Welcome to this week's episode of the Read Out Loud, a weekly biotech podcast from Stat. I'm Allison D'Angelus.
It is Tuesday, January 13th, and we are coming to you from the JP Morgan Healthcare Conference in San Francisco.
We are recording this episode in front of a live audience at the conference. Hey audience, come on, make some noise.
Yes. Yes. Very nice. Very nice.
We will have two guests here with us. First, we'll talk with Novo Nordisk's new CEO, Mike Dustar, about his vision for the company as it faces growing competition in the obesity market. Then, we're going to have Bob Nelson, co-founder and managing director of Arch Venture Partners. We'll hear his thoughts on everything going on in DC, China's ascent in biomedical innovation, and the use of AI in drug development. But first, a word from our sponsor.
Okay, so Adam, Elaine, let's kick it off. Let's talk a little bit about JP Morgan. And I actually want to ask you guys about the thing that seems like it's missing from JP Morgan this year. We kicked off the conference without a big M&A announcement. What do you guys make of that?
You know, I feel like we're obsessing a little bit about M&A, and I wrote this in a recent column. So, I think it's okay that we haven't had a lot of M&A deals. I think that there are certainly M&A deals on the horizon that will be announced. And so, everyone should just chill out.
It was very strange getting a text message from Adam in the last couple of days telling me to chill. That's not normally your MO.
I know that's not usually my MO, but it's my new persona. My JPM persona is now the very chill, relaxed persona. That's what I'm trying to be. I wonder if it's also maybe just a reflection of the waning importance of the JPM conference where maybe there's not as much urgency or companies don't feel the need to have to announce big news at the conference. It's just, you know, Allison, you were talking about you were surprised because on the flight here, it was actually not a full flight.
Yeah. Yeah. I took the Boston to San Francisco route, a route that normally on a Saturday or Sunday before JP Morgan, jam-packed. Like I'm fighting, elbowing people to get my bag in the overhead bin, and that was not the case this year. There were empty seats, and I heard from at least two or three other people that their Boston to San Francisco route also had empty seats, which really struck me and struck them too as a sign of like, okay, yeah, maybe we're having a little bit of tempering of expectations.
If you want a relaxed experience traveling to San Francisco for JPM, fly on Friday, which is what I did.
You did. And you were also then sending us, you know, we're all like scrambling, getting ready for the conference. Adam, once again out here chilling, sending photos of the food that he's eating. This is Adam. Once again, my ongoing beef with you is that you're sending delicious food photos that I can't enjoy. So, our first guest today is Mike Dustar, the CEO of Novo Nordisk. A few years ago, Novo transformed the obesity treatment landscape with its blockbuster GLP-1 drug, Wegovy. But over the past year, the company has been losing market share to Eli Lilly, and it's facing questions about its pipeline and commercial strategy. Mike was named CEO just 5 months ago, tasked with the responsibility of making Novo more competitive in the obesity market that it created. One key catalyst that he has going for him is Novo's recent launch of the Wegovy pill, the first oral GLP-1 obesity drug on the market. And so Mike joins us today to discuss his vision and his strategy for the company moving forward. Everybody, please help me welcome Mike onto the stage.
Allison, and then you can adjust that mic and make yourself nice and comfortable.
The chairs are kind of deep.
This is a nice room.
So, Mike, how's it going? Like, you're... This is your first JPM as the CEO. I don't know if you've been at other JPM.
Mike, this is my 22nd JPM. I've got you beat.
So, so just quickly, like, how's the experience been so far?
It's been really nice. I think, let me see if I can do this.
So, it's been really good. It's crowded like I thought it would be, but it's also been incredibly rich in terms of the dialogues we have had with the media, with our partners, with our peers. So, I'm having a good time.
So, Mike, you've had an interesting path at Novo. You joined the company over 30 years ago. You started off as an office clerk in Austria. Obviously, you've climbed through the ranks and now you are the CEO of the company. So, I wonder, like, how has that career path shaped your approach as the CEO and sort of the strategic direction you want to take the company?
It's a good question. And I don't know how long time you have, but of course, you know, when I came to the company, I came as a 21-year-old who just needed some pocket money. That was the only thing I cared about that summer, making some photocopies. Some years into it, when you really start to realize what our industry does and specifically maybe what my company does, you create a bit of a sense of purpose that what we do matters. And especially in our business within Novo Nordisk, there is not a single person here that is not aware of someone who's either suffering from diabetes or obesity. And when you are also the largest within your own field, you actually see people that are using your product. There is a bit of a good feel about that, that because of what you do, they are having a normal life and they're having a better life. And that, of course, I have carried that through my career. Obviously, you know, when you sit at the top in my current position, even more so, you feel responsible. But I would not lie to tell you that even when I was a lower-level office clerk or working in a department, I really feel like I'm making an impact as part of it. And that's what the company does. The company really does a good job trying to say it doesn't matter what fancy title you have or you don't have. We're all here for a purpose and we share that responsibility. And I felt that from a very young age.
Mike, can I ask, you're also... so this is not only your first JP Morgan, this... you were the first CEO at Novo Nordisk. It's not Danish. Correct.
Yeah. I'm actually the sixth CEO, which is odd for a company that has 103 years of history. So, in 103 years, we only have had... I'm number six, but yes, the other five were Danish.
Okay. So, tell us a little bit about the culture. What do you make of the environment? I mean, a company that's only had six CEOs over, you know, a hundred-year history, most of which have been Danish. Do you find that culture in the company fitting for kind of a 21st-century pharmaceutical company? Is there anything you feel like you need to change?
Well, I'm biased here. First, I like the culture. Otherwise, I think there's something wrong with me having stayed there for 33 years. But I also think that the company has been quite successful. There are a lot of companies that maybe have a hundred-year history, but they've gone down and down and down and they're today a fraction of what they used to be. Novo Nordisk, despite all of its ups and downs, still is one of the largest European, I would say one of the largest global companies. And that is in light of the culture it has as well. And by the way, Novo got to this size without mergers and acquisitions. It's all been organic growth, which is quite unusual, I would say, also when you look at our industry. Like any culture, there are pluses and minuses, and you have to figure out how you want to read the book. One of the things that Scandinavians and Danes specifically are famous for are their consensus-driven organizations, their inclusivity. On a plus side, you could say long before diversity and inclusion, DNI, became popular, it was in our culture. I came in as a copy boy and they judged me and treated me equal to anyone else regardless of my younger age, my status, or what have you. So that's really good. That's part of the culture. On the other hand, you could say consensus means that you include everyone and you speak to everyone and you make sure that everyone is heard. If you need to make a decision and there are 20 people around with 20 different opinions and you have to not just listen but adhere to everyone's thought and try to consolidate everyone's thought into a decision, that culture sometimes becomes slower than in a dictatorship when one person says we're going to do it this way. So being aware of that and trying to make sure that you don't compromise speed when it's not uncompromisable is very, very important.
Well, on that point, Mike, I want to follow up because, you know, we've reported at Stat that there have been some people within Novo Nordisk that have felt over the last several years that, you know, the company's R&D operations have become a little bit too cautious. They've, you know, kind of focused on internal projects and maybe not looked beyond at the rest of the pharmaceutical industry and that things were kind of... opportunities were missed as a result. I mean, how do you think that was the case? What do you do from here on out?
I think, again, it depends who you ask and how you look at it. Over the last five years, we've done more than 100 different BD transactions. Most people don't know that, including, by the way, many of our own internal employees. So from that perspective, I think many of the things we have done, we looked out and bought some parts of it somewhere else. And very proud, obviously, in our normal value chain, manufacturing, what have you, we do a lot of partnerships to get where we are. On the other hand, the fact that I've been in the company 33 years and I've never been to JP Morgan as an exec... I've been an executive for 12 years or so. I've never been here. I think my previous boss, the previous CEO of the company, in his eight years as a CEO, was only here once. It speaks volumes to what you mentioned for the other side of the story, that you come here and every single company, small or big, is here presenting, explaining who they are and welcoming a dialogue. Yet Novo was a bit less present. That would be something that I would like to actually amend and improve. And that's why also this year I've brought my whole entire executive management team here just to see and feel that there is a lot happening. And this not-invented-here syndrome that sometimes does exist in many companies, and certainly it has in our company as well, should go away. And yesterday we had a reception where we had invited many of the partners and a number of companies that want to be partnering with us over there. It really was phenomenal to see how much more we can do with the ambition that we have treating two billion people that is above and beyond what we can do on our own. The problem is simply too big for us to be naive and think we can solve it on our own.
Do you want to... you want to go into the...
What? Because so on the topic of BD and M&A.
This is the podcasting magic.
This is... we're going off script here for a second. I'm like getting my signals from Elaine.
You want me to go into the M&A? Yeah.
See, this is what happens, people. Like, you know. So let's stick to the topic of M&A for a second. But, you know, obviously, at the end of the year, there was this really interesting fight, bidding war over Metsera, the obesity drug developer, between Novo Nordisk and Pfizer. And eventually Pfizer won, paying around $10 billion for the company. I wonder, my first question for you on that is, I wonder if your pursuit of Metsera was really kind of a ploy to get Pfizer to overpay for an obesity asset.
Let me put it that way. I don't think actually there was a bidding war. Maybe from one element you could say there was one. If you would read the proxy, then you see there was a reference to player one. Over notice was player one. We were there from the very beginning. And then we were joined first by another company and eventually by Pfizer. If you continue reading the proxy, you see that our first bid was $10 billion and 16 bids later, our last bid was $10 billion. That's quite unusual and I think something that gets lost in translation. We looked at the data, we understand this stuff, and we knew that to us this is worth $10 billion. So instead of playing games and getting all the bankers involved, we went with our last bid first. We said we would like to buy the stuff for $10 billion and then got some interest. Eventually Pfizer came in. They wanted to buy it for $7 billion. We thought that's not fair. So we repeated our bid, that is $10 billion. And eventually they, I think, took the whole thing for $10.1 billion, I think it was, or something. And that's fine. We knew to us this is not worth a dollar more than $10 billion from the very beginning.
So you say you were disciplined in the approach, and you have to be. I think basically a bad deal is worse than no deal.
Yeah. We were not there just to make a deal. We were there to bring a couple of assets in at the cost we thought is worth it to us. And it's worth more for Pfizer. And I'm very happy for them. And I think that this is how it panned out. But I was very vocal and public about this. If you would like to take these assets, God be with you. Just pay the right price for it. And eventually they did. So I'm incredibly thankful that they listened to me.
So moving forward on the BD front, on the M&A front for Novo Nordisk, I mean, obviously it's too simplistic to say, oh, you were willing to spend $10 billion on Metsera, so therefore you have $10 billion to spend on somebody else. But I wonder how are you thinking about the kind of assets, the kind of companies that you may want to pursue in future transactions.
Yeah. And I think the answer to that is we take it back to the patients. We never put a bid limit before we went into the Metsera deal. We put the limit after we saw the data and calculated what it does compared to what we have timewise and so on and so forth, where we said it's worth that much. We could have actually on a different deal with something that was worth more go twice, three times, four times more. If you look at our basically leverage and our balance sheet, you could see that we could go very high, much higher than most of our other peers due to our financial strength. So from my perspective, it's almost wrong to say I'm going to do a five if you have the money to say I'm going to do $5 billion deals or $10 billion or $20 billion. You have to say what do you want to achieve? What do you want to do? We would like to treat as many people suffering from diabetes, obesity, or overweight as possible so we can expand on the current leadership we have within these two areas. Our strategy is rather simple. Do a couple of things, but do it world class. Be the best in the world at it. So in that context, then we say, so how many people are out there? There are about two billion people that are suffering from these three different conditions. And then you basically say, okay, well, this cannot be a single disease. Obesity, everyone calls obesity obesity, but in reality, there's multiple different versions of it out there with multiple different wishes and needs of individuals for treatment. I need to be at every corner of that.
Is there a company out there like Metsera that you would be interested in buying, a cardiometabolic company in obesity, weight loss? I mean, is that the priority for Novo Nordisk?
Yeah, we just bought another asset from a company called Auro. We actually bought the company Auro. And they're selling a product for fatty liver. 80% of those patients are obese. We paid $5 billion for it, same time. By the way, we were bidding for Metsera's exact same period. And this is for late-stage MASH F4. We have some semaglutide that is basically helpful in F2 and F3. And we felt like we have nothing for patients with F4 MASH. And those patients often have to get a liver transplant. But I was going to say, so F4, for people who don't understand it, it's patients with more severe disease, scarred basically liver, and their only solution is transplant. This product, if it proves to fulfill its promise, is able to almost reverse the condition and avoid you getting a transplant. Huge unmet need. So we went and purchased them. Are there more out there? Absolutely. We are here with my whole team to explore some of that. There's some early asset things that are happening. There's some later asset things. The trick, Adam, is to figure out is it substantially better or earlier than what we can do ourselves? Because we also, in all humbleness, tell the world within these two areas are able to do quite a bit on our own. So if we can actually bring something decent on our own, we're not going to buy a duplicate of it elsewhere. So it's not any deal, but it's the right deal.
So I want to pivot to commercial strategy because you're a commercial guy. Specifically on this emerging direct-to-consumer market, this market where patients use cash to buy drugs directly from the pharmaceutical companies. You were slower to the DTC market than Lilly, but now it seems like you're really leaning in. I've been hearing your talks here at the conference. You're talking about DTC a lot. It seems like perhaps focusing even more on DTC than traditional insurance channels. Why are you focusing so much on DTC? What are the metrics that led you to this? Are you seeing more growth of prescriptions in DTC than in traditional insurance?
Yeah. So if you allow me to first maybe make a correction, with all my subjectiveness, I would not say we were slower than Lilly. I would say we were cursed as a leader in an area where we were first, right? When you go somewhere, when if you go to a dark tunnel on your own, and when I really say dark tunnel, this obesity was a dark tunnel. When we went into obesity 30 years ago, people made fun of my company saying that this is not a disease. This is not a condition for serious pharmaceutical to enter in. And maybe more importantly, there's no money in it. There is no money in this. That's why they were all late. Novo Nordisk saw the patients. We did also not see the money. It's not that we were visionary and knew what's going to happen. We basically saw the people because obesity is a very visible disease. We also knew that it's a leading cause of type 2 diabetes, what we do. And if you truly want to help prevent future diabetics, then you got to get involved in obesity. That's why we went there. Then when you go into this dark tunnel on your own without anyone else, you will start falling into certain puddles. Left, right, and center. If the guy behind you following you has any feelings and sense and savviness, and Lilly does, then they just try to avoid the puddles that you fell in. So they went back and forth, and one of those elements was, of course, they went earlier on us with, let's say, the cash channels and what have you, because they noticed that, ah, there's something being segmented there. Our job is to make sure we don't repeat the same mistakes twice.
Right. What are you seeing? Like, are you seeing now that the scripts in the DTC channel are growing faster than in the insurance channels?
Absolutely. I think not just us, Lilly also sees that. So if you take a look at the latest data from IQVIA from last year, you clearly see that the insurance channels' growth are subpar compared to the e-health and the cash channel growth for both companies. We also notice now, and we are trying to exercise this with our Wegovy pill launch, that no matter how well that growth is, the comparator should not be the insurance channel growth rates, but it should be the potential of what's possible. And that's why, in addition to our own novocarepharmacy.com, which is the path for people to buy our Wegovy pill, we also have started doing massive partnerships with LifeMD, with Ro, with Weight Watchers, with Amazon Pharmacy the other day. Because many of these patients, they don't know my site, right? They know their site. And we need to meet the patients where they are rather than where we want them to be. If you really want to go fast in a broad way...
What percentage of your scripts now comes from DTC?
So we have, as of end of last published data, I had about 10% was coming from the cash channels. I think if you look at the latest data from Lilly, that was about 30%. So they've done better than us, and we use that as a benchmark to say we can do better.
Okay. So kind of the flip side of this DTC model is that it actually ends up putting more costs onto the individual patient because they are paying out of pocket for these drugs. You said this yesterday at an event yesterday morning that, you know, as health care costs become more burdensome for health systems, you know, patients will... one solution is patients taking on more costs themselves. But doesn't this go against the argument that Novo has been making that the DTC model actually expands access for patients?
If you... on my honest opinion, I think, and now this is a forward-looking statement, so take it with a pinch of salt. I think if you go 10 years from now, not just in the US but probably globally, you'll see that cash channels will play a bigger role than we have seen today. And let me try to explain why, and then you can tell me if you disagree. We have a situation where medicine costs are getting more and more and more to develop a drug. As a result, when pharma companies bring their newest, latest drugs into the market, they're more and more expensive. So the cost of medicine is higher than 10 years ago. On the other hand, the health care systems, and that could be the insurance system here in the US or a public social system somewhere in Europe or elsewhere, they are getting closer and closer to bankruptcy, without exaggerating, because of the aging population predominantly and less money going into the system. So this imbalance will at one point or the other can break unless someone else starts to share the cost. So that could go either through higher and higher copays, more and more restrictions, which you start to see in this market. You have various different mechanisms to control that cost. But you also see it in Europe and elsewhere where products are not reimbursed and companies launch it and then try to see whoever wants to pick it up. I do see that this is going to increase because of that. Now, I'm still a big fan of insurance and feel like your tax money has to pay back somehow, and it's not to belittle that, but I do think pharma companies that master both of these channels and not put all their bets hedged on one side or the other are the ones that will end up competing best.
So what's interesting about that is, you know, you have the cash channel, you have the insurance channel. I've been hearing that large employers are actually, you know, increasingly dropping coverage of GLP-1 drugs. And part of what is motivating them to do that may actually be because of the growth of the DTC programs. They're saying, look, employees, like, we don't have to cover GLP-1 drugs anymore because you have this alternative to turn to. So counterintuitively, the DTC program may be leading to less limited access through insurance channels. So what are your thoughts about that dynamic? Does that concern you?
No. I think what probably will end up happening is that you'll see the pharma companies... So I think pharma companies will, of course, continue having good dialogues with the insurers through the PBMs and what have you, where they will try to convince the other side to ease up on some of the restrictions. If you take Wegovy as an example, 55 million patients are insured in this country out of the 100 million. But a fraction of those, literally single low single-digit millions, are able to get the product through the insurance with the copay. I think our job as a pharma company is to convince the insurers to do better than that. So we will do that. On the other hand, of course, open up your cash channels at reasonable prices, like I just explained through the e-health channels, is the other extreme that we need to develop. And then there's this middle ground, which I think you're touching upon, the possibility of going to large employers, those who have many employees, and say, how about we make a package deal for your employees, where then if you are, let's assume you're Amazon with so many employees, you will basically then buy a package from your CVS or UnitedHealth or wherever you're insuring your employees that excludes some medications and therefore a lower cost. But then you have your special deal with company A and company B through some sort of e-vouchers and coupons and God knows what to go and pick up if you're suffering from this or that condition. And I do think all those three channels probably need to coexist together to manage the cost.
I mean, ultimately for employers, their costs are determined on the net prices. So we've seen you drop the DTC prices pretty quickly. Why not do that on the net prices and lower the financial strain for insurers and employers? And why not try to compete on list prices?
List prices? You mean list and net prices?
So we have, of course, now gone when we are dealing with, let's say, our NovoCare pharmacy or when you find our products in the e-health channels, reduced the price dramatically.
Yeah. But I mean, for employers, why not compete on lower net prices?
Yeah. So it's part of the dialogues and the discussions. I think historically in this market, when you talked about the list and the net, someone was benefiting in the middle, and there were obstacles to doing so. What matters for us as a pharmaceutical endpoint company is the bring-home price for what it's worth at the end of it. What matters to me is what goes on into our bank account after all of the discounts and what have you. So I have all the incentives to make the prices as low as possible for the patients with the access that, of course, comes with that. But I'm not the only player in the game. So you really need to have a good dialogue to make sure no one else is losing in a big way in that dialogue.
Hey, Mike, I have a bit of a random question. Do you like games?
I do like games. Well, it depends. It's a tricky question. Well, it depends.
Yes. All right. So we're going to... All right. Go ahead, Elaine.
Well, we wanted to end this interview. I know that was kind of an abrupt transition, but we wanted to end this interview with a game. It was technically Adam's idea, but somehow I was tasked with becoming the game show host. So, how do you do... Do you know Swedish at all?
Swedish. Swedish. Do I speak Swedish?
Okay. Well, then this will be great because...
All on level playing field.
It's a level playing field because the game we're playing is, is it an IKEA furniture or is it a drug name? So I have a list of...
Do you have any IKEA furniture in your house?
Do you have any IKEA furniture in your house?
I do have some. Yeah. Yeah.
You see, everyone has IKEA furniture.
Yeah, I do have some, but I don't remember their names. They do have these strange names where you have a hard time pronouncing. Same with drug names. Yeah.
So I have a list of words. I'm going to go through them one by one. It's also going to show up on the big screen, so for the audience, you can follow along. I'm going to show you the word, and then I'll count down, and you tell me, is it IKEA or is it a drug?
Here we go.
So first one, I don't know how to pronounce this. Smika.
That's a drug. I think that's also a drug. Adam, you sure it's not like an IKEA bookshelf or something?
So, it is IKEA. It's IKEA plastic flowers.
You'll do better than next time.
I think that's a trick question. So I would basically think it's a sofa. No, I would say drug again.
I also think drug again. You and I are united in this, Mike.
I'm going to say drug name.
It is a drug. It's to treat a disease that leads to excessive underarm sweating.
Wow. Which we're all doing up here.
Voxnan. Voxnan.
That sounds like a drug again. Not that I don't like IKEA furniture, but Voxnan...
I feel like I should mix it up. So I'm going to go IKEA furniture.
I'm going to go IKEA furniture, too.
It's a bathroom set.
Okay. Next one.
Ector.
If you know it, then it's a drug.
I'm not going to say. I'm not going to say.
Should we go on the count of three? Ready? One, two, three. IKEA. No.
