AstraZeneca's CFO on GLP-1 Drugs, AI, and More

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Speaker B: hey everyone, Andy here. A quick note from the Erens team that we'll be moving from a weekly podcast to a bi weekly show. Twice a month you'll get in depth interviews with CEOs and business leaders and deep dives into the biggest stories in business. Thanks so much for listening. With all the action in pharma these days in GLP1 drugs, it's sometimes difficult for the rest of the industry to garner attention. Recently I sat down with AstraZeneca CFO Aradna Serene. One question I asked was how our company is addressing the red hot GLP1 market, which at the moment is crowded with injectable drugs. All the action seems to be in GLP1 drugs. So how do you keep up with the Joneses over there, those companies that feature those particular drugs?

Speaker C: Yeah, so we, uh, also have our own, uh, GLP1 medicine development. Um, the drugs in the market today are injectable and we have what is an oral small molecule GLP1. So not a peptide GLP1, but a small molecule oral GLP1. And, uh, we will be presenting soon, uh, the phase two data from that and expect to move that into phase three. Um, and again for oral medicines. There's not a lot of companies that have oral medicines, uh, really only one competitor ahead of us. The other thing where we think is really differentiated is, uh, you know, GLPs have been used mostly for weight loss or diabetes management. But when you look at the patients, uh, that, uh, have metabolic disease, so, you know, as a bigger umbrella, many of them, or most of them actually have one to two comorbidities. So patients will have not, um, only weight management issues, but either hypertension or dyslipidemia or other sort of comorbidities. And so what we're developing is combinations that allows us to treat, uh, the patient holistically with those comorbidities as well. So that's a very unique angle.

Speaker B: AstraZeneca's push into GLP1s is key to its efforts to reach $80 billion of revenue by 2030. But when CEO Pascal Sorio first announced that target, backed by plans for 20 new medicines, or Wall street was skeptical. You have this goal, your company does, of reaching $80 billion of revenue by 2030 um, 50% of that will come in the United States. I understand. Or you hope to. How do you achieve that goal, Rhonda?

Speaker C: So when we, when we set that goal back In May of 2024, um, uh, it was sort of almost doubling our revenues from 24 through to 2030. And, and at that time consensus, uh, estimates, uh, were at 67, uh, billion for 2030. And we had set an $80 billion goal. Right. So yes, it was very ambitious. Um, but we also had so many things in our pipeline that we felt, uh, if we're able to have some of these positive readouts and get visibility on that drug pipeline, the 80 billion would be achievable. Um, earlier this year, that, uh, consensus estimate for 2030, uh, has actually moved from 67 to end of last year was like 76. And now it's actually ahead of 80, it's almost 82. So the street is already getting ahead a little bit I think of, uh, the estimate.

Speaker B: Is that realistic, the 82.

Speaker C: Do you think it's possible? It is possible. Uh, there is luck involved in this business too. So fingers crossed for many of our upcoming readouts.

Speaker B: And is this growth organic or are you doing acquisitions?

Speaker C: Uh, no, all of this is organically driven. Um, we do do licensing deals, uh, in the early phases. So preclinical, some phase one. Um, but again the lifetime of developing those still takes another six to seven years. So the growth we have till 2030 is really organically driven.

Speaker B: Let's talk about the company a little bit itself. Obviously oncology, cancer drugs, cancer therapies have been a real strength of AstraZeneca. Is that still the primary growth area or what non cancer areas are investors missing?

Speaker C: So I would say for the last five years, definitely oncology has been the key driver of growth. Um, but also the biopharma business. The biopharma is, is sort of a bigger unit which includes cardiovascular renal medicines as well as respiratory and immunology medicines. Um, so while oncology is still very important, we think the next phase of growth that we'll see is actually going to come from biopharma. And uh, there are some really exciting medicines in the cardiovascular renal portfolio. One we just launched not even a month back, um, uh, is a novel drug for hypertension. Um, so several million people live in the country who have what is called resistant hypertension. So you may be on two to three hypertensive drugs already, but still your blood pressure is not controlled. And this was a brand new mechanism. So new innovation in hypertension that never happened in 30 years. And we just launched that drug, um, and there are many other drugs similar to that that are novel drugs in the cardiovascular portfolio. So we're seeing that and respiratory as that will be the next, um, growth driver.

Speaker B: To support its goals for growth, the company recently shifted its US listing from the NASDAQ to the New York Stock Exchange. This move sets up AstraZeneca to appeal to a broader range of investors, especially in the US market. So you recently changed the listing of AstraZeneca, which of course is one of the world's largest pharma and biotech companies based in the uk, but it's a global company. Of course. But you recently changed your US listing. Why?

Speaker C: So what we had, uh, in the US earlier were ADRs, which is what most, uh, foreign issuers have. And what we did is actually change that to regular shares. So ordinary shares. And the shares that we now have listed on the New York Stock Exchange are the same exact shares that are listed, traded on the LSE and traded in Stockholm. So you know, doing that and all the back end of actually enabling all that trading was, was actually quite complicated. Uh, but that is what we did, which is harmonized the listings across, um, the three exchanges. And the reason for doing that was, you know, our shareholder base has changed over the last five years. So five years back we were probably closer to 36, 37% US shareholders. Today we're closer to 45. Um, and a lot of that has been driven, yes, by the growth of the company. But also we are a growth company, uh, in terms of innovation and R and D. And we think in the US growth is very much rewarded and supported. So we wanted to enable, uh, less friction in that whole trading and process. So that was really the reason for doing that.

Speaker B: Even with the multi billion dollar R and D budget, AstraZeneca can't fund every promising drug program. Choosing which drugs to bet on and which to cut is the job of executive leadership. Talk to me about part of your job. Working with your chief executive, I'm sure, about deploying capital and you have all these mouths to feed in terms of scientists who want you to fund their drug, um, experiments. Right. How do you go about doing that?

Speaker C: Uh, uh, it's a very difficult balance to strike. Um, I can tell you that most people in R and D probably hate me, uh, because my job, uh, is to make sure we're making the best investments. And um, in a way it's a high class problem because, uh, there are companies who don't have the pipeline that we have, we actually have many drugs and we have great, great, uh, people who are really experts in this field, in their own field, whether it's in oncology or cardiovascular. So we have great people, we have great actual assets to put behind. Um, and then we just need to do studies. But those studies take a lot of capital. Um, and so our job is to prioritize, uh, what we will invest behind. And the prioritization happens on a bunch of metrics. So it's not just financial metrics, it's um, where's the most unmet medical need, uh, how much is the product de risked? Um, what do we know about the science that gives us comfort that taking this bet will pay off? And of course the financial and pricing and how the landscape may evolve in five years from now when you actually end up launching the product. So all of that is taken into account to prioritize. But um, that's something that I feel is probably our greatest responsibility as an executive team is to make those choices.

Speaker B: Are you using AI in that process? I mean you have so many different inputs with so many different variables, right?

Speaker C: Uh, not quite yet in that decision making process. Because like you said, there are a lot of variables, um, and not all those variables are necessarily, uh, sort of distilled down to particular, uh, input. Uh, and also there's a lot of judgment involved, uh, from people who are again experts in regulatory or statistics, et cetera. So, um, we're working towards including more and more AI in our clinical trials. So places where we're using AI is for example, um, what's uh, the right medicine for a particular patient? More and more medicines are getting targeted and therefore can we run our clinical trials more effectively by picking the right patient population for that medicine? Uh, so that's where we're using AI.

Speaker B: And so not only are you balancing various R and D projects against each other, but then you're also balancing R&D versus shareholder demands.

Speaker C: Absolutely.

Speaker B: Because the shareholders also are hungry mouths to feed, they want their earnings. And so how do you look at that? Ah, how do you balance that out?

Speaker C: Uh, you know, it's a, it's a balance between short term and long term. Um, and I don't think one can take one's eye off the ball, um, on either place because we give guidance, we have to deliver what we commit for the year. So that's more the short term, M quarter on quarter, year on year, um, but also the long term. Because I mentioned in the beginning growth investors, people invest in our company because they see that the Company is going to be a consistent grower for the long term. And in order to consistently grow for the long term you have to make investments. So I think a lot of it is making sure investors understand the trade offs we're making and um, while delivering on the year ahead, also investing for the long term. And they will be beneficiaries of that growth.

Speaker B: What do you make of governments looking to curb drug pricing? Um, and it's not only in the United States, Japan just cut prices of drugs, including one of your important drugs there. How do you look at that and how do you model that out in terms of um, what you're going to be delivering?

Speaker C: Yeah, so the world is definitely dynamically uh, moving, uh, to say the least. In the U.S. um, there has been agreements signed as it relates to the mfn.

Speaker B: What is the mfn?

Speaker C: So the MFN is uh, an agreement we and other pharma companies signed, uh, which is relating the most favored nation, so the U.S. uh government, um, so Medicare, Medicaid, et cetera, will get pricing for drugs, net pricing for drugs that is uh, at par with other uh, wealthy nations and on a GDP adjusted basis. So what that does I think is

Speaker B: um,

Speaker C: uh, obviously help over time lower costs for new drugs that are coming into the U.S. market. Um, but I think it also forces countries uh, to invest more in their innovative medicines as a portion of their total budget. And that's the case we're making to uh, many of these countries in Europe because um, they have under invested in innovative medicines and uh, as a whole not just our drugs, um, and that's the case we're making that you need to increase your spending in innovative medicines to make sure you stay competitive as well in the lifestyle.

Speaker A: This message comes from Viking, committed to exploring the world in comfort. Journey through the heart of Europe on an elegant Viking longship with thoughtful service, destination focused dining and cultural enrichment on board and on shore. And every Viking voyage is all inclusive with no children and no casinos. Discover more@viking.com this message comes from Viking, committed to exploring the world in comfort. Journey through the heart of Europe on an elegant, uh, Viking longship with thoughtful service, destination focused dining and cultural enrichment on board and onshore. And every Viking voyage is all inclusive with no children and no casinos. Discover more@viking.com yeah, maybe talk a little

Speaker B: bit more about those global pressures both in terms of um, having to manufacture in specific countries. Obviously that's a big priority in the United States. But also tariffs. Do you face either one of those pressures?

Speaker C: So you know, we are probably more blessed than many from that standpoint. Um, and I think it goes back to the COVID days. So, um, you may not, uh, recall, uh, but, uh, we supplied vaccine. AstraZeneca supplied vaccine during the COVID I

Speaker B: remember it wasn't that long ago.

Speaker C: It wasn't that long ago. And we supplied, you know, over 3 billion doses across the world. And what we learned, I think, during that whole process, was that countries were very, um, interested in satisfying their needs first, uh, before exports, et cetera, et cetera. So I think we took some of that learning from back, uh, during the pandemic and decided over time to make our supply chains very, uh, regional. So we have, um, uh, 30 plus manufacturing sites all over the world. But we have manufacturing in China that supplies China and Asia, and then we have manufacturing in Europe that supplies Europe and rest of the world. And then we have many manufacturing sites in the US So we've tried to regionalize some of those supply chains. It's not 100% and it's not perfect, but we were very, I would say we felt that the tariff stuff was manageable because we had already planned this for many years.

Speaker B: A little more than a decade ago, Pfizer wanted to buy AstraZeneca. And now your market cap is, what, 280 billion, which is bigger than theirs? Your stock has gone up a lot. Aradna. Uh, why should investors buy the stock now, though? I mean, what's ahead for them in terms of, you know, maybe they feel like they've missed the run up already.

Speaker C: Yeah, I don't think they've missed the run up. I, uh, think, well, if you just take the ambition we have for 20, 30, uh, which is 80 billion in revenue and 20 new medicines, we're already halfway there, uh, in terms of 10 new medicines, I think there's a lot of growth still to come. Um, the other thing I would say, not only are we global, as I mentioned before, very global compared to, uh, you know, other pharma companies, and therefore the ups and downs on pricing or other challenges, I think we are built well to weather all of that, um, and we have a very broad and deep pipeline. So not everything will work. But I think if things work the way they've been working in the past, I think there's a lot of growth, um, still to come, so a, uh, lot more forward for people to look forward to.

Speaker B: Erodna joined AstraZeneca from Alexion Pharmaceuticals at the same time that AstraZeneca was acquiring that company. The move marked A transformational shift for AstraZeneca into rare diseases and was one of the largest drug mergers at the time. Now, you came to the company in what, 2021 when AstraZeneca bought Alexion.

Speaker C: That's right.

Speaker B: It was a $39 billion acquisition. How's that fit going? That was the rare disease company. And how's that fit going?

Speaker C: Uh, very well, actually. I would say, um, the Alexion acquisition, uh, has delivered better than expected. Um, the rare disease, uh, business, uh, has grown substantially. Uh, it's now almost $9 billion plus business. So it is another leg. Uh, also we have, uh, done a lot of sort of bridges between the two companies from a research standpoint. So scientists are collaborating, um, because if you think of, from a scientific standpoint, many of the pathways and mechanisms may also be relevant to rare diseases. So I think that collaboration is going really well. Uh, Alexion used to sell products in 15 to 20 markets. Uh, we're now selling the Alexion rare disease products in 70 plus markets. Um, so the global infrastructure that AstraZeneca has, we're leveraging that. So I think the business is doing very well and, you know, fingers crossed, it continues to do well.

Speaker B: And what are some rare diseases, by the way, that, um, you at Alexion and now AstraZeneca treats? I'm just curious about that.

Speaker C: So some of the diseases we treat are, um, uh, pnh. Uh, maybe those names are, you know, atypical hus. Um, hpp.

Speaker B: Uh, I don't think people know what those stand for.

Speaker C: M. Probably not a lot.

Speaker B: Uh, maybe just one example.

Speaker C: The one example that maybe people do know is myasthenia gravis. Um, so that is a disease where actually mostly affects women in sort of their 40s. Um, and, uh, it's muscle weakening disease. Uh, so people experience that, as you, uh, know, weakness in their muscles, inability to, like, stand up, um, you know, have weakness, uh, and muscles in their eyes. So again, inability to focus. Um, so, you know, all of these are sort of rare diseases. Rare diseases, anything that has a population of less than 200,000 patients in the entire, uh, country. So it's a very, uh, you know, these are patients where, uh, you know, it's even challenging to do clinical trials because you need to find these patients and, um, you know, it's hard.

Speaker B: And then you have to monetize it and not charge a million dollars a dose. So that's very tricky. Right. Yep. Yeah. I want to, uh, wind things up by asking a couple questions about you. It's a UK based Company. But you're mostly based in the United States, although you travel around a lot, right? Tell us about the road.

Speaker C: Yeah, I'm on the road probably seven months of the year.

Speaker B: That's a lot.

Speaker C: It's a lot.

Speaker B: Okay, and so you're visiting what sort of countries and what sort of facilities are you visiting then?

Speaker C: So I, you know, uh, it's very interesting. Our executive team is very spread out. Um, and uh, because we're so global, I think we uh. And also I think as an executive team we like to be close to the business. Um, so we, I don't think that feel that. Okay. You can be in a, in a headquarters sort of isolated from, you know, the ground. Realities and challenges are different in every market. Um, so, you know, when we're. So what am I traveling for? Um, other than sort of board meetings and investors and things, it's um, you know, business reviews and markets, you know, maybe engagement in the local market, um, manufacturing sites, visiting, uh, people, government meeting different governments. Uh, so I think it's very, very important, uh, in today's day and age to be close to what's actually happening in different markets. Um, we have a big business in Japan, we have a huge business in China. Uh, we have business in the Middle east, which is sort of our. Dubai is sort of our headquarters for international region. Uh, Europe. We have research, um, sites. We have six global research sites. Uh, two in the U.S. two in Europe and two in China. So it's uh, all of those.

Speaker B: That's what keeps you on the airplane. And final question, you are an MD in India, Stanford MBA after that. Then you went to work on Wall street before you went to Alexion. How does that background Aradna inform your thinking about your job?

Speaker C: I think, uh, one, it keeps me close to the science and we are very much a science and innovation driven company. Um, I actually spent this last weekend, uh, till Monday I was at asco, which is the big congress for oncology in Chicago. M. Again, why do I need to go to a congress as a cfo? But I'm really interested in not only innovations we're doing, but innovations that are happening in the field. Um, so one, it helps me be close to the science. And then coming back to the question you asked. How do you make that judgment on capital allocation? You have a $15 billion R&D budget, uh, and you have to make choices. Um, and so understanding the patient need, understanding diseases, understanding the science really helps. Uh, outside of just the financial. Um, and then I just love what I do so makes sense.

Speaker B: Arun Nasserin, CFO of AstraZeneca thank you so much for joining us.

Speaker C: Thank you so much for having me.

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Speaker A: This message comes from Viking Committed to exploring the world in comfort. Journey through the heart of Europe on an elegant Viking longship with thoughtful service, destination focused dining and cultural enrichment on board and on shore. And every Viking voyage is all inclusive with no children and no casinos. Discover more at viking. Com.