WEBVTT - Novartis CEO Vas Narasimhan Talks Psoriasis Drug, China Growth, M&A

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>Shares of Novarda's lower in US trading today, despite the

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<v Speaker 2>Swiss drug maker raising its guidance and announcing a ten

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<v Speaker 2>billion dollars stock buyback. Instead, investors are keing in on

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<v Speaker 2>disappointing sales for a key drug and news that it's

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<v Speaker 2>longtime CFO is retiring. All of this against a backdrop

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<v Speaker 2>in which President Trump has signaled possible new tariffs on

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<v Speaker 2>the pharma sector. Joining us now to discuss what's ahead

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<v Speaker 2>is vos Narasimmon, he is CEO of nevardis joining us

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<v Speaker 2>from their global research headquarters in Cambridge, Massachusetts.

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<v Speaker 3>Boss, thanks for joining us.

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<v Speaker 2>I want to start with the big picture, of which

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<v Speaker 2>is tariffs, of course, because you've pledged to invest twenty

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<v Speaker 2>three billion dollars in US production over five years to

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<v Speaker 2>make key drugs for the American market in order to

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<v Speaker 2>mitigate the impacts of potential tariffs. Do you have any

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<v Speaker 2>indication that this commitment, this level of commitment would be

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<v Speaker 2>enough to get an exemption from tariffs in the introim

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<v Speaker 2>until your new facilities are up and running.

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<v Speaker 4>It great to be here, Scarlett, So we don't know.

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<v Speaker 1>We don't know what exactly is going to be required

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<v Speaker 1>for the exemptions that have been talked about, but I

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<v Speaker 1>would say that we are in a very good position

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<v Speaker 1>right now and that we have inventory on hand in

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<v Speaker 1>the US so that tariffs will not impact twenty twenty five.

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<v Speaker 1>We continue to build inventories as well for well now

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<v Speaker 1>into twenty twenty six, and then we're working as fast

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<v Speaker 1>as we can to get those facilities up and running

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<v Speaker 1>so that more and more of our key medicines are

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<v Speaker 1>produced in the US, with a goal that within four years,

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<v Speaker 1>all of our key medicines are produced in the US

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<v Speaker 1>for the US.

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<v Speaker 3>You're hoping that go ahead?

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<v Speaker 1>I'm sorry, I was going to say, we're hopefully the

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<v Speaker 1>administration will be pragmatic in how they think about this, right.

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<v Speaker 2>Right, And to that end, have you had specific conversations

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<v Speaker 2>with the administration on this point.

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<v Speaker 1>We've had conversations with the trade representative trying to understand

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<v Speaker 1>the contours of what they're thinking about, but of course

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<v Speaker 1>we don't know until I think the final policy is

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<v Speaker 1>written and released.

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<v Speaker 3>Yeah, fair enough.

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<v Speaker 2>In a similar way, do you worry that these investments

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<v Speaker 2>won't make as much economic sense if there's a new

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<v Speaker 2>administration in a couple of years, who decides to roll

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<v Speaker 2>back remove any of the tariffs.

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<v Speaker 1>The way we think about this investment is we didn't

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<v Speaker 1>do it because of the tariffs.

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<v Speaker 4>It just makes strategic sense.

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<v Speaker 1>I mean, soon we expect the US to account for

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<v Speaker 1>fifty percent of our global sales, certainly by the end

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<v Speaker 1>of the decade, so it makes sense to have production

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<v Speaker 1>capacity in the US for the US market, Europe for Europe,

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<v Speaker 1>and then of course we also build up capacity in

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<v Speaker 1>China and Japan to service the Asian markets. I think

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<v Speaker 1>that's a sensible strategic approach given all of the uncertainties

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<v Speaker 1>that we've seen over the recent years.

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<v Speaker 2>I want to talk about your siasis drug cocentics. It

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<v Speaker 2>saw slower than expected growth in the US for some

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<v Speaker 2>new indications, and then you also.

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<v Speaker 3>Have the backdrop of a broader.

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<v Speaker 2>Slowdown in China for innovative medicines. What is your confidence

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<v Speaker 2>that either of these factors will improve materially in the

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<v Speaker 2>next few months.

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<v Speaker 1>Look, I think in China, I do expect there to

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<v Speaker 1>be improvement over the second half of the year and

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<v Speaker 1>going into next year, as we go off of a

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<v Speaker 1>lower base that maybe than we had originally expect is

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<v Speaker 1>I think growth will come back, and I think more broadly,

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<v Speaker 1>we expect Consentics to consistently deliver mid single digit growth.

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<v Speaker 1>What's interesting about a lot the focus on Consentics today

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<v Speaker 1>is we have not moved off our eight billion dollar

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<v Speaker 1>plus peak sales guidance in twenty twenty nine. And Consentics

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<v Speaker 1>has had many competitors over the years, and we've been

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<v Speaker 1>able to manage each one. Usually when those competitors come in,

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<v Speaker 1>there is a market reaction like we had today, and

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<v Speaker 1>then we work through it and then we build confidence back.

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<v Speaker 1>I think much more importantly when you look at our

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<v Speaker 1>guide five percent of plus and with all of the

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<v Speaker 1>launches performing well, I think the long run investors will

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<v Speaker 1>see through this and then continue I think to look

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<v Speaker 1>favorably on our performance.

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<v Speaker 2>Which of those markets in the US or China do

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<v Speaker 2>you have more conviction in when it comes to this

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<v Speaker 2>particular drug.

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<v Speaker 1>With respect to Consentics, I mean both are critically critically

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<v Speaker 1>are important.

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<v Speaker 4>I think very different dynamics.

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<v Speaker 1>You know, in China we have a very high growth environment,

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<v Speaker 1>and so obviously when you have a little bit less growth, it.

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<v Speaker 4>Has an impact.

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<v Speaker 1>In the US, this is a very significt in medicine already,

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<v Speaker 1>you know, approaching three billion dollars plus in sales and

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<v Speaker 1>so there. Of course, it's much more of managing competition,

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<v Speaker 1>new new indications, new formulations to continue the growth. But look,

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<v Speaker 1>I think overall, as I said, eight billion dollar plus,

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<v Speaker 1>we're sticking with it and we feel confident we'll get there.

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<v Speaker 3>Yeah, that's a pretty good sign.

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<v Speaker 1>Well.

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<v Speaker 2>One reason of Artists did raise its full your earnings

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<v Speaker 2>guidance is because of the growth of your breast cancer medicine,

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<v Speaker 2>Chris Colli, and the UK has said that it will

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<v Speaker 2>now recommend the drug for more patients. I guess I

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<v Speaker 2>wonder are you surprised by the uptake of this medicine

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<v Speaker 2>in recent months for patients with early breast cancer.

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<v Speaker 1>It succeeded our expectations, scarl I have to say, I mean,

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<v Speaker 1>when we look at it, we knew the medicine could

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<v Speaker 1>be significant, but we're now market leader in new to

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<v Speaker 1>brand RX in the US, both in metastatic and early

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<v Speaker 1>breast cancer. We've seen remarkable uptake with the early launch

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<v Speaker 1>in Germany, so the demand is really there and I

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<v Speaker 1>think what's most promising for long run is that we're

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<v Speaker 1>seeing patients with no zero or so called lymph node

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<v Speaker 1>zero lymph node one, so a little bit earlier stage

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<v Speaker 1>of the disease, also using the medicine, and that's an indication.

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<v Speaker 1>It's two thirds of women with this form of early

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<v Speaker 1>breast cancer and we're the only one with this indication.

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<v Speaker 1>So I give us a lot of energy and excitement.

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<v Speaker 1>We've guided to eight billion dollars plus, but certainly if

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<v Speaker 1>things continue in this way, the medicine could be significantly bigger.

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<v Speaker 2>Okay, so that's that's where you I want to go next.

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<v Speaker 2>At what point do you start to really reassess what

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<v Speaker 2>the peak sales potential for this drug could be?

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<v Speaker 4>You know, we look at it every year and so

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<v Speaker 4>before our capital markets.

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<v Speaker 1>Day in the fall, we evaluate and so certainly we'll

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<v Speaker 1>do that right now. I mean, given the momentum we're seeing,

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<v Speaker 1>we'll have to look at would we raise our CAISCOALI

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<v Speaker 1>guidance given given the performance that we're seeing. So it's

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<v Speaker 1>very exciting and we have that with a few medicine semblics.

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<v Speaker 1>Are other cancer drug performing extremely well, plu Victo, our

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<v Speaker 1>pro say cancer medicine performing extremely well. So I think

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<v Speaker 1>we'll be able to show investors that we have the

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<v Speaker 1>growth drivers to growth through the end of a decade

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<v Speaker 1>and into the twenty thirties.

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<v Speaker 2>You also, as I mentioned, plan to buy back up

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<v Speaker 2>to ten billion dollars of your own shares in the

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<v Speaker 2>coming years. What does to say about your appetite for

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<v Speaker 2>M and A and in licensing of medicines. Is there

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<v Speaker 2>a lack of sufficiently priced, attractive targets right now out there?

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<v Speaker 1>We're in the great position that we can do both.

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<v Speaker 1>We can buy back our shares and do M and A.

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<v Speaker 1>When you look at where our cash flow is heading,

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<v Speaker 1>we'll soon be approaching twenty billion dollars of free cash flow.

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<v Speaker 1>That enables us to play a strong and growing dividend,

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<v Speaker 1>that enables us to buy back our shares and then

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<v Speaker 1>also to invest fully in M and A and media

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<v Speaker 1>l So we're not pulling back. We actually led the

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<v Speaker 1>industry and the number of deals completed over the last

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<v Speaker 1>eighteen months, and so we'll continue to look and if

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<v Speaker 1>there's a good asset that fits with our therapeutic areas,

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<v Speaker 1>fits with our technology priorities, we'll certainly go after it.

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<v Speaker 3>Now, you mentioned M and A and how you are

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<v Speaker 3>looking for things.

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<v Speaker 2>You've talked about maybe bolt on deals, which specific areas

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<v Speaker 2>make the most sense for you.

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<v Speaker 4>Right now, we stick with our priorities.

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<v Speaker 1>Have war main therapeutic areas oncology, immunology, cardiovascular, neuroscience. We

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<v Speaker 1>have three main technology eras selling gene therapies, RNA therapeutics,

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<v Speaker 1>and radio ligan therapies.

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<v Speaker 4>That's where we look. We've learned that focus is.

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<v Speaker 1>What's driven the outstanding performance we've seen over the last

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<v Speaker 1>three plus years, and we want to say ultra focus

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<v Speaker 1>key therapeutic areas, key technology platforms, and that's where we

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<v Speaker 1>primarily look.

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<v Speaker 2>I mentioned Boss that you are in Cambridge. That's where

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<v Speaker 2>Novartis's global research headquarters are based. But it's also your

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<v Speaker 2>old stomping grounds because you've got your MD and your

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<v Speaker 2>MPH from Harvard. I believe you're also a current fellow,

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<v Speaker 2>so you've got a lot of links to the city and.

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<v Speaker 3>To the school itself.

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<v Speaker 2>We know that the school is under attack from the

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<v Speaker 2>Trump administration. There's losses flying both ways. How do you

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<v Speaker 2>think about the brain drain, the discouragement to the Harvard

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<v Speaker 2>community by what's going on within the political climate right now.

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<v Speaker 1>Look, I'm not close to the details, but certainly. I

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<v Speaker 1>think speaking for research based universities, it is a challenging

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<v Speaker 1>time and we see now with China emerging as a

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<v Speaker 1>major player in biopharmaceuticals and biotech, particularly in the Shanghai area,

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<v Speaker 1>that the US has to maintain competitiveness, and that means

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<v Speaker 1>having world leading universities, a strong NIH and continuing to

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<v Speaker 1>fund the breakthrough science that's led to the Cambridge biotech ecosystem,

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<v Speaker 1>which you see behind me where there's over five hundred biotechs,

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<v Speaker 1>a leading biopharmaceutical ecosystem. To see the Harvard University research

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<v Speaker 1>labs and hospitals with other universities as well have similar footprints.

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<v Speaker 1>And we need to maintain that competitive edge in the

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<v Speaker 1>US and that's going to be I think, really something

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<v Speaker 1>that comes to the fore in the coming years as

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<v Speaker 1>China continues to invest in biotech.

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<v Speaker 2>Yeah, it's something that we keep hearing from leaders among

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<v Speaker 2>companies and the role that the US needs to play

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<v Speaker 2>to kind of fend off that competition.

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<v Speaker 3>Boss, thank you so much for joining us today.

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<v Speaker 2>Vos Narrisimon is CEO of Novardest joining us from Cambridge, Massachusetts,