Consumers and investors will "ultimately" come to value pharmaceutical companies that focus on curing diseases rather than treating them, Novartis CEO Vas Narasimhan said Monday.
Speaking at the 37th annual J.P. Morgan Healthcare Conference in San Francisco, Narasimhan told CNBC that Novartis may have to start separating itself from the idea that profitable medications — which are often lucrative because they manage chronic diseases rather than curing them — is one of the few ways to be successful in the pharmaceutical space.
"We're getting into gene therapies and cell therapies that could cure patients of disease, and my belief is there are a lot of diseases we could tackle with these technologies and really provide cures," Narasimhan, who took over as CEO in Feb. 2018, said in a "Mad Money" interview with Jim Cramer.
"What we're really finding out is that society wants that and that, ultimately, they will value it," he continued. "My conviction is that we'll figure out the payment systems. We'll figure out those challenges. But if you're a company that could consistently bring cures to patients, you're really well-positioned to be successful."
Novartis, a Swiss drugmaker that boasts a $216 billion market cap, has been reworking its portfolio, selling off non-core assets like its generic drug segment and spinning off its soon-to-be former subsidiary Alcon, a catch-all eye-care business.
The pharmaceutical giant has also made two key acquisitions related to cancer treatment: a $3.9 billion deal for French radiopharmaceutical specialist Advanced Accelerator Applications in 2017 and its $2.1 billion purchase of U.S.-based biopharmaceutical Endocyte last year.
"We're all about platforms. We're moving into cell therapy, gene therapy, and now we've got this new platform called radio-ligand therapy" with the Endocyte deal, said Narasimhan, who holds an M.D. from Harvard Medical School.
Endocyte's specialty is "pretty simple" in concept, but, to Novartis' benefit, is "really hard to replicate" in practice, Narasimhan told Cramer.
"What we do is we take a drug that's really specific to a cancer and we link it to a radioactive particle that's very controlled and we take it to the cancer and we kill the cancer. And that's worked really well in one tumor [type] called neuroendocrine tumors. We think it could work in prostate cancer. Frankly, we think it could work in many other solid tumor types," the CEO said.
But when it comes to the competition in cancer treatment, which now includes high-profile players like Eli Lilly, radio-ligand solutions aren't easy to come by, Narasimhan said.
"You need big-time capabilities in managing nuclear materials and complex supply chain[s]," he said. "And with the two acquisitions we did last year — AAA [and] Endocyte — we built up that capability."
Shares of Novartis fell 1.18 percent in Monday's trading session, closing at $84.88. In the company's third-quarter earnings report, management raised its full-year sales forecast and highlighted the strong performance of the company's psoriasis drug, Cosentyx, and its heart-failure medicine Entresto.
Novartis will report its fourth-quarter results on Jan. 30.
Disclosure: Cramer's charitable trust owns shares of J.P. Morgan.
Correction: This story has been revised to reflect the correct fourth-quarter earnings date.