GSK plc (GSK) Earnings Call Transcript & Summary

Good morning, good afternoon and good evening, depending on where you're joining us from. I'm Ariel Babcock, FCLT Global's Head of Research. We're a nonprofit whose mission is to reorient capital markets to focus capital on the long term in support of a more prosperous sustainable economy. We've got a terrific group assembled here for today's conversation to take a topic that's really important and timely into discussion. So our goal is to spend the time together in interactive dialogue. This is something that we do at FCLT on a regular basis. We bring together leading asset owners, asset managers and companies to develop practical solutions that market participants can use to make long-term practices the norm and not the exception. So how do you make the long-term decision the default instead of the difficult is something that we grapple with every day. Today, we're going to talk about the financing of health care advancements and particularly vaccine development. This became a central priority of our time with the onset of the COVID-19 pandemic, but the scale and importance of such developments are not new. Successful innovation depends on a wide array of decisions, including capital allocation, risk management, communication with investors and with other stakeholders. And each of these decisions involves trade-offs between short- and long-term focus. So we've got a terrific group today. I'm joined by Roger Connor, President of Vaccines and Global Health at GSK. GSK is a science-led health care company focused on helping people do more, feel better and live longer. Rebecca Sykes is Senior Managing Director and Global Industry Analyst at Wellington. Wellington is one of the largest private independent asset management firms worldwide and has a long history of taking that long-term perspective. And finally, Dr. Fidah Alsagoff. He is Head of Life Sciences and Joint Head of Enterprise Development Group at Temasek. Temasek is a Singaporean state holding company that takes a generational approach to investing. So we'll spend the first portion of this conversation in panel discussion, and then we'll open it up to audience questions. If you have a question, please submit it via the chat function, and our moderator, Demi McClure, will collect those and feed them up to the panel from there.

So Roger, if it's all right, let's start with you. We know from our research that returns on long-horizon innovation are typically multiples higher than the returns on short-term incremental innovations, things that are sort of the 2.0 version of the last thing. And we also know that historically, really transformational vaccine R&D was a very long-horizon process. But the pandemic really pushed organizations to accelerate vaccine development. Has that experience shifted your view of how to manage the mix of project time horizons in your R&D portfolio? And what are kind of the key lessons learned from that?

Ariel, thanks very much for asking me to come along. Such an important topic as well. I think it's a massive understatement, it's an incredibly exciting time to be part of any vaccines company and part of the vaccines industry overall. I think what the industry has achieved in the last couple of years through COVID is something that we're all incredibly proud of, 12 million doses delivered already on COVID vaccines. And that can never have happened without a long-term investment approach. I think -- just to put that in perspective, by the way, all vaccines in the world typically in a pre-pandemic space would probably add up to around 3.5 billion to 5 billion. And so to turn on even just the supply and development to deliver 12 million in the period that we have shows you the level of mobilization. And the pace at which it's been done, I mean, we were talking years to develop a vaccine previously, and the industry has come through with a number of vaccines in around a year's time. I think it's important to understand how that's been achieved because a part of that answers your question. First of all, COVID had been researched as a family of viruses for a long time so a lot of investment had gone into just getting a head start particularly in the NIH. So there have been investments post SARS and MERS to understand this family of viruses. And then if you look at what has happened in the industry, the focus, the risk sharing, the investment in new transformative technologies. I think mRNA is probably the one that everyone knows now. Everyone is talking about mRNA around their dinner table. And 2 years ago, no one would have known of this technology. It's phenomenal what has happened. The regulatory mindset of moving at pace and just the level of collaboration that we've seen across the industry has been something special that has allowed us to achieve the outcome that we have. I suppose to answer your question directly, what does it change, it's reinforced in GSK -- we're one of the biggest vaccines players in the world, so what it's reinforced for us is some obvious things but important things. One, the power of vaccination. This is avoiding you getting a disease. And there is no better intervention other than drinking clean water to public health, and that health economic return is massive. It's miraculous actually that you can take an injection and just not get sick from a certain element, and we take that for granted. But it's shown the power of that. And secondly, I mentioned it, but investing in platform technologies. mRNA had been worked on for decades. It didn't just arrive. So this long-term approach actually saved the world, and this is something that we're very used to in vaccines. We have a transformative technology called our adjuvant platform. It has transformed the vaccination of shingles, real horrible condition, and created a vaccine with 97% efficacy. And that investment in GSK was going on for decades to come up with the right adjuvant platform to create that level of disruption. So as an industry, we've got to keep looking at what the next technology intervention will be. And then finally, it's a high-risk, high-reward business. I mean if you invest in that -- in those technologies, if you invest in those new products, you create potentially a stream of income that can last a very, very long time. Some of our vaccines are over 30 years old. They are highly effective. They're more like consumer products because if you keep investing in their life cycle, they will continue. So those are probably our biggest takeaways, Ariel.

So it sounds like the characterization then that this was a rapidly developed vaccine is one that perhaps long-term investors need to push back on then to sort of write the story and the narrative around that.

Completely, completely.

Rebecca, I'd love to pull you in on this one. Because I think -- as a long-term organization, how do investors really think about short-term investments versus longer-term investments like vaccines or investments in potentially moonshot innovation in this category? And has that changed as the result of the pandemic?

Sure, Ariel. And thanks for having me here. It's a pleasure and an honor to be with this group. Of course, the entire pharmaceutical industry and drug development is generally a pretty expensive and long cycle business relative to other industries for sure, and vaccines, we tend to think of as being among the biggest investments. But the COVID vaccine development, of course, as Roger pointed out, was astonishingly fast, right, within the course of about a year to come up with a couple of really effective vaccines. And that was for a number of reasons. The industry, of course, chased it. So fervently, regulators were flexible. And of course, the mRNA platform lends itself to quick identification of the right sequence and the right vaccine here and rapid scale up. So I do think there's going to be important learnings about processes and sort of how to invest at risk, et cetera, that's going to shorten some investment cycles for vaccine and non-vaccine development, but it's still going to be a long-cycle industry. And we have to recognize that as investors and understand the risks, particularly for smaller companies that are in the space, the big risks they're taking and the funding that's needed. So that probably hasn't changed, but we are trying to understand how processes have changed, how regulators are working more effectively with industry to get things accomplished faster. So that's all great. I'm also interested that the silver -- one of the silver linings of this pandemic has been increased attention and focus of government and industry on infectious disease. It's been sort of -- at least in the limelight in terms of where R&D dollars get spent and where you see all the exciting innovation, there's been so much focus on cancer and autoimmune diseases, of course, in the last decade. And that's for good reason. We've learned a lot about how to harness the immune system in particular for cancer. But I think it will be important to have more focus on malaria, GSK has a malaria vaccine, better malaria vaccines. Drug-resistant TB, HIV, of course, big, big problems globally that can be addressed either by vaccines or better anti-infectives.

So Fidah, you've got a bit of a different perspective coming from a large asset owner organization. We often think of the asset owners that work we with as being more attuned with the beneficiaries that they're -- and the purpose of their organizations because they're much closer to the end favor. So as an asset owner organization, I think you can also often take a longer-term perspective in your investments. How do you think about the mix of short versus long term when it comes to the health care portfolio that you look after?

Well, Ariel, first of all, absolutely delighted to be here. Thank you for having me. I think we have to take a deterministic view, a deliberate view in portfolio allocation. It is a lot easier to do a short-term investment, much less risky. However, if we want to be truly involved with groundbreaking innovation, if we want to push that agenda along, we have to be prepared to take a very long-term view and ride the cycles and the uncertain. But it really has to be done if you really truly want to advance and evolve the way health care is being given. So we have to make a determined view on certain areas that as -- in our portfolio, we will take a very early view and we will try to capitalize. We look at -- we like the term catalytic capital, so -- for returns but also patient impact, and I think of both equally, and to go in there and follow that along -- and bring that along. Otherwise -- we had a phenomenal run in COVID-19 because, as Roger mentioned, there were massive investments into platform technologies. And mRNA has been around a decade; some of the stuff we see in conjugated proteins, 20 years or more. And if we didn't have that, it really wouldn't have been that quick. So yes, we preplan. We will take a diverse view. And then once we decide on the areas to focus on, we will go in very early and then try our best not just of winning capital but try to help the technology evolve in any way that can be helpful.

I love that phrase, catalytic capital. Roger, I saw you nodding. I know the pandemic has maybe disrupted or perhaps reinforced the ways that pharma finances vaccines and other long-term innovations. What are kind of some of the implications that you've seen for capital allocation decisions? And in particular, the point that we were making here around the catalytic capital, I mean, some of our research has shown that even just allocating kind of 10% of the R&D portfolio to those potentially catalytic or, we call them, right, groundbreaking, innovative, long-term, right, things can really have a bigger impact. But at the same time, many of those things are likely to fail. So how do you think about the implications when it comes to capital allocation decision-making? Has any of that changed your perspective?

I think Fidah [ has teed this up ]. Catalytic capital is or catalytic investment is an important one. I really believe that as an organization, you've got to set aside a certain element of your investment for transformative and innovative new technologies. And my background is in the manufacturing side before I moved into the vaccines business. And in pharmaceutical manufacturing, I think it's critical that we continue to invest in those new technologies and new processes because they can transform the way that you operate. But as you say, the failure rate can be high, but you have to attempt. And I think allocation of spend is very, very important. And in the pandemic, we've seen that actually a long-term investment strategy created an accelerated solution in the year. That's what happened. I still firmly believe that it is a long-term perspective investment that led to the success that we've seen at pace within the pandemic. I think at the highest level, from a company point of view, you have to be clear in your strategy and you have to stick to your strategy. You need to invest and allocate into that strategy. And we've been in vaccines for years within GSK, and it started small and had a significant capital outlay at the start, knowing that we were building something for the future that creates scale and capability. And that's allowed us to get into 160 countries and have 25 vaccines around the world. But it's because we have allocated capital in a very clear strategic framework. I think what we have -- we probably had our key beliefs in vaccines reinforced by what's happened over the last couple of years. It is a crown jewel in GSK. It's a crown jewel that we've always felt was something special. And now everybody's quite interested and asking us about it and we go, "Yes, yes, we knew that this is a cool area to work in." A few things that it has emphasized. I mentioned platform technology, I will repeat myself, in terms of the need to invest in those disruptive technologies for the future. Particularly in the vaccines space, maybe we're going to laugh at needles being used in 10, 15 years' time. Maybe there'll be new delivery mechanisms. That's where we'll need to focus. But to do that, I think you've got to really be very open to external innovation. Everything that we've ever innovated in GSK has been because we partnered with someone on some aspect years ago or maybe recently. And being that partner of choice strategically is very important to us, that you never become complacent that you believe everything can be created inside. You've got great scientists, yes. But you also have to ensure that if somebody creates something cool, first people they call is GSK. That's what we want. We want to be known as who they can talk to, who they can connect with because they know that we'll move the pace and bring them the capability that they need. And then another thing that is becoming obviously very much more available now is external funding sources. And from our perspective, not hugely relevant from a cash flow point of view but particularly in the space of pandemic preparedness is where we are engaging with governments. Think a little bit about their own after-action review in the pandemic. Many are looking at and asking, "What did we get right? What did we get wrong?" Many are realizing that they did not have onshore capability, and they would like it as a long-term strategic play. So again, we are asking ourselves, "Well, who do we want to partner with? Who would -- what governments would we want to partner with? What win-win can we get to make sure that the world is better prepared for the next time a pandemic happens?" Because it will. I just think we have to ensure that we're better prepared for the next one.

Rebecca, I saw you nodding. Did you want to react to a bit of what Roger said there?

Yes, sure. I mean the job of the pharma industry is to come up with important new medicines for patients, right, and address big problems in global health. And I think the way they do that has to be thoughtful and, of course, incorporate external innovation as well as internal. And I think the best companies at that know their strengths, right, their technology strengths, their development strengths, their commercial strengths and take advantage of that and supplement it with external expertise. So what hasn't changed, of course, outside looking in to this industry, is an appreciation that that's a very hard challenge. And we're constantly evaluating both the company's current pipeline but also their decision-making and ability to allocate capital effectively, internally and externally. And of course, for some companies, that's more urgent than for others. I mean there's a life cycle to pharma and inherent lumpiness of when the best drugs lose their exclusivity, et cetera. So it's something we always focus on. And I think that hasn't changed through the pandemic. Did you want me to talk about maybe the way things have changed a bit or...

Yes. I think one of the things that we're always curious about is how the investor corporate dialogue is impacting capital allocation decisions kind of on both sides of the aisle. So from your perspective, are -- those conversations you're having with your portfolio companies about their capital allocation behavior, have they shifted? Are you still sort of encouraging them to go full steam ahead? Or now that, to Roger's point, there's perhaps some external funding sources, do they need you less than they used to need you? How have you seen that conversation shift, if at all?

Sure, sure. Yes. I think one of the interesting things coming from the pandemic is a focus on efficiency. So large pharmaceutical companies at scale enjoy good gross margins on their commercial portfolios. But there's an expense to that -- to distribution of those medicines. And of course, research is very expensive to look for those next important products for the coming years. I think COVID, of course, by necessity restrained a lot of marketing activities of the industry. And so I've been interested that companies have found new ways to educate, to convey their messages virtually, et cetera. And some of that will revert back to the old way of things. But some of that I think, it sounds like, has been learnings that will persist. And so hopefully, that's an efficiency that can enhance profitability and cash flows going forward. The other thing, I think, that's obvious, maybe not so much a pandemic impact but just the world we've lived in, capital markets in the last 12 months especially, is just the reset of prices, right? And sort of in small and mid-cap biotech, we had really strong 2020, especially coming out of the pandemic, but really, since February of last year, 12 months now, it's been a more difficult environment. So that's relevant because it hopefully makes the investment decisions easier for pharma to the extent that they will leverage external ideas and -- either via acquisitions or licensing, et cetera. So that, to me, is something I've watched and I think plays to the great positioning of a lot of the large-cap pharma industry in terms of the resources they have. Of course, a lot of cash on balance sheets industry-wide, but also a lot of really interesting companies out there that are cheaper than they were a year ago.

So we were talking just now about what I think most people think about, dollars and cents, when they think of capital allocation. But Fidah, I think one of the things that we've also learned in this pandemic is that scarce resources aren't always financial resources. We're seeing a lot of conversation about human capital resources being a real constraint here, talent, labor, innovation. I think that's probably more pronounced perhaps in pharma where the skill set required is very specific. But our language of capital allocation really hasn't shifted. I think it's still rooted in that mindset of scarce financial capital. Are you thinking about new ways to evaluate your portfolio companies? Or do we need new ways to measure returns on things like human capital? How do you think about that influence as a long-term investor if the constraint is not financial but is perhaps human or natural capital and some other categories that we think about? Like are there different -- is that different math for you?

That is a very important question, something we think about a lot. I think probably it's not an issue of do we need new measures to replace the financial indicators because that's always going to be important. Without the financial returns, there's no sustainability. However, that is awfully inadequate, especially if you're going to take a long-term view. And all the meaningful innovation in health care is going to require a long-term view. Drugs do not discover themselves and they do not develop themselves. People do it through certain processes, and it requires continual growth and innovation. And what we have to start looking at more, we do already do that. We look at capabilities. Do you have them? Do you have the capability to evolve within your people? Do you have the capability to retain good talent? Do you have the capability to suitably empower, motivate and reward the talent so they will stay for the long haul? So they are dimensions to human capital that is absolutely critical and we do look at them. And perhaps, we need to look at them even more because the pace of change, the pace of innovation is getting even ever more rapid, and it goes way beyond the traditional molecular biology PhD. Now you have to throw in digital machine learning into the sequence and on top of that, be an expert in health economics. So that is the future we're going in, and our people have to be adequately prepared for that. So we do look at that. But you alluded to this, it goes even beyond human capital, social capital. If we are looking at the long haul, we have to look at a way that -- we have to look at how what we do impact and benefit the entire communities, right? So there are stakeholders besides shareholders. Very important to look at that. How do you think about that? And so it's not linear. You might take a dashboard view of it. It's not let's put 3 categories together and average it out. But I think they are all important components that has to be looked at in its entirety if you're going to get a shot at truly backing a continually innovating and evolving health care company.

Ariel, maybe if I comment on this. Is that okay?

Please, yes.

It's just such an important topic, and I think Fidah just summarized it really well. I mean I don't think we'll ever get away from financial return analysis. Like every company, our next incremental project, the incremental spend we put against the incremental value created and we look at our efficiency front here and we look and decide, "Okay, is this the next best project we can deliver?" And we're very structured and balanced on that. I'm forecasting all those mechanical things need to be done. But as you said, if you don't have the people, again, to do that work when you've allocated that fund, you're going to run into a bigger problem. And people are everything. In an innovative industry like this, I really believe they are key. In the vaccines space at the moment, there is a war on talent going on with the influx. You might -- if you can spell the word vaccines, you're probably going to get a phone call because people are expanding. It's that sort of environment. So -- and they come fishing in some of the biggest pools, and one of the biggest talent pools is GSK at the moment. And we are making sure that we both, to your point, attract and retain. And all of the financial elements, everybody's brain goes there first, but actually, what's most important in deciding to work for us is great science. So great science attracts and retains great scientists. And it's back to this long-term view around investing in technologies and excitement that we'll keep and attract the very, very, very best into GSK. That's our overall approach as well. And then one other element I'd mention that we have found in this whole skills and capabilities space. Obviously, you've got to pipeline your skills like you pipeline your portfolio. Where are you going to play after you make COVID [ nonexistent ]? Are you going to in RNA? Are you going to play in therapeutics? Whatever it might be, you have to plot your skills for the next 10 years and then decide, "Can you buy that in? Or do you have to build it and start working with academia to fuel that pipeline of skills as well?" I think industry could get much, much better at that. And you then have to sprinkle through that diversity. It's overly used phrase, but diversity in every angle fundamentally will create better innovation in a company. Any angle you can think of that creates a diverse team, whether it be culturally, whether it be gender, whether it be disability, whatever that is, we find that, that is critical. The highest performing teams and most innovative teams are the most diverse teams as well. So when we do that pipelining, we have to make sure that we do that from a diversity lens as well. This is so fundamental that you can't just get the money right. You got to get the most important thing right -- the people, right as well.

So I'd imagine that kind of plays in then to the, I'd say, unprecedented collaboration we've seen amongst industry players in the midst of this pandemic. I mean, I think it took quite a number of investors, I'd say, just judging by the headlines I saw in some of the financial journals, by real surprise at the way that the industry pulled together and was willing to collaborate and share what were undoubtedly trade secrets, right? So when you think about that collaboration, like is -- have you bumped into a tension -- there must be a balance between kind of collaboration to provide the services the global community needs and then also maintaining that competitive positioning. And to your point, maybe people are also kind of fishing around the teams at the same time that they're collaborating for their next pool of talent. So how do you balance that piece? And how has that evolved here? Are there new ways of doing business that will persist at the back of this pandemic?

Maybe if I give you a perspective, Ariel. I'm incredibly proud of what the industry has done. Some of it are very visible, like AZ-Oxford, GSK-Sanofi, others. Some not that visible but just done because it's the right thing to do. I'm lucky that I share what's called the vaccines steering group between all of the CEOs that run the vaccines companies in the world under the EMA. And that group has achieved, I think, incredible things to help each other out. And these are small things like sending glass. These are like sending buffer solutions. These are things that will never ever be reported but just the industry got on and did. And I think it was because we all put the most important thing first, which was people who are waiting and -- struggling and waiting for this. And we had a common enemy. The common enemy was the virus as well. So I think that really helped. But obviously, we're competitors as well and we'll always be competitors. And competition is healthy. Competition is what innovates, what drives us to create the next best vaccine as well. So I think, as you said, it's completely a balance. I think we got that balance right to date. There'll always be learnings and more that we could have done, but it's something I'm proud of.

I'd love to get the investor perspective on that. Rebecca or Fidah, please jump in. How do you value companies participating in collaborative initiatives versus prioritizing profits?

Yes. Maybe I'll start. I mean, I think it's quite important particularly in emergency or pandemic situations, right, that profit focus is left to the side and companies do things because they're the right things to do and because they're -- they do enhance the company's reputation, its ability to attract talent and lower business risk over time. I mean there's actually measurable benefits to setting aside a profit-only goal in the near term. But like Roger said, as an investor, I look for the appropriate balance, right? Sort of sharing vaccine -- or sharing manufacturing capability, sharing adjuvant, right, knowing when to cut bait on your own internal programs because they haven't worked out and when to work on other things that -- sort of where you can bring value, that's important and honest internal reflection that needs to happen and that many of the companies did. And not that -- of course, no one would have guessed that Pfizer would have the leading vaccine for COVID, but it happened and that's fine. And Glaxo has a role to play today hopefully with its adjuvant but definitely on the treatment side with the monoclonal antibodies with their partner. And that's all fine. And I think it's that healthy balance in the context of the situation we're in.

I totally agree with that. I also think though that in a crisis -- a company that steps up to collaborate, to work for the greater good in a crisis as unprecedented as COVID-19 speaks well of the value base of the company. And as a long-term investor in health care, you think that is surely a good thing. I mean if you're keeping everything to yourself and going for highest price, what does it say about your value base as a company in health care? So for us, I mean, that certainly is a plus. And then, of course, there will be a time soon, we hope, when you go back to business as usual and you have the competition but also a bit of a collaboration. At least, we've seen in the darkest of times, how companies -- what's really at the core of companies.

I think one of your comments sort of sparks a related question here. We're talking about the tension between collaboration and competition, but I think there's also been a tension highlighted in this pandemic between kind of pricing versus access. And those -- both of those things feed into profits from the investors' perspective. I sort of just let that sit on the floor and see who wants to take the mic on that one.

I'm very happy to...

Go ahead.

Thank you. I think there's -- this is such an important area around price, access and getting that balance right. I think from a vaccines point of view, first of all, the health economic equation is incredibly strong. And when you look at it against -- I mentioned earlier I think only taking freshwater as vaccination is the next best significant health impact for investment. Even looking at some of the recent data that we see around health economic modeling from immunization at EUR 1 spend -- this was a trial that we saw in The Netherlands recently. EUR 1 spent creates EUR 4 of value, EUR 1 spent on immunization of older adults. And this is an area, again, that's completely, I think, underpenetrated in the world. Everybody thinks of vaccines and immediately think of kids and going on holidays. And we want people to realize that when you get old, your immune system starts to go and you need to do something about that. And COVID has stimulated that. People know now that you're at more risk when you're older because your immune system declines. Therefore, flu, shingles, RSV family of vaccines, they're all coming in the future. These are all things that we need to make sure people are aware of. And obviously, pricing appropriately and tiering it for the market that you're in is very, very important. We also believe in GSK -- you can see I'm vaccines but I'm also global health. We have -- I'm the head of global health of the company. We have a global health unit. And this is so cool. I mean we've got one unit and their role is -- they have an allocated budget, and our -- we don't plot dollar spend against profit generated. We plot dollars spent against lives impacted. Take those neglected tropical diseases, those neglected diseases that commercially will never make sense like malaria, for example, we will go after and succeed and not look to generate the level of return that we create in our commercial portfolio because the success of our commercial portfolio allows us to do this from a global health perspective. I think there's a real win-win balance there that is important in what we call our trust priorities. We innovate and we perform obviously because we're a business and we have to, but we have to maintain trust. And maintain trust for society means investing our capability into those diseases because if we don't, who else is going to? So there is a balance that's very important for us as well. And in a partnership with the likes of Gavi -- we're one of the biggest suppliers into Gavi to make sure that we access low-income countries and get them access to the very basic vaccinations that we all take for granted as well. And there's still work to be done. And it's never perfect but it's one that we've got to keep pushing ourselves on in terms of our ESG agenda because that's a very important part that our -- we believe our shareholders expect us to do as well in terms of that balance.

Is that fair? Is that what shareholders expect?

Yes, definitely. Of course, this whole audience will know there's a growing appreciation from long-term investors that ESG considerations are really important to the fundamental value of the company. And that's for the reasons that Roger talked about, right? It's, of course, the right thing to do, but it enhances trust in the company. It helps with the talent equation that we've talked about and reduces overall business risk, I personally think. So of course, it's a balance, right? Glaxo is going to work on a number of diseases. They have a broad vaccines portfolio. And so while there might be less profitability or return on tropical medicine portfolio or vaccine portfolio, of course, they also have highly impactful vaccines like Shingrix that are used globally and can sort of provide the returns that then enable that balanced approach. So I think also context matters, right, in a pandemic. I think it's sort of -- it makes us all think about prioritizing access a bit more and definitely a tiered approach to pricing at a minimum. I mean some companies, of course, have gone not for profit across the board. But I think there's a reasonable case to be made for either approach, either tiered or 100% not for profit. And the other interesting thing is access is a very complicated challenge, right? And Roger knows this better than any of us. It's not strictly linked to pricing. A pharmaceutical company could give away their vaccine or offer contracts and it takes governments, it takes NGOs coordinating. It takes funding, critically important. And it takes politics and nationals on the side, et cetera. And so that all gets tested. And sometimes, it's easy to blame industry but access is a complex equation, I think, that industry is only one piece of.

I think that's an important point that sort of circles back to something else we were talking about on that pandemic preparedness question that Roger raised around where is the line between the responsibility of private industry and responsibilities of governments. Fidah, Temasek is an asset owner with very keen alignment between beneficiaries. What do you think the responsibility of investors is for pandemic risk? Is that something that sits with governments? Or are there things that investors should be doing to deal with pandemic preparedness more systematically perhaps?

Yes. We clearly have been thinking a lot about this over the past 2 years. At the end of it, it really is a whole of society effort, isn't it? And not just single society but across societies. It's more than a whole of government, and certainly, it isn't just a private sector project. Each stakeholder brings different necessary things to the agenda and to the game, and that's what we're seeing. The countries that have managed to do -- take on COVID-19 in a whole of society basis have tended to be better. Some of it's intangible. How much trust do you have in the policies? How much trust do you have in the ministries of health, right? And then, how good is your local logistics and so on and so forth. So it's fairly complicated. We do look at the implications of a disease X. It's inevitable, it's going to come. And COVID-19 is an important testing ground for us to see what needs to be done. It's not an issue to us of how much profit you'll make. It really is an issue of how much loss economically and societally you would endure if you didn't do this. I mean we're talking about health care and quite a few health care companies that have done well for us. But we have a portfolio that consists of all the sectors. Many sectors have taken a real beating. The impact on society has been tremendous. Mental health is going to be the next big problem that comes out of COVID-19. And because we're dealing with the acute problems, we're missing this. It's going to be a huge problem. What's the cost of that? So therefore, how do we prevent this so that we don't have to deal with all these costs? And so we come back to initial theme that we look at all stakeholders. And so then, what is our role? We touched on this early on. We have to keep investing in the right human capital, in the right platform technologies and particularly the disruptive ones that we don't know enough about where we think there will be potential. We need to understand the potential and realize it. And we need to do this. We need to start looking going even earlier for some possible treatments or some approaches. An investor, even if the risk is high, maybe the solution then is to have differentiated parts of capital to look at different things and start looking at this in a coordinated manner. I think we do have to do that. We have to look at investing or bringing about global surveillance systems. We know where [ the problems ] come from. We can survey. We can do predictive analytics. We can store possible solutions into the freezer. And think of it as an insurance premium and hoping you are able to use it. And so some of these will do very well financially. But if we do this in a cohesive, coordinated manner, then, in its entirety, I think investors will contribute meaningfully to the overall robustness of our ability to prevent a tragic disease X from coming upon us. Yes. I think we have to frame how we fund different things. I think shareholder capital has had its day in the sun and I think it's not [ so good ]. Many -- a lot of the thought behind that is still relevant. It's just inadequate. What is our role then as investors for innovation that doesn't give you adequate returns? Rebecca spoke about this when she talked about tropical vaccines. Malaria doesn't make you a lot but it's absolutely important, depending on how you look at the metrics. Should we then have a part of capital that truly is -- we have impact investing. One possible definition of impact investing that could generate this sort of innovation over the long term would be innovation that gives you adequate financial returns to recycle the principal capital but the social impact is huge, right? And then excess profits, we look at finding a way to give some of that to philanthropy because some innovations are just not going to be generating financial returns but are necessary in and of itself to stimulate the development of other forms of innovation. So different buckets in a coordinated manner to drive the entire value chain of innovation so that at the end of it, we get robust pipeline innovation, gives us financial returns, of course, but will put us in a far better state to prevent COVID-19 and its like from coming upon us again. That's the wish and that's the hope in any case.

So I'm going to turn now to some questions we've gotten via e-mail and also in the chat here from the audience in our last few minutes together. One of them that's come up actually in a number of different lenses is just around risk-taking behavior and the intersection of kind of putting all your eggs not necessarily into one basket, right, because there are a whole lot of people looking at vaccines. But thinking about how that risk-taking behavior has resolved as a result of pandemic market conditions. And I think this is probably a question for investors but also for companies in the sense that it looks like, from the outside, throwing a lot of money at the problem and we got a vaccine much faster. And then in the investor community, we saw a rush of retail investors into the market that were perhaps treating capital markets a little more like a casino than in previous years. So I think there's sort of 2 sides to this coin where there were some investors that were kind of going gung-ho into health care and biotech stocks, and Rebecca, I think you touched on this a little bit in the performance of some of those small/ mid-cap names more recently and how investors have been influenced by that experience; and then, on the flip side for the companies, how the lessons learned from some of this collaboration and some of what's happened has adjusted the risk-taking behavior in the R&D portfolio. So those are sort of 2 different questions that I tried to shove together. I'm not sure if that worked but we'll give it a go. Rebecca, maybe since some of it was a bit inspired by that small/mid biotech comment, have you seen the behavior of other investors in this space shifting as a result of some of what we've seen in terms of market performance?

So that's obviously a hard thing to fully understand and even successfully invest behind, right? So I would tell you upfront that we try to look through that, right, volatility created by abnormal market participants, retail behavior, et cetera, and use volatility to our advantage as portfolio managers but not invest seeking -- whether it be ETF or retail-driven behavior to increase demand for pandemic-related or vaccine stocks. So it's something we try to understand, of course. But -- and sort of looking forward, could there be -- particularly regionally, if we think about China, if we think about areas of the world that tend to have concentrations of a certain type of capital or capital local to that region, what could be the considerations that might force them to exit or attract them to a certain area, region and/or sector, right? So we try to understand that. But really, as a fundamental health care investor, I am trying to understand important big ideas, innovations from the industry and direction of change. And so while I understand that -- I try to understand that I don't invest for that, I guess, is how I would answer it.

Anyone else on the evolution of risk-taking behavior in markets?

Maybe just very practically from a company perspective. One of the reasons why the industry was able to move so quickly was expenditure at risk. And this was due to risk sharing and funding that have been made available, particularly through the Warp Speed initiative from the U.S. government. So ourselves and Sanofi were selected in Warp Speed. And like many of the manufacturers, to go fast, you had to assume success and you assume you knew your dose, you manufactured in advance. And these are all things that you wouldn't typically do in a normal development cycle because you could potentially be putting tens, hundreds of millions of dollars at risk. And you wait to derisk your program and then you invest and then you derisk and then you invest. This was all pulled forward. Now I don't think that will stay. We've got to be realistic. If I did that for my whole platform, I mean, I wouldn't be in my job very long. But that's [ been well ]. And I think what, as an industry, I see is a couple of things. One, a new benchmark for development, that it's not going to be done in 12 months. I know my boss would love it to be done in 12 months for every vaccine. But I mean it's not going be done in 12 months but it will be done faster because I think we were more focused on white space. You did time in the critical path to bring a product through. Rather than talking in years, you're just talking in weeks and changing your unit of measures so that your level of accuracy and your tolerance for any gap becomes much less. That's something I see culturally happening, and that creates [ a sense of ] urgency which I love. I think that's very important. But it also then does trigger us to think about, "Well, how much should we be willing to spend at risk to gain 6 months in the competitive environment that we're in?" So Roger, if you spend GBP 10 million and you do manufacture this at risk, you may end up throwing it away. But guess what, you'll be 6 months ahead of your launch date. And in a crowded market with a number of players, that can be huge. So we're using it to really challenge ourselves on risk decision and investment at risk to create value ultimately as well. And I think that's a good mindset. So it's something that very practically I see coming out of the pandemic as we exercise some new muscles that we have to retain and keep in our product development process because everybody wins. The product arrives faster and people will get the benefit earlier as well as the business benefiting as well.

So there's an interesting question in the chat that I think is linked to the aging demographics of many of the countries in the developed world. So this question is, as many societies continue to age quite rapidly, is there a scenario where we would take a similar collective engagement pooled approach to collaboration to address many of the problems of aging? I think Roger, you touched on this a bit, but would love to hear from perhaps the investor side too. Like is solving the demographic problem going to happen in the pharmaceutical sector? And could that potentially combat some of what we are seeing in some of the estimates around deceleration in global growth and pieces like that? Like should there be a similar push by governments and business and investment communities to try to solve the problems of aging too?

I would love to say yes, that's what is going to happen. I think practically, what we have, had and are still in is a burning platform of unprecedented proportions where to do nothing means to perish. And there's a commonality of urgency that unfortunately we won't get ordinarily even though these problems are huge. I mean dementia is a big problem as society ages. Depression is going to be possibly the most prevalent clinical disease in the world, huge impact on society and on other comorbid conditions. So still, not a whole lot in that. I hope though even though the current conditions -- I'm not optimistic that they will coalesce again for these conditions. I'm hopeful though that the power or the impact of a truly collaborative cross-stakeholder endeavor at least will bring about some smaller-scale replication of that and we'll take it from there. I think I could be hopeful for that. I'm a little less sanguine of COVID-19 response being replicated, but I would love to be completely wrong.

I think that raises an interesting question though. I mean we've continuously gone back to the various stakeholders and the perspectives of folks at stake in the middle of this pandemic. But there are often circumstances where a stakeholder expectation can distract from long-term strategy or is at odds with the purpose of a business or an organization. And just because stakeholders expect something of you, it doesn't necessarily mean that you're well placed to deliver it. How have we dealt with that tension? How -- are there cases where those stakeholder expectations can be a real distraction when it comes to delivering on that long-term purpose? And how do you practically deal with those? That's a big question and we've got a few minutes left, so I'm going to ask you to keep it...

I'd give a very simple answer, Ariel. Everybody else can chip in. I honestly think this is about being clear in your priorities and sticking with them and balance -- and ensuring those priorities are balanced. Obviously, reputation and -- when some of these stakeholders come in, that can be seen as pressure or will it damage our reputation. However, if your priorities are already balanced and appropriate, I really feel like it gives you a framework with which to stick to, and that's what I mean. In pharma and in GSK, we continuously come back to innovation, performance and trust and are we balanced in these priorities and are we allocating our resources and capital to make sure that we get that balance right. I think that's an incredibly important part, and it's an anchor that we'll always sort of come back to.

Yes. Maybe I could just add. And I saw a question also about sort of ESG frameworks and how do you grapple with this and incorporate into your analysis of the value of a company. I think we've talked about some of the pieces, but one classic example where sort of short term and long term might conflict is drug pricing. And it's an area relevant for not just vaccines, of course. It sort of seems at first flush to be -- drug pricing, companies should have profit maximization in mind. And certainly, particularly with free pricing in the U.S. today, we do empirically see much higher prices in this country. And so I think what's become very obvious in the last couple of years, ignoring political pressure, is that the industry needs to effect change from within and think potentially in disruptive ways to solve the problem of sort of widely -- this very wide variance in prices globally and implications for access because if they don't do it, it probably will happen to them. And so we think it's a fundamental business question that has supreme relevance for the long term. And so I think about it a lot as an investor. I try to understand how companies are thinking about it because it really does impact their value today and sort of how the markets value the whole business model of a pharmaceutical company. And so I think it seems like a conflict, but actually, it can be quite accretive to long-term value to think disruptively and not necessarily in a "highest price that works" type of market clearing strategy. So that's controversial, but it's something that I think is becoming quite a bit more apparent as the years pass.

Rebecca, I completely agree. I think when we go into our trust agenda and we talk about an ESG framework, there's probably 6 areas that we look at, and at the very top of the list is pricing and access. And we follow that up with global health because we really believe that someone has to look after those areas of disease that would not naturally get looked at. And that's where -- we haven't talked antimicrobial resistance today because I think that is the next almost pandemic that the world will wake up to at some point. So industry and everyone has a role to play on that as well. And you add inclusion and diversity, you add environmental to that as well. We haven't talked sustainability. But as companies, we have a huge role to play to make sure that we are not only looking out to the climate but contributing positively to nature as well is a big goal we've set ourselves. These are all important topics and it's brilliant to hear you saying that you look at that balance as an investor.

So I do want to be sensitive to the time because we're at the top of the hour. So I'll give Fidah the mic for 30 seconds. And then I'm going to take moderator's prerogative and close us off.

I'll just take 10 seconds. I totally agree with Rebecca's statements. ESG -- and Roger's. ESG considerations are extremely important but especially for long-term investors. I think probably the metric to move away from is profit maximization. Perhaps you should think about profit optimization because you have to look at all sorts of other variables. But completely agree with the comments there.

So I want to -- this has been a wonderful panel discussion. Thank you so much for joining us today. I'd really like to thank our panelists, Roger, Rebecca and Fidah, for joining us and sharing their insights. I think we heard some great suggestions for practical action today, and I really hope others can use that to inform their own capital allocation and investment decisions. And I'd invite you to join us for other upcoming events. You can see where those are by visiting www.fcltglobal.org/events. And we welcome comments and suggestions and really look forward to continuing this conversation. Please send those to [email protected]. Thank you so much.

Thanks, everyone.

Thank you.

Thank you.