Over much of the past three decades, i have been an investor. The highest calling of mankind, ive often thought, was private equity. [laughter] and then i started interviewing. I watched your interviews, so i know how to do some interviews. Ive learned from doing my interviews how leaders make it to the top. Jeff i asked him how much he wanted. He said 250. I said, fine. I didnt negotiate with him. I did no due diligence. David i have something i would like to sell. [laughter] and how they stay there. You dont feel inadequate now because being only the second wealthiest man in the world, is that right . [laughter] vasant narashimhan is the ceo of novartis, a major swissbased pharmaceutical company. Born in the United States to indian parents, he was educated at Harvard Medical School but chose not to Practice Medicine. Instead, he chose to go into the pharmaceutical industry and is now leading the transformation of novartis to one of the most important pharmaceutical companies in the world. I had a chance to sit down with vasant in new york recently to talk about this transformation. So many people know the names of the drugs that they use, but they dont know the names of the Drug Companies or pharmaceutical companies that produce them. So for people who might not know much about novartis, tell us what drugs or products people would have heard of. Dr. Narashimhan there are a couple of major drugs we have now. Entresto, a medicine for heart failure. Another drug for a whole range of immunology indications. We have a drug for Breast Cancer. These names are not always tied these names are not always tied to what the drugs actually do. We have a broad portfolio of medicines, over 15 medicines and over 1 billion in sales. David by the way, who comes up with these brand names, because they are names i cannot pronounce sometimes. [laughter] dr. Narashimhan its a whole industry, maybe private equity would be interested to getting into it. But theres a whole industry of people who basically try to find word permutations that might tie to the drug, and then you have to send it to the regulators and they have to be sure the word will not be confused in any number of different languages for some other medicine or something else. David people who dont follow the industry carefully might not recognize it, but the way the industry works as i understand it is that Large Pharmaceutical Companies other developed internally or through an acquisition a drug, pharmaceutical product, they can sell and it is patented, and the patents last for 17 years. Dr. Narashimhan 17 years. David and after 17 years it becomes whats known as a generic, which means it is not patented, and you can get it presumably for a lower price. Is that a good way to make a business . You bill products and in 17 years they are gone . Dr. Narashimhan its a tough way to make a business, you are on a constant treadmill, and you have to have the innovation capacity to have what we call replacement power. You have to replace your sales with the next medicines and innovations. So the only winners in the long run are companies that have the r d firepower and capacity to keep inventing medicines, to rejuvenate almost an entire portfolio. So you think of a company like us with 45 every year we could billion dollars in sales every year we could, every year we could have 2 billion to 8 billion plus going off patent, and we have to generate sales to replace that and grow on top. We have a limited number of very Large Pharmaceutical Companies. David when somebody develops a drug or pharmaceutical product like you do, do they do it in the lab in switzerland . Dr. Narashimhan we invest about 9. 5 billion a year in r d, the Research Departments are in massachusetts and switzerland. David you test on animals and then a small subset of humans and then a large subset of humans . Dr. Narashimhan roughly thats how it works. Its a long journey. Firstly, what we have to do is find what we call a target in the human body we want to drug. We think this target has some ability to impact human health and the disease we are interested in. Then we have to design the drug to either inhibit or promote that target. That takes time. Ai might help us to do that faster, we will see. When we have the target drug optimized, we take it to animals, make sure it doesnt cause any preclinical safety signals, and then we finally move to humans. From the time we move into humans to when we get it the people is usually around nine years. David last year, in 2023, we saw an enormous increase in drugs that reduce your weight. And they seem to work quite well. There are two Drug Companies, one in the United States, and one in europe that seem to dominate that business. Are you going to get into that business and why not . It seems very profitable. Dr. Narashimhan we are interested. We are interested in the next wave of medicines. These glp1 ones youre talking about are very well serviced by the current companies. Its a fascinating story. It goes back to the early 1990s. It took us almost 25 years to realize the potent effect these drugs would have on obesity. We think theres opportunity to improve on them. Its very early stages in novartis, but can we come up with drugs that better preserve muscle, or may be easier to take and more frequently taken . Or more infrequently taken . One area where it novartis are the leaders is what we call small interfering rna therapies. It sounds like a fancy word, but really, what it allows you to do is to take drugs you normally would take every single day and make them drugs you only have to take twice a year. So in cholesterollowering, we have a drug you only have to take twice a year to lower cholesterol 60 . We are working on similar medicines for hypertension, high Blood Pressure, other risk factors. And the idea is that you can get infrequentlydosed medicines, because most people dont stay on their drugs. David as i get older, the drug im most interested in is one that deals with alzheimers or dementia, because im always wondering, am i going to be getting this disease . What are you doing in that area . Dr. Narashimhan we are active. We are interested in the next wave of what might be effective therapies for alzheimers disease. Today, there are two drugs, one drug licensed in another drug company, targeting the plaques in the brain. But we think the nextgeneration opportunities will be the target of other elements that accumulate in the brain. There are other targets as well. I would say alzheimers is a really tough space. One of the things that is very hard is you need to intervene very early, because its a slowly progressing disease. And identifying which patients to intervene on and figuring out what to treat them with is very difficult. David cancerrelated drugs. There are some cancerrelated drugs, and i guess you have some as well, but they tend to deal with cancer, once you have cancer, they try to ameliorate the side effects or the effects of it. What about something that prevents cancer . Is that realistic in my lifetime . Dr. Narashimhan that is something thats a heavy interest of the field, and at our company, we just got great data about a Breast Cancer drug that can be given to women to prevent it recurring. Where theres a lot of interest right now is can you identify things in the blood, things that are circulating, tumor dna, that would show the cancer is starting to happen in the body but well before it would be detectable in any scan . If we can get those tests to an adequate level of precision and treat patients before the cancer shows up, that would be the big opportunity, but thats still some time away. David you produce medicines that presumably help people with their lives, help them live longer and so what, so why arent you a more popular industry . You know, the private Equity Industry has its detractors, no doubt, but the pharmaceutical industry is not too far behind us. Why do people not love you, for the drugs you are producing . Dr. Narashimhan its a long story, in terms of the history of this industry. Even if you go back to the 1970s or 1980s, we were much more popular as a sector. As we brought more and more medicines forward and patients got on more and more therapies, one thing we were not watching carefully enough as an industry was what was happening at the pharmacy counter. Theres a lot of focus and congressional hearings and other places on list prices. That list prices mean very little in the sector because you have pharmacy benefit managers, you have retail pharmacies, you have wholesalers. What really matters is at the end of the day, when someone comes to the pharmacy counter, can they afford their medicines . And we are starting to address that. Some recent legislation addresses it. We are thinking a lot about it. Thats what we have to think about how to solve. David lets talk about your background. So your parents came from where . They came from tamil nadu, southern india. David when did they come to the United States . Dr. Narashimhan they came in the late 1960s and early 1970s. David were they educated . Dr. Narashimhan they were, my father, alongside his brothers, were some of the first people in our family to go to college in india. My father did his phd in india. He was able to work his way up and was one of the first people to come to the United States. My mother came to carnegie mellon, becoming a nuclear engineer. It was pretty extraordinary story in that they were able to come from relatively modest beginnings, so beginning with my grandparents, in relatively small places in india, and ultimately find a way to the United States. David you grew up in the pittsburgh area . Dr. Narashimhan i grew up a steelers fan indeed. David you did well in high school . Dr. Narashimhan i did well. David you went to the university of chicago. And why did you go there as opposed to other good schools . Dr. Narashimhan its an interesting story. I actually applied to all of the ivies and didnt get in anywhere. [laughs] actually, the one school that did admit me was the university of chicago, and it ended up being such an incredible gift in the end, because i would still credit it perhaps more than any other educational experience top me how to think, how to synthesize, how to be relentlessly curious. David ok, so harvard recognizing its mistake and admitted you to medical school. Dr. Narashimhan they did. David i assume your immigrant parents were saying great, my son is going to be a doctor. When you told him you were not going to be a practicing doctor, what did they say . Dr. Narashimhan they were very confused. They were very, very confused. I had this idea in my mind. I did work in Public Health and had great mentors at harvard, and i really wanted to see how could i have a bigger impact beyond individual patient care. And so i wanted to i first went to the world health organization. Then i went to mckinsey. All this time, i think the parents were assuming i would do a residency and become a cardiologist and finish the journey. And it never actually worked out that way. David for a while, you were i guess a protege of paul farmer, the famous doctor at harvard for a while, among other places. You then went back to india and went back working with Street Children in india. Did your parents say, you have a Harvard Medical School degree and you are making no money in india . India is a great country, but why dont you go Practice Medicine . Did they ever say that . Dr. Narashimhan my father would ask, i worked so hard to get out of these places, why are you working so hard to go back to them . It was certainly a confusion he had in his mind. But overall, my parents were very supportive of this Public Health school that i had. David you ultimately came to mckinsey after some Public Health work, and why did you not stay at mckinsey . Dr. Narashimhan mckinsey was a great Training Ground for a physician who did not anything about a pnl, a balance sheet, nothing about m a or valuation. I learned a lot quickly. But i felt a little detached from the real action. I had an opportunity presented to me to join novartis pharmaceuticals, to really try to look at the r d strategy at novartis at the time. And it was a little bit of a whim, sort of a gamble to see how that would work out. I would never have imagined it unfolded the way you did but it was really great. David so you work your way up and then, at the age of 40, somebody at novartis says we have a 40yearold who didnt go to business school, is not from switzerland, and he is a medical doctor who has never practiced medicine, lets make him the ceo. Dr. Narashimhan thats right. [laughter] david were you surprised . Dr. Narashimhan i was shocked when they first even asked me to even be a part of it. I was the head of Drug Development. I had the opportunity to do so many different roles at novartis in developing vaccines, i worked in the vaccine division, i worked in Drug Development for many years. I think part of the reason they were interested is because i had gotten a background in r d. But i think it was also not only my age, but also the fact that i think no other Major Pharmaceutical Company had an r d head or Development Head as their ceo. David your strategy has been different than the strategy you inherited. Novartis was in many different areas. They had a generic drug business and you sold that. Dr. Narashimhan yes. David why did you get out of that business . It seems to be a reasonably profitable business. Dr. Narashimhan as you know, when you have these conglomerates, you have to ask, is there value in the conglomerate . Is there value building all of these businesses together . The question is, what are we really great at . When i came into the role of ceo, i looked. We were in Consumer Health, devices, generics, we had a broad range, a broad portfolio. And i think what our company is great at is discovering these novel breakthroughs and getting access to over 280 million patients, which is our reach today, the largest we believe of any pharma company, to all of these patients. And so in order to do that well, i didnt think we could allocate capital successfully across all these different businesses. So we spun off sandoz, sold our Consumer Health business, and about 130 billion of transactions later, we come out as a pure play medicines company, which i think we are best for the long run. David you are the ceo and you go to the board and say weve been in the generics business, the consumer drug business, we will get out of all of them except the business we are in now. Did they say you are not qualified to make that judgment . Or what did they say . Dr. Narashimhan well, i think they went along and generally were aligned, but it also was a stepwise journey. First, we did Consumer Health and we saw how that went. Then we did alcon. Then the pandemic came. Then we did sandoz. The fear comes back from what we discussed earlier. When you have a business in innovative medicines, and you have these patent cliffs, if you have these other more stable businesses, theres a feeling you can offset risk. You have stable businesses and this one business where you face these cliffs every 15 to 17 years. I take the view that the only way you will generate enough medicines to keep growing is to focus your capital on innovation. David last week, you made another acquisition i think for roughly 5 billion. You bought a company that is dealing with blood cancer. Why was that a good acquisition, and how long does it take you to make an assessment about whether an acquisition is good or not . And do you come up with the ideas yourself, or does investment banker come along and tell you . Dr. Narashimhan we limit our time with Investment Bankers in general. We have been in blood cancers for over 20 years. Some of the most pioneering drugs in blood cancers have come from our research labs. This is an area we are in. We have deep understanding. Therefore it makes sense to actually add another medicine to that portfolio. We made that assessment, and it was a good, strategic fit. In this case, a good financial fit. We will make the bet. One of the things we have tried to be much more disciplined on is to try to go at the lower end of the range, under 5 billion for acquisitions, and really ensure that they are in areas where we have deep understanding. Generally when weve gone too far away from our core, the Value Creation hasnt been better. David in 2023, ai burst onto the scene. Everyone is excited about ai. How is ai affecting your company . Do you think it will help your company . Dr. Narashimhan i think ai will have an impact. But i think it will take more time than most people expect. I think first, in productivity areas, ai has immediate applications. A few like in productivity, we can use ai for Document Management and generation, not really the sexy areas. In our sector, most uniquely, the big question is, can you speed up or increase the efficiency of drug r d . End there, we are doing a couple of things. Clinical trials and optimizing our clinical trials, but the big bets we have made here with palantir, Microsoft Research labs, Google Deepmind, and some other partners to say can we discover some novel drugs that were not discoverable without ai . Can you optimize drugs more quickly . This is our building on the pioneering work that Google Deepmind did. A technology called alphafold. We also have to acknowledge we only understand about 5 to 10 of whats going on in the human body. So to expect ai to use that 5 to 10 to extrapolate and come up with big discoveries, is going to take time. David other than ai, what other medical technologies will come along in the next one to three years are likely to change what you do or the medical world . Dr. Narashimhan a couple of things. Rna therapeutics, as i mentioned one, earlier in the broadcast. These are really coming to life now. What these allow you to do is to treat diseases that were not treatable or treat them with very infrequent drug dosing. You can imagine if we could take on Blood Pressure or cholesterol with one dosing, transformative. Another is cell therapy for immunie diseases. We have seen Extraordinary Results in earlyphase 30 that if you could reset somebodys immune system, the autoimmune disease actually goes away. We will see if it sustains. But these are some of the most impressive results we have ever seen in early stage clinical studies. Then the last as we are big in an area of cancer called radioligand therapy. This is the idea of, can you bring nuclear particles right next to a cancer in the body and deliver the radiation very locally . And this has the opportunity to treat a whole tumors in ways we range of solid tumors in ways we could not before. David why should someone want to be in the pharmaceutical industry . Why not go into something sexy like private equity . Dr. Narashimhan in the end, what we do is we create miracles in the palm of your hand, these little medicines that can transform a human beings life. David what do you do to lower your global footprint . What do you do . Dr. Narashimhan our big topic on sustainability is much more access to medicines, so we have a big effort on Global Access to medicines, trying to make sure our innovations are accessible. The work we do in areas like malaria, leprosy, sickle cell disease, to ensure that populations around the world can get access to those medicines. David how do you pay for that . Dr. Narashimhan its all part of our sustainability efforts, and we view it as part of our core mission to deliver these Global Health therapies to patients around the globe. We have a huge effort in Global Health r d. We invested 250 billion in trying to discover the next wave of medicines to treat these Global Health conditions. David what about dei . Dr. Narashimhan on dei, we are on a good track here. We actually have 48 women in management, the median pay is higher for women in novartis than for men. So we have our work to do at the upper levels of the company but overall we are doing well. David what skill set should somebody develop in order to rise up to be a ceo . Dr. Narashimhan i think the biggest thing i think about is curiosity. Just relentless, relentless curiosity. I think whatever position i was put in at novartis, i had to learn, teach myself, be relentlessly curious and then apply it. Having experiences in a range of different parts of the Business World will be a huge success. David how may employees does novartis have now . Dr. Narashimhan 76,000. David 76,000. Thats a lot of employees. So do you frequently get a chance to meet them at some organization somewhere, some meeting . How do you deal with all those employees . Dr. Narashimhan i think the most valuable thing i find in my job is t around the world and meet our people, be able to have town halls and interactions. It used to be, before we spun off all of these businesses, 135,000 people. So we have definitely slimmed down, but i think there shoring up nothing that can replace showing up facetoface and describing why we do what we do. David as the ceo, do you tell your subordinates, these are the areas that i think we should work on and see if you can come up with a pharmaceutical product in that area . Or do they come to you and say say, we have a prospect here, and you bless this . How does that work . Dr. Narashimhan i have a philosophy we call in our culture unbossed. We try to unboss our people. We want our people to bring the ideas up. We, of course, have to challenge them, and then make the call. I believe in our sector, some of our scientists, many of our scientists are worldclass. They should bring up the ideas and we have to curate them. That certainly, i am not sitting on some mountain knowing the right thing to do. David if someone is saying im graduating from college or graduate school in the next year or so, and i want a nice career, why should somebody want to be in the pharmaceutical industry . Why not go into something sexy like private equity or Investment Banking or Something Like that . [laughter] dr. Narashimhan [laughs] despite some of the concepts people have about our industry, in the end, what we do is create these miracles that fit in the palm of your hand, these little medicines that can transform a human beings life. If you look at the arc of history, in the last 130 years, weve been able to move through the power of medicine Life Expectancy from 30 years to 80 years. We are now able to cure diseases. We are able to give people with debilitating diseases their lives back. If youre part of that enterprise, you can get up every day back knowing you are moving the needle for society, you are moving the needle for mankind. I think we imagine medicine with the medicines we create. Thats an inspiring way to create your time. David suppose a president came to you and said you would be great to be the secretary of health and human services, head of the fda or something, what would you say . Dr. Narashimhan i would think hard about it. At the moment, it would feel like a really daunting task, given the politics. But on the flipside, i do think Public Service has so much power. I think, if you are the right if you are in the right context, you can do a lot of good for the world. But i think it is very contextdependent. As you know, it can be a very short time in some of these roles with some of the recent cabinet members. David suppose i said im a stock market picker, and i want to be buying good stocks in companies that will grow. Why should i want to invest in the pharmaceutical industry . Is it going to continue to grow, as it did last year . What about your own company . Do you think it will have good Growth Prospects the next couple of years . Dr. Narashimhan we do, we signed up for a 5 plus growth and 40 both in markets over time. I think the reason to invest in the sector is the science. If you look, again, as i look back in history, for most of the last century, we were only giving people pills and small molecule drugs. Then we discovered that we had this whole world of biologics and we could treat diseases with biologics. More recently, weve discovered we can reprogram cells, edit the genome, we can use rna therapies to completely transform areas of medicine. Those technologies are at the very nascent stage. They will open up whole new areas of growth from our business standpoint and the Human Health Impact standpoint. And so to get in now as thats happening and you have seen how the obesity companies are clearing the 500 billion dollar market cap on rna therapeutics, so we we will also be able to hope that as we work climb to a new level of market cap over time. David you are still early in the career relative to many other people i often talk to. Any other regrets about going this route or not becoming a medical doctor and working on medical patients . No, i have to say, when i look at the reach of our medicines and the impact they have i will go back to my time with paul farmer to say he unfortunately passed away but was an incredible mentor, an inspiring mentor i always told him i wanted to have this big impact on Public Health. He, of course, did it with working with patients in some of the poorest communities in the world. Novartis has a malaria drug, coartem, thats almost 99 effective when it is given on time to treat a malaria patient. Over 400 million children treated with our malaria medicines, the biggest malaria pipeline. Even from a Public Health standpoint, the opportunity to have an impact at scale has really been fulfilled with this role. Youre probably not easily persuaded to switch mobile providers for your business. But what if we told you its possible that comcast business mobile can save you up to 75 a year on your wireless bill versus the big three carriers . 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