LIZ CLAMAN, FOX BUSINESS NETWORK ANCHOR
This is your first interview since the FDA approved the first oral therapy here in the United States for Multiple Sclerosis (MS) Gilenya. How much of a game changer is this and why?
8:56:18
JOE JIMENEZ, CEO NOVARTIS
I'll tell you the FDA's approval of Gilenya really represents a breakthrough in the treatment for MS. Not only is it the first oral therapy for MS patients. So typically, today, a MS patient has to either inject or infuse the medicine...
08:56:34
LIZ
Which is no fun.
8:56:35
JIMENEZ
No, and we get comments all the time from patients who say they don't like that. So this is the first oral therapy. But also, it has best in class efficacy. So we were able to demonstrate a 52% reduction in relapse rate versus the current standard of care in MS.
08:56:53
LIZ
So it's not just easing the pain of MS, it actually slows the progression?
8:56:58
JIMENEZ
It does. So if you think about MS, it's an autoimmune disease in which the body's own immune system starts to attack the protective coating round the nerve fibers that transmit signals to other parts of the body. And what Gilenya does is it slows that autoimmune response.
08:57:20
LIZ
And when you look at this drug, the pricing...I haven't heard anything on the pricing yet. Now the prices of most MS drugs have skyrocketed over the past 10 years. How will you price this?
8:56:31
JIMENEZ
We're going to price Gilenya competitive with the other MS compounds. Part of it is that we have had this drug in development for over 10 years. We have spent over $1 billion in total development costs to bring it to market. Therefore, obviously the way that pharmaceutical companies and any company that's really invested in research recovers the cost of that investment is by pricing it competitively to what's on the market.
08:58:02
LIZ
You want to make your money back...totally understandable. That's the capitalist system. I have seen analyst numbers that put this at being about a billion dollars in sales a year for your company. Does that sound about right?
8:58:12
JIMENEZ
What we have said is that it will at least be a blockbuster, which is $1 billion in sales. But the total MS market globally is over $10 billion. And within the U.S. it's about half of that, so we feel fairly confident that it will at least be a $1 billion drug for us.
08:58:31
LIZ
Do you expect a rush of people switching from say, for example, competitor Tysabri or other subcutaneous injection-type drugs? Do you think I would much rather take an oral therapy? Are you prepared for that?
8:58:43
JIMENEZ
We do know that there are a number of patients that are waiting for an oral therapy, and they have chosen to not be treated with injections or infusions. So we do think that there will be a number of patients. But what's important is that that patient and the physician have a good conversation about whether Gilenya is right for them.
08:59:02
LIZ
Obviously, as you just mentioned, it took you 10 years and more than $1 billion to develop this. This is not a cheap process for anybody. It is a huge investment for your company over of course more than decade. Today is the first day that parts of US Healthcare Bill law now come into place. Do you expect for example that you would think these kinds of drugs will continue to be made. Or will it be an onerous atmosphere for companies like yours to develop drugs, take the time to do this.
8:59:32
JIMENEZ
No, we see healthcare, and I personally think that healthcare is going to be a growth industry well into the next decade, because if you just think about the aging population and the fact that obesity rates continue to rise, there is going to be more and more demand for high quality healthcare. So at Novartis, we will be investing heavily in research and development because the business is fundamentally about innovation.
08:59:58
LIZ
So you don't see this as a negative, this new Healthcare law?
9:00:01
JIMENEZ
No, in fact, I think it's a step in the right direction. We were very pleased to see that there will be over 35 million more Americans covered.
09:00:07
LIZ:
More demand for your drugs
9:00:10
JIMENEZ
More demand for our drugs, but we're also helping to pay for it. So the pharmaceutical industry was first to come forward to the Obama administration and offered to work with the administration to help fund some of the increase in coverage, through either rebates or other ways.
9:00:28
LIZ
You've heard the criticism that the pharmaceutical companies by doing so got some type of sweetheart deal. What do you say to that?
9:00:35
JIMENEZ
You now, I say we came to the table first because we saw the need to help reform healthcare in the US. And it was genuine. It is costing us a lot. Not just Novartis, but other pharmaceutical companies next year will have a pretty heavy price tag to pay for part of this healthcare reform. But I think it's the right thing to do, and that's why we support it.
09:01:02
LIZ
The President has also just announced more research and development tax credits. How does that affect Novartis?
09:01:07
JIMENEZ
I think anything that encourages more research and development is going to be good for the industry but it's also going to be good for patients everywhere. Because if you think about our research process, at Novartis we focus on understanding the disease mechanism in new and different ways and then developing new compounds that can help offset the diseases...and anything that will help us do that is a positive step.
09:01:32
LIZ
Am I hearing you correctly? You don't sound like you are of that chorus that's out there. Some say it's growing rather loudly-that say the President is anti-business.
09:01:43
JIMENEZ
You know, I think we're focused on helping patients and that's really what we want to do. Which is why we came to the administration and we said look, "We understand the need for healthcare reform in the US." We want to be a part of the solution and we're going to continue on that track.
09:02:03
LIZ
You're getting it from other sides as well though. When you look at the atmospheres of changing political landscapes, generics that situation of course. Barron's yesterday had a headline that said "Generic Armageddon," pertaining to a Goldman Sachs downgrade of your company from "Buy" to a "Neutral." They said that you perhaps are most vulnerable to sales problems due to some sun-setting, using that term that's a big political word, of some of your drugs and becoming generic. Many more healthcare plans will say that you have to take the generic version or we're not going to pay for it. How do you battle the generic situation?
09:02:38
JIMENEZ
You know, we join it. Because at Novartis, we have spent a lot of time shaping our portfolio in a way that will go after the fastest-growing segments in healthcare. For example, not only do we have a division that focuses on innovative pharmaceuticals but we are actually the number 2 generic manufacturer in the world. I think very few people know that. We have vaccines in diagnostics, over-the-counter drugs, and with our acquisition of Alcon the eye-care company we now have a 5th platform for growth. So we believe that there are generic opportunities and we're participating in those opportunities directly through our generic division.
09:03:15
LIZ
Well obviously that's smart because you know that healthcare plans are now pushing for all of the generics because pharmaceuticals are very expensive for people. At the height of recession, you heard these stories of mostly elderly folks breaking their pills in half to make them stretch out, lowering their dosages to make their medicine stretch out. How do you make a profit yet make drugs people desperately need affordable?
09:03:38
JIMENEZ
Yes, I would say fundamentally at Novartis we are pro-patent because pro-patent means we will be able to fund research and development and come up with some of the medical breakthroughs like Gilenya that will help patients everywhere. But when those patents end, we are also very happy to lower the total prices through our generics arm and really capture that. So we are able to offer very lower prices for any compound that comes off patent protection whether it's from Novartis or whether it's from other pharmaceutical companies.
09:04:11
LIZ
You talk about what could be this blockbuster Gilenya. What is the biggest blockbuster you believe is in your pipeline right now.
09:04:18
JIMENEZ
Well that's a good question. I would say that there are 3 very important compounds. The first is Gilenya as we launched right now. The second is an oncology drug called Afinitor which is right now being used for renal cell carcinoma, but it's also right now in clinical testing for a number of other cancer indications. And then the third is an anti-hypertensive called Tekturna which is a new mechanism of action for high blood pressure.
09:04:49
LIZ
You got a good pipeline there, definitely.
09:04:50
JIMENEZ
We do.
09:04:52
LIZ
I know you're based in Basel, Switzerland. But obviously you know in this country, we're facing tax changes come November, possibly the sun setting of the Bush tax cuts on at least the upper tier of the population. Have you thought about how that might affect your business?
09:06:06
JIMENEZ
We have, and obviously any tax increase or reduction of tax credit has an impact on our business. And it will mean that we have to reduce total cost. If we are going to face higher costs or higher taxes, we are going to have to look very hard at our cost structure and ensure that we are doing things very efficiently, that we have the right number of people, and that we are able to take our procurement costs and lower those total costs.
09:05:39
LIZ
Right number of people, does that mean you may have to lay people off?
09:05:42
JIMENEZ
No, I think we are a business that constantly is looking at if we have the right workforce. Luckily we are a healthcare company that is growing. We just announced our second quarter results in July and our topline was up 12% versus a year ago. So the outlook is pretty positive for Novartis.
09:06:02
LIZ
Well, the ad says Novartis thinks what's possible, and people hear that and they truly appreciate some of the therapies that you've come up with. In the end, pharmaceutical business, what do you forsee is the biggest change on the landscape looking ahead?
09:06:17
JIMENEZ
I think the biggest change in the pharmaceutical industry going forward is how we work with payers and government around the world to ensure that we can bring our medicines to market in an affordable way. If you look at what is happening in Europe right now, because of the debt crisis many governments have slashed the price of pharmaceuticals. Greece, Turkey, a number of other countries have taken 15 and 20 percent hits. We at Novartis have been able to offset that because we have a very strong pipeline and generate new volume from our new compounds. But other companies in our space have not been as fortune because they do not have as rich a pipeline. As we now shift away from what has been a transactional approach with these payers to helping them deliver a positive outcome with new pricing mechanisms, new ways to help them bring these new medicines to their populations.
09:07:18
LIZ
You're looking at the way insurance pays out, aren't you? It's got to be an issue.
09:07:19
JIMENEZ
Yes.
09:07:21
LIZ
It's got to be an issue.
09:07:22
JIMENEZ
Yes.
09:07:25
LIZ
I just look at this business and I say you're a guy who came from Clorox, Heinz, also AstraZenec a too. But running a pharmaceutical company of this heft? Do you lie in bed at night and think, suddenly I feel like a doctor, I've got to know about all this stuff?
09:07:44
JIMENEZ
You know, it's funny. Before I became CEO in Feb I had run the pharmaceutical division at Novartis for about 3 years so I was well grounded in the industry. But I also do not have 20 years in the industry like many people in my position do. I think though that is actually a benefit because if you think of how healthcare is changing and what is going to happen in the next 10 years, this is a radically different industry than it was 10 years ago. So I do not have some of the history and some of the success that the other people in the industry have, so I get to take a look at the industry through a new lens.
09:08:24
LIZ
Well, a new lens, not the old-style bad habits.
09:08:26
JIMENEZ
Yes.
END