Hi everyone and welcome to In Good Company. I'm Nikolai Tangen, the head of the Norwegian Sovereign Wealth Fund and today I'm in particular good company because I'm here with Albert Bourla who is the chairman and CEO of Pfizer, one of the largest pharma companies in the world. Now Albert has been with Pfizer for 30 years, been CEO since 2019 and has led the company through a remarkable period of change. Warm welcome.
Thank you very much. And you know I'm with Pfizer 33 years. I'm with my wife 30. All right. I got it mixed up there a bit.
Yes. Now, a lot of stuff has happened since you took over as CEO. What are you most excited about just now?
I think I'm always excited by the future like all CEOs, right? They see the opportunities ahead and science is at the highest levels we ever had it and science is affecting our business very big time. So I'm very very optimistic about the scientific progress that we can see in the next years until the end of the decade.
You sharpened the focus on innovative medicine, sold consumer healthcare and so on. Why did you think that was the right decision to make?
I'm a believer that you know corporations' role is not to hedge, it is to be very good at a few things. Investors' role is to hedge. So I believe that requires different culture for a scientific company and different culture for a consumer company and very different culture for an off-patent generic company. So I felt that we should choose to be good at what is really important and that was science.
Now we're not going to spend much time on COVID but we have to just touch on the fact that you did an unbelievable job, put a huge amount of your own capital in there and produced the vaccine in 8 months. Just how was that possible?
Well, you know it was possible for several reasons but the most important is was exceptional times. So everybody felt that this is not business as usual and everybody felt that the culture of society, our civilization is at risk. So everybody gave everything. And when I say everybody, I mean the government, I mean our people, I mean our hospitals that collaborated. So it was not easy to be done without them being aligned.
Why don't we continue to work this way at full speed? Because we don't have this big need that is driving people's behaviors and they have the tendency to go back to the old habits. I have seen that with regulators but after being extremely instrumental in being able to achieve what we achieved they became back to more conservative. I have seen that with the government operations that were opening the ways to us to be able to accomplish what we accomplished and now they are back to the normal trend. So it's unfortunately you need a common enemy to motivate people.
Absolutely. No, we see that in many places. Now on the back of that success you had a big pile of money and then you had to decide what to do with it. How do you decide on a thing like that?
First let me tell you that I don't think that it was only the money that came to us that was a very big asset. The most important I think was that they believe in our organization that there is nothing that we can't do. Our people felt so proud about what they were able to accomplish and as a company and individuals we were showered by awards and by recognition that make us all feel that when we put our will together we can bend every curve. That's a very big asset and I think that we found it extremely helpful once things went not good after the COVID was controlled by what we did and as a result the money stopped being as big as they were coming. So the fact that we had developed this resilience culture helped us a lot to pivot to something new.
Now the money were quite good and we invested it all. There were a lot of of course people that would have different views as to how this money needs to be invested. There were the conservative people that would say give it as a dividend. There were people that were saying buy back shares and you know our sales were at 50 at that time. And there were people that were saying it's time to invest in business. So it's a unique opportunity. You have an LOE period. You need to make sure you do investments. I've chosen the last part and we did a significant amount of investments almost 80 plus billion dollars in acquisitions.
Three of which are 80% of the total cost. And still the jury is out particularly in the bigger one of them which was Seagen. It had products that were in the market and over there it's an overwhelming victory those products are doing tremendously well.
Well we'll come back to those but just first that kind of confidence that you gain by achieving something like you did during COVID, how long time does that confidence last?
It was a very tough period in the year 2023. In 22 our revenues from COVID were 56 billion now it is six. So it was a huge drop.
But the confidence I mean the fact that people think they are super human.
I'm coming to that. So when you are having such a drop of reality from the stock being the best performing to suddenly the stock being the worst performing that puts a lot of doubts in everyone's minds and collectively and individually that included me that I was wondering if I'm a failure just months after I was the hero of the world. But also I knew that that included many people in my organization because they perceived the stock price as an external validation of success and when that was not there anymore and of course not the weekly recognitions that we were receiving they felt very bad. Still I believe because we developed this resilience and because this memory was lasting a lot we were able to overcome it and in 24 we came up really as winners mentality with the confidence that we can go and win in the marketplace we can win in business development we can win in research and that's what happened in 24 and 25 there were exceptional years in terms of performance everybody was very impressed how we are able to grow topline and beat analysts and reduce cost.
Organizational confidence is such an interesting thing, I think. And one of my favorite movies is Kung Fu Panda. I don't know, you probably haven't seen it because it's a children's movie, but basically they're trying to figure out why this panda is so strong and you know what's his magic thing and they find these magic ingredients and it's basically just a mirror. He believes in himself. How do you foster organizational confidence, self-confidence?
It is coming with confirmation through successes. It's very difficult to build a culture of confidence. If people see only failures in front of them, you need to take it together with successes and you need to magnify because there is always in the organization pockets that they are having examples of that and pockets that they don't and usually everybody's attention is on what went wrong. You need to make sure that you project to the collective organization what went right as well.
Let's go back to the acquisition. So you spent more than 40 billion to buy Seagen. What was it that you saw there that other people didn't see?
It was one technology to be frank and that technology was ADCs. It was a technology that was started to become one of the hottest new things in oncology. It was not yet at that time. It became much bigger and there were a lot of singular players here and there that they could have ADC technology but there was only one that had four products in the market and they had 13 R&D projects in a clinic.
ADC being antibody drug conjugates.
Antibody drug conjugate is one of the latest and more promising ways to fight cancer.
Why does it work so well?
You should consider the ADCs like this extremely precise missiles that modern warfare is using. Why they are so extremely precise? Because they have a GPS system that takes them directly to the target and then based on what is the target they can adjust the warhead. They can make it big, small, explosive. This is exactly how ADCs work. The antibody is the GPS and it is programmed biologically to identify a location in the body and go and stick to it. And the drug is the warhead that is carried together with the antibody and when it hits the target is releasing the impact. Imagine a chemotherapy that doesn't go everywhere but goes predominantly to the cancer cells. That's the ADC technology. You can change the antibody and you can send from liver to brain to bones to stomach. You can change the payload and you can use radioactive payloads or you can use chemotherapy or you can use protease. You can use a lot of different weapons. But that's exactly the beauty of it that from a scientific and business perspectives gives you an opportunity to have so many combinations and so many sources and goals. So that's what I really believed in that and we did and if the technology is proven to deliver on the promise it's going to be one of the most successful acquisitions if the technology doesn't deliver to what we were hoping will do I think will be like a modest return but I don't think we will lose money.
So that was in oncology. Now the other area you wanted to zoom in on was obesity and you bought Metsera. Why was that so important to buy and you outbid Novo Nordisk there?
Yes we always believed that obesity is a very big area and we always believed that Pfizer is the company that can be very competitive over there. So we enter into the obesity space way back in the day and if things wouldn't go wrong for us scientifically because two major assets that we had in the clinic they suddenly saw signs of liver toxicity. So we had to discontinue them although they were very effective right. But if that was not the case we would be the first to launch an oral product right now in the market and things will be very very different for all of us. But unfortunately this didn't happen. So now we are having a development organization that knows how to do primary care a very big complicated studies. We have a commercial organization that is a powerhouse and knows how to sell stuff. And we have a manufacturing network that can make those stuff better and faster and cheaper than anybody else. And guess what? We didn't have a portfolio. So it was for us extremely important to cover this gap because of bad luck of scientific bad luck with an acquisition. And that's what we did with Metsera.
Now you own it for a little while. Have your view changed?
Not at all. Not at all. I think I'm more and more optimistic if anything.
Why are you more optimistic?
Because we had the release of data post the acquisition and we knew that the Metsera has a very good weekly product that we were really certain. You can never be 100% but we were 85 90% certain that that will deliver. But we didn't have hard evidence that a monthly product could be delivered. We knew that the pharmacokinetics support something like that. We knew from phase one early data that it should work but we needed the phase two data which we didn't have available when we did the acquisition. The phase 2 came later and indeed it confirmed that we do have a monthly product. We can debate is it going to be better than Eli Lilly's worse than Lilly but it's going to be monthly. Lilly's and Novo will be weekly that we know now with very high level of confidence to the degree of course that science can provide you such. So that's why.
Why is your clinical success rate better than competition? So I think the success rate in the industry is something like 10 11% you are quite a lot higher than that. Why are you so good?
I think because you can have first of all this type of success and you're right one in 10 succeeds in the industry almost two in 10 succeeds in our hands. So we are 18 19% of clinical successes and we have a very very long history as a research organization and actually Pfizer's research organization it is I believe one of the best. I'm sure we will discuss what we have done to change the trajectory of Pfizer organization but.
But why is it one of the best?
Because when it comes to capabilities we are all the metrics indicate that we can kill it. That you mentioned one of I can mention to you the phase 2 success rates that with an industry being around 25% and 30 and we were below that 15 20 and we jumped it to 50 plus. In regulatory success we are almost at 95%. So all the metrics are showing that we are very good but I wouldn't also say the success because sometimes success is because you choose to do easy things and not challenging things right not scientifically big projects. If you see the number of breakthrough designations that we received from FDA which is a recognition that this potential medicine is so good that I will put it in a fast track because if it is successful can change the trajectory of a disease. We were among the top ones if you see how many approvals we received we were among the top ones. So I think we were always very very good when it comes to capabilities.
So but you restructured last year.
No, no, no, no. There is a big but. I don't think we were perceived as very good for a good reason because when you measure how much we put in the system and how much we got out of the system in terms of dollars, we were mediocre not top quartile because everything else that I told you we were top quartile.
So what did you change last year?
What was the reason of that? It became very clear to me that we made the wrong choices into choosing which products to develop. They were not easy technically which makes me even more angry. So it was technically challenging but we miscalculated the commercial potential of those products and there were silos between R&D and commercial that created that it was not focused on the R&D. We were going to whatever we had as positive data we would go and develop it and that's the number one thing that I aim to change. The good news is that if it was a question of capabilities for us that would mean five six seven years journey to be able to turn that around. If it is a question of focus with good capabilities but wrong focus that's a cultural that's a governance that's a leadership issue you can change within months.
So you got a new head of R&D. What are the other changes you made specifically?
We have multiple heads of R&D units that they are new and they bring a different culture into the organization that I wanted to be and particularly the focus. As I said I was not looking for a better oncologist or a better endocrinologist. I was looking for an oncologist that can focus. And that were the type of changes that we did. We put together the entire R&D organization as an end to end which was not the case also before we had early and late and then later also we separated oncology. Now we had early and late under one leadership you know it makes very big difference because the handovers between early and late when the two organizations are separate early means someone discovers the molecule and once he discovers he gives it to the late organization. It means we have clinicians that do experiments to prove that the molecule works. This hand over between my baby now make sure that it is successful. It is one of the most challenging phases in drug development and discovery and I think that's what we did quite well.
Let's spend some time on AI. We recently you and I spent some time at the conference together where some people think that within 10 to 15 years we can get rid of all the illnesses in the world with more use of AI. Just what are your when you hear that? What are your reflections?
I think that it is a very bold statement that probably exaggerates to make a point but I think still the point is valid. I think that we will see in 10 15 years and earlier I think by the end of this decade in five years tremendous tremendous progress that is due to AI in addition to advancements in biology. So that's the point. I don't think in 15 years all diseases will be cured. But I think that in five years we will have a very different level of standards of care.
How will that change the pharma industry?
Will change it? Not only the pharma industry, will change the health system, will change hospitals, will change physicians, how they are organized. It will change regulators, how they see products and it will change pharma and pharma will change in research and development because I think we can identify better targets and then synthesize better molecules and then have better clinical trials. But also in manufacturing and it will make huge difference also in commercial approaches.
Is it good news or bad news for Pfizer?
I think it's very good news but we need to be careful that that will be radical change that will be a disruption and disruption always creates new winners and new losers. The bigger the disruption the bigger the new.
And how will you make sure that Pfizer is on the right side of that change?
That's all I sleep and go to bed and wake up with in my mind. There are two things, China and AI and politics unfortunately.
Let's do AI first. Just specifically, how has it changed the way you work because it was instrumental in helping you with the COVID vaccine, right?
Yeah, it was. And it was not with the vaccine that much. It was with a treatment Paxlovid the pill that we discovered was indeed the first machine learning molecule that with such an impact at least that I'm aware of. AI cannot do everything right now but can do way more than what we are using it for.
That's the fundamental question I'm asking. All these models can do way more than what are used for. And the question is so then why they are not used as much?
Because right now we have reached the level that it is not a question of technology. It is a question of organizational ability to adjust and transform itself through AI. That poses a question what is the best way to enable leaders to transform their organizations with AI. And I think the first one is that they should receive the accountability of doing it. So there are two views to how to organize AI. One is centralized. You have visionary AI guys that they're coming and they are building your discipline in your and then they cascade to everybody else. And there is one that is very decentralized that says that the center is only the infrastructure, the data, the computing power, the cloud. But then the accountability, responsibility and resources to create use cases is with the units, is with manufacturing, it is with research, it is with commercial. I went to that and we discussed it a lot with Pfizer and we moved into giving accountability to our leaders to do those changes but also they have to deliver. So they have all the obligation to deliver their transformational plans that will really move the needle really go to something very different. So I think that's a very very important thing.
How do you close that technology overhang? I mean the fact that these models can do so much more than we are able to utilize them for.
I think that's what I was trying maybe not successfully to explain that the reason why they are not using it is because there is inertia, there is fear. The fear is for my job but also there is fear because I don't understand it.
But what's the key to solving this because it's not only in the company it's across society.
Right. Yeah. The key to solve it is to understand it. So if you understand that people are scared because they don't understand it, you need to create the AI literacy.
We train them. We are putting thousands of people into programs that they will understand how to interact with an AI model.
