Our coverage here from Davos 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. Let me start by asking you what the year ahead looks like for the pharmaceutical industry. There's plenty of regulatory headwinds likely courtesy of what President Trump has threatened to do with tariffs, reshoring and so on and so forth. But stripped of that, what do you make of the picture?
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.
I'll talk about Entresto in just a second, but let me get back to what you said on MFN as well as tariffs. How have you been able to mitigate both those significant challenges?
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 eliminates whatever new tariff comes, it's okay. And on top of that, our MFN agreement includes provisions that exclude us from tariffs for three years as long as we keep investing. So tariffs are mitigated. And 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.
Well, that is going to be the latest challenge that you're going to have to deal with this year. But, you know, going back to some of these regulatory headwinds and reassuring 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?
Well, interestingly, with those new facilities, we're really leveraging automation, AI to 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 given the overall size of the company.
Okay, let's talk about Entresto because 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?
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.
So I want to double down on both those deals. You did a 12 billion deal. Are we likely to see you do more and any specific areas that you want to focus on?
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, you always have patent expires, 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 then 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.
So what's cooking in the R&D labs? What can we expect in terms of the innovation pipeline?
Well, exciting launches. This year we have a new medicine for dermatology called Rapsido. We'll be 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.
So, no change of heart or mind as far as the GLP1 market is concerned for you. Still not interested?
I mean, when you look at it, it's very interesting. You know, we're the number two total shareholder return company in pharmaceuticals without a GLP1 over the last 3 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 soon in India, an explosion in India, but we want to be a leader in all of the other diseases that humanity faces. 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.
Well, 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?
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 is that Novartis' commitment to India is absolute. We have 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.
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 a couple of years on?
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, 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.
Outside of the R&D base that India provides, what about India and the market?
