Novartis shakes up structure to strengthen US business
Swiss drugmaker Novartis is simplifying its structure as part of plans to save $1bn in costs by 2024 and strengthen its business in the US, the world’s largest pharmaceutical market.
Three executives will leave the company as part of the restructuring, which will combine the oncology and pharmaceutical units into one innovative medicines division, with separate commercial organisations for the US and international markets.
Novartis’s chief executive Vas Narasimhan said the changes were central to the company’s growth strategy, which he hopes will deliver sales and margin growth above rivals in the medium to long term. The company is hoping to catch up with peers that have cut the proportion they spend on sales, general and administration expenses.
“If we could emerge from the coming years with a combination of the top five in the US and number one or in the top three in Europe, China and Japan, we will be a formidable company,” he said.
Narasimhan insisted the reorganisation was a “natural progression” for the company and was not in response to external pressure. The company has made significant divestments of its consumer health and eyecare businesses. The pharmaceuticals division’s focus on speciality drugs now gives it a more similar profile to the oncology unit.
“We’ve been on a transformation journey, really since 2014, to move from a conglomerate healthcare company to a focused medicines company,” he said.
The company is also considering the future of its generics business Sandoz, which it could decide to sell or spin off, in a strategic review by the end of the year.
Novartis is also looking for a leader for a new strategy and growth division, which will be run in the interim by Lutz Hegemann, the head of global health.
The company expects these changes to ensure at least 4 per cent compound annual growth from 2020 to 2026. It said the restructuring will help it deliver margins at the high end of guidance of 30 percentage points in the medium term, and more than 40 percentage points in the mid to long term. But the changes will not affect forecasts for 2022.
Shares in Novartis rose 1.6 per cent to SFr81.89 in morning trading on Monday in Switzerland.
Narasimhan has been trying to focus the group on innovative and higher-priced pharmaceuticals since he took the top job in 2018, investing in areas such as gene therapy, data science and digital technologies.
Novartis’s chief medical officer, John Tsai, is leaving and will be replaced by Shreeram Aradhye, who is returning to the company from Dicerna Pharmaceuticals.
Susanne Schaffert, who ran the now subsumed Novartis oncology unit, and Robert Weltevreden, who led customer and technology solutions, are also leaving Novartis.
Marie-France Tschudin, president of pharmaceuticals, will lead the international division of innovative medicines and become chief commercial officer.
In the US Victor Bulto, head of US pharmaceuticals, will become president of the US division of innovative medicines. Steffen Lang, global head of Novartis’s technical operations, will become president of operations. All three will report to Narasimhan.