Sector News

New Novartis CEO Narasimhan will face plenty of obstacles

September 5, 2017
Life sciences

Novartis’ Sept. 4 announcement of the impending retirement of CEO Joe Jimenez seemed to be timed to the best news the company had received in his eight-year tenure: the surprise early approval last week of Kymriah, its groundbreaking CAR-T treatment for pediatric acute lymphoblastic leukemia.

Jimenez said during a conference call with reporters after the announcement that the FDA nod didn’t come into play in his decision to leave—but it does give his successor, Vas Narasimhan, the opportunity to turn CAR-T into a “big and important business for the company,” he said.

During the call, Narasimhan, who currently serves as Novartis’ head of drug development, said it’s too early to make any firm predictions about what the next phase of the Swiss company’s evolution will look like, saying only that his goal is to “continue to drive that innovation agenda.” Perhaps, but Narasimhan’s efforts to advance that agenda will be accompanied by the need to deal with the many challenges he’s inheriting from Jimenez.

No doubt Narasimhan’s ascension will usher in a completely new management style. Jimenez, after all, was an outsider, joining Novartis from H.J. Heinz. Narasimhan, by contrast, is both a doctor and a specialist in public health who worked at the Rockefeller Foundation bringing advanced medical treatments to developing countries. Appointing him to the CEO post “suggests the company is going to really focus on the drug and innovation part of the business,” said Bartjan van Hulten, founder of London-based health investment firm Medex Capital, in an interview with Bloomberg.

But there still are those challenges. Topping the list of hurdles is its eye unit Alcon, which has struggled ever since the company laid out more than $39 billion to buy it in 2010. Novartis is also facing pricing pushback in both its generics and branded businesses. It all adds up to a big leadership task for Narasimhan, whose background as a Harvard-trained physician is quite different from that of Jimenez, a consumer-products veteran.

The most immediate challenge for Novartis is Alcon, which has been the target of a strategic review at the company since earlier this year. Years of stagnating sales led analysts to predict Novartis will sell Alcon or spin it off—the second of which became more realistic after the unit posted better-than-expected sales in the second quarter. Jimenez has promised to update investors on the results by the end of the year, just before stepping down at the end of January and handing the reins to Narasimhan.

But even if Alcon is resolved before Narasimhan officially takes over, the new CEO will still have to deal with price erosion in the generics business, which has taken a toll on its Sandoz unit. Sandoz’s sales dropped 4% to $2.5 billion during the second quarter, largely because of pricing pressure in the U.S. Sandoz did win approval in Europe for two potentially more lucrative biosimilar drugs earlier this year, but analysts don’t expect those products to fill in the revenue holes created by the older products.

Then there’s Novartis’ new products, some of which have faced pushback on pricing from insurers and pharmacy benefits managers. Novartis launched its heart failure drug Entresto two years ago at $4,600 a year and immediately ran into roadblocks from payers, who spurned the drug in favor of cheaper generics. In the hopes of persuading them to change their minds, Novartis initiated 40 new clinical trials, some of which churned out data showing that Entresto was superior to those less expensive alternatives. It’s finally working—sales of the drug jumped 244% to $110 million in the most recent quarter—but that may not be enough to get it to the $3 billion in sales a year analysts were expecting.

The company could face a similar fight with Kymriah. Although the $475,000 price for the one-time engineered cell treatment was lower than many pharma watchers had been predicting, it’s still a massive price tag that could raise concerns among payers. Novartis said after the FDA approval that it will explore outcomes-based pricing. For example, the company intends to collect payments from the Centers for Medicare and Medicaid Services (CMS) only when patients respond to the treatment within the first month.

As for Jimenez, he declined to provide details about his future plans during the media call. He did say his family is ready to return to the U.S., and he strongly hinted he may remain a force in the biopharma world after he leaves Novartis.

“I’ve always been incredibly interested in the intersection between biology and technology,” he said, adding that he would head back to his home state of California—where the biotech hotbed Silicon Valley is located—and “then we’ll see what transpires after that.”

By Arlene Weintraub

Source: Fierce Pharma

comments closed

Related News

March 24, 2024

Johnson Matthey to sell its Medical Devices business for $700 million

Life sciences

Johnson Matthey Plc (JM; London) announced that it has signed a definitive agreement to sell 100% of its Medical Device Components business (MDC) to Montagu Private Equity (Montagu) for cash consideration of US$700 million (£550 million) on a cash free debt free basis.

March 24, 2024

Lonza acquires biologics manufacturing plant in California from Roche

Life sciences

Lonza AG (Basel, Switzerland) announced it has signed an agreement to acquire the Genentech large-scale biologics manufacturing site in Vacaville, Calif. from Roche (Basel, Switzerland) for $1.2 billion. The acquisition will significantly increase Lonza’s large-scale biologics manufacturing capacity.

March 24, 2024

Roquette to acquire IFF Pharma Solutions to boost global excipient presence

Life sciences

Roquette plans to acquire International Flavors & Fragrances (IFF) Pharma Solutions for an enterprise value of up to €2.85 billion (US$3.09 billion). With the acquisition set to close in the first half of 2025, the plant-based ingredient and pharmaceutical excipients supplier aims to reinforce its position in the pharmaceutical industry.

How can we help you?

We're easy to reach