Novartis executive exodus complicates drugmaker's rebuilding job

Mon May 23, 2016 12:16pm EDT
 
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By John Miller

ZURICH (Reuters) - With seven departures in the space of five months, Novartis's (NOVN.S: Quote) top management is in upheaval just as CEO Joe Jimenez tries to tackle a list of challenges that have seen the drug firm's share price fall 25 percent since July.

The most dramatic exit came last week, when head of pharmaceuticals David Epstein quit as his division was broken in two.

By splitting oncology into a department of its own, Novartis aims to make the most of a high-margin business that it bought from GlaxoSmithKline for $16 billion last year, a reorganization that has business logic for analysts.

“After years of empire building ... that’s what investors want", said Cedric de Fonclare, a fund manager at London-based Jupiter Asset Management and a Novartis investor. "Clearly, the future of that company will be about specialized drugs, high-value drugs, so they can face up to what is the challenge in this industry: price deflation and price pressure."

But the departures also reflect ongoing problems, as well as longer-term management instability.

U.S. country head Christi Shaw left this month after overseeing, with Epstein, the lackluster launch of Entresto, Novartis's seemingly promising heart-failure medication, now expected to garner less than half the sales in 2016 than analysts had been forecasting.

Novartis did get a break last week, when global guidelines on the treatment of heart failure strongly endorsed the drug.

But the product pipeline is a pressing issue for the firm after the expiry of the U.S. patent for Gleevec, its best-selling blood cancer drug, which has put $2.5 billion of revenue at risk.   Continued...

 
David Epstein, Division Head of Novartis Pharmaceuticals of Swiss drugmaker Novartis, addresses the annual news conference at the company's headquarters in Basel, Switzerland January 27, 2015. REUTERS/Arnd Wiegmann/File Photo