Jimenez hails ‘New Novartis’

Chief executive Joe Jimenez has unveiled a new vision for the company's future, promising a 'New and more focused Novartis'.

The company has now finished a strategic review of its business, the most eye-catching element of which was the $14.5 billion 'swap' of divisions with GSK. This deal, announced in April, will see it sell its vaccines division to GSK, and acquire GSK's oncology portfolio in return.

The deal also sees Novartis divest its animal health division to Lilly for around $5.4 billion.

This leaves Novartis with three core business divisions – pharmaceuticals, Alcon, the ophthalmology business, and Sandoz, the generics arm.

The break up of the old, more diversified Novartis reflects changes across big pharma, which is under pressure from investors to squeeze more profitability out of their businesses.

The Swiss headquartered firm has resisted a renewed bout of mergers and acquisitions in the sector, which includes Pfizer's failed bid for AstraZeneca and Valeant's ongoing pursuit of Allergan.

More profitable

Novartis says its three remaining businesses have the 'innovation power' to produce breakthroughs as well as the global scale to achieve growth in different global markets.

The new Novartis is expected to be more profitable: under the announced new structure, the Group's core operating income margin in 2013 would have been 27.2%, 250 basis points higher than the announced 24.7% on a pro forma basis.

The firm has created Novartis Business Services (NBS), a way of cutting costs by harmonising services across the company and its divisions. The scope of NBS covers over $6 billion in expenses, and Novartis says it complements other ongoing productivity initiatives, including a review of its manufacturing footprint.

Despite all the changes, Jimenez said the group's strategic priorities of innovation, growth and productivity remain unchanged.

"With Pharmaceuticals, Alcon and Sandoz, as well as [R&D division] NIBR, we have shaped Novartis to win in a future world in which innovation and scale are expected to be critical to meet demand," said Jimenez,

He concluded: "Following the expected completion of the portfolio transformation transactions, the new Novartis will be more focused, more profitable, with the potential to grow faster."

Research and development

Novartis has a number of promising late-stage drugs which it hopes will help it maintain growth over the next decade.

The firm's pharmaceuticals division is focused on five business areas - Oncology, Dermatology, Heart Failure, Respiratory and Cell Therapy.

Among the drugs nearing the market or already approved are two heart failure treatments - LCZ696 in chronic heart failure and RLX030 (serelaxin) in acute heart failure. While both drugs have been identified as potential Breakthrough Therapies, serelaxin has hit major problems after the FDA rejected it in May because of lack of efficacy data.

In dermatology, AIN457 (secukinumab) is the first IL-17A biologic for psoriasis, and is expecting first regulatory decisions at the end of 2014 and early 2015.

In oncology, LEE011 (a highly selective CDK4/6 inhibitor) is a first line hormone receptor positive advanced breast cancer is currently in phase III.

Meanwhile in respiratory medicine, the new Ultibro Breezhaler is looking to compete in COPD, but will face stiff competition from GSK's established Seretide, as well as its new Breo Ellipta.

Finally Novartis is looking to compete in the cutting edge field of cell and gene therapy, and has created a new division to develop expertise in this field.

This includes presence in immunotherapy, an area fast emerging as having a key role in oncology. The division's work programmes include Facilitating Cell Therapy Platform (FCRx) and CART. Novartis says these CART programmes are developing personalised cellular immuno-oncology (IO) therapies for both haematological and solid tumours.

Links

Novartis and GSK’s multi-billion dollar swaps to transform both companies