And I think cell therapies and immunology is going to be a huge area alongside immune reset, bispecifics, trispecifics, but that is going to be a whole renaissance for cell therapy. And alongside that what also happened is we figured out how to make the manufacturing factors less costly. And I think that's the other part of that story. If we were just doing immunology but with the same, you know, cost structure, super expensive bespoke manufacturing. But now that we're all working on rapid platforms, you know, that take two days into f, eight days, vein to vein time, this is changing the game. And so I think now, as often happens, there was the hype, then we went through the valley and now we're coming back out the other end. I'm not sure any of us would have predicted that would have been an immunology and not cancer, but hey, so be it. I think gene therapy is a tough one at the moment. As you know with the safety. Zolgensma has been hugely successful, we think still remarkable drug. Amazing. I mean the story maybe for your listeners this is for a terrible pediatric disease called spinal muscular atrophy. These children would face a certain death at 2 years of age or if they have a less severe form, they live a life in wheelchairs and really debilitated. And so zildjones one time gene therapy, if given early enough can almost let children lead a normal life. So it's been a success story. Now we had hoped we would have a whole series of those behind it's.

12:04

A success story, but it's an end of one story.

14:09

This is not platformized yet. You know, I think because a combination of factors. One, the tracking these gene therapies of the plasmid to the right cell type, getting the expression, as you hope, safety profile. All of these things turned out to be much more of a puzzle and there wasn't as plug and play as I think we initially expected. That said, I still think that for certain diseases, if you could get a one time therapy, be hugely beneficial, particularly in Children. And I still think, you know, there's more to do, there's more, more opportunities here. We some companies around this and so let's see. But that one is still to be, to be proven. Whereas I think cell therapy is really maturing now.

14:11

Fantastic. So, okay, so let's shift to RNA medicines. Why don't we give the audience a sort of a quick primer on why RNA medicines are interesting and just to, just to like prompt you, I heard you in an interview, I think it was maybe one of the Davos interviews where you said sirna. Sirna is effectively a de risk modality. Which by the way, for folks that have been in biotech for a long time, that's like music to the industry's ears. Right? This incredible innovation has essentially been reduced to practice. And correct me if I've misquoted you.

14:53

No, I think that is my view and I think it's an extraordinary story when you look at it. So the idea here is that you can use small sequences of rna, a smaller chain of RNA to silence the MRNA inside the cells to prevent the protein from expressing. And that sounds like a simple thing, but actually work goes back to the early 80s, decades of work. Alnylam and Ionis and other companies worked on these technologies for a long time, struggled. And then there was an unlock around, I think 2015, 2016, where they figured out how to traffic that RNA fragment in a relatively efficient way into the cell, have relatively high specificity, and that led to a really impressive data. So we, we went in primarily for cardiovascular disease at first. Our first Medicine is a PCSK9 SIRNA that allows you to take down PCSK9 for high cholesterol with a drug that you give every six months. And, and it works amazing. And right now actually it's doing extremely well, particularly in China, come back to that. But it's really amazing. And now the opportunity is with that kind of technology, you can get to once yearly dosing. People are working on more and more targets in cardiovascular disease. And so I personally think we're going to be at a place within the next five to seven years where you could get a single injection that covers HMG CoA reductase, which is the statin Lipitor statin pathway, PCSK9 to knock down that other pathway for cholesterol and probably, if it works, lp, another major cardiovascular factor. So once yearly injection, and think about that from a public health standpoint, it's unbelievable. But the Sirna story was all about liver directed targets. So everything we were doing was targeting everything to the liver. And we were seeing these impressive results. And then I think what's happened now more recently is we figured out how, at least starting to see, we'll see how the data plays out. Can you traffic these sirnas into other parts of the body, into the muscle, into the brain, into the heart? And we recently made a proposed acquisition around this to try to see can we actually get those sirnas into the muscle. But this is opening up the field even more broadly. Can you traffic them to the kidney? And so you can have all of these opportunities to have less frequently administered high efficacy drugs. So I think this is a mature platform.

15:27

So just to pull on that thread for a second, one of the fascinating things about all of the things you're described is that these molecules, as we learned to design them, eventually program them, can do pretty remarkable things. But first and foremost you need to get them there. You need to get them to the right cells, to the right tissues. There have been some breakthroughs on sort of what we'll call broadly delivery technology to get SIRNAs to other parts of the body. You mentioned the muscle things need to get into the CNS and the like. What's your view on where the next big breakthroughs in delivery technology might come from? And you know, how do you all think about how to unlock, you know, new new new horizons, if you will, for where the medicines can be?

17:59

Yeah, and you know, this is a topic not just for RNA is also in gene therapy, as you know as well.

18:44

Yeah, that's a global comment.

18:49

Yeah, it's, it's a, it's a general comment, you know, I think so a couple of areas for us are interested. One is I think synthetic capsid design and this has been around, but I think we're getting better at can you synthetically create a kind of a capsid we hear would be like a synthetic virus, you know, instead of using the AAAV virus which often use and use that to traffic. Of course there's been, you know, a lot of work done on certain receptors on the, in the nervous system that can basically draw in to the central nervous system. And I think that's obviously the transferrin receptor in particular, but there have been others as well. Antibodies conjugated to the SRNA or antibodies conjugated to an aso, so then the antibody takes it to the target cell. So I think these are all, all in play. I think it's all maturing quickly. There's also more, I mean all kinds technologies, you know, you would probably know better. We can lipid Conjugate. So we actually have. We actually acquired a company that also can lipid conjugate to get into certain cell types. So I think a lot of activity happening. And the key is, can you find the right address and can you hit that address with high specificity and not have the RNA go to all kinds of other places? Right. Because depending on what you're delivering, if you don't want to hit the heart and you only want to hit the kidney, but you still hit the heart at even small levels, you'll just get the side effect profile that you don't want.

18:51

That makes sense. All right, I don't want to give a short shrift to the last platform you mentioned, which is radio. So why don't you explain what radio is really quickly? And then I want to make sure we cover other platform technologies that may not be on the.

20:10

Yeah, absolutely, absolutely. So I think the listeners likely know radiation and cancer care has been around for decades. But the idea that a company that we first acquired in 2019 called Advanced Accelerator Applications is actually a spin out from cern, a particle accelerator outside of Geneva. The idea was, could you actually bring a small radioactive particle right next to the cancer cells to basically have the cancer cells killed? Very elegant idea. Took many years again for them to actually mature. Kind of a fringe idea when Novartis first acquired it, but it turns out to be very effective. And so the idea is you link basically a drug that is very specific to either the cancer cells you're trying to target or the area around the cancer cells. You link it to a radioactive particle, and then the drug is bringing the radioactive particle near the cancer. Relatively small doses, reasonably effective. And we have two drugs now. One of our drugs for prostate cancer for a target called PSMA, over $2 billion in sales. The other for neuroendocrine tumors, approaching a billion dollars in sales, launched globally. Very challenging technology in that after you activate the drug, you have between four and five days from the factory to the patient. So the supply chain here is very, very complex.

20:24

It's a radioactive molecule, right.

21:49

It's got a half life and, you know, dedicated supply chain. We've had to figure this out. It's taken us, I think, seven years, but we've now done it at scale. I mean, we have launched these products globally and are, you know, 99.9% on time on every dose, which taken a huge effort.

21:50

So once you build. Once you actually build that infrastructure, the supply chain, the capability. I'm going to use the word incorrectly, but is it effectively Trivial at this point to change what you target once with a radioisotope. Like in other words, is this essentially a platform technology that could go very broad.

22:07

So for the given isotope. So in the case of the one we've scaled lutetium, which is a beta emitter, now I think it is platformized. We just have to find of course, and that turns out as always, not as easy as it sounds, but finding another target, the next target after PSMA is what we're looking for. But within our, our manufacturing network. Yes. Now it gets much more complicated if you want to switch to another isotope. So if you want to switch dactinium alpha emitter, you know, there's terbium, there's kind of alpha beta mixed emitters. And so those are much more complex because you would have to build a slightly or a radically different supply chain. So those are not plug and play, but within lutetium. And that's what we do now. We I think have eight or nine projects now in the clinic, all with lutetium tied to another target, targeting different cancer types to try to see if we can be successful.

22:29

Got it. Okay, so we've covered the basic matrix right now. Right. We talked about the disease areas. You're interested, the platform, technologies you have on hand. Two questions on, on, on that, on the lay the landscape as it exists today. The first one is I assume that you obviously you have this incredible tools chest or war chest of modalities and you pick the best tool for the job for any given target and any given disease indication. There's a sort of a mix and match effect I would imagine. For radio it's mostly cancer, but as you said for cell therapy it could be autoimmune disease now and the like. What have you guys, what have you and what has the industry learned about patient choice when it comes to modality and how does that inform how you develop a therapeutic product profile? And just to like put precision on the question, I guess is do we have a view as an industry on whether patients prefer a once yearly injection versus a once a week pill? Like how do you think about those trade offs and how do they factor into how you design a program?

23:18

Yeah, so I think we do a lot more thinking now at Novartis, I'm sure at other companies as well, on, on not just the target product profile, which is kind of what a clinician would say, who's maybe a science based clinician. We think about the patient profile and I'll come back to that. We even think about the kind of physician adoption profile because it's not always straightforward. What seems obvious to us when we're sitting in our company is when it actually goes into practice, is that something that a physician actually wants to deal with? And these considerations, I think these practical considerations are really, really important. I think the first lesson is there's no one size fits all. I think what we find is that there are segments of patients, let's say in the case of sirnas, who prefer a less frequently administered medicine. Others are okay with a daily oral because they don't like an injection. These sirnas are injected. We even see geographical differences. I mentioned in Asia there's huge interest in SRNA based technologies for cardiovascular disease. In US it's still building and we're still working through it. I think the other thing I'd say on cancer is that we've moved away from an era where it was all about efficacy at all costs. One of the interesting things about radioligand therapy and to juxtapose it to another technology, antibody drug conjugates, which we also are in, but not as big as radioligand therapy. The safety profile is what often is very attractive to patients when they can have relatively high efficacy but a short course. Radioligand therapies are 4 to 6, usually doses that are given and then you stop. And with a reasonable safety profile, that's more attractive than chronically feeling sick over time. That's a shift. I mean we used to, as, you know, we used to just go, we go as hard as we can, try to knock down the cancer and we don't worry about the safety profile. That's another shift. So I think you have to think through one, there's gonna be different segments for different people, have different needs. And then I think you have to be, you know, comfortable. But you know, it's interesting with our radio ligand therapy portfolio, I'm often asked, but there's all these orals coming for us to be successful if we just get 20% market share of every one of those cardiovascular categories. We have huge medicines. And because these medicines are actually in the US context under the medical benefit, not the pharmacy benefit, actually it's quite economically attractive. So, you know, I think you have to be comfortable with those ambiguities. Please.

24:21

Yeah, no, clearly a lot of thought goes into this as we talk about the things that aren't on the modality axis of that matrix. One of the things that's not on there, at least we haven't put it on there yet, is AI. So I'd Love to take a few minutes to talk about what you see is happening in the world of AI and how you're thinking about that for Novartis, for me it was really interesting. The industry goes every year to this JP Morgan Healthcare conference in January and this year felt like a tipping point year for AI. And what I mean by that is the promise of it has been around for a very, very long time. I think the conversation we had eight years ago, or whatever it was seven years ago, we talked a lot about AI. So the promise was there for a long time. It felt like this year in 26 is finally when you started to see AI transaction.

26:55

Yeah.

27:50

And there were several deals announced where a large pharma company is partnering with an, I'll call it an AI first startup, which I think in and of itself is fascinating. The other thing I thought was fascinating is that the sort of flavor of deals is pretty varied. Right. In some cases it's a partnership, in some cases it's a license. In some cases I want to get access to a specific model. And so we're actually seeing not only technology innovation, but a little bit of business model innovation where pharma is willing to transact on AI and a number of different ways. So that to me was just like a, a fascinating thing to see in a lot of ways an exciting one given where we sit and where we spend our time in Turkey.

27:50

And, and just a quick question, I mean do you, do you prefer in your investment portfolio companies that build AI platform technologies for companies like us to apply on a research portfolios or ones that actually want to find their own drugs and try to turn into actual AI Biotech?

28:30

Yeah, so we actually have the, the full, we run the full gamut. We have the full spectrum in our portfolio. We have, we just recently announced investment in a company called Boltz. Boltz Bio came out of an open source project at mit.

28:46

Yeah, I know Boltz well. Yeah, absolutely.

29:00

You use the model. So they just launched the company and so they have maintained this commitment to open science. They're actually, they're incorporated as a public benefit corporation to really make sure that they cement that point, that they want to continue to release open source models. But on top of that, what they're looking to build is essentially a product, an application that companies like Novartis and others, they announced a partnership with Pfizer at their launch, can essentially use the Boltz product to wire in the ability to have Frontier AI accessible to the, to the, to the, all the scientists in their laboratories. So whether it's an industry based lab or an academic lab. So in that case that's an infrastructure investment platform. Yeah, pure platform investment. And you know, our hope is that, you know, a lot of the pharmaceutical companies that are interested in integrating AI will use, use those rails, if you will, to do that. On the other end of the spectrum, we have several biotechnology companies that are AI first and they're using their internal AI capabilities to develop their own pipeline of drugs. And a lot of times what that will look like is they'll partner with a company like Novartis on a program or on a discovery project and that looks much more like traditional bd. And then you're starting to see sort of of a couple of flavors in.

29:02

The middle to do both.

30:16

So they do a little bit of both. They're not an investment of ours, but a company called Noetic announced a partnership with GSK around JP Morgan where GSK is getting access to their software on a specific model to really be analyzed. I believe it's for lung cancer patients. So that's like a model access partnership, which is really interesting. And then you have, you know, other flavors in between. So like we're starting to really see a lot of this happening. Interesting. And so I, we, we're trying, we believe that there, that this is going to look like a spectrum. And so we want to have investments across that spectrum and back entrepreneurs that are pursuing different opportunities.

30:17

So that makes sense.

30:55

But it's been really fun to, to watch and that's why I say for me, this year, 2026 was a kind of a. Yeah, exactly. So I'd be curious sort of how, how do you, how do you see AI as a platform? It do. Well, let me start at the beginning. Do you see AI as a platform technology? Would you even put it on? And then my second question is, how does VaaS use AI today?

30:56

Yeah, so I see it as kind of an enabling technology across all of that matrix that you described. I'm not sure if I see it as its own technology platform yet, but I do see it as a powerful, powerful enabler. When I think about when people always ask me what can the impact be? I generally say in R and D It'll take seven to 10 years because that's just how long it takes to develop drugs. And that the things we have to be watching is how much does it shorten the overall time from when we have a target in the lab to when we get a drug license, which can be 12 to 14 years. Can we bring that down by two to four years. And can you. That already would have a huge impact. And can you move the probability of success number meaning from where we are today? You know, as you know from the research, it's 10 out of 1,000. When we get into the clinic, it's, you know, 10 out of a hundred. If you can move that meaningfully, even a little bit, frankly, the compounding effect is huge. So. And I think that should all be well, well, with hand. I mean the way we approach it with the Novartis is we break down the whole R and D value chain and we say what is the technologies we need need in target discovery, in candidate identification, candidate optimization, in preclinical safety, PKPD modeling, in you know, phase one trial optimization, so on and so forth all the way through. All the way through, you know, document, you know, work protocol optimization. Can you get automatically from the protocol to the CSR all of. And basically try to find the right technology companies to support us across all of that. And now we're trying to integrate that much better and say can we actually have, have more of an integrated platform across. And I think over time, I think we are now starting to see the benefit. I would agree. We're at a point now where you could actually say that this will have an impact. I think the hard part is that whenever we set expectations high, people expect it to happen within two years. And really the first purely AI generated candidate by definition cannot come out the other end for eight to 10 years.

31:18

It's going to be a long time.

33:29

We just don't know. Right. But I think it's really interesting. We do work with isomorphic labs on what we call undruggable targets. So we give them undruggable targets. We've not been able to drug ourselves. We think are are interesting. They're working on drugging them using AlphaFold3 bolts also, you know, being a similar kind of technology that could be used for that. You have others that are using, you know, quantum technologies to say can they better model the protein, protein interactions to find these weak interactions and better drug design. So I see all of this happening and again it's going to be one of those things where all of these little gains are suddenly going to compound to a really big gain and that's what we're going to see. My expectation at the other end.

33:30

Yeah, and I would agree with that. And I think that, you know, it's probably fair to say that the first AI generated drug candidate is somewhere in a pipeline. Some, you know, for sure at the moment so we will see it emerge or debut in a couple of years. And it sounds like from what you just said that the Novartis as an organization has, has been or is in the process of adopting AI as being AI. If there's AI ification across the Org. Is that a fair.

34:14

Yeah, absolutely. I think it comes back to you. I also want to answer how does, how do I use AI? And I'll come back to that. But yes, we are, we have a very systematic approach and we are trying to scale it now across the whole company. I think we have one of the highest numbers of AI licenses for Microsoft Copilot with all the different model options that you have there. We're one of the lead partners for Palantir in terms of all our R D. The data goes into a data lake powered by Foundry. And so, you know, we really try that. These are all things we did like six years ago. Right. And we really, it's really not. And we weren't sure how it's going to pay off. And now I have, you know, 3,000 scientists on the foundry platform, you know, picking the right models to actually just go into our data lake and extract data. That used to take six months and now it takes minutes. I mean the power here is incredible. So we are absolutely, absolutely scaling, scaling it how I'm using it. And it's part of our general push. One of the, I think big opportunities in companies like us is not the high end bio, biotech side of things. It's just all the ways we could just automate very rudimentary things that we do. Regulated industry, so much document management, so much review, all of this with large language models can now be done, you know, super fast. So, you know, I can and create a podcast to listen to my integrated financial report to prepare for my earnings call. I mean this kind of stuff, like, who would have thought, thought it's possible or, or kind of we can draft a press release pretty quickly or with a quote in my voice, I have an agent, right? And you can just basically say please look at all of my historical comments and please draft it in my voice. And it'll do it pretty, pretty well. We have agents that look at all of our historical decisions in R and D. And then as a chair of a lot of these committees, I can use those agents to inform my next decision. Whereas I'm not just relying on my memory. I can actually go into the agent. Every single time we saw a situation like this, what were the key issues that we identified? And that makes you have A better next decision. So all of that is now happening even on my desk every day.

34:41

That's fantastic. Speaking of sitting at your desk, you've been sort of in the chair now since 2018.

36:45

January of 2018, yeah.

36:54

Okay. So. So I want to sort of COVID this in two parts if we can. One is the world has changed significantly since 2018, so let's start there. And then second, I want to talk about sort of how your views of how the view from your desk has changed since 2018. So let's talk about the world changing. So obviously from the last time we spoke, which was shortly after, it was a year after you were in the seat, we've had a pandemic and there's been a big change just in the world from a geopolitical standpoint, also just from industry, industry dynamics and competition. So if we could unpack a couple of things, let me throw a couple of world events your way. So the first one is on the industry dynamic side. So we in the, you know, in the United States have long been a leader in sort of biotechnology as an industry. Over the course of the last several years, China has really risen as a, as a competitor in the industry. And I think there's two things I'd love to get your take on. The first one is from where we sit, we invest in early stage companies, early stage biotechnology companies whose ambition is to obviously innovate and find ways to partner with folks like Novartis and other leading pharmaceutical companies in a world where the US biotechnology industry was the dominant game in town. There was a sort of natural equilibrium. I'm going to oversimplify it, but there was a natural equilibrium that existed where, where the small innovator could come up with something interesting and if it was relevant to you, we could partner, get acquired by, or find other ways to work together. China Rising has shifted that equilibrium where now large global pharma players can go and license things directly from China. What do you think the impact will be on the US based biotechnology industry in a world where they are competing with a really effective Chinese industry that is fast, in some ways cheaper and just incredibly productive and has scaled.

36:55

Yeah, I think this has to sharpen the competitive edge that we have in US Biotech because I think what we see in very talented scientists who are now leveraging a lot of know how they've learned over many years also in our labs and in our company companies to move extremely quickly. And I think it started off as more fast follower working around biologic patents and that continues at Scale but it's slowly morphed now into when you look at as an example like bispecifics. I mean there's huge number of bispecifics now happening in China. Cell therapies and related technologies. I think last year, at least from my understanding of the data, I think China had more licensing or exits than US biotech or somewhere close to that. So it just gives you a sense of the specific speed and the scale. So I think what a couple of things for US Biotech. I think clearly now speed is of the essence and that part of that is also going to have to be regulatory frameworks. I mean the NMPA simply moves incredibly fast for a first in human study. I mean it's under a month now and that I think enables those, those companies to generate human data incredibly, incredibly fast. The NMPA being China regulator, you know, and I think that that's one and one enabler. The second, and this is as you know, been a long term challenge is just the speed of trial kind of bureaucracy in the United States. Again China is able to leverage these very large integrated centers, the China biotechs and they generate that data extremely fast. So they get that de risking phase one data and they get that proof of concept data and then they can go market themselves much more quickly. So I think we have to now tackle how can you get more scale and speed speed in US clinical trials or even European clinical trial centers as well. And Europe has historically been a bit faster. Belgium, Australia, you can go very fast. But even Belgium and Australia are not as fast now as the way China's moving. So that's going to be a second topic for sure. And then I think as you know we have to continue to support NIH and the things that make the US bio eat. I was really heartened to see that the Senate Finance Committee is fully supported NIH funding because think I, I think that's going to be really important in the long run because that is something unique. I think that other countries, including China haven't fully figured out how to replicate. That ecosystem that goes from universities to biotech is incredibly unique. But those other elements we're going to have to tackle I think.

39:04

And so to the FDA's credit, the current administration is I think demonstrated that there is a very high willingness to figure out ways to do, to have the necessary reform so we can accelerate the path to getting these medicines to patients. So there's a will and I think the question is what's the right way? If you had sort of your Magic wand and say, hey, here are some ideas that I think would go a very long way to getting us there. What would be on your sort of, I don't know, top two three wish list items for reform?

41:33

Well, I think a lot of it actually is making sure we have talent and capabilities and really ensure that FDA is enabled to hire the scientists they need at scale and can then review these IND applications really quickly. I have two minds. It's a tricky one because do you want to reduce the IND requirements? Because I do think in China you do have a leaner package. I think to get to that first in human. And is that a good thing in the law? Long run, we need to maintain trust with society to be able to do this work. But if we just wanted to just optimize for speed, you could look at the size of the preclinical package. Again, I think to be debated, I would say is that the right thing or not in the long run? And I think that's something we'll have to consider for sure. And then I think Outside of the FDA's purview, I think we have to come up now with a more streamlined approach to IRB reviews, you know, common contracts, all of the stuff that can really slow down your ability to get a trial started up in the US if we could get more platforms in place where you could just, you know, go right in in a particular disease without having to recontract and redo everything, I think you could generate the data a lot faster. And I think those kind of networks now need to get scaled if the US wants to remain competitive.

42:10

Yeah, I think that that makes all the sense in the world. World. On the innovation piece, have you seen US biotech sort of respond to this competitive pressure in a meaningful way yet or in a measurable way where you're saying, okay, like folks are, you know, innovating to address. They're finding ways to innovate to address this essentially new global competitor that has emerged. Or is it too early to say?

43:34

I would say it's too early to say. And that's to say it might be happening. I may not just have visibility into it. Right. But at least I have not seen it. I am, I am sometimes concerned that the effort turns into how do we block China innovation from, you know, being accessed by, by global biotech companies or, you know, all of the efforts to do that? Because I think in the long run, better to actually, you know, as, you know, I mean, and the history would show us that we would want to have More competitive industries. We don't want to be able to say there's a beautiful discovery in Shanghai, let's not use it because it was discovered in Shanghai. I think important though however, to make sure we have global clinical trials, clinical trials that reflect the ethnic diversity, playing fields, even all of those things.

43:57

For sure. Yeah, makes sense. Let's take one second to talk about access. So you're a global pharmaceutical company. You yourself care deeply about public health. One of the challenges that the industry has long had is when we innovate, we have to find ways to pay for it. And you have this remarkable example in your SMA gene therapy where you've created this incredible drug. The price tag, at least the sticker price is north of $2 million. And so where do you think there's opportunity to be more creative around how we ensure that we can get reimbursement for these kinds of innovations that are very expensive. And then on the other end of the spectrum, as we start to move towards a world where people are thinking about preventative medicine, things like that, where the system really isn't set up to figure out how to pay for that. Have you seen any innovation really on how we think about reimbursement, how society pays for these innovations because the innovations are incredibly valuable. How do we essentially reflect that in how we pay for it?

44:41

Yeah, I think first baselining for the audience, I think some of the facts that get lost in this discussion, you know, about over 90% of scripts in the US are generic. Yeah, right. Generic drugs in the US are the cheapest in, in the OECD. So it's, you know, I think the system works insofar as innovation is rewarded during your IP and then it's radically, you know, taken down in price and.

45:52

It effectively becomes a public good.

46:15

It effectively becomes a public good. And that's why actually the innovative medicine span share of U.S. healthcare expenditures is actually going down. Right. And net prices in the US are only growing in the single digit level. We have certain population groups now, very US focused at the moment, that have a challenge in affording medicines. But actually for most people out of pocket costs are quite manageable and many policies are in place to drive them down. I just wanted to say that as context. No, I think to your point, on these one time therapies, they present a unique challenge. What's interesting is Zolgensma, even at that price point is reimbursed in 40, 38 countries around the world. The reason for that is that the cost effectiveness is so high when any Government around the world sees that the cost of caring for one of these patients is more like $10 million for, for their life. And if you actually intervene early and the child lives a normal life, then all of that cost saving comes back to the, to the system. So I think that that has to be, that story has to be told. Well now if we have many one time therapies clearly then there's a phasing issue and then you would have to come up with new, new approaches I zulgens when we were not successful and moving to those models where you kind of phase payment out because the systems just don't aren't ready for it. And we've been talking about this forever, this whole kind of idea of value based medicine. Will you get reimbursed if the drug doesn't work? Can you phase cost over time? The franchise model? Very difficult so far is the honest truth. Right. Just, just very hard. Just very hard because the systems just aren't, they're designed for annual payments and not tracking patients over time. Right. And, and that, that is reality at now. Would I get tipped if you had 10 of these? Maybe, but that's, that's still, that's still the unknown. I think your question on the preventative therapy is, is the one long term question we have to keep grappling with from a number of different I think perspectives. One, these trials take a long time. If you have a policy like the IRA in the United States that cap you know our re our ability to recoup investments at nine years, you can't run the long trial. Second, you need I think continued innovation on endpoints because if you're going to wait for out outcomes and then you're going to do these preventative studies, you're never going to actually get to the outcome within. It'll take forever. So we need to innovate on outcomes. And then I think you think about payment models because now you're going to have to treat a lot of people, many of whom will never get the disease in order to prevent. So it's a number needed to treat problem. And so we're going to have to come up with new payment models. And then of course the system is designed to care for the sick, not to prevent. So I don't have the solution. But I do think this is something we want to look at more assisted, systematically. Especially because our medicines are getting better and better at going early and preventing the cancers from recurring. And I worry that the system right now, if it doesn't start adapting, we Just won't be able to systematically do that. You know, starting, starting with the ira. But also now, if you think about FDA regulations that require a overall survival benefit, doing that in an early stage cancer study, I mean, it's not possible, right?

46:17

Absolutely.

49:30

So I think there's a lot of thinking that needs to happen in each one of those areas to make preventative medicine a reality.

49:31

I want to talk about your sort of, your, your tenure so far as the CEO of Novartis. And as I alluded to how the view has changed from your desk. I remember when you were relatively a fresh CEO. There was this big focus on culture and really driving a culture of innovation. Driving a culture. I remember of you talking about making sure that we don't sit in a world where we view things as not invented here syndrome. And you had a phrase, it was I'm going to.

49:36

Unbossed.

50:12

Unbossed.

50:12

Unbossed.

50:13

How has that, what is your view on the culture driven, focused, mandate played out and how do you see it today?

50:14

I think we've come a long way now. There's always a long way to go when you think about culture and a huge organization like us. But you know, when I go around the company now, this idea of inspired, curious, unbossed that, inspired by purpose, curious about yourself and the outside world and empowered by, by the unbossed philosophy, I think it's, it's taken hold now. I, I think one of the things that's interesting about unboss, I learned is it just always creates a conversation about culture. And if your organization is always talking about what is the culture we want to have. Actually the culture kind of naturally improves because people are aware that they drive the culture, that this is something we all have to own. So I really see, I mean we have all of the survey data that shows that engagement and all these things have gotten really to hire a place. But when I just look at the results, the innovation performance has been outstanding. You know, we're I think number two in tsr. We're the best non obesity company in the sector. So as I like to say, because we don't have an obesity portfolio, but there's a lot of diseases outside of obesity that also need to get treated. So I think we're doing pretty well on, on that front. So I think not only is, I think, do I see it, but I also see it in the performance. I see it in the R and D engine working well. So I'm pretty pleased with where we.

50:24

Are given where you sit and the view from Your desk. I don't want to put you to work, but I'm going to ask you anyway. What is one company or idea that you think, I can't believe somebody hasn't started, hasn't created a startup to address it. Whether it's a, you know, moonshot problem or a boring problem. Is there something where you, you say, wow, I'm surprised an entrepreneur hasn't created a startup to address this pain point.

51:43

So there's a boring one I think that I always reflect on and it's really, it's really kind of, it sounds so dull, but it affects every single trial. And a company that does hundreds and hundreds of trials every year is every time we do a clinical trial, the study nurse has to record what is happening for the patient in a case report form that's done usually on paper in the clinic 2026, and then has to input that into our source data. That's called the source data, input it into our electronic case report form, may have to also put information into an electronic health record and that all of this has to happen and then we have people coming to check that the source data matches what's in the case report form. And I mean, we've been trying to innovate around this and the fact that with all of the magic of AI and blockchain and there's got to be a way to make this super streamlined for all of these clinical trial sites around the world, but with all of the EHR fragmentation and then all the companies having different systems and all the hospitals having different documentation, it just hasn't happened. It is a pain point and it's why we have unfortunately, you know, huge amount of effort to check all of that on an ongoing basis. On the bigger picture, one, I mean, I think we still have to crack and I'm not sure it's a startup, but we still have to crack. How can we use, you know, various early biomarkers for large scale prevention? I mean, the fact that we still treat disease as late as we do when we know whether it's, it's immunologic disease through atopic march or in certain cases in cancer, that if you treat early, you're going to win. And the fact that we have not solved this problem at scale is the next great opportunity for us in healthcare.

52:14

Well, I hope somebody listening just had a light bulb go off right over their head. All right, so speaking of your vantage point, you're the CEO of a top 10 global biopharmaceutical company. What advice would you Give to an entrepreneur, to someone who's thinking, thinking about starting a company in this space, in the biotechnology space.

54:10

Yeah, I think a couple things. One, I think that there's a huge value in intellectual honesty about, you know, where does your drug really fit into the treatment paradigm, your concept fit into the treatment program? That'd be one. And just really I think doing the hard work to understand that up front, I think second is to do the killer experiments because often when we're doing due diligence, we're looking for those killer experiments that's in the preclinical setting to really prove, prove that your target is doing what you say it does or your drug is doing what it's you say it is, doing the preclinical safety work. It's tempting to cut corners on that early stuff, but often that's why we have to walk away just because we're looking for that validation, particularly when we're going to enter in with relatively large upfronts on a drug. And my third, which is my biggest kind of pet peeve on all of these due diligences we do is all around, around technical development and manufacturing. The CMC work we consistently see is underinvested in. And what that means is tremendous rework on our side or that we just may walk away just because we can't be sure we can actually scale the production process.

54:30

And is it because they didn't have the money to do the work well, to do it right the first time, or they didn't know how to do it right the first time?

55:45

So I suspect it's a mix of both. But I do wonder if it's a know how like I've often thought I've talked about to some of the, some of the VCs that I've met with over the years. Should we just create like a CMC boot camp for biotech startups so they at least know the right questions to ask and because there's so many avoidable things that happen and if you just did those things right, you might get an exit faster and we would certainly get the medicine to patients much more quickly than having to redo a huge amount of work to do the next trial and ultimately scale the process. So I think cmc, it seems like such a side topic that that thing you don't want to deal with probably in your executive committee or in your board meetings, but it has such a huge impact on whether or not we can actually accelerate these innovations.

55:53

And for the audience, CMC stands for.

56:42

Chemical manufacturing and control. So this is basically the manufacturing controls and all of the work to make sure you can scale your production process from what is a scale process all the way up to a commercial scale process.

56:44

If you if you set up that boot camp you would sell it out in a week.

56:59

We can do it as a joy adventure.

57:03

I would love that. Thank you so much. F thank you for being here.

57:04

Great to be here. Thank you for having me.

57:07

Podcast.

57:08

Thanks for listening to this episode of the A16Z podcast. If you like this episode, be sure to like, comment, subscribe, leave us a rating or review and share it with your friends and family. For more episodes go to YouTube, Apple Podcasts and Spotify. Follow us on x16z and subscribe to our substack@a16z.substack.com thanks again for listening and I'll see you in the next episode. As a reminder, the content here is for informational purposes only, should not be taken as legal, business, tax or investment advice, or be used to evaluate any investment or security, and is not directed at any investors or potential investors in any A16Z fund. Please note that A16Z and its affiliates may also maintain investments in the companies discussed in this podcast. For more details, including a link to our investments, please see a16z.com disclosures.

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