Chief Executive Officer, Novartis
Davos 2026 LIVE | Shereen Bhan In Conversation With Vas Narasimhan, CEO, Novartis | WEF | N18L
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About Vasant Narasimhan
Vasant Narasimhan, CEO of Novartis, discussed the company's second-quarter 2024 performance in a July 21 interview, noting that the first half of the year involved navigating "the largest expertise in our history" while the second half is focused on investing in the pipeline and launches to sustain 5 to 6% growth. He stated that despite a "big beat" in the quarter, the company chose not to raise full-year guidance to maintain investment levels, with a reevaluation planned for the third quarter. Narasimhan also addressed patent expirations for drugs like Entresto and Cosentyx, expressing confidence that Novartis can grow through 2031 with assets such as Pluvicto and Kisqali. Narasimhan commented on the company's acquisition strategy, stating that larger deals are evaluated when they bring new capabilities and late-stage assets in core therapeutic areas, citing acquisitions like Avidity, The Medicines Company, and two radio ligand therapy companies. He described radio ligand therapy as a potential $25 to $30 billion segment and noted that Novartis has built manufacturing capacity, including eight facilities in the US and a network in Europe and Asia, to support over 900 sites in the US and 800 internationally. He also expressed concern about the European market, stating that only 60% of new medicines are launched in a timely manner there and predicting that percentage could decline further.
Transcript (41 segments)
S
Shireen0:08
2026 continues. We've been focusing on technology, energy. It's time now to put the spotlight on what the outlook is for the pharmaceutical industry. Who better than to give us a perspective than Vasant Narasimhan of Novartis? Vaz, always a pleasure. Many thanks for joining us here at Davos 2026. Uh, let me start by asking you what the year ahead looks like for the pharmaceutical industry. There's plenty of regulatory headwinds likely, uh, courtesy what President Trump has threatened to do uh with tariffs, reshoring and so on and so forth. But stripped off that, what do you make of the picture?
V
Vasant Narasimhan0:40
Well, look, I think in 2025 we were able to navigate a lot of the geopolitical complexities for Novartis, but I think the industry overall, the US tariffs, I think we've got good solutions there. I think with the MFN agreements to get certainty on how we're going to approach drug pricing in the US also I think a de-risking event for the industry. So I think this year will be much more focused on, at least for us, innovation, new launches, getting more medicines out. So I'm actually quite excited about the year. You know, for Novartis we have to navigate a big patent expiry. But after that we expect to get back to really strong growth for the years to come.
S
Shireen1:13
I'll talk about Entresto in just a second, but let me get back to what you said, uh, both on MFN as well as tariffs. How have you been able to sort of mitigate both those significant challenges?
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Vasant Narasimhan1:25
Yeah, I think on tariffs, what we did very early was began to adjust our supply chain. So we began to have more medicines on stock in the US in our warehouses, expand our warehousing capacity, and we made a $23 billion commitment, nine new facilities. We've broken ground on multiple facilities already. So that puts us in a very good place to be able to have supply coming from those factories in the US for the US, which then sort of eliminates whatever new tariff comes; it's okay. And then on top of that, our MFN agreement includes provisions that excludes us from tariffs for three years as long as we keep investing. So then tariffs are mitigated. And then on the MFN, it took us months but we came to a place where I think it's a pretty reasonable approach that allows us to maintain our guidance one year and five year, but gives the president some of the things that he's looking for. The big challenge will be now how does Europe respond to that MFN, because that's going to change the whole European marketplace for medicines.
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Shireen2:20
Well, that is going to be the latest challenge that you're going to have to deal with this year's challenge. But, you know, going back to some of these regulatory headwinds and this reshoring to the US, you know, North Carolina is just one of the facilities that you're looking at. What does that do to cost for the pharmaceutical industry? What does it do to cost for you?
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Vasant Narasimhan2:38
Well, interestingly, with those new facilities, we're really leveraging automation, AI to really, you know, enable us to have less labor costs than maybe we've had in other facilities. And so what that means is across all of those facilities only about a thousand new roles, and then of course more roles in the ecosystem, but we're using a lot more technological innovation to streamline and get the cost down. Now they do have higher cost of goods than our existing facilities, but we're able to absorb that, you know, given the overall size of the company.
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Shireen3:07
Okay, let's talk about Entresto, because you know that is where you are going to feel the competitive intensity of generics coming in. How do you deal with that? What's the plan going forward?
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Vasant Narasimhan3:16
Look, I think it's incredible that we have the innovation power that even with the largest patent expiry in Novartis' history, we're going to grow sales. And our ability to grow through that is, I think, one of the unique capabilities we have as a company, that we can keep innovating and new launches allow us to keep growing. And so we'll grow through Entresto. That'll be a first half of the year story, and then in the second half of the year when we fully lap the Entresto expiry, I think you'll see an acceleration of this business. We guided to 5% to 6% growth for the next 5 years. I think that's really a testament to the innovation power that we had. We've also been very active on the deal-making front. We led the industry in the number of deals last year. That's bringing a lot more innovation as well into the pipeline.
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Shireen3:55
So, I want to double down on both those deals. You know, you did a $12 billion deal. Are we likely to see you do more? And any specific areas that you want to focus on?
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Vasant Narasimhan4:04
You know, the deal-making will have to continue, because we are a $60 billion, approaching a $60 billion revenue company, soon to be hopefully $70, $80 billion of revenues. In order to grow that sized company, when you always have patent expiries, you have to keep the innovation engine full. Now I don't think we need to set the record for deals every year or lead the industry every year, but we need to be consistent on the deal-making front. And it'll always be focused in our core therapeutic areas and as well as these new technology platforms. The $12 billion deal we did was an RNA interference, but now instead of to the heart and to the liver, now it's getting into the nervous system and the muscle. And so that's the kind of thing we want to be at. We always want to be one of the leaders at the leading edge of medicine. And that's the vision we have for the company.
S
Shireen4:47
So what's cooking in the R&D labs? What can we expect in terms of the innovation pipeline?
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Vasant Narasimhan4:51
Well, exciting launches this year. We have a new medicine for dermatology called Rapsido. We'll be launching, we're already launching that in the US. We think this could be one of our biggest drugs, expanding across a range of new indications. We continue to be the leader in radioligand therapy, this new technology to treat cancer. One area I'm really interested in the long run is called immune reset, where we use cell and gene therapies to really reset somebody's immune disease. So all of these things now are advancing this year. So I think we're on a good track. Yeah.
S
Shireen5:22
And when do you expect to be able to get commercial gains from some of these things?
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Vasant Narasimhan5:27
Maybe not in the near term. I mean, I think cell and gene therapy for immunology could be 2028. Radioligand therapy is ongoing. Some of these new RNA therapeutics we hope to get approvals in the 2027, 2028, 2029 time frame. Because for Novartis now, the story is less about how will we grow to 2030, it's much more how will we grow from 2032 to 2037. And in our industry, that means you have to make the bets today that will hopefully pay off at the end of the decade.
S
Shireen5:53
So no change of heart or mind as far as the GLP-1 market is concerned for you. Still not interested.
V
Vasant Narasimhan6:00
I mean, when you look at it, it's very interesting. We're the number two total shareholder return company in pharmaceuticals without a GLP-1 over the last three years. So what that shows you is you can be a leading innovator in the areas outside of obesity and still be a market winner. So there are great companies leading in obesity. I think some of those will actually even go generic, I think soon in India. An explosion of the market in India. But we want to be a leader in all of the other diseases that humanity faces. And we do that. I mean, even as an example, malaria, Novartis is the global leader in malaria innovation. So we can innovate in all of these other areas and be very successful.
S
Shireen6:36
But let's double down on India then, Vaz. The last time we spoke, you were still looking for a buyer for the Novartis India business. Any progress on that?
V
Vasant Narasimhan6:45
You know, I think, Shireen, it's really interesting how much focus there is on our company structure. It doesn't change Novartis' commitment, because Novartis Pharma, Novartis AG is committed to India. These are all kind of structural things with our legal entities. So no change in the strategic review of how to structure ourselves. But the most important message I would want to get to all of the viewers: Novartis' commitment to India is absolute. We have over approximately 10,000 people now. We have 25 years in the Hyderabad area now with our Novartis corporate center there. And that commitment is long-term and that's not going to change.
S
Shireen7:20
So from an R&D point of view, the strategic importance of India as you highlighted, 10,000 people there in Hyderabad, not just for Novartis, but will India emerge or could India emerge as the CDMO leader, you know, a couple of years on?
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Vasant Narasimhan7:35
I think India has an opportunity, certainly with some of the disruptions you're seeing in China in R&D as well as in manufacturing, to kind of fill the void and be a real competitor in the CDMO space. I think that's an opportunity. We've brought research back to Hyderabad, and so we have a research presence now, basic science research, and that's very much leveraging the ecosystem of partners that we have in India. So I think it's an opportunity to continue to build that up.
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Shireen8:04
Outside of the R&D base that India provides, what about India and the market?
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Vasant Narasimhan8:09
Well, I think that's an opportunity for sure. I mean, I think we still have not seen the market development that I would hope over time for India.
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Shireen8:15
Why do you believe that's the case?
V
Vasant Narasimhan8:17
Well, the government understandably wants to maximize access to a huge population, and how do you balance that with continuing to also invest in high-end innovative medicines? Now I do think, and I don't want to always bring up the China story, but China somehow managed to navigate this with their NRDL system that allows you to bring innovative medicines to the broad population. And I think it'd be worthwhile to continue to look with the Indian government to look at how can you modernize the Ayushman Bharat system to allow you to bring innovative medicines to broader groups of patients within India. For sure.
S
Shireen8:50
You said GLP-1 is off the radar as far as you're concerned, but AI in specific, and you know that theme continues to play out, it's a lot more real today in the conversations that we're having. But what is that doing for you at Novartis today in terms of use of AI?
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Vasant Narasimhan9:09
Look, we're all in in making sure AI is embedded in every part of the value chain at the company. We've made big investments in R&D with some of the largest partners in the world: DeepMind, Isomorphic Labs, Palantir, Amazon, Microsoft, to ensure that we have the latest AI in all parts of drug R&D. I don't think you're going to see the benefits of that as quickly as maybe some people expect.
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Shireen9:30
Is that being overstated? Because everybody's talking about the fact that we're, you know, in the next few years we're going to see commercial cycles shrink. I mean, is that overstated?
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Vasant Narasimhan9:38
I mean, it's probably an overstated sentence, but we overestimate what will happen in the short term and we underestimate the long term. And I think this is a 7 to 10 year story, mostly because it takes 10 years to develop a new medicine. So this does not happen overnight. So I think you will see accruing benefits from AI, but it'll be on a 7 to 10 year timeline. I think where you'll see benefits much more quickly is in customer-facing operations, marketing, sales, where I think the technology is already good enough. We don't need AGI to modernize these areas. So we're looking to take out multiple billions of dollars of costs out of Novartis by using AI even today. But I think the big win would be: can we find completely new medicines? Can we treat diseases we couldn't even imagine to treat before? And I think AI gives us that potential. But it's a 7 to 10 year project, not a three-year one.
S
Shireen10:28
Not a three-year one. So in terms of cost optimization, and that's largely where you're using AI today, how do you make the transition to actually being able to go from optimization to transformation?
V
Vasant Narasimhan10:40
Look, I think it's a step-wise process, because one of the things you have to do is also upskill your people and get them very capable. Interestingly, a lot of our AI work actually happens in Hyderabad. Many of our top scientists and engineers working on AI are actually based there, and they're the ones doing the innovations on these use cases that will hopefully help us modernize the company. But I actually think the biggest challenge is a cultural one. People keep thinking about the impact on the workforce, but often what you're doing is having impact on the individual's tasks. Certain tasks are going to be done in a different way; it's not that you're going to take out an individual and put in an AI system. And to have people understand how to use these technologies is a multi-year effort. It's a cultural transformation. But we're trying to drive that. We're putting really bold goals in front of people, and hopefully I can sit here in a few years and say we made it happen.
S
Shireen11:29
So what is the goal that you're working towards?
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Vasant Narasimhan11:32
Well, right now I think the big one is on the cost side. I think we'd like to get $3 billion of costs out over the next three to four years, and really not impact our people, but say we're going to do things a lot more efficiently with our third-party spend in some of those areas. But then I think, as I said earlier, in order to grow with AI, we have to discover better medicines faster with AI. That's the real long-term opportunity.
S
Shireen11:56
So, going back to India and the bet that you've made there on betting on Indian talent, what will that mean in terms of incremental investments over the next five years in terms of expanding your facility and your presence in India?
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Vasant Narasimhan12:08
Yeah, right now we're comfortable with the 10,000 number, but I remember when I've been here in the past, I said I was comfortable with the 3,000 number, the 5,000 number, and we keep going up. So I think that's more of a testament to the incredible talent and spirit of the people we have there. Nobody who visits our Hyderabad site from anywhere in the world at Novartis does not leave completely inspired by the talent and the energy you see at that site. So I think as long as the site keeps delivering, we'll keep expanding. And I think that's the opportunity in front of them.
S
Shireen12:36
You know, if the big breakthrough through 2024 and 2025 was on GLP-1, where do you anticipate the next big breakthrough could be?
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Vasant Narasimhan12:44
I mean, I think clearly we hope in neuroscience, where we're making a lot of big bets on both neuromuscular diseases that are more rare, but also on things like Huntington's, Parkinson's, Alzheimer's. I think if we could, for humanity the next big breakthrough would be could we really meaningfully tackle one of these diseases? It's much harder. The mysteries of the brain remain, I think, still beyond us at the moment. But that would be the next big breakthrough. We have a couple of big bet readouts coming up. We'll see.
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Shireen13:15
Are they looking good?
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Vasant Narasimhan13:16
Don't know. [laughter] That's the hard part in this industry. It's just a card flip. I get a call one morning and I learn what happened with 10 years of effort.
S
Shireen13:24
Well, when you do get the call, we hope to hear from you, Vaz. Always a pleasure. Many thanks for joining us here in Davos. We wish you the very best of luck for the year ahead and look forward to seeing more of you in India.
V
Vasant Narasimhan13:34
Thank you, Shireen.
S
Shireen13:35
Well, that is Vasant Narasimhan of Novartis giving us a sense of what the year ahead looks like for the pharmaceutical industry. Plenty of challenges, but the pharmaceutical industry also responding to many of those and of course continuing to bet on their talent in India and growing their presence there. We are going to take a break. The conversations continue here on CNBC TV18. Don't go anywhere. We're back in a moment with more.