By Denise Roland
Novartis AG Chief Executive Joe Jimenez is stepping down in
January after leading the Swiss pharmaceutical giant through a
tumultuous eight years marked by big patent expiries and
intensifying scrutiny on drug pricing in the U.S.
He will be replaced by Vas Narasimhan, Novartis's global head of
drug development and chief medical officer.
Mr. Jimenez, 57 years old, joined the company in 2007 and became
its CEO in 2010. He will remain available to Novartis in an
advisory capacity until the end of August next year, when he will
retire, the company said.
He presided over the patent expirations of Diovan for
hypertension and cancer drug Gleevec, both of which generated
several billion dollars annually at peak. When a drug patent
expires, cheaper copycats can enter the market, sharply eroding
sales.
To replace that lost revenue, Mr. Jimenez bet on a series of
would-be blockbusters which have met with mixed success.
Cosentyx, for certain rheumatological conditions and psoriasis,
generated annual revenue of $1.1 billion last year, having launched
in 2015.
But Mr. Jimenez's other big bet, Entresto for heart failure, was
met with resistance from doctors reluctant to switch patients onto
a new drug, as well as reimbursement barriers from insurers. That
is changing as doctors gain more experience with Entresto and
insurers gradually adopt more permissive policies, but those
initial hurdles have hampered the drug's growth. Although Novartis
launched Entresto shortly after Cosentyx, the heart drug's 2016
revenue came to just $170 million.
He also bet big on a new form of cancer treatment that
re-engineers a patient's immune cells to make them more vigorous at
fighting tumors. Last week, Novartis became the first company to
win the Food and Drug Administration's approval for such a therapy,
which is known as CAR-T, though questions remain over whether
insurers will balk at the treatment's $475,000 price tag.
Novartis Chairman Joerg Reinhardt credited Mr. Jimenez with
rejuvenating the company's drug pipeline and navigating the patent
expirations of the company's two largest products.
"We anticipate a smooth transition as Joe built a strong
leadership team and mentored his successor," he said. The board
considered both internal and external candidates for the role, he
told reporters.
Mr. Jimenez said Novartis was on a "strong path to the future"
and that it was the "right moment" to hand over the reins to Dr.
Narasimhan.
"A CEO should not stay much longer" than eight years, he told
reporters. "You come in, see what you want to change, and change
it."
Mr. Jimenez, who spent most of his career in the packaged-goods
industry before joining Novartis in 2007, ushered in a period of
heightened cost-consciousness at the drugs giant by gathering the
company's back-office operations into a single unit.
He also slimmed Novartis down, following a period of intense
consolidation by his predecessor Daniel Vasella. In 2014, Mr.
Jimenez struck deals to offload Novartis's animal-health unit and
most of its vaccines business to Eli Lilly & Co. and
GlaxoSmithKline PLC respectively. In the same raft of deals,
Novartis bought Glaxo's marketed cancer drugs and the pair pooled
their consumer health care divisions, which make pharmacy staples
like over-the-counter remedies, into a joint venture controlled by
the U.K. drugmaker.
Novartis is in the midst of a strategic review of its struggling
eyecare unit, Alcon. Mr. Jimenez told reporters he planned to
complete that review, which could result in spinning off the
business, before he steps down.
Mr. Jimenez's tenure hasn't been without controversy. In 2015,
Novartis paid the U.S. Department of Justice $390 million to settle
allegations that it had induced specialty pharmacies to boost
prescriptions for its drugs by paying kickbacks in the form of
rebates.
Earlier this year, South Korean authorities fined Novartis 200
million won ($176,900) and banned the company from selling certain
drugs for three months for allegedly paying kickbacks to promote
sales of its medicines. Novartis accepted the decision but said the
actions of the South Korean staff in question weren't sanctioned by
the company's higher management.
Dr. Narasimhan, 41 years old, trained in medicine and public
health. He joined Novartis in 2005 from management consultancy
McKinsey & Co. He was put in charge of Novartis's drugs
pipeline in 2014 and last year was also named chief medical
officer. He will become CEO on February 1 next year.
Mr. Reinhardt said Dr. Narasimhan's medical background combined
with his "significant experience managing the interfaces between
research and development and commercial units" made him the right
choice to succeed Mr. Jimenez.
Among his biggest challenges will be ensuring the success of
Entresto and other new drugs amid growing pressure from
cost-conscious health insurers in the U.S. "Novartis has been
productive in R&D over the last few quarters, but this does not
necessarily automatically warrant commercial success," said UBS
analyst Michael Leuchten in a note to clients Monday morning.
Dr. Narasimhan told reporters it was too soon for him to comment
on the next phase of the company.
Mr. Jimenez, who as CEO has been based in Basel, Switzerland,
said he planned to move back to California, where he is from, with
an eye to taking up a role in Silicon Valley. "It's too early to
say [what I will do next], but I've always been incredibly
interested in the intersection between biology and technology," he
told reporters.
Write to Denise Roland at Denise.Roland@wsj.com
(END) Dow Jones Newswires
September 04, 2017 07:28 ET (11:28 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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