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GZERO World with Ian Bremmer
How life sciences investment drives economic growth
00:29:54
In this episode of The Ripple Effect: Investing in Life Sciences, host Dan Riskin speaks with Patrick Horber, President of Novartis International, and David Gluckman, Vice Chairman of Investment Banking and Global Head of Healthcare at Lazard. Together, they break down the outsized economic impact of life science innovation, from trillions in US bioscience output to China’s meteoric rise as a global R&D hub.
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Foreign.
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Welcome to the Ripple Effect Investing in Life Sciences, a podcast from Gzero's Blue Circle Studios, produced in partnership with Novartis. I'm Dan Riskin, a biologist and science journalist, and I spend a lot of time trying to understand the hidden connections that drive our world. In this series, we dive into the ways that research in the life sciences has surprising importance to geopolitics, economics and the resilience of societies to dealing with change. In the last episode, we uncovered some fascinating links between health research and national security. We really saw how government investment in life sciences does much more beyond advancing medicine. And today we're focusing on another one of those added benefits. We're going to look at how investments in health science strengthen a country's economy and provide competitive returns on investment to both private and public investors. And let me show you what I mean with some numbers. Between 2007 and 2022, $46 billion in government funding for global health research in the US stimulated 104 billion in added economic activity. That's more than double. And in addition to that, it created 600,000 U.S. jobs. But despite those financial benefits, some countries are slipping behind even some with traditionally strong life sciences sectors. So today I'm going to drill down on two fundamental questions. First, with all the different ways a government can invest, what is the purely fiscal argument for government investment in healthcare? Strictly from the perspective of a return on investment. We know there are other benefits like the medicines themselves or the national security interests that we learned about in the last episode. But today we going to put on our bean counting hats and look at the financial upsides for governments that invest in the life sciences. And second, I want to talk about policy decisions that bring investments to one country over another. If I'm an investor looking to put some of my money into healthcare research, what factors are going to guide my decisions about which country I invest that money in? So let's get started. I've got two fabulous guests today that bring a ton of expertise in exactly this space. We're joined by an industry leader, Patrick Horber, president of Novartis International, as well as someone on the other side of the equation in the financial advisory space, David Gluckman, Vice chairman of investment banking and global head of healthcare at Lazard. Welcome to both of you.
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Thank you.
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C
Thank you very much.
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David, let's start with you. You work with companies of all sizes and connect with investors across the board. In your view, why is investing into and engaging with the life sciences sector important? What do you think makes life sciences so appealing to investors right now.
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You know, needless to say, life science is fundamental to our society. It works not only to improve the human condition, but really transcend many limitations. Aging, health span, mortality and so forth. And there's really an incredible convergence of demographics and science and AI and technology, but it goes beyond that. It generates outsized economic impact and growth and returns. In the US the bioscience sector generated over 3.2 trillion in economic output in 2023, employed 2.3 million Americans directly, another 8 million in additional jobs, and over roughly a 30 year period, 1990 to 2022 generated a 17% compound annual return. And even during some periods of volatility, the return was very, very healthy. And what's also really interesting is that the financial outperformance disproportionately impacts some really important segments of society. So if you think about the aging population and the global longevity economy, which is really the economic contribution made by the aging population, that represents $45 trillion globally or more than a third of total global GDP. And that is growing at a remarkable rate.
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Those numbers are sort of just mind boggling, aren't they?
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Absolutely. And they're set to accelerate actually, because in many ways we're in the golden age of medical and bioscience at the moment. And it's really driven by a confluence of tremendous advances across biology, chemistry, protein and cell engineering, and a really wide variety of areas. And these are really poised to transform health outcomes and economic growth even more. In fact, Laz, every year we do a study involving hundreds of global healthcare executives and leaders. We've just done one of these and we asked them what their top innovative disruptive technological priorities are. And what was really interesting was the emphasis was across the board, next generation antibodies, data analytics, AI, ML, precision medicine, rna, which to me really speaks to just the sheer breadth, pace and depth of innovation. That's really exciting.
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Yeah, you get a sense that it's already got a ton of momentum. With that in mind, let me just get a geographic perspective on this. Because innovation in the life sciences happens.
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All over the world.
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So when you're thinking about opportunities to invest in different global regions based on where you've seen the most success over the last few years, what do you think are the key ingredients for for success for one region over another?
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C
You know, when you step back, you see some really deeply integrated value chains around specific hubs. So think Boston, there's parts of California, so think San Francisco, San Diego. In Europe you've got Basel, of course, and Cambridge. And increasingly Shanghai in China, these hubs have grown up with some mutually reinforcing elements that drive what, what I call the innovation ecosystem flywheel. So world class research universities supported by governments, there's infrastructure that's highly specialized to the life sciences area, deep capital markets, both private capital and public capital, and then experienced talent and generations of talent that cycle and create these hubs. Now, a solid regulatory environment is absolutely critical to support sort of all of these different constituents working in tandem. There's a density factor. So if in Boston, for example, there are many, many hundreds of companies in close proximity around them, venture capitalists and others in the healthcare ecosystem, success creates more talent, which creates more success, which brings yet more talent. Now, universities in close proximity is really important. Private investment is really important to the geographic element of your question. The science in the UK and Europe is absolutely first. Right? I think that the UK around Cambridge generates perhaps more startups than any other place. But the biotech ecosystem is perhaps a little bit more fragmented. There are more smaller companies, companies have a harder time making it to become large public companies and perhaps that's driven by smaller national markets, different languages, different regulations to some degree, and more separated and spread out group of specialist investors and the like. I think Japan has had a setback in terms of number of drugs produced, a number of new chemical entities. But what I am really watching, and some of the people that we engage with at Lazard are watching, is just a huge momentum in China. You know, China's R and D spending went from less than 100 million over a decade ago to about 15 billion in 2023. It's just absolutely remarkable. And the drug development coming out of China is more than a quarter of global drug development, which is six times larger than a decade ago. And so what we see is China really focusing on this cluster model that I referred to before. Capital markets, access and hubs around a couple of really important spaces. China's very much on the upswing and all of this is happening amidst really, I'd say, rising geopolitical tensions. And life sciences is becoming a battleground in many ways for economic and technological competition. So I think there's really strong arguments, particularly for government support for local innovation across regulatory tax infrastructure, which can create really big advantages.
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Patrick, I want to bring you in here. You're in the private sector and Novartis brings medicines to patients all over the world. This conversation is, is about the financial benefits of the life sciences and innovation in the life sciences. But before I go there, can we just take a moment for you to give us a sense of the impact that a company like Novartis can have on people's health. And can you share a bit about how you make that possible?
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Sure. Novartis is present in over a hundred markets worldwide. And in 2024, we've been able to provide to 296 million patients our medicines, which makes us as well, the leader in Europe and in many, many countries across the world. We have around 78,000 employees which are working globally and, you know, working every day to reimagine medicine to really improve and, you know, extend the lives of the people around the world. We invest around US$10 billion in research and development and with approximately 70,000 patients which are enrol 2,000 active clinical trials around the world. So really significant investment in research and development and lots of trials and molecules which we are looking into. We invest heavily, especially in cutting edge technologies to really bring groundbreaking therapies to patients. And I think something which is extremely special from a Novartis perspective is that it's the reflection of our legacy where we try to come every time with something which is first, if it's from a pioneering treatment perspective. Just as an example, we were the first ones who have been able to really change the life of the treatment of CML patients. We are investing in novel platforms like radio ligand therapy or sirna, with the objective every time to meet unmet medical needs for society so broadly invested across the world, and really trying to get cutting edge technologies to the patients.
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We heard from David about the impetus for the private sector to invest in life sciences. And now an important piece of that is the role of governments, both as investors themselves, but also as facilitators of private investment, because they can encourage innovation through their policies. So what do you see as the ideal relationship between the public and private sector when it comes to life sciences investing? And how do you talk to ministers and policymakers around the world about their potential impact?
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Patrick, as has been said, life science industry is definitely a major contributor to the growth and the prosperity. Every dollar which gets invested in the life science industry generates $3 in GDP globally. Every job which gets created through the life science industry generates 5 in the global economy. And I think there are many examples with regard to how our industry has changed the economic reality in cities or in countries. This all makes at the end, the life science industry one of the, I would say, most productive and as well, competitive industry a country or an investor could invest in. Yeah, but if I look on where we are today, there are still gaps in governments to really understand how important our industry is and really as well to provide the right value on innovation, which at the end, if I look at now from the pharmaceutical industry perspective, we see significant delays in access to innovative treatments. So just as an example, 20% of the medicines which have been brought to the market and to patients in the United States never made it to the European market because they even never get submitted or approved. Then of the ones who got approved, they have a regulatory approval. It takes almost two years as an average in most of the European countries to really provide this innovative medicine to patients in the countries. And I think the situation which we have here is extremely bad and there is a need for action. And I have to say definitely us from a Novartis perspective and especially as well, myself and my country presidents in the country, we're being now very, very vocal and are directly involved in having discussions with policymakers to really make clear how important innovation is for society.
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It's gotta be so frustrating to carry the football right to the goal line and then not be able to take it across, right? I mean you've done all the work to create the medicine and it's just, it all comes down to red tape, doesn't is right.
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You brought the analog of the football. I'm a marathon runner. I think every time about the finish line and a marathon is pretty long. So sometimes I think about this is like a marathon. And I really hope that I'm making the finish line because as you said, I think there is a lot of investment, there is a lot of emotion and work which we put innovative medicines and what we see is that there is not a recognition of the value now. At the same time, I have to say if I look back over the last three to six months, with all the interactions I had, especially in Europe, I see that there is an increased awareness how important the life science industry is. But still it's taking time and I don't see yet, I would say, the results which we would like to see. Nevertheless, I would like to highlight maybe one example. Spain had really put over the last two years significant efforts to develop long term policies. They have now as well included into the policy a new medicines law and a legislation on hta and as well pricing and reimbursement, which gives me a certain hope of recognition of innovation in the future. We'll have to see if they really walk the talk. At the same time, there are contradictory signals. We were talking before about the United Kingdom and how great Cambridge is as a place of really creating startups. Creating innovations. The avpi on behalf of the pharmaceutical industry was in negotiations with the UK government to conclude the vpac. This is a clawback system with so.
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Many different factors that go into the regulatory sort of framework in different countries. How do you choose where Novartis is going to invest next? What are the big pillars that you make your decisions on? You know, if you're going to set up a new facility or if you're going to hire staff, if you're going to test new drugs. How do you pick the country? What are the most important factors for you?
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We clearly have started to really focus our investment strategy on markets that show a clear commitment to valuing pharmaceutical innovation. There probably is a little bit of change of our mindset compared to maybe a decade ago. If we talk about really valuing pharmaceutical innovation as well, showing a commitment to innovation, it means three main things. One is having the right regulatory framework to really speed patient access. And the second one is really having a robust intellectual property protection so that we can ensure that our investments into research and development really come back and we see them in the long term in the markets. And then the third one goes back into the sustainable funding mechanism about at the end, pricing and reimbursement. And we will invest mainly there where we see that they're not taking actions to undermine our innovation or as well, you know, taking top down budget cuts, which we see sometimes in some of the markets.
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Sure.
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So we really want to invest there where innovation is at the end, not just approved, it should be embraced and recognized. So that's where we're going for. And I hope that as well, based on our actions which we're taking, that countries are realizing that the life science industry is extremely critical for them.
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So Patrick's sort of running this marathon and David, you're sort of in the stands watching all these runners move along and trying to figure out where to place your bets, so to speak, and how to understand sort of the marathon as a whole. So let's talk about that big perspective. In what parts of the world have you seen government regulatory support for investment in life sciences make the difference for an innovation ecosystem? And has that been changing in recent years?
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Absolutely. I referred earlier to the innovation ecosystem flywheel, and it's really important and government plays an absolutely critical role in that flywheel. And as Patrick referred to, it's certainly about creating the right financial incentives, but what you also need is a solid regulatory foundation and the political momentum to supercharge innovation. And this cuts across the impact not only on human health but the economic benefits that Patrick and I referred to earlier, even national security, as a matter of fact. And I think Patrick made a really important point on the multiplier effect of investing in innovation. He cited a very interesting figure. There's another one in respect of NIH funding here in the US that delivers $2.56, according to one study that I've seen, for every dollar invested. And that compares very favorably with sort of generic government investments in other areas which are much, much smaller than that. And so from a financial perspective, governments have a role in building basic research foundations here in the U.S. notwithstanding some of the changes happening at the moment, the NIH has had a very, very important contribution to research in some senses. Government there acts as a first investor, absorbing a lot of the upfront risks that private markets wouldn't touch. And then the government's role in that respect is to really create a basic science foundation that enables private investment and ultimately public investment and makes those investments sort of more attractive, which then incentivizes more innovation that otherwise might not have happened in the first place. But it goes beyond financial investments. Regulatory support is absolutely critical. So we need streamlined and clear drug approval pathways. We need predictable healthcare policy. We need strong IP protection, as Patrick referred to before, even backing high risk R and D investments for highly specialized markets. And then again, capital will flow where there is a return. So there need to be pricing and reimbursement policies that do provide a return for investors, otherwise the investment dollars are going to go elsewhere. So, you know, just unpacking that a little bit. Patent protection, absolutely critical. You know, the average market exclusivity in the US is roughly 12 years. It depends obviously on the particular situation. In the US The Breakthrough Therapy designation program has been, I think, a very big success, which really reduces the clinical development time and the review time for a lot of drugs. You know, the Orphan Drug act really helped spur investment into rare diseases, where in the late 80s, maybe 5% of new drugs were orphan drugs. And in 2023, it was much closer to, you know, 40, 45%.
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Wow.
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Which is a remarkable change for a wide swath of patients with these highly specialized diseases. I do want to come back to China, though, where they seem to be having a very systematic approach. They've got the Strategic Emerging Industries Initiative, which has identified biotech as a critical industry for competitiveness. The 14th Five Year Plan did the same to the point I made earlier about China's rise in biotech. And building on Patrick's point, having streamlined approval pathways, strong IP protections Predictable regulations, access, pricing, all of those things go together to make a healthy innovation ecosystem.
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I'm going to ask you both this next question. What would be the impact from your perspective if countries started dedicating a percentage of their GDP to invest in the life sciences? I'm interested in the impact that's going to have on investment on the life sciences themselves and beyond. Patrick, let's start with you. What do you think of that policy idea?
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I think it would for sure unlock unprecedented capital flows into the innovation ecosystem. You know, with a sustained public investment you would see a search in research and development capabilities, talent development, infrastructure, and at the end it will be a multiplier. If we think about the effect on prosperity and economic growth, and we know I mentioned it before, that one job in the life size industry creates five jobs globally. And I think the other thing is that if we would see investment in innovative medicines, it would signal very strongly to innovators and as well to us as Novartis and other life science companies, that there is a recognition of the work which we do every day and that they recognize that we are bringing value to society from different perspectives. I think from an economical perspective on one hand, but at the end as well value from a health perspective in really providing innovative medicines and keeping the society healthy. It would mean as well that these countries would have to implement, let's call it a pro innovation regulatory, but as well pricing frameworks. So I think such an approach in investing a certain percentage of the GDP innovation specifically now in our industry into innovative medicines would have a significant impact. And at the end, my view is it's about the people and you know, when innovation gets funded, patients and society benefits from that.
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So it would be helpful, especially economically, but it would also need to come with the IP framework and a few other pieces to really, really take hold fully. Okay, so David, let me ask you, what do you think of this idea of dedicating a percentage of GDP to invest in life sciences?
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Well, just building on Patrick's comments, the national commitment for a percentage of GDP in the context of the other regulations and policies that we talked about could only strengthen national resilience and security. And you only need to look back to sort of the COVID 19 pandemic to be reminded that healthcare systems supply chains are really critical national assets and they can be disrupted, you know, very, very easily. We saw that with the supply chains and COVID 19. We saw that with sort of just in time manufacturing models which really minimized inventory and left very little flexibility to scale up Production. So you know, a lot of fragile, a lot of brittleness and then knock on effects. When you think about delayed treatments, canceled procedures and just the broad economic impact. If there was a steady and stable and predictable level of investment and a stable set of regulations and policies, I think that resilience would go up significantly. I think there are also very, very interesting parallels. We just need to look at the military industry and defense capabilities as one example and look at the civilian innovation track record from defense investments. So you think about DARPA, helped create the Internet, the GPS, the computer mouse. You go back to World War II and you think about jet propulsion and optics and fission and you know, various radar computing even. And so these weren't accidents and not just happenstance spillovers, but they were the systematic results of sustained government investment. And to Patrick's point, it helps patients, it addresses sort of the limitations that we as humans face to our health and our health span. But equally it sort of has spillover effects into other innovation, other economics elements. But again, it's not just the investment. I do want to stress that the policy predictability around that investment is also really important.
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We've covered a lot of ground here and we're getting close to our time. But before we go, I just, I wonder whether there's anything else that's surprising or misunderstood that I've missed that you'd like to clear up for our audience about how investing in life sciences affects the competitiveness and long term prosperity and well being of a country as a whole.
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There is a real urgency here. You know, we see that governments are struggling with aging populations, rising chronic disease burdens. You know, we have a geopolitically instability. I really think that governments cannot afford to treat life science as a cost anymore. They have to see there's something which is a priority for them. And you know, as we were saying before, life sciences is not just about health, it's about the national security, it's about economical growth and it's even about strategic autonomy. So delays in access, outdated regulatory frameworks are really at the end risking that we are leaving patients behind and even we may get a stagnant economy overall. And I think from a, let's say a medicine perspective, we are at the tipping point. There is a lot of innovation developed. We have different platforms who could make a significant impact on different diseases. If it's radioligand therapies in oncology or RNA platforms, cell and gene therapies, they all are ready in a way to transform care. And if the governments are not really willing to invest into innovation, we will not have an impact in these countries. What I'm saying to my team every day is when we talk to governments, what we have to tell them is the time is now to invest. They have to do it now or never.
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Patrick, I couldn't agree more. I would add that I think it's important to remember that life sciences, the sector doesn't exist in a vacuum and it enables a broad swath of benefits across the economy and modern life. And I've always found that the most compelling innovation happens at the intersection of things that may seem quite disparate from one another. And so you have a cross pollination of ideas, shared platforms, technologies, techniques, data flows across sectors and you can see a big interplay between life sciences and AI, for example, or advanced manufacturing with respect to cell therap or clean energy and the like. So I think we've also got to open the aperture and think quite broadly about not just the multiplier effects within life sciences, but much beyond life sciences to other sectors and the dynamism that that can really create. And I think countries that invest and create these policy frameworks and regulatory frameworks have a greater shot at leading across other critical sectors because that philosophy and approach will spill over to other technologies and create an even broader flywheel across the economy and across innovations in other areas. And then that in turn will lead to all the benefits that Patrick just mentioned. And I agree. I think the time to act decisively is now. I think countries should create and establish comprehensive innovation systems, regulatory frameworks, partnerships internationally, and those that do are going to capture a disproportionate portion of the benefits that Patrick and I have just talked about. The window's narrowing and now's the time.
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Patrick Horber and David Gluckman, thank you so much for joining me.
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Thanks a lot, Dan.
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Thank you very much. It's been a real pleasure to talk to you both.
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And thank you for tuning in to the Ripple Effect, a limited series where we've highlighted the critical role of life science. Innovation is a driver for growth, prosperity and national security. For Gzero's Blue Circle Studios, I'm Dan Riskin. Thanks for listening and have a great day.