Vasant Narasimhan, a 41-year-old Harvard-trained doctor, took the helm earlier this month at Novartis, the world’s No. 2 prescription-drug firm by sales after Pfizer Inc. Dr. Narasimhan has promised a technological revolution at Novartis to boost its drug-development pipeline. He inherits an empire that his predecessor spent most of his tenure pruning to focus more on its bread and butter—finding and developing new prescription drugs.
“We need to become a focused medicines company that’s powered by data science and digital technologies,” Dr. Narasimhan said in a recent interview.
Amid his larger ambitions for using new technology to boost a drugs push, Dr. Narasimhan faces looming decisions on whether to sell two big units: Novartis has said it would decide within 18 months whether to spin off its Alcon eyecare business, and it is reviewing the U.S. arm of its Sandoz generics business.
“Timing Alcon’s spinoff right and dealing with Sandoz could become a big headache for the new CEO and distract some of his attention from R&D,” UBS analyst Michael Leuchten said.
Dr. Narasimhan, an Indian-born U.S. citizen, joined Novartis in 2005 from consultancy McKinsey & Co., rose quickly through the Swiss drugmaker’s ranks and ultimately ran its prized research-and-development arm.
Now, as CEO, he is pushing a series of tech-based initiatives he says could jump-start the company’s drug pipeline. He wants to introduce artificial-intelligence to find new biomarkers, molecules that can help identify patients most likely to respond to a specific treatment and speed up clinical trials. Novartis also is working on devices including wearable sensors to capture real-time data during drug trials: New sensor technology it developed with Microsoft Corp. , for example, would help it monitor multiple-sclerosis symptoms in trials.
But before devoting his full attention to those initiatives, Dr. Narasimhan has to decide what to do about Alcon and Sandoz.
Novartis bought Alcon in two transactions starting 10 years ago for a total of more than $50 billion, and it has been a big disappointment—until recently. Sales growth has picked up, making any decision to shed the unit a much tougher call.
Dr. Narasimhan also is struggling with the Sandoz generics unit in the U.S. It has been a reliable money-spinner, but fourth-quarter revenue tumbled 17% in the U.S. last year, reflecting pricing weakness in generic drugs and raising questions about whether Novartis will part ways with the unit.
While Novartis has said it would continue to invest in Sandoz’s unit for biosimilar drugs—near-replicas of biologic drugs, which are made using living cells—it will need to take hard look at the rest of its portfolio in the U.S.
“We have to ask ourselves how we want to shape our U.S. presence in the future,” Dr. Narasimhan said. “It’s going to take some time for us to assess and come up with the right answer.”
Over the past decade, drug makers like Novartis, U.S. rival Pfizer and Britain’s GlaxoSmithKline PLC have invested billions of dollars diversifying into businesses like consumer health care—think toothpaste, pain killers—and vaccines, to help mitigate the loss of patent protection on some of their biggest-selling medicines.
Now, as some of these giants work their way through the bulk of those expirations, they are reversing course and refocusing again on high-risk, but high-margin, prescription drugs: Pfizer is selling its giant consumer health care business, and Glaxo, under its own new, young CEO, has promised to double down on the R&D pipeline.
Novartis says 2017 was a “landmark year for innovation.” It received 16 approvals for new drugs or for new indications for existing products—and it will be able to maintain that pace in 2018, a company spokesman said.
It falls to Dr. Narasimhan to keep the momentum going. He succeeds Joseph Jimenez, who as CEO dismantled the sprawling drug and health-care giant his predecessor had built. In 2014, he sold Novartis’s animal health unit. He spun off its consumer health-care business into an independent joint-venture and sold the company’s vaccine unit in 2015.
The down-sizing affected sales, shrinking them almost by a fifth over the past five years. Novartis stock has underperformed that peers, rising 41% over Mr. Jimenez’s eight-year tenure, compared with a rise of 130% over the same period for the S&P Global 1200 Health Care Index.
Last month, Novartis reported annual sales rose 1% for 2017—its first revenue increase in three years.
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