david: this is, uh, my kitchen

table, and it's also my filing system. over much of the past three decades, i have been an investor. the highest calling of mankind, i've often thought, was private equity. [laughter] and then i started interviewing. i watched your interviews, so i know how to do some interviews. i've 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 didn't negotiate with him. and i did no due diligence. david: i have something i would like to sell. [laughter] and how they stay there. you don't 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 swiss-based pharmaceutical company. born in the united states to indian immigrant 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 don't know the names of the drug companies or pharmaceutical companies that produce them. so, for people who may not know much about novartis, tell us what drugs or pharmaceutical products it produces that people may have heard of. dr. narashimhan: there are a couple of major drugs we have now. entresto, a medicine for heart failure. another drug cosentyx for a whole range of immunology. we have a drug for breast cancer. these names are not always tied to what the drugs actually do. but we have a pretty broad portfolio of medicines. over 15 medicines and over $1 billion in sales. david: by the way, speaking of brand names, who comes up with these brand names? because they are names i cannot pronounce sometimes. [laughter] dr. narashimhan: it's a whole industry. maybe private equity would be interested to getting into it. but there's 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 that this word will not be confused in any number of different languages for some other medicine or something else. david: people who don't follow this industry carefully might not recognize it, but the way the industry works, as i understand it, is large pharmaceutical companies develop 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 what's known as a generic. which means it is not patented, and you can get it for, presumably, a lower price. is that a good way to make a business? you build products and in 17 years they are gone? dr. narashimhan: it's 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, the next innovation. so the only winners in the long run are companies that have the r&d firepower, r&d capacity to

keep inventing medicines, to rejuvenate almost an entire portfolio. a company like us, $45 billion in sales, every year we could have anywhere from $2 billion to $8 billion plus going off-patent. we have to generate sales to replace that and grow on top. that is why you have a very limited number of pharmaceutical companies. david: if someone develops a drug or pharmaceutical company, like, you have a lab in switzerland? dr. narashimhan: we invest about $9.5 billion a year in r&d. the research departments are in cambridge, massachusetts, and basel, switzerland. david: you test first on animals, and then a small subset of humans, and then a large subset of humans? is that how it works? dr. narashimhan: roughly that's how it works. it's a long journey. first we have to 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. once we have that target drug optimized, we take it to animals, make sure it doesn't cause any preclinical safety signals, and then we finally move to humans. and from the time we move into humans to when we get it to 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. are you going to get into that business, and why not? it seems to be extremely profitable. dr. narashimhan: we are interested. we are interested in the next wave of medicines. these glp-1 you're talking about are very well-serviced by the current companies. it's a fascinating story. it goes back, actually, to the early 1990's. it took us almost 25 years to realize the potent effect these types of drugs would have on obesity.

we think there's opportunity to improve on them. it is very early stage within novartis, but can we come up with drugs that better preserve muscle, or may be easier to take, and are more infrequently taken. one area where we are a leader is what is called small interfering rna therapies. it sounds like a fancy word, but really what it allows you to do is take drugs you normally would take every single day and make them drugs you only have to take twice a year. so in cholesterol-lowering, 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 for cardiovascular disease. and the idea is, can you get to very infrequently-dosed medicines? because most people don't stay on their drugs. david: as i get older, the drug i'm most interested in is one that deals with alzheimer's or dementia. because i'm always wondering, am i going to be getting this disease? what are you doing in that area? dr. narashimhan: we are active. what we are interested in is the

next wave of what might b effective therapies for alzheimer's disease. today there are two drugs, one licensed and another drug coming, targeting the plaques in the brain. anti-amyloid drugs. we think the next generation opportunities will be to target other elements that accumulate in the brain. one is called tau. there are other targets as well. i would say alzheimer's is a tough space. one thing that is hard is you need to intervene very early, because it's a slowly-progressing disease. and identifying which patients to intervene on and figuring out what to treat them with is very difficult. david: cancer-related drugs. there are some cancer-related 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 of it or the effects of it. what about something that prevents cancer? is that realistic in my lifetime? dr. narashimhan: that is something that's a heavy interest of the field, and at our company we just got great data on a breast cancer drug that can be given to women who

have had breast cancer, and prevent it from recurring. where there's 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 start to treat patients well before the cancer shows up, that would be the big opportunity. but that is still some time away. david: you produce medicines that presumably help people with their lives and so forth. so why aren't 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: it's a long story, in terms of the history of this industry. even if you go back to the 1970's or 1980's, we were a much more popular sector. as we brought more and more medicines forward and patients

got on more and more therapies, the one thing we were not watching carefully enough as an industry was what was happening at the pharmacy counter. there's a lot of focus and congressional hearings and other places on list prices. but list prices mean very little in this sector, because you hav pharmacy benefit managers, retail pharmacies, 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. but that is what we have got to figure out how to solve. ♪

david: let's talk about your background. your parents came from where? dr. narashimhan: they came from southern india. david: when did they come to the united states? dr. narashimhan: they came in the late 1960's and early 1970's. david: and where 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. 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. and, yeah. i think it is a pretty extraordinary story, in that they were able to come from relatively modest beginnings. 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. dr. narashimhan: i went to the university of chicago. david: and why did you go there as opposed to other good schools? dr. narashimhan: it's an interesting story. i applied to all of the ivies and didn't get in anywhere, and one place that admitted 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 with how to think, how to synthesize, and be relentlessly curious.

david: harvard recognizing its mistake, admitted you to the 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. and all this time i think my parents were assuming i was going to go back and 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 protégé of paul farmer, the famous doctor at harvard for a while, among other places. and you then did other things to help people in india. you went back, working with street children in india? dr. narashimhan: yes.

david: 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 don't you go practice medicine? 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 goal. david: so 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 know anything about a pnl, a balance sheet, nothing about m&a or valuation. i learned a lot quickly. but i felt like it was a little detached from the real action. i had an opportunity presented to me to join novartis pharmaceuticals, to really try to look at our 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 have never imagined it would have unfolded the way it 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 40-year-old who didn't go to business school, is not from switzerland, and he is a medical doctor who has never practiced medicine, let's make him the ceo? dr. narashimhan: that's right. [laughter] david: were you surprised? dr. narashimhan: i was shocked. i was shocked when they first even asked me to be 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 department, working 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 we have these conglomerates you have to ask, is there value in the conglomerate? is there value building all of these businesses together? and then the question is, what are we really great at? when i came into the role of ceo, i looked. we were in consumer health, eyecare, devices, generics, we had a broad range, a broad portfolio. and i think what our company is really 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 didn't think we could allocate capital successfully across all of these different businesses. we spun out sandoz, sold our consumer health business. about $130 billion of transactions later, we come out as a pure play medicines company, which i think we are best-position for the long run. david: you are the ceo and you go to the board and say we've

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. and then a year later we did alcon. then the pandemic came. then we did sandoz. because i think 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 other businesses that are much more stable, there is a feeling that 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, as we are talking now, last week you made another acquisition for, i think, 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, this is a great idea? dr. narashimhan: we limit our time with investment bankers in general. what we try to look at is, in the areas we are in, 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 this makes sense, to actually add another medicine to that portfolio. so we make that assessment. if it is a good strategic fit, in this case a good financial fit, we will make that 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 we've gone too far away from our core, the value creation hasn't been there. david: in 2023, ai burst onto the scene. everybody is now excited about ai. how is ai affecting your company?

and do you think it is going to help your company? dr. narashimhan: i think ai is going to have an impact, but i think it will take more time than most people expect. in productivity areas, ai has immediate applications. i think in productivity, we can use ai for document management document generation. not really sexy areas. in our sector uniquely, the big question is, can you speed up or increase the efficiency of drug r&d? in there we are working on doing a couple of things, working on clinical trials and optimizing our clinical trials. but the big bets we have made here with palantir, microsoft research labs, google deepmind, and a few other partners to say, could you really discover novel drugs that maybe were not discoverable without ai? can you optimize drugs more quickly? this is all building on the pioneering work that google deepmind did. on a technology called alphafold. we also have to acknowledge we only understand about 5% to 10% of what's 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 medical technologies you think are coming along in the next one to three years are likely to change what you do or the medical world? dr. narashimhan: rna therapeutics, as i mentioned earlier in the broadcast. sirna's, these are coming to life now. what this allows you to do is 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 once a year dosing, hugely transformative. another is cell therapy for immune diseases. we have seen extraordinary results in early studies, that if you can reset somebody's immune system, their autoimmune disease 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. the last is, we are big in an area of cancer called radioligand therapy. this is the idea that, can you

bring nuclear particles right next to a cancer in the body and deliver the radiation very locally? it has the opportunity to treat a whole range of solid tumors in ways we could not before. david: why should somebody 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 that fit in the palm of your hand, these little medicines that can transform a human being's life. ♪

david: how many employees does novartis have now? dr. narashimhan: 76,000. david: that is a lot of employees. do you frequently get a chance to meet them? how do you deal with all those employees? dr. narashimhan: i think the most valuable thing i find in my job is to go 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's nothing that can replace showing up face-to-face and describing why we do what we do. david: so as the ceo of novartis, 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, 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, and we of course have to challenge them, and then we make the call. i believe in our sector, some of our scientists are world-class. many of our scientists are world-class. they should be bringing up the ideas. and we have to curate them, but certainly i am not sitting on some mountain knowing the right thing to do. david: if someone is saying i'm 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? dr. narashimhan: [laughs] you know, despite some of the

things, 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 being's life. and if you look at the arc of history, in the last 130 years we have 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 you're 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 do reimagine medicine with the medicines we create. i think that is a pretty inspiring way to spend your time. david: suppose a president came to you and said, i know you are living in switzerland, but 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 very daunting task, given the politics. but on the flipside, i do think

public service has so much power. i think if you are in the right context you can do a lot of good for the world. but i think it's very context-dependent. as you know, it can be a very short time in some of these roles, with some of the recent members. david: suppose i said, i'm 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? and what about your own company? do you think it will have good growth prospects in 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 biologicals. more recently we have discovered we can reprogram cells, edit the

genome, we can use rna therapies to completely transform areas of medicine. those technology areas are at their very nascent stage. they will open up whole new areas of growth from our business standpoint and the human health impact standpoint. so, to get in now as that is happening. you've seen the obesity companies clearing the $500 billion market cap. we hope that as we work in our areas like rna therapeutics, we will also be able to climb to a new level of market cap over time. david: as you look back in your career -- and you are still early in your career relative to many people i often talk to -- any regrets about going this route or not becoming a medical doctor and working on patients? dr. narashimhan: 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 -- who 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.

today novartis, our malaria drug, coartem, is almost 99% effective when given on time to treat a malaria patient. over 400 million children treated with our malaria medicines, the biggest malaria pipeline. so even from a public health standpoint the opportunity to have an impact at scale has really been fulfilled with this role. ♪

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