mgmt 385 post#5

Case: George, W., Palepu, K., and Knoop, C. (2014) “Novartis: Leading a Global Enterprise”.

Study Questions: How has Novartis tried to become a global company? How has Novartis tried to develop their employees so that they can contribute better to global business? How successful have these approaches for global growth and employee development been?

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9 -4 1 3 -0 9 6
REV: OCTOBER 3, 2014
WILLIAM W. GEORGE
KRISHNA G. PALEPU
CARIN-ISABEL KNOOP
Novartis: Leading a Global Enterprise
How do you follow a legacy CEO? This is the hardest thing you could possibly encounter. Dan [Vasella]
shaped the company, the portfolio, and the future of the company.
— Joe Jimenez, CEO
As the 2,688 attendees at the February 22, 2013 Novartis annual general meeting (AGM) filed out
of the large assembly hall, 53-year-old Novartis CEO Joe Jimenez realized that the retirement of
Daniel Vasella, MD as chair of the Novartis board meant the ball was entirely in his court. Since its
formation 17 years earlier with the merger of Sandoz and Ciba-Geigy in 1996, Novartis had been led
by Vasella, either as CEO, board chair or both. At the meeting vice chair Ulrich Lehner was elected
interim chair to serve until August, 2013, when Joerg Reinhardt, former chief operating officer of
Novartis and currently head of Bayer Healthcare, would return as chair of the Novartis board.
Vasella was elected honorary chair at the meeting, but would only attend board meetings as a
guest and coach senior company executives without any other involvement. “I left the company with
a good successor, a rich pipeline, a solid financial footing and a good top team,” Vasella said after the
meeting. From its Basel, Switzerland headquarters Novartis leadership orchestrated 127,000
employees of 153 nationalities in 140 countries. With $56.7 billion in 2012 revenues and $9.6 billion in
net income, Novartis ranked as one of the world’s largest and most profitable companies. (See
Exhibits 1 for basic financials, 2 for milestones, and 3 for divestments and acquisitions.)
Jimenez, who succeeded Vasella as CEO in 2010, recognized that rapid changes in the global
health care environment would create severe challenges for Novartis in the years ahead. “My greatest
worry is taking a company that has been successful for a decade and a half and positioning it in
today’s external environment,” he said. Among those challenges were changes in national health care
systems, like the Affordable Care Act in the US, putting downward pressure on prices and changing
the way companies got paid for their products from prices per pill to paying for patient outcomes,
which no one had figured out how to measure precisely.
Jimenez was clear about his mandate as CEO: “My mission is turning us from a pharmaceutical
company into a global healthcare company.” The pharmaceutical business provided 57% of sales and
66% of operating income, and dominated the culture. A survey of global executives conducted by
Professors William W. George and Krishna G. Palepu and Executive Director Carin-Isabel Knoop (Case Research & Writing Group) prepared this
case. It was reviewed and approved before publication by a company designate. Funding for the development of this case was provided by
Harvard Business School and not by the company. Professor George served on the board of Novartis from February 1999 through February 2009,
and also led Novartis leadership seminars in 2010-11. HBS cases are developed solely as the basis for class discussion. Cases are not intended to
serve as endorsements, sources of primary data, or illustrations of effective or ineffective management.
Copyright © 2013, 2014 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-5457685, write Harvard Business School Publishing, Boston, MA 02163, or go to www.hbsp.harvard.edu. This publication may not be digitized,
photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School.
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Novartis: Leading a Global Enterprise
Fortune Magazine ranked Novartis as the world’s most admired pharmaceutical company for the
third consecutive year. It was best known for anti-hypertensive Diovan and its leukemia treatment
Gleevec. “With financially troubled healthcare systems around the world, offering only innovative
specialty pharmaceuticals would put us in a risk profile where we don’t want to be,” Jimenez said.
Reflecting on the company’s five other divisions—generic drugs, eye care products, over-thecounter medications (OTC), animal health, and vaccines and diagnostics—Jimenez worried that none
of them alone was large enough to offset pressures on the pharmaceutical business (see Exhibit 4).
Jimenez also was concerned that several of the company’s smaller units lacked the scale to operate as
separate global units. He believed strongly in the global division structure with different business
models, but was not comfortable with the infrastructure cost of duplicate functions. “If we could
standardize our processes, we could free up resources to drop to the bottom line or reinvest in the
business. Yet I fear taking away the autonomy of division management and in-country leadership.
We’ve had knock-down, drag-out fights about this and still don’t have it resolved.”
In spite of its size and scope, the company had a long way to go to serve a high proportion of the
world’s population, especially in rapidly growing developing countries like Brazil, China, India, and
Russia. “We are working on developing global leaders from the fast-growing markets because that’s
our biggest deficit,” Jimenez observed. “You look around our executive committee and there’s not
one person from Brazil, China, or Russia. It’s not because we don’t look for them; it’s because we
haven’t been able to develop them.”
Back in his office, Jimenez asked his assistant to put all these issues on the agenda for the next
executive committee meeting to discuss with his top team.
The Birth of Novartis
Born on December 23, 1996 from the merger of Sandoz and Ciba-Geigy, Novartis instantly became
one of the world’s leading life sciences companies. Former Ciba-Geigy chair Alex Krauer was elected
to chair the new Novartis board. Krauer felt the two organizations were “perfectly matched in terms
of professional skills, financial strengths and innovative capabilities to form a new company with
tremendous growth potential.”1 The merger gave the two companies benefits of scale and extended
their geographical reach. Recalled general counsel Urs Barlocher, “The old Swiss companies were
export-oriented and went to countries with market potential, but were certainly not global.”
Daniel Vasella, a 42-year-old physician who has been head of Sandoz’s pharmaceutical business,
was named CEO. After graduating with high honors from University of Bern, where he studied
medicine and psychoanalysis in Zürich, Vasella practiced as an internist and specialist in
psychosomatic medicine in teaching hospitals in Switzerland until 1988. He then accepted Sandoz’s
offer in U.S. sales. Switching from medicine to business, he said, gave him the opportunity to do
work that could benefit “not one but thousands” of people.2 He rose rapidly in Sandoz’s marketing
organization in both the U.S. and Switzerland, becoming CEO of Sandoz pharmaceuticals in 1995.
When Krauer retired in 1999, Vasella was also elected board chair, giving him the dual mandate.
Novartis was organized into three main businesses: health care (59% of sales), agribusiness (28%),
and nutrition (13%), with the world’s largest agribusiness company, second largest pharmaceutical
company (4.4% of global drug market), and Europe’s largest health food producer.3 The chemicals
business was spun-off after the merger as Ciba Specialty Chemicals. In pharmaceuticals, Novartis
held leading positions in several therapeutic areas, including immunology and inflammatory
diseases, and strong positions in central nervous system disorders, cardiovascular, endocrine and
metabolic diseases, oncology, dermatology and asthma.4
2
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Novartis: Leading a Global Enterprise
413-096
Sandoz’s negotiating team for the merger consisted of Vasella, head of Sandoz’s pharmaceutical
business, CFO Raymond Breu, General Counsel Urs Barlocher and Alex Jetzer, CEO of Sandoz. “The
merger process itself went relatively smoothly, but the cultural differences between the two
companies were surprising,” Barlocher observed. “At first I thought the talk about it was a bit
ridiculous, but later I realized there were huge differences.” Breu observed, “Sandoz had a command
and control culture, led by CEO Marc Moret. Ciba’s culture was one of constant debate, but
implementation discipline wasn’t there.”
Former McKinsey Director Henri Vanni, who joined the Novartis board in 2011, recalled, “Ciba
and Sandoz were two mid-tier pharmaceutical companies that were losing ground to the American
players who were moving much faster in globalizing industry. The two companies had very different
management approaches: Ciba had a more Swiss culture, with centralized research and large
corporate functions, with thorough but slow decision-making. Sandoz had a more international
culture, with a more agile organization and greater business decentralization, including research,
and with quick top down decision making.” Vanni noted, “Vasella’s leadership was central to the
new firm. He has a passion for the American way of doing business—moving rapidly to get results
with a top-down style, very much aspiration-driven. Ciba’s style featured more extensive discussion,
evaluating all possibilities, somehow slowing down decisions. Dan’s ability to have fast but thorough
analytical discussions is pretty unique. He follows the reasoning, understanding fast scientific and
business issues, before deciding the right thing to do.”
Creating a New Culture
Vasella wanted to create a dynamic global company that would be highly competitive around the
world, far exceeding what Sandoz and Ciba had been. To him, that meant a results-oriented company
with high aspirations and very clear values. He noted, “Novartis should have a worldwide
reputation for successfully launching breakthrough products; be a company feared and respected by
competition, where the best people want to work and inspire each other with a sense of pride; and be
our customer’s reference for quality of products and services. Novartis should be one of the fastestgrowing, most profitable companies in each business we are in.”5
The early years focused on building the global organization Novartis needed to realize these
goals. Recognizing cultural differences between the companies, Vasella decided Novartis needed a
new culture built on the strengths of each. He knew building Novartis into a global structure
required creating a meritocracy providing advancement opportunities for talented people regardless
of national origin. “To create a new culture, Dan hired many talented people from outside,” said
Juergen Brokatzky-Geiger, human resources head. “In the early days 80% of openings in top
positions went to people from other companies. Today 80% of our executives come from within.”
To put a closed-loop performance management system in place, Vasella and his team installed
new controls and reporting. Some employees interpreted that to mean Vasella did not trust them.
“When you deliver results, you get rewarded with greater autonomy,” he explained. “Big words
aren’t credible, only results. This was a difficult transition for some people. It took more time than I
anticipated turning around the attitudes in both companies.” The company spent two years bringing
together its far-flung operations, while delivering promised cost savings from the merger of $1.4
billion over three years by cutting 12,000 jobs but leaving research and development spending intact.
This resulted in one-time restructuring charges of $2.5 billion offset by extraordinary after-tax gains
from divestitures of $1 billion. At the time Vasella said that more acquisitions were likely but “we are
going to stick with the industrial portfolio we have—and not diversify.”
3
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Vasella, who was always thinking ahead, had a reputation for challenging his staff. He could also
be critical and demanding. Barlocher noted that Vasella had made a few key hiring mistakes and
could be unforgiving of people who crossed or disappointed him. “You can argue with Daniel, but
you need a good relationship, good arguments, and past successes. Sandoz was always ruled by
dictators. Moret was used to dominating, and Daniel is also very dominant.”
Helmut Sihler, former vice chairman and lead director at Novartis from 1996 to 2006, said, “As I
saw Vasella with the board, I was impressed with his ability, his intelligence, and his diplomacy. You
could reach him, unlike many CEOs who have a wall outside of their egos that you cannot get
through. Dan had all the prerequisites to be a global leader.” Added Vanni, “Dan created a culture of
open debate, where everybody participated. He isn’t afraid to put a question on the table and say,
‘I’m not prepared yet to finalize a decision, but here’s what I think. What is your opinion?’”
In 1996, Vasella engaged Harvard Business School (HBS) to help him achieve a new company
culture by bringing top executives to programs created by HBS faculty. “We needed to become one
company,” he explained, “that was more Anglo-Saxon because that business model is much more
successful. Our benchmarks were American companies.” He continued: “One way to bridge
differences is learning new things together in teams and taking people out of their normal comfort
zone. We wanted to get them out of their offices and into the classroom. We had programs at HBS,
Basel or Bürgenstock, Switzerland, Shanghai and Mumbai—the latter two were emerging centers
many executives had never visited.”
The spirit of innovation and development of new business models were top priorities, along with
financial discipline and ensuring the organization delivered what it promised. “Within a year we
implemented the finance system and monthly performance against targets,” Breu explained. “Ciba
didn’t even have comprehensive monthly reporting. Once your systems are in place, the organization
adapts to the discipline. Within three years the performance-based culture fully took hold.”
Regrouping
By 1998 Novartis results were disappointing, hurt by below par pharmaceutical sales and the
Swiss franc’s appreciation. Moreover, Novartis was losing ground in the U.S., the largest and most
profitable pharmaceutical market, while U.S. competitors were making major gains. With only a few
new drugs in the 1999 pipeline, analysts observed that Novartis risked falling further behind U.S.
competitors and should consider a large acquisition or merger.
Instead, Novartis doubled down on R&D. As a result of increased investment, the company was
able to accelerate a large pipeline of products in late-stage clinical development, many of which came
from Ciba’s labs. By the end of 1999, Novartis had 50 projects in clinical development—23 in Phase III
clinical trials, 24 in Phase I and II clinical trials, and three in registration.6 Global Pharmaceuticals
Head David Epstein noted: “We launched a new drug every 100 days from 2000 to 2003. Most
companies are happy to launch one product per year, let alone three or four.”7
Global Bets for a New Century
At the start of the new century, Vasella decided on several strategic initiatives: 1) shift the focus
from life sciences to healthcare, 2) invest in businesses not attractive to competitors, 3) globalize
research, 4) globalize the investor base; and 5) transform headquarters to reflect the company’s global
scope, innovation and care for its associates.
4
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From Life Sciences to Healthcare
In 2000, Novartis decided to focus entirely on healthcare. It spun off and merged its agricultural
business with the Anglo-Swedish firm AstraZeneca’s business to form a new company, Syngenta,
with revenues of $8 billion and a market value of $12 billion, then the world’s largest agrochemical
business.8
Also in 2000, the company reorganized its pharmaceutical business to focus on its strongest
products, dividing it into primary care, specialty care, and mature products business units, providing
each with greater autonomy. “We are aligning our pharmaceutical activities around franchises and
strategic brands with a focused management structure,”9 Vasella said. “These changes provide
entrepreneurial space, speed, and resources to our leaders.”10
Vasella changed pharmaceutical leadership, replacing Jerry Karabelas with Thomas Ebeling who
ran consumer health, having joined Novartis from PepsiCo. Ebeling noted, “The new business unit
leaders will have autonomy and clear accountability, with responsibility for managing their
portfolios from research through market activities.”11 As a result of shifting marketing resources to
key products, sales of the company’s top 10 products grew 12% in 1999.12
In 2001 Novartis purchased 20% of the voting shares of cross-town rival Roche. In 2002-03 it
acquired additional shares, bringing its holdings to 32.7%, slightly below the level at which Swiss law
required Novartis to make a tender offer for the company. Meanwhile, Roche’s two founding
families, which held over 50% of voting shares, were bound together by an agreement prohibiting
them to sell. Novartis’s moves were not well received by Roche management, in spite of Novartis’
commitment to be only a passive investor. In 2013 Novartis still retained its shares, with the power to
block any change of Roche’s capital structure needed for a large transaction.
Beyond Blockbusters
In pharmaceuticals, Vasella challenged the firm to look beyond blockbusters by focusing on
smaller patient populations or emerging market diseases. In 1990 a team of scientists began testing
400 molecules to find one targeting Chronic Myelogenous Leukemia (CML). After two years of
testing, the team developed the molecule that became Gleevec. Referred to by many as a “miracle
drug,” Gleevec targeted the genetic defect causing the malignancy. The market was small, with only
28,000 CML patients worldwide. Early animal tests hinted at some liver toxicity, and Ciba-Geigy had
been hesitant to take risk on a potentially toxic drug. Listening to the complaints of Dr. Alex Matter,
head of oncology research, during a hallway discussion, Vasella pushed for the start of clinical trials.
After seeing stunning results in just 31 patients in Phase I clinical trials, Vasella went to the labs to
talk to the Gleevec team. There he learned that the project had effectively been shelved due to lack of
funds to proceed with further clinical trials. Despite disagreements with some senior colleagues who
were hesitant due to the small market for CML, Vasella decided to accelerate Gleevec’s development,
telling them he wasn’t concerned with the high cost. In less than two years, U.S. Food and Drug
Administration (FDA) approval was received in 2001 due to the FDA’s special “fast track” procedure
for life saving cancer and AIDS drugs. Through 2013, Gleevec had proven effective against six other
life-threatening diseases, validating Novartis’ early strategy.13 In 2012 Gleevec and its successor drug
Tasigna generated $5.7 billion in sales worldwide, making it Novartis’ largest product.
Early in his tenure, Vasella committed to making the fight against leprosy and malaria a
cornerstone of Novartis’ access-to-medicine programs providing all drugs for the treatment of
leprosy worldwide free of charge. In 2001 he launched the Novartis Malaria Initiative, unveiling a 105
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Novartis: Leading a Global Enterprise
year alliance with the World Health Organization (WHO) to provide Coartem, Novartis’
breakthrough malaria medicine, without profit for use by public health systems in developing
countries. Novartis provided Coartem for $1.57 per treatment and WHO distributed it through
governments of malaria-endemic countries. Coartem obtained regulatory approval from three
countries in 1999 and from the FDA in 2009. By 2013 Novartis had provided 500 million treatments
without profit, making it one of the largest access-to-medicine programs.
Globalizing Novartis Research
Vasella’s boldest move came in 2002, when he abandoned the traditional drug-development
model, declaring Novartis would only investigate diseases for which new drugs were desperately
needed and where there were a solid scientific basis or hypothesis of the mechanisms (genetic and/or
pathways) leading to the target illnesses. While other CEOs saw the pursuit of rare diseases as
commercial suicide, Vasella believed many of the illnesses shared genetic underpinnings with more
common ailments.14
Historically, both Sandoz and Ciba leaders felt they could attract the best scientists in the world to
work in Basel. In contrast, Vasella felt the company needed to be where the talent pool was located
and that Novartis needed to attract the top scientists in the U.S. Consequently, he shifted Novartis’s
global research headquarters to the U.S. by establishing the Novartis Institutes for Biomedical
Research (NIBR) in Cambridge, MA near Harvard University and MIT. While the Basel research site
was maintained, the company closed its research center in New Jersey, transferring key scientists to
Cambridge. The original investment was $1 billion.
To head NIBR, Vasella recruited Mark Fishman, M.D., chief of cardiology at Massachusetts
General Hospital, a geneticist and top scientist. “We needed an M.D. with a modern approach to
research with vast knowledge of molecular biology and genetics, and with broad clinical experience,”
Vasella explained. His decisions set off a firestorm in Basel. Concerns were voiced about
“abandoning Basel” and hiring an American academic medical scientist without industry experience.
Fishman recalled, “The original idea was actually to have a research site in the Boston-Cambridge
area, but I thought it had to be the headquarters for research. You can’t change an organization by
modifying it from within. Second, research could not be part of pharma. It had to be discoverydriven, not financially-driven by marketing as most pharmaceutical companies were.”
Vasella agreed on both points, having Fishman report directly to him rather than Ebeling. This
also led to internal criticism because the pharmaceutical group felt strongly it had to control its own
research. “Separating research out,” Vasella said, “allowed me to protect the investment; otherwise,
people start to cut it due to budgetary pressures.”
NIBR’s mission was to discover innovative new drugs that would change the practice of medicine.
Traditionally, drug researchers discovered medicines by bombarding an illness with a variety of
chemicals until they hit a combination that treated it. A research strategy based on molecular
pathways, by contrast, zeroed in on the exact molecular mechanisms that caused a disease.15 Fishman
cancelled 30% of research projects to shift the focus to rare diseases. “First, we have to understand the
unmet need,” he explained, “and then the mechanism and the path of physiology in order to make a
medicine.”
Fishman also changed the way Novartis selected research projects and the kind of scientists it
hired. While Fishman saw early progress with his new molecular pathways-focused methods, he
noted “the hostility from the old guard.” NIBR hired 1,000 people in its first year. “The few who came
6
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413-096
from Basel were very valuable in terms of forming liaisons,” Fishman noted. By 2012 NIBR had 10
research institutes around the world with approximately 6,000 scientists. As part of this growth,
Novartis committed to invest $1 billion in a new research center in Shanghai, China, making it the
largest research center in China. “Having a Chinese research institute has helped the commercial
groups a lot,” said Fishman, “because it is a vote of confidence in the country, and the government
loves having us there.”
In April 2012, Fishman joined Governor of Massachusetts Deval Patrick and other local notables to
break ground on a new 550,000 square foot campus of lab, office, and retail space across the street
from the NIBR headquarters—a $600 million expansion.
Globalizing the Investor Base
With most of its stock held by Swiss institutions, Vasella and Breu decided Novartis needed to
develop a global shareholder base. They believed the discipline of listing on the New York Stock
Exchange (NYSE) would be beneficial. Consequently, in May 2000 Novartis listed its stock on NYSE,
with a simplified share structure and $2.5 billion share-repurchase program.16 In 2003 Novartis began
reporting in U.S. dollars, initially reconciling results between U.S. and international GAAP.
“We began thinking about U.S. stock listing back in 1990,” Breu said, “when we realized that our
main competition was in New Jersey, not across the Rhine. To attract the best talent, we knew we
would have to play by U.S. rules.” Some security analysts saw the U.S. listing as a gateway to a major
acquisition or merger enabling Novartis to strengthen its U.S. position. In 1999 it approached both
Monsanto Co. and American Home Products Corp. about possible transactions.17 Other observers felt
Novartis would be better off alone, questioning whether it needed a big acquisition with its solid
pipeline of upcoming drugs.18
Recasting Basel
In 2001 Vasella launched a plan to transform its Basel headquarters from a rundown chemical
complex into a modern state-of-the-art campus designed by world-famous architects such as Frank
Gehry, Rafael Moneo, and Alvaro Siza. Many buildings were demolished, except the 1939
headquarters. New facilities were designed to improve communication between employees and
facilitate their daily lives by providing grocery shopping, banking services and so on. Office floor
layouts encouraged cross-disciplinary interaction, while beautiful parks and courtyards provided
space for quiet reflection. To implement its new campus design, Novartis purchased adjacent land
from the city of Basel and closed a street that connected with French border control. Vasella noted,
“We put 100 million Swiss francs on the table and the government agreed.”19 By 2012 10 research and
office buildings were completed, with seven additional buildings under construction.20
Strengthening Novartis’ Healthcare Portfolio
Also in 2000, Novartis began broadening its healthcare portfolio, expanding its subscale generics
business by acquiring BASF Pharma’s European business, U.S.-based Apotheccon and Germany’s
Grandis. Two years later, it bought Slovenia’s Lek Pharmaceuticals to gain a presence in Central and
Eastern Europe. Other acquisitions included Sabex and Durascan, Astra-Zeneca’s generic company.
In 2004 Novartis united its global generics operations in a new division under the Sandoz name,
mothballed since the merger. The following year it acquired Germany’s Hexal and its U.S. affiliate,
Eon Labs. Although some analysts had misgivings about the $8.3 billion price tag, Vasella felt it was
7
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Novartis: Leading a Global Enterprise
inevitable that tighter healthcare budgets would boost generics.21 Sandoz headquarters was relocated
to Hexal’s headquarters outside Munich, Germany, to separate it clearly from the pharma business.
In 2006 Novartis acquired the remaining 58% of California-based Chiron, having purchased 42%
in the mid-1990s. Chiron’s vaccine business with more than 30 vaccines was the fifth largest vaccine
company. Novartis hoped new technologies and a shake-out in vaccines would transform it from a
low-growth, low-price business. The following year Novartis disposed of its remaining nonhealthcare assets, selling its medical nutrition and Gerber baby food businesses to Nestlé.
Novartis made its biggest bet ever in 2008, when it agreed to acquire Alcon eye care from Nestlé
for an amount which ultimately totaled $52 billion. Analysts were displeased. As one noted, “We
struggle to see how acquiring a market leader at top multiples can create shareholder value.”22
Another opined, “This transaction annihilates Novartis’s key attraction for investors: undervalued
cash generation.”23
“Although security analysts were advocating that Novartis be a pure pharmaceutical company,”
Breu explained, “we decided to invest in generic drugs, consumer health, vaccines and eye care to
reduce exposure to pharmaceutical pricing pressures. From a margin standpoint, acquiring vaccines
was a disaster, but we believed it had great long-term prospects. We’re growing the company, not
improving margins by cutting R&D and marketing. Our goal is to maximize net present value, not
increase the short-term stock price.”
Between 2000 and 2012, price-to-earnings ratios for the pharmaceutical industry dropped from 25
times earnings to 10 times, as analysts worried about R&D productivity and pricing power, which
had shifted to buyers of healthcare (see Exhibit 5 for stock price information). Against the industry
trend, Novartis increased investments in R&D and marketing. Breu noted, “We needed to invest to
make Novartis ‘the best-in-class company.’”
Upgrading Executive Leadership
Throughout his 14 years as CEO, Vasella made continual changes to his executive team to ensure
Novartis had the right leaders in place as the company expanded. In 2006 American Joe Jimenez was
hired from H. J. Heinz as global head of consumer health, pharmaceuticals development head Joerg
Reinhardt was named head of vaccines and diagnostics following the completion of the Chiron
acquisition, and Andreas Rummelt, head of pharmaceutical operations, was asked to lead Sandoz.
The next year Vasella switched Jimenez’s and Ebeling’s positions: Jimenez became global head of
pharmaceuticals as Ebeling took over consumer health. In late 2008 Vasella appointed Reinhardt as
chief operating officer with all business reporting to him. He also promoted two young executives in
their thirties to the executive committee, Swiss-born Andrin Oswald (37) as global head of vaccines
and diagnostics and American Jeff George (35) as global head of generics. (See Exhibit 6 for an
organization chart and Exhibit 7 for leadership changes over time).
At the start of 2010 the Novartis board accepted Vasella’s recommendation to name Jimenez his
successor as CEO. Subsequently, Reinhardt left to become head of Bayer Healthcare. David Epstein,
who had run oncology and specialty medicines in pharmaceuticals, succeeded Jimenez as global head
of pharmaceuticals. Breu retired as CFO and was replaced by Jon Symonds, who came from Goldman
Sachs and AstraZeneca.
With these appointments Novartis completed its transition from the Swiss-dominated leadership
to a multi-national team at the top. The new executive committee had an American CEO and head of
8
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research, a British CFO, and a Swiss general counsel and a German human resource head. Its six
businesses were led by four Americans, one Swiss and one Brit. The Novartis board, once comprised
of 12 Swiss members, one American and one German, had also globalized, and now included five
Swiss, two Germans, two Americans, a Chinese woman, and one member each born in India and
Lebanon. (See Exhibit 8 for 2012 board composition.)
Leadership Challenges
In terms of developing global leaders, Vasella noted, “Hard skills are easier to transmit, while soft
skills are much more difficult to teach. You can teach concepts, but you can’t teach experiences. To be
a good leader, you need to be intelligent, a conceptual thinker, ambitious, and take pleasure in
building organizations.” He continued:
Those qualities need to be balanced by skepticism—recognition that not everyone
wants you to succeed and that bad things will happen. If I look at the reasons leaders
fail, it’s usually the soft factors, such as failing to resist seduction. I talk to my team
about the temptations that come with leadership—sexual enticement, money, or praise.
You need to be aware of your vulnerabilities in order to resist seduction and keep your
integrity.24
“Today’s leaders must understand what society needs, values and will pay for,” Vasella
continued, “and have the courage to stand up for it even if unpopular. They need courage to make
mistakes and not think their heads will be cut off. Leaders need to avoid taking shortsighted actions. I
worry most about pressures people feel from the stock market to take short-term actions like portfolio
management and restructuring to pull the white rabbit out of the hat.”
Breu added, “New leaders should not imitate the past. They have to think very differently about
the next ten years. How do you anticipate what will happen and place your bets? There will be
changes to the way business units operate, to the portfolio and the company’s global footprint. In my
time the challenge was getting larger in the U.S. Now the opportunities are in Asia, Brazil and
potentially in Africa. Novartis’ culture has become very international. From two Swiss companies we
became a global healthcare leader. In 1996 people would have said: ‘As an American, I have no
chance of being CEO of Novartis.’ That has changed.”
When Vasella concluded his 14 years as CEO, he said he left the company with strong leadership,
excellent financial results, a diversified set of healthy businesses, and a full pipeline of new products.
That year 910 million people benefited from Novartis products. He noted:
We came out of a diversified business, and divested everything except healthcare. By
expanding there, we became stronger and more diversified. Now there is a different
evolution. Companies which were once on the top of the industry have fallen, so the
analysts are saying companies should diversify. Competitors who once said generics
were incompatible with pharmaceuticals, are suddenly entering generics.
After 25 years with Novartis, including three additional years as board chair, Vasella announced
he would step down at the 2013 AGM. With the board’s support, he persuaded Reinhardt to return to
Novartis as non-executive chair of the board. Vasella agreed to refrain from competing with Novartis
for six years in exchange for CHF 12 million per annum, which he committed to donate entirely for
philanthropy. Nevertheless, the disclosure set off a political firestorm in Switzerland, which was in
the midst of a referendum on the Minder Initiative supported by activist shareholders aimed at
limiting CEO pay. One week before the AGM, Vasella announced that he decided to forgo any
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Novartis: Leading a Global Enterprise
payments related to his non-compete agreement while the Board cancelled the non-compete clause of
his contract. Five days later the Minder Initiative passed.
Joe Jimenez’s New Era
On February 1, 2010 Jimenez became the first American to lead a Swiss pharmaceutical company.
He was not a physician by training and had spent most of his career in consumer goods. At age 37, he
headed up H. J. Heinz’s North American operations, and was head of its European operations from
before joining Novartis. He recalled, “When Dan asked me to run pharmaceuticals, I said, ‘You’re
kidding, somebody with no pharmaceutical background, not a scientist, a researcher, or a medic?’ He
replied, ‘We have lots of good medics and good scientists, but don’t have someone who can look
outside and see what is happening in the world and position the division for future growth.’”
Just as Moret had bet on him, Vasella bet on Jimenez. “Not being a physician or a scientist and
running a science-based organization is an interesting challenge,” Jimenez conceded.
You have to know enough about the science to know whom to listen to. My advice is,
play to your strengths. I could look outside this industry, understand how the world
was changing, and position the company to take advantage of it. Coming from outside
has its advantages, as you don’t get caught up in the internal way of thinking.25
As Jimenez looked ahead to his challenges, he saw several imperatives: 1) addressing the rapid
changes in global health systems; 2) sustaining research excellence; 3) building a balanced, vibrant
health care portfolio; 4) expanding in emerging markets; and, 5) developing global leaders.
Meeting the Challenges of Global Health Systems
In the U.S., the Affordable Care Act was expected to put cost pressure on healthcare providers,
including drug manufacturers. In Europe, highly stressed governments sought ways to reduce health
care and drug payments.26 “Patients need innovative pharmaceuticals, but also low-cost options,”
Jimenez said, observing that this played to Novartis’ strengths:
With financially troubled healthcare systems around the world, just offering
innovative pharmaceuticals at $60,000 to $80,000 per year is a risk profile we don’t want
to be in. Due to the breadth of our healthcare portfolio, less than 55% of our sales are
reimbursed by public agencies. We see significant opportunities in healthcare starting
with the patient to offer more than just pharmaceuticals. We can also use our R&D
expertise to excel in generics and take advantage of the volume growth. There are
hundreds of millions of patients around the world who need Sandoz generics with very
high-quality but low-cost.
Jimenez said the future for pharmaceuticals was in moving from the science of medicine to the art
of healing. “Everything must start with the patient,” he said. “Our traditional business model was a
transaction—selling pills to physicians. Today payers and physicians are insisting on positive
outcomes for patients. We need leaders with skills who focus on holistically helping patients with
programs, technology, and services to help physicians deliver positive patient outcomes.”
As global head of Novartis Pharmaceuticals, Epstein anticipated major shifts in the
pharmaceutical industry. “In the past we were just selling pills. Today you have to understand the
patient’s journey from diagnosis through treatment of their disease,” he said. “Without that
understanding, you don’t have the insights to develop a sophisticated strategy. In the oncology
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413-096
business, we worked together on the same team with the same metrics in commercial and
development. Together we talked to customers, developed strategy, and made smarter decisions
enabling us to leapfrog the competition with the next clinical trial, drug combination, or new patient
segment. Now we’re using that approach for the entire pharmaceutical business.”
Jimenez added, “The global financial crisis has put tremendous pressure on national governments
to constrain healthcare spending. These days we have to partner with governments to demonstrate
the value of patient outcomes. In oncology, this means developing companion diagnostics to provide
100% certainty that patients will respond to a drug, thereby avoiding the waste of ineffective drugs.”
Sustaining Research Excellence
While spending $9 billion per year on Group R&D (including an amount for pharma research
which totaled 20% of pharma sales), Novartis considered research productivity critical to its future.
Jimenez’s attitude was to invest where the talent was. “We build our research centers where the
scientists are—in Cambridge, Basel, and Shanghai,” he explained. He and Fishman planned to
expand on the pathways approach to drug discovery by understanding the molecular pathway of
diseases, often rare diseases with small but homogeneous patient populations. “We develop a drug
that interrupts that pathway, and then expand into other disease areas impacted by the same
pathway,” he noted. See Exhibit 9 for Novartis’ pipeline.
Jimenez was bullish about two therapeutic areas, oncology and regenerative medicine. “The
sequencing of the human genome has created a wealth of data that will allow discovery of new drugs
never before possible,” he said. He was also betting on regenerative medicine, using technology to
tackle problems of muscle, sight and hearing loss.27 “Mining bioinformatics data is essential in
understanding specific mutations leading to cancer,” Jimenez noted.28 “This requires melding
medical, scientific, and information technologies to create medical advancements.”29 Through all the
shifts Novartis expected to maintain its high R&D investment (see Exhibit 10).
Building a Balanced, Vibrant Health Care Company
One of Jimenez’s concerns was getting Novartis’ other health care businesses up to critical mass so
they would be full contributors to the company’s revenues and profits, giving counterbalance to its
pharmaceutical business. In examining them, he noted that Alcon’s industry leadership gave it that
mass in eye care, and Sandoz’s recent expansion brought it just to critical mass in generics. However,
OTC, vaccines and diagnostics, and animal health were too small to sustain required investments
while contributing significant bottom-line profits. He said:
There is a scale benefit that comes from multiple divisions that permits longer-term
investment decisions. We let businesses invest through the cycle, and use good years in
one division to permit another division to invest. There are also costs to being part of
Novartis. Quality standards that make sense for pharmaceuticals are being imposed on
smaller divisions in ways that wouldn’t happen if they were independent. Last year’s
quality problems were a painful reminder that Novartis must set its standards at the
most demanding level, which is expensive. In Sandoz and OTC, this accounts for a
disproportionate amount of their profitability. The challenge is turning superior quality
in these businesses into a competitive advantage over smaller competitors.
We assess each unit during the annual strategy cycle to ensure it has a viable strategy
to become a leader in its field and create net present value. We have the financial ability
to invest deeply in innovation and apply that innovation across all the divisions. Each
11
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division has also benefited from each other’s talent, especially the smaller units that
have access to pharmaceutical capabilities.
Novartis’ vaccine business was the most volatile in the portfolio. In 2009 the division was $500
million below target, but the following year it hit high profit margins with the first vaccine for H1N1
for swine flu. Recalled business head Andrin Oswald: “By hiring 1,000 people, we were first to ship
the vaccine. This is great example of Novartis doing extraordinary things in a crisis.“ Unfortunately,
the pandemic took management’s focus off the core vaccine business. “When the panic was over,
orders for the H1N1 vaccine fell close to zero, profits disappeared, and the business went into a loss.
During the crisis it was hard to focus on our core strategy, as demand for other vaccines dropped,
and quality issues arose. This might not have happened had we not focused on the pandemic,”
Oswald said. However, in 2012 three new vaccines were approved, an industry first.
While Jimenez saw the potential for generics to expand Novartis’ reach, especially in emerging
markets, he acknowledged the challenges of competing in generics. On average, the cost of a generic
drug was 80% to 85% lower than the brand-name product; generic drugs saved American consumers
alone $150 billion per year. Although profit margins were lower as limited barriers to entry meant
more competitors and lower prices, production costs were rising because the FDA required generic
manufacturers to pass the same quality standards as those for brand-name drugs.
When George took over Sandoz in late 2008, it was considered Novartis’ step-child, with revenue
growth only 1% and costs up 10%. The culture was considered slow, complacent, and weak
commercially. George replaced half of Sandoz’s top 200 people and focused on near-term
performance. The first three years produced annual revenue growth of 12% and profit increases
averaging 17%. In 2012 new competition for its best-selling product and added quality costs drove
down 2012 revenues and profit margins, in spite of $2 billion in cost savings between 2009 and 2012.
Meanwhile, George shifted Sandoz’s strategy to specialty generics such as biosimilars, oncology,
ophthalmology and dermatology where profit margins were higher. He noted, “Each year we face
high single-digit price erosion which must be offset with higher volumes. We need to recreate twothirds of annual income to stay even while aggressively cutting costs.”
Expanding in Emerging Markets
With slower growth in the U.S. and Europe, Jimenez saw great opportunities in emerging
markets. “China grew 24% last year,” he said, “because the Chinese government made a massive
commitment to improving health care. The Russian government is dedicated to improving healthcare
access to reverse its population decline. Africa is the next emerging market so we are building
infrastructure in sub-Saharan Africa. Nigeria and Kenya are growing 6% to 7% per year.”
To accelerate revenues in select high-growth emerging markets, Novartis shifted to a single
country organization in 2008 under Global Emerging Markets (GEM). While the new organization
worked well for pharmaceuticals, lower margin businesses like generics found it difficult to get the
attention of country management. According to George, “We found that the growth rate in GEM
markets was well below what the generics business generated with its own country managers.” In
2012 the GEM organization was disbanded with country responsibilities returned to the divisions.
An experiment in China with a single country management was much more successful. The large
size of the market enabled the Chinese country organization to staff the divisions at appropriate
levels with clear focus on their respective business. “We feel this structure is working well under
centralized management in China,” said George. “We are realizing growth exceeding 20%.”
12
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Nevertheless, Oswald pointed out how challenging it was to reconcile Novartis’ high cost base with
local employee expectations and immature markets. In 2011 Novartis purchased a Chinese vaccine
company. Within two years of becoming part of Novartis, its costs doubled, as the 600-employee
company had no HR or IT systems. “We brought in the Novartis systems and applied our strict
business practices,” Oswald noted. “It’s hard to compete against local companies with Novartis rules.”
Patent protection was also a challenge. In early 2013 India’s Supreme Court denied Novartis’
Gleevec patent, concluding a seven-year process that began in 2006. The court’s decision was a major
win for local generic makers like Cipla and Natco Pharma, which sold generic versions of Gleevec for
10% of Novartis’s price. India managing director Ranjit Shahani, said the company would now be
cautious about investing in R&D activities in India. Industry leaders worried the Gleevec decision
could cause the global patent system to unravel.
Jimenez was also considering whether Novartis had the right organizational structure for its
global business: each of its six businesses had complete organizations in every country. This gave
businesses greater autonomy and increased focus on their customers; however, the high cost of
duplicative country and regional staffs was an impediment to profitability. While the structure
seemed fully justified for the giant pharmaceutical business, it raised questions for the other units.
Finally, Jimenez questioned whether the back office structures in each country should be managed
centrally, leaving front-line sales and marketing to the six divisions. Although experiments with
centralized systems had resulted in higher costs, Jimenez was uncertain whether this was the result of
the principle of centralized systems or ineffective execution.
Developing Global Leaders
Jimenez believed Novartis faced a major challenge in building its global leadership team for the
future. In spite of its successful evolution from Swiss-dominated management, the shortage of leaders
from emerging markets concerned him. “Two years ago we launched a project called “Lead” to take
20 high-potential emerging market leaders, and give them 18-month assignments working with the
executive committee and on action projects,” he noted. “They come to Basel to learn our culture, and
go back to their host country to function as local and global leaders.”
Reflecting on what was required to develop its cadre of global leaders, Jimenez felt they had to
develop themselves along three dimensions: leading self, leading team, and leading the business.
“When we assess Novartis leaders on self, teams, and business, self is the weakest,” he said.
We are injecting this leadership framework into our 360s review process from the
entry level all the way to me. Leading self requires knowing your strengths and
weaknesses, backstopping your weaknesses, and focusing your time on what’s most
important. We have leaders who are great in motivating their teams, and great
strategists who guide their businesses in very thoughtful ways, but struggle in leading
themselves. By assessing people on those elements, we identify how to help them. For
today’s leaders in such a complex world, leading self is an important aspect where we
cannot afford outages. In the past, leadership was about execution. In the next 10 years
leading self will be the most important for success.
Jimenez cited an example of why leading self matters. “We had an American who failed as a
global leader because he thought he needed to spend his time and energy in the U.S. Instead, he
should have been driving our smaller, emerging markets in other parts of the world. This requires an
awareness of and respect for cultural differences and an appreciation of the potential of other
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Novartis: Leading a Global Enterprise
countries. I’ve seen many people who aren’t global leaders because they can’t think beyond their
home country. All decisions are steeped in that dominant culture.
Jimenez believed that physically living in different countries was critically important for the
globalization of a leader. “When you take leaders out of their U.S. comfort zone and put them in a
country like China or India,” he explained, “where they have to figure out how to buy groceries, go
to the doctor, and exist in another country, we see powerful transformations in their self-awareness
and respect for other cultures. As a result, they figure out how to grow their business using different
business models than the ones they are used to.”
Brokatzky-Geiger noted that Novartis employed a high touch approach to its 360 review process.
“We work with external professionals to interview executives, their peers and direct reports and have
open discussions with them. The interviewers can ask questions that internal people cannot, giving
us a better picture of their capabilities, often with very descriptive examples,” he explained. “Our
accelerated development program for developing global leaders identifies top talent and sends them
to areas where they haven’t worked before.” He added:
Sometimes we move people into commercial, development, or general manager
roles. We use this targeted approach because everyone brings something different to the
table. Everyone is missing some element required to be an outstanding global leader. In
addition to developing expertise, global leaders need to be self-aware and understand
their impact on their organizations, take feedback, and change their behavior when
needed.
The Future
Looking to the future, Jimenez was clearly focused on his priorities: innovation, growth,
productivity and organizational health. “My goal is to put us on a growth trajectory that is
sustainable long after I am gone,” he said. He set up a special meeting with his executive committee
to sharpen the focus on these goals and become the world’s leading healthcare company.
14
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Novartis: Leading a Global Enterprise
Exhibit 1a
Group Income Statement, 1996, 2002, 2006, and 2010 to 2012
Net sales
Operating income
Net income
Basic earnings per share
Exhibit 1b
Source:
413-096
1996
2002
2006
2010
2011
2012
$27,060
4,317
1,721
$20,887
5,092
4,725
$34,393
7,681
7,175
$50,624
11,526
9,969
$58,566
10,998
9,245
$56,673
11,511
9,618
$1.84
$2.28
$4.28
$3.83
$3.93
Healthcase Portfolio Overview, 2012
Company documents.
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413-096
Novartis: Leading a Global Enterprise
Exhibit 2
Company Milestones
1996
Merger of Ciba-Geigy and Sandoz to create one of the largest healthcare companies
2002
Novartis Institutes for Biomedical Research (NIBR) is created, headquartered in the United States
2003
Acquisition of Mead Johnson & Co., a subsidiary of Bristol-Myers Squibb
2004
Novartis submits Xolair for EU approval for treatment of allergic asthma
NIBR announces joint project with the Broad Institute of MIT and Harvard to research type 2 diabetes
2005
Landmark trial on Gleevec/Glivec, to treat chronic myeloid leukemia, shows 90% of patients still alive
after four years of treatment
Aclasta gains EU regulation approval for treatment of Paget’s bone disease
Acquired North American over the counter brand portfolio of Bristol-Myers Squibb, expanding Novartis’
presence
2006
Strategic biomedical R&D center opens in Shanghai
Novartis Institute for Tropical Disease (NITD) initiates research on malaria. Through partnership with
World Health Organization (WHO), provides anti-malarial Coartem, for no charge in developing nations
st
Omnitrope receives European Commission approval; 1 product approved under the EU’s new
regulatory pathway for follow-on biological products
2007
Completed non-core divestments of the Gerber and Medical Nutrition Business units to Nestlé for $5.5
billion and $2.5 billion, respectively
Ranked No. 1 among pharmaceutical companies in Fortune magazine’s “World’s Most Admired
Companies” survey
2008
Novartis announced an agreement to acquire 25% interest in Alcon, Inc., world leader in eye care with
pharmaceutical, surgical, and consumer products (majority ownership acquired in 2010 and 100% in
2011)
Opened new vaccine research institute in Siena, Italy
Named healthcare super sector leader in the 2008 update of the Dow Jones Sustainability World Index
2009
Novartis became the first company to produce influence A (H1N1) vaccines with modern cell-culture
biotechnology
Announced $1 billion investment over five years in China to build the largest pharmaceutical R&D
institute in China
2010
Joseph Jimenez was named CEO
FDA approved Gilenya as the first oral treatment for relapsing-remitting multiple sclerosis
2011
Vaccines and medicines from Novartis reach an estimated $1 billion patients
Ranked No. 1 among pharmaceutical companies in Fortune magazine’s “World’s Most Admired
Companies” survey
2012
Source:
Novartis to start construction of new biotechnology facility in Singapore with an investment of over $500
million
Company documents.
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Novartis: Leading a Global Enterprise
Exhibit 3
413-096
Divestments and Acquisitions, 1992–2012
Acquisitions
1992
Systemix (genetics science
company)
1994
Gerber (baby food producer),
$3.7B
1995
Divestments
Other
Clariant (specialty chemicals)
spun-off
1996
Azupharma (contract
pharmaceutical developer)
MBT (construction chemicals)
Novartis formed through
merger of Ciba-Geigy and
Sandoz Pharma divisions
1997
Merck Agro (crop protection
business), $910M
Ciba non-pharmaceuticals
businesses spun-off
First attempt U.S. listing (Delta)
and integration of Stiftungen
1998
Roland
1999
Wasa sold to Barilla Alimentare
($315M), Eden sold to De-VauGe Gesundkostwerk
(undisclosed)
2000
Wesley Jessen VisionCare
(contact lenses), $785M—made
Ciba Vision the second-largest
contact-lens company in the
world
2001
Roche (21.3%) (pharma)
2002
Roche (11.4%); Lek (generics),
$900M
Syngenta (agribusiness) formed
when Novartis and AstraZeneca
PLC combined agricultural
chemical business
Wander AG (health foods)
2003
Unification of all generics
operations into Sandoz
2004
Roche (0.6%); Sabex and
Durascan; BMS medical
nutrition
2005
Hexal; Eon Labs (generics);
BMS over-the-counter
2006
Chiron (biotech firm), $5.4B
2007
Nutrition & Santé (dietetics and
organic foods) sold to ABN
AMRO Capital France ($260M)
Entry into human vaccines
through Chiron acquisition
Medical Nutrition business;
Gerber baby foods sold to
Nestlé ($5.5B)
2008
Speedel (pharmaceuticals),
$880M
2009
Ebewe (injectables), $1.2B
2010
Merger with Alcon (eye care)
2012
Fougera Pharma for $1.25B
Source:
Compiled from company documents.
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Novartis: Leading a Global Enterprise
Exhibit 4
Novartis Business Divisions
Division Name
Description
Pharmaceutical
Products concentrated in major therapeutic areas including: primary care
(hypertension, metabolism, respiratory); established medicines (oncology,
including hematology), specialty (neuroscience, ophthalmics, integrated
hospital care, and critical care.) The portfolio included more than 40 key
marketed products, many of which were leaders in their respective therapeutic
areas. In 2011, the division received a total of 15 approvals in the United
States, Europe and Japan. The product development pipeline had 138 projects
in various stages of clinical development, including potential new products as
well as potential new indications or formulations for existing products.
Alcon
Alcon was the global leader in eye care with a breadth of product offerings in
surgical, ophthalmic pharmaceuticals and vision care, serving the full life cycle
of patient needs across eye diseases and vision conditions.
Sandoz
Sandoz develops, produces and markets approximately 1 000 compounds
across all major therapeutic areas, as well as biopharmaceuticals, active
substances and intermediates. Its operations span five continents, and it
markets products in about 130 countries. In addition to its retail generics
business, Sandoz also operates anti-infectives and biopharmaceuticals and
oncology injectables businesses, where it has a strong leadership position.
Consumer Health
Novartis OTC (Over-the-Counter) was a world leader in the research,
development, production and marketing of self-care products designed for inhome treatment of medical conditions and ailments. The division had a portfolio
of cough, cold, respiratory disease treatments, digestive health solutions and
pain management medication, as well as skin care products, smokingcessation therapies and mineral supplements. Novartis Animal Health was a
leader in developing new and better ways to prevent and treat diseases in pets,
farm animals and cultivated fish.
Vaccines and Diagnostics
The Novartis Vaccines and Diagnostics Division provided more than 20
vaccines to prevent viral and bacterial diseases, as well as sophisticated
instruments, assays and software to protect the blood supply from infectious
diseases such as HIV and Hepatitis. The division consisted of two
businesses—Novartis Vaccines and Novartis Diagnostics.
Source:
Company documents.
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Novartis: Leading a Global Enterprise
Exhibit 5
413-096
Novartis Share Price vs. Indices, January 1997–January 2013
300
Novartis Relative Stock Price Performance
January 1997 – January 2013
January 31, 1997 = 100
250
200
150
100
50
0
WORLD PHARMA INDEX
Source:
NOVARTIS
NOVARTIS ADR
Thomson Reuters Datastream, accessed May 7, 2013.
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413-096
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Exhibit 6
Organizational Structure, January 2013
Chairman
Board of Directors
ECN Members
Prof. Ulrich Lehner
Chairman
Audit & Compliance Committee
Chairman’s Office
Prof. Srikant Datar
Dr. Matthias Leuenberger
Audit & Compliance
Corporate Secretary
Peter Elam
Dr. Charlotte Pamer-Wieser
CEO
Joseph Jimenez
Human Resources
CFO
Dr. Jurgen Brokatzky-Geiger
Jon Symonds
General Counsel
Group Communications
Dr. Felix Ehrat
Michele Galan
Chief Compliance Officer
Group QA
Dr. Peter Kornicker
Dr. Erwin Vanhaecke
Strategic Planning &
External Affairs
N.N.
Source:
NIBR
Pharma
Sandoz
V&D
Dr. Mark Fishman
David Epstein
Jeff George
Dr. Andrin Oswald
Alcon
OTC
Animal Health
Kevin Buehler
Brian McNamara
Dr. George Gunn
Company documents. Information as of January 2013.
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Novartis: Leading a Global Enterprise
Exhibit 7
413-096
Executive Committee, Select Years
Position
1997
2002
2007
2012
CEO, Novartis AG
Daniel Vasella, M.D
Daniel Vasella, M.D
Daniel Vasella, M.D
Joseph Jimenez
CFO, Novartis AG
Raymund Breu, Ph.D
Raymund Breu, Ph.D
Raymund Breu, Ph.D.
Jonathan Symonds
Head, Pharma
Thomas Ebeling
Joseph Jimenez
David Epstein
Head, Consumer Health
Paul Choffat, J.D
Thomas Ebeling
Brian McNamara
Head, Sandoz
Andreas Rummelt, Ph.D.
Jeff George
Head, Vaccines and
Diagnostics
Joerg Reinhardt, Ph.D.
Andrin Oswald
Head, Research
Mark C. Fishman, M.D.
(Pharma)
Mark C. Fishman,
M.D.(biomedical)
Mark C. Fishman
Head, Human Resources
Norman C. Walker
Juergen Brokatzky-Geiger,
Ph.D
Juergen BrokatzkyGeiger
Head, Legal and
General Affairs
Alexandre Jetzer
Urs Bärlocher J.D.
Head, Corporate Affairs
Thomas Wellauer, Ph.D.
Head, Strategic Planning
Source:
Felix Ehrat, Ph.D
Gilbert Wenzel
Company documents.
Exhibit 8
Novartis Board of Directors, 2012
Daniel Vasella, M.D.——Chairman
Ulrich Lehner, Ph.D.——Vice Chairman (since 2002)
Former CEO, A.G.
Dimitri Azar, M.D., MBA (since 2012) Dean of the College of Medicine and Professor of Ophthalmology,
Bioengineering and Pharmacology at the University of Illinois at Chicago.
William Brody, M.D., Ph.D. (since 2009) President of the Salk Institute for Biological Studies, La Jolla,
California, and former president of Johns Hopkins.
Srikant Datar, Ph.D (since 2003)
Ann Fudge (since 2008)
Professor at Harvard Business School.
Former CEO of Young and Rubicam.
Pierre Landolt, Ph.D (since 1996)
Chair of the Sandoz Family Foundation.
Enrico Vanni, Ph.D (since 2011)
Former McKinsey Managing Partner.
Vice Chairman of Holcim Ltd. and of the Schweizerische National-
Andreas von Planta, Ph.D (since 2006)
Versicherungs-Gesellschaft A.G.
Dr. Ing. Wendelin Wiedeking (since 2003)
Margorie Mun Tak Yang (since 2008)
Rolf M. Zinkernagel, M.D. (since 1999)
Source:
Former CEO, Porsche, GmbH.
Chairman of Esquel Group, Hong Kong, China.
University of Zurich Medical School Faculty and Nobel Prize Winner.
Company documents.
21
This document is authorized for use only by Seda Keshishyan in MGMT 385 International Business Summer 2024 taught by GREGORY THEYEL, California State University – East Bay from
May 2024 to Aug 2024.
Company documents. Information as of early 2013.
Source:
Exhibit 9
In-Market and in Pipeline Pharma Products, early 2013
413-096
-22-
For the exclusive use of S. Keshishyan, 2024.
This document is authorized for use only by Seda Keshishyan in MGMT 385 International Business Summer 2024 taught by GREGORY THEYEL, California State University – East Bay from
May 2024 to Aug 2024.
For the exclusive use of S. Keshishyan, 2024.
Novartis: Leading a Global Enterprise
Exhibit 10
Source:
413-096
Average Annual Peak Sales of First Launched Products, 2007–2011 (in $ billions)
Company documents.
23
This document is authorized for use only by Seda Keshishyan in MGMT 385 International Business Summer 2024 taught by GREGORY THEYEL, California State University – East Bay from
May 2024 to Aug 2024.
For the exclusive use of S. Keshishyan, 2024.
413-096
Novartis: Leading a Global Enterprise
Endnotes
1 “FTC Clears Novartis Merger, Creating the World’s Leading Life Sciences Company,” PR Newswire December 17, 1996, via
Factiva, accessed March 2013.
2 McKinsey & Company, “An interview with Daniel Vasella,” September 2012,
http://www.mckinsey.com/features/leading_in_the_21st_century/daniel_vasella, accessed March 2013.
3 Srikant Datar and Carin-Isabel Knoop, “Novartis (A): Being a Global Leader,” HBS No. 198-041.
4 Datar and Knoop.
5 Datar and Knoop.
6 Joseph Brown, “Concentrated focus (Novartis),” Med Ad News, September 1, 2000, via Factiva, accessed March 2013.
7 Brown.
8 “Agrochemical deal planted,” CNN Money, December 2, 1999, http://money.cnn.com/1999/12/02/europe/drugdeal/,
accessed January 2013.
9 Brown.
10 Brown.
11 Brown.
12 Brown.
13 Kerry Capell, “Novartis: Radically Remaking Its Drug Business,” Bloomberg BusinessWeek, June 11, 2009,
http://www.businessweek.com/magazine/content/09_25/b4136030131343.htm, accessed March 2013.
14 Capell.
15 Jeanne Whalen, “Novartis’s Big Experiment—Former Professor Reinvents Process for Making Drug Discoveries,” The Wall
Street Journal, p. 4, January 19, 2005, via Factiva, accessed January 4, 2013.
16 Brown.
17 Moore.
18 Carey Sargent, “Novartis Can Stand Alone On Portfolio, Sales Strength,” Dow Jones International News, March 27, 2002, via
Factiva, accessed March 22, 2013.
19 Nicolai Ouroussoff, “Many Hands, One Vision,” New York Times, December 23, 2009,
http://www.nytimes.com/2009/12/27/arts/design/27novartis.html?pagewanted=all&_r=0, accessed April 2013.
20 Ouroussoff.
21 Haig Simonian, “Sandoz chief has no misgivings over Hexal,”Financial Times, April 13, 2005, http://search.proquest.com,
accessed March 5, 2013.
22 “Novartis: Downgrade to Peer Perform after Alcon Acquisition,” Bear Stearns, April 8, 2008, available via Thomson ONE,
accessed March 2013.
23 “Novartis: Downgrade to Peer Perform after Alcon Acquisition,” Bear Stearns, April 8, 2008.
24 McKinsey & Company, “An interview with Daniel Vasella,” September 2012,
http://www.mckinsey.com/features/leading_in_the_21st_century/daniel_vasella, accessed March 4, 2013.
25 Geoff Colvin, “Novartis’s pathway to business longevity,” Fortune Magazine, March 21, 2013.
26 Colvin, “Novartis’s pathway to business longevity.”
27 Colvin, “Novartis’s pathway to business longevity.”
28 Colvin, “Novartis’s pathway to business longevity.”
29 Colvin, “Novartis’s pathway to business longevity.”
24
This document is authorized for use only by Seda Keshishyan in MGMT 385 International Business Summer 2024 taught by GREGORY THEYEL, California State University – East Bay from
May 2024 to Aug 2024.