Change Makers: Richard Francis on the Pillars of Innovation and Growth

It's great to be here John.

Well, firstly, thanks for asking because it's an important question. And I do want to say Teva has a very big tradition and legacy in generics. We're very proud of that. I think one in 13 scripts in the United States is one of our generic medicines, so we're the cornerstone of healthcare. But we're also a company capable of great innovation, and we've had that in the past with a product for multiple sclerosis called Copaxone, which is an amazing drug helping many patients and still does today. But we have this capability, and the pivot to growth is about getting Teva back to growth after a number of years of decline. Part of the opportunity we see is this rich pipeline we have that if we focus on it, apply resources to it, then we can bring those products to the market, and that will be something that really drives sustainable growth for the long term. So it is something we've always had, and I think if we're successful, I'd like to think that people say Teva is an amazing pharmaceutical company that happens to have a world-class generics company and a world-class innovative business.

Yes. So when I came into the company, it was clear that wanting to get the company back to growth is more than a tagline, pivot to growth. So there's got to be something of substance that we can really direct the organization. And by the way, we had six years of decline of revenue, so to go back to growth was a challenge and a big challenge. And so when we put the strategy together, pivot to growth, we really wanted to know what we needed to focus on, and that's where the four pillars come in. So pillar one was simply deliver on our growth engines, and our growth engines are our innovative products: Austedo for dyskinesia and Huntington's disease, Ajovy for migraine, and Uzedy for schizophrenia. So that was pillar one. So what does that mean? It means we need to put resources and build capability to maximize those products. Pillar two was step up innovation, going back to your opening question around are we a generics company or are we innovative. So the innovative pipeline we had here, I came in and I sat down with Dr. Eric Hughes, our head of R&D, and he showed me our pipeline. I went, 'Wow, this would be a cool pipeline in any innovative company.'

Absolutely. And I think there are certain synergies that can actually help on generics going to be helped by innovation and vice versa. And on this step up innovation, which is pillar two, it was how do we get this pipeline to the market, to the patients who need it as fast as possible. So that was sort of pillar two because it had been under-resourced in the past, so we hadn't given it the money or the capability or the focus. And then pillar three, which goes back to this sort of what company that does both, is how do we create a sustainable generics business that can grow long term and what do we need to make that happen. And then the final pillar was focus the business, and that's really about how do we allocate resources and capital and management time and focus. Because having any sort of strategy is relatively easy, but executing it requires focus, attention, week in, week out.

Exactly. So I would say all of the above, but some of them are going to have more traction sooner than later. I think all of the things you said are possible, but they're not going to happen immediately. For example, getting products to the market quickly is important because we're quite a big company, but it's important that we don't waste resource. And if you're taking a long time to bring a product to market, it consumes a lot of money and a lot of capital, a lot of time. So we want to shorten that. And so I think we're becoming a bit brave at leaning into AI. And I'll give you an example in development: we did a partnership with a company called Biologic Design who developed an antibody completely with AI, never made it, so did it on the computer, incredible. And now we're taking that, we're making the antibody, and we'll move it into the clinic. Normally, from the time of designing your first antibody to moving into clinic takes about four years. Having a candidate, we've reduced that to two years. So we've shaved that time off. We've done that, and that product will be going into the clinic in the next year. So that's a real-life example. So that change, AI is helping. But I think on the rest, we're using it probably more practically at Teva when it comes to making sure we're making the right thing at the right time, carrying the right inventory. We're starting to use AI to do that because the complexity in that is huge, and that's what AI can really help.

Well, I think once again going back to the fact that we want to make sure we're bringing products to the market that are efficacious and safe, and we know what they do, we know what patients we should be giving them to, I think that's the goal. I do think it needs to be reduced. Some of that is about how quickly we can do clinical studies, the appropriate clinical studies in the appropriate population. Some of that's about making sure the regulatory authorities, including the FDA, can actually process that information in a timely manner. And I think if you work on just those two aspects, which are pretty big aspects, we can condense the time. And then the discovery years, what would be ideal for you? Look, I mean, I think I've never really actually thought about that, what would be ideal. I think for me, knowing that we're at the forefront of some major breakthroughs in medicine and treating people with new modalities and targets, I'd like to think it gets easily below 10 years. But then there's another part of that which I think is important, which I can talk about with Teva. You're talking about innovation, but on the generic side, some of the products take a very long time to get to market because unfortunately they don't have the same pressures from the regulatory authorities to push them through. And so you'll have situations where a generic medicine could be brought to the market many, many years quicker than it actually does because of some of the processes in the regulatory authorities. And the reason why that's important is when the generic product comes to the market, the cost goes down, access for patients goes up, out of pocket probably goes down. And having generic medicine is important because it drives the next level of innovation because you have to innovate, you're forced to.

So let me sort of, I think it's a great question, and let me sort of ground you in a couple of sort of facts I find interesting. Firstly, in Europe, the adoption is incredibly high and incredibly quick. Now, part of that's because the healthcare systems they have there, where it can be one payer, and so that drives through the adoption quickly and it restricts the use of the patented products. It's almost, it's also this issue of interchangeability, you know, getting a little into the weeds exactly, whereas in Europe they don't have that issue, they just said everything's interchangeable, it's a fact. So I think there's an education maybe required and maybe a knowledge lag in the United States versus Europe, where I think as physicians start to see the data, they realize actually these biosimilars, I can use them in the patients that I currently use the innovator brand, and I can do that with confidence. And once the patients understand that, the pharmacists understand that, then you see traction. And if you see some of the earlier biosimilars launched in the US, the adoption has been significant and very high. But we're at the start of that journey, and as more biosimilars get launched, we're seeing more. And we've been talking about it for more than a decade, but now the big wave is coming. So the big wave of the big products, like the biosimilar Humira that's come out, the biosimilar Stelara, so you think that's going to change?

I do. And the reason why I think it's going to change ultimately is because as we drive this innovation, this incredible innovation in science and in new therapies, the ability to save money on what is now older innovation allows you to balance the books. So as we have biosimilars, the price of these drugs goes down, that frees up budget to start allocating these new drugs that have come out, which can take levels of efficacy and treatment to a new level. So it's a really great ecosystem. So I think when physicians and payers start to see that, they say actually this is a great opportunity. And when you look at some of the vertically integrated healthcare systems in the US, like Kaiser Permanente, they switch everything as soon as there's a biosimilar, they switch everything, they save a lot of money.