Novartis CEO explains how AI will impact drug development

One of the top topics at the World Economic Forum is generative AI, with endless discussions on how it can impact a broad range of sectors and businesses. Pharmaceutical drug development is one of those sectors where AI can help improve the research and development pipeline. Novartis (NVS) recently announced a partnership with Alphabet (GOOG,GOOGL) owned Isomorphic Labs, which will leverage its AI platform to develop small molecule drugs.

Novartis CEO Vasant Narasimhan joins Yahoo Finance's Julie Hyman and Brian Sozzi to discuss how Novartis, and pharmaceutical companies in general, will use AI going forward to expedite the drug development process and potentially make breakthroughs in medicine.

Narasimhan explains that while AI won't have a large impact in the next five years, it will still aid in a number of ways: "Impacting the next five years is how AI is going to impact many of our productivity efforts, in drug development, how fast can we generate new trial protocols? How fast can we work with regulators? How fast we can look at patient safety, look at large patient data sets? Not necessarily...it is generative AI, but may be not the most cutting-edge generative AI. Those areas will hopefully give us six months, maybe nine months, but if we want some of the big gains, that's going to take longer."

It's all part of Yahoo Finance's exclusive coverage from the World Economic Forum in Davos, Switzerland, where our team will speak to top decision-makers as well as preeminent leaders in business, finance, and politics about the world’s most pressing issues and priorities for the coming year.Watch this full episode of Yahoo Finance Live here.

Editor's note: This article was written by Nicholas Jacobino

Video Transcript

JULIE HYMAN: Let's talk about the intersection of one of the big themes here in Davos with health care, that is, AI and health care. That was part of our conversation, for example, with Bill Gates the other day where he talked about the way that AI is informing health care discoveries, drug discovery, for example. So let's bring in Novartis CEO Vas Narasimhan to talk more about this. I mean, is AI everything here at Davos this year, Vas? Thank you so much for--

VASANT NARASIMHAN: It does feel like an AI conference.

JULIE HYMAN: Yeah, it really does. I mean, you know, are you guys using AI yet when it comes to things like drug discovery? And I guess, I mean specifically generative AI because that's usually what we're talking about now.

VASANT NARASIMHAN: Yeah, we've been in actually generative AI for a number of years. We signed a collaboration with Microsoft Research Labs even three, four years ago where we developed an approach called generative chemistry to try to speed up how fast we can bring new medicines into the clinic.

Last week we announced a partnership with Isomorphic Labs, which is a spin-out of DeepMind from Google, to also see how can we, again, speed up our ability to drug new potential targets for new medicines.

I would say it's early days. I mean, the hype cycle here is quite strong. I mean, these are very powerful tools. When you look at what DeepMind did with their AlphaFold library, which teaches us how proteins fold. I mean, this is now widely used in research. It's really opening up new horizons. But we still need to see the proof in humans that this is actually gonna lead to faster drugs.

BRIAN SOZZI: How does this impact the pipeline of drugs you will bring to market over the next five years? Or does it impact it at all yet?

VASANT NARASIMHAN: It won't impact the next five years. Impacting the next five years is how AI is gonna impact many of our productivity efforts in drug development, how fast can we generate new trial protocols? How fast can we work with regulators? How fast can we look at patient safety, look at large patient data sets?

Not necessarily I would call it. I mean, it is generative AI but maybe not the most cutting edge generative AI. But those areas will hopefully give us six months, maybe nine months. But if we want some of the big gains, that's gonna take longer.

JULIE HYMAN: If the buzzword here in Davos is AI, I think it's safe to say the buzzword last year in health care broadly was GLP-1, right? This is not an area where you guys are active. And as a pharmaceutical company, how do you decide kind of when you do wanna get on that big next train?

VASANT NARASIMHAN: You know, one of the things we've learned and we talked about this last year, Julie, we've been on this journey to really become a focused company. We focused $130 billion of deals focused down to be pure play medicines, focused on four therapeutic areas. And in each of those therapeutic areas, we decide which diseases we wanna play in.

Obesity has not historically been one of them. So it's very tempting to get into the GLP race. But rather, we say focus on what we're really good at. And when you look at last year, we had 10 positive phase three readouts across cancer, immunology, kidney diseases, where we are one of the leaders.

And so I think we're gonna stay the course. And maybe some breakthroughs will happen in our research lab down the line. Maybe AI will generate us a better obesity drug. We'll see. But I think the discipline of focus is what's delivering results. And that's what we wanna continue doing.

BRIAN SOZZI: Well, you're the perfect person then, since you're not in this market, to ask, is this a sustainable trend? And I ask that because we've had a great conversation with PepsiCo CEO Ramon Laguarta. And he acknowledged that weight loss drugs are maybe impacting just a little bit on the fringes but dismissed any longer-term impact. How do you see it?

VASANT NARASIMHAN: It's early days. Look, I mean, when you look at other segments where you're trying to prevent diseases for the long run, if you look at the data on how many people take their statins, their statins to lower their cholesterol, if they've already had a heart attack-- so these are patients, had a heart attack. We wanna keep their cholesterol low. Only 30% of patients are compliant with their statins.

So now we ask the question, you get-- we're now in the early days. People are seeing the weight loss. It's a lifelong therapy. You've got to stay on it. It'll be interesting to see how many patients stay on two years out, three years out.

And then what is the impact if you fall off? You've lost muscle mass. How is that gonna impact your health? So there's a lot of open questions. There's no question that these drugs are extraordinary at losing weight in the short term. Now the question is, how will people stay on these drugs for the long term.

JULIE HYMAN: Do you think if they do that there's also potential ripple effects for other areas where you guys do, where you are active, cancer, for example?

VASANT NARASIMHAN: Hard to say on cancer. Certainly in cardiovascular disease, that's something we've been thinking about. And what we have really seen so far in the data is-- and that's important to remind people from a public health standpoint. This isn't magic.

I mean, you still need to be careful about what you eat on cholesterol and triglycerides. This is a separate risk factor than being obese. You need to look at other genetic risk factors that we work on, something called LPLA.

And so you've got to balance all of these things. If you just think this is magic and now I can do whatever I want, those other risks still remain. So I think as long as those risks are independent, our drug pipeline will continue to prosper.

JULIE HYMAN: There's been a lot of attention paid lately to M&A that you guys--

VASANT NARASIMHAN: I heard.

JULIE HYMAN: --might potentially be doing or not doing. Then it seems like maybe you're not. I mean, can you give us some clarity on what's going on with you guys?

VASANT NARASIMHAN: Yeah, you know, we have a focused M&A strategy. As I mentioned, we have a strong pipeline 10 positive phase 3s. We did have really strong year last year. So M&A is really complementing our portfolio. If you look at the 15 deals we did last year, all sub $3 billion, sub $4 billion deals. And that's where our focus has been.

Now we evaluate larger companies. And I think that's why, of course, you see coverage. But, you know, our focus remains on the smaller companies. We don't wanna comment on independent deals. But really we think where we have a sweet spot is a sub $5 billion deals.

BRIAN SOZZI: A lot of these we're talking to here are concerned. They're voicing the concern about a potential next Trump presidency. Now, in that last administration, Trump presidency, science was under attack and a lot of what was happening in the drug discovery industry and, of course, COVID vaccines. Should President Trump be re-elected, are you concerned that science comes under attack? And what impact does that have to your business?

VASANT NARASIMHAN: I would say, in general, I am concerned generally about the attacks on science. And certainly, depending on who the next administration is, you have concerns that there'll be a further erosion in trust in medical science.

And so I think we're gonna have to be sure that we have strong voices to educate the public. I also think it's important also to watch how the Senate and the House unfold because I think that will also be important to really see how policies will ultimately be shaped in the US in the coming years.

For us, most important is that we resolve IRA for the pharmaceutical industry. We continue to believe that the 9 and 13 disparities on certain drugs will make it hard to develop cancer drugs that are given orally, cardiovascular drugs that are given orally.

And I think what you're gonna see over the next five to seven years if we don't get this policy fixed is those drugs will start to disappear from our pipelines. And then at the end of the decade, patients will be asking, where are these next waves of medicines? So I'm hoping we can get that fixed regardless of which administration takes on.