Hi everybody, my name is Drew Armstrong. I'm the executive editor of Endpoints News. Thank you all so much for being here for our happy hour. We are going to be doing something that we have never done before, which is taking our YouTube show, streaming and podcast, Post Hawk Live, and doing it live here at JP Morgan. We're going to be broadcasting a little bit later in the week back on East Coast time when all of your colleagues who are having restful, calm weeks back at home are at their desks and have a chance to watch. For those of you who don't know the show, Post Hawk Live is our show where we take you behind the scenes in the newsroom. We have conversations with sources, conversations with our other reporters. We talk about what we think are the most important stories that are going on, give you the reporting, the analysis, and the context. So thrilled to be doing this here with you in person. I hope you have a drink. For those of you who are up front, please come close. Gather around. We're going to have a nice time. So take everybody a few steps forward. I am going to be introducing and interviewing Noubar Afeyan from Flagship Pioneering. He's the CEO and the founder. He is one of the best chats in biotech. We're going to have a ton to talk about with his annual letter. To introduce that conversation, I have TK Rabba, the president and CEO of Otsuka North America Pharmaceutical. Throughout his career he's held leadership roles with global biopharmaceutical companies on four continents, bringing together high-functioning teams that challenge conventional thinking and deliver results in complex business environments. Please everybody give TK a round of applause, a little bit of silence and then we will be on with our show. Thank you.
Thank you so much Drew. Hello everyone. Thank you so much for coming. Obviously not coming to see me, I know, but it's really nice to see everyone here. I work for Otsuka Pharmaceuticals. We've been in business since 1921. Our mission is really to defy limitations so that we can set the examples for others. To do that, we really need to push the boundaries of science and we can't do that without partnership and collaboration. And that's probably why we are all here during this week. We do focus on two main areas: psychiatry and neurology, and nephrology, but we are also extremely excited to expand into immunology. We've been accumulating for the last few years a number of proprietary platforms in immunology and we think we are in a really good place to meet so much unmet need, specifically when it comes to immunological diseases. At the end of the day, I think it's extremely important for us to maintain the environment that really made the US the best place for the industry in biopharmaceuticals, and we hope we can keep this ecosystem and this discovery culture that we have. We are extremely excited that for the next decade this will be for Otsuka the most transformative period in its history, and the most interesting thing is that it's coming from innovation that is outside our own labs. So talking about the future, I am extremely honored to pass it to Drew for the discussion with Noubar.
All right, TK, thank you very much. Noubar, please come up. Have a seat. I'm delighted to have you on the show. I know you're one of the busiest men at JP Morgan. I feel like I see you on one stage or another running around. We usually do this show from my living room and so this is a bit strange, but if you can all imagine that we've got the fire in the background and everything like that. We'll do it as best we can here in the basement of the Marriott Marquis. Now, every year you put out this letter where you take stock of where we are in biotech. And this year's letter, I think, was in some ways unusual. It was a warning. You talked about this being a moment that we're in as being at risk of taking a sledgehammer to our miracle machine, calling it the most dangerous time we've seen in 40 years in this business. I talk to folks in industry and you're saying the house is on fire and it feels like there's not enough other people saying the house is on fire. When I look at leaders in this industry and elsewhere, why do you think the industry is not yet speaking out in the terms that you are? I know some people are, but it feels like there is a little bit of a lack of leadership right now.
All right. Well, thanks. This is not your living room, is that what you're saying? Okay. They invited me to his living room, but first, thanks for sticking around. I know this is a very busy time and you probably have 10 other things you could do. So whatever Drew did to bring you here, I'm happy to participate and contribute to. Look, I don't know that I'd say what I'm saying is the house is on fire, but I think as an industry, we have certain things we take for granted. One of them is the talent and the underlying scientific advances that allow us to come up with new medicines. It's so kind of motherhood and apple pie that we just take it for granted because the government in this country has for the last 70, 80 years had this great alliance where they undertook funding basic and applied research in academia. They further put obligations on academic research to be translated and have impact to society, which in our field means new medicines, new tests, and the venture industry and the pharmaceutical industry entirely depends on that oxygen, on that fuel. And what's happening in front of us if you really stop and think about it is that the underlying premise that that can be counted on is in question. Now you might say, well, no, it's not a big deal, we've got all these pipelines, etc. But in fact, the science that's being advanced today is the basis for the products two, three, five, ten years from now, and if we really cut that off and feel like it's not going to affect me in the next few years, I'm on my job, I'll get promoted, I don't care about it, then we would be acting at our peril. So what I would say is that as an industry, we are the beneficiaries of essentially relatively free access to major scientific advances because we live in this country and the government has for a long time, using a scientific process which forces fact-based arguments, made determinations not only to fund things but also what facts are. All of that in my view has led to our advantage in biotechnology, and I believe that we should spend at least 10% of our time worrying about it. I'm not saying the house is on fire, I'm not saying investors don't invest in biotech, all that. But I'm worried about the underlying. I'm saying our foundations are shaking.
Do you think it's often easy to forget when we look at this incredible system of science that we have here in the US how new all of it is in some ways? I mean, this is in many ways a product of a post-World War II environment. People fled Europe, they came here. I wanted to ask you this. Your background, you're an immigrant to this country. You were born in Lebanon. Your family left the civil war there. You're in some ways a very American success story that I think people sometimes forget what that means and that this is one of the places where that's possible in the world. Do you see people taking for granted this amazing thing that we have and forgetting what a kind of new miracle machine it is?
Right. So for those of you who have 10 minutes to waste reading this letter, you'll see the case that I lay out is that you can view biotechnology, not to aggrandize it, as a source of what otherwise people would view as miracles. I mean, the notion that you can take a pill every few months and treat completely and restrain HIV or certain forms of cancer or prevent diseases, in any other time that would seem like a miracle. And we go to work every day and perform these man-made or human-made miracles and it just goes on and on like that. And we kind of feel like, how come it's so expensive, instead of saying, holy cow, it's a miracle. I'm saving lives. I think that isn't just a right we have. I think it's the result of the way the system works. There's two aspects. One is the government funding, etc. That's one thing. The other is that when we discuss what is and isn't objectively a valid medicine, a valid protocol, a mandate or not of how to get vaccinated, how to treat people in different diseases, there is a data-driven debate and then there's a collective conclusion that is based on data-based argumentation. What I worry about, and again, I've done this for 39 years, almost 40 years, and I don't think my history is one of being alarmist. You'd be hard-pressed to do a search and find anything alarmist that I've put out. But maybe it's a sign of getting old. But I find now left and right points being made where one side is arguing based on documents, data, facts, debates, and the other side is just saying, well, this is my opinion and I don't need to come up with facts. That's what I think. People try to pin me down, well, what specifically do you mean? Just look around at every one of these topics. I don't think there is the same type of data-driven argumentation, and I think we need to as a scientific community insist on it because I say in the letter and I really believe this today, it could be childhood vaccines or it could be autism or it could be mRNA. I think tomorrow it will be many other things. And you asked the question, Drew, I want to just call it out. We're all complicit in this. I think a lot of companies and people go, thank God I'm not working on mRNA. Thank God I'm not working on Jaxis. I'm safe. And I'm here to tell you you're not.
Right. Well, I think one other thing that you mentioned very specifically in your letter is that we're in this very pivotal period right now where there is rising competition around the world. You talk a lot about China. I want to get your perspective on what I think is a really interesting debate. I see it amongst a lot of VCs where there's the argument of let's put up barriers. Let's make it harder to access innovation from China. Let's make it more expensive. We need to protect the biotech ecosystem and VC ecosystem. When you hear that argument, what do you think about that?
I don't make that argument in my letter. What I do is lay out the fact that I think competition is generally a good thing provided it's done on a fair basis, and I think that this industry is collaborating a lot with China on the research side in licensing assets, but we need to make sure that the result of that is fair competition. So if on the one hand you can generate data there, get human data in a fraction of the time, fraction of the cost because it's permitted, and on the benefit of that you will displace assets being developed here from a deal-making standpoint, I don't think that's fair competition. One way or the other, you have to figure out either in the US they have to create a level playing field or they have to create some way for the industry to compete. By the way, if anybody thinks that US economic policy has not protected in many ways research and biotech, let alone semiconductors, it has. It has for a long time. I think some of those protections seem to be going away. So I'm not an advocate of restricting investment into China. I think there should be conditions. We should also think, obviously the Senate has a group looking at security implications. We should just make sure it's done in a fair and safe way. And after that, welcome the competition.
Yeah. Well, can I ask you, on the competitive standpoint, we had Bob Nelson at our event earlier today. Bob is always outspoken, always provides a quote. And one of the things he said was that on Christmas day, he was on business calls with a bunch of the AI companies that he's working with. And he said he wasn't on the phone with any of the biotech companies that he's working with. And I think the quote he said was, 'We're trying to cure cancer. We don't want people who want to go mountain biking at 4:30 in the afternoon.' The level of intensity we can learn from China and we can learn from AI. You're a fixture in Boston, you're a fixture in this industry, you work with a ton of different companies. Is this something where the US needs to be competitive on a fair basis? Are we at risk of losing a step when we think about global competition, how hard people are working and who really wants this more?
I have not witnessed in the biotech industry a kind of relaxed atmosphere. We come from a period over the last five years where the conditions have been damn near mortal, and I don't know why Bob thinks that people are taking it easy. Maybe in the last few months, three or four large acquisitions later, the investors are taking it easy. I don't know, but I don't know anybody in biotech companies that are taking it easy. I think they're mortified at the prospect of raising money and advancing their programs. So I think the competitive pressure exists in the US. The competitive pressure is looming and larger from China. And like I said, I'm not arguing for less competition. I'm arguing for an even playing field. But also, I want to point out that what the Chinese are investing money in is the scientific method in deciding what is and isn't objectively true. And I think that if we lose that, we create this disadvantage where they'll be more right than we are.
Yeah. You mentioned one other thing in your letter that I wanted to get into. You talked about the rebound that we're in right now and you also mentioned the possibility of overdoing it in some areas. Can you talk a little bit about what you mean by that and where maybe it has been kind of an incredible recovery a little bit over the last few months? Obviously a long way to go. Do you see overexuberance in any areas or people getting a little bit ahead of themselves in some spots?
