Dive Brief:
- Novartis on Tuesday named Ronny Gal, a longtime analyst with advisory firm Bernstein, as its chief strategy and growth officer, the latest move in an organizational shakeup the Swiss drug company announced in early April.
- Gal’s role is a newly created position that will involve dealmaking and portfolio-management responsibilities. Novartis combined those functions, which were previously carried out by multiple executives, into a single job. Gal will report directly to CEO Vas Narasimhan and begin no later than Aug. 1, the company said in an earnings presentation.
- While Novartis hasn’t yet finalized the layoffs that will come alongside its restructuring. Narasimhan said on a conference call that the affected positions will be “in the single-digit thousands.” The drugmaker employed more than 104,000 workers at the end of 2021, according to a regulatory filing.
Dive Insight:
Novartis for years has been seeking to slim down from the sprawling healthcare conglomerate it once was, and the restructuring it began earlier this month is aimed at taking those ambitions a step further.
The company announced plans to merge several business units. For example, its pharmaceutical and oncology divisions are being combined into an “innovative medicines” unit responsible for finding and developing prescription drugs. Technical operations and its “customer technology” division also are becoming a single unit.
Thousands of rank-and-file employees will be affected, though Novartis hasn’t said which roles will be impacted or how many. In a television interview with Bloomberg Tuesday, Narasimhan provided a few additional details, noting that the layoffs will occur across Novartis’ global operations and primarily affect general, administrative as well as “customer-facing” positions. About 4,700 full-time Novartis employees worked in general and administrative functions at the end of 2021, according to a regulatory filing.
The series of moves are expected to save the drugmaker at least $1 billion annually and boost margins. Currently, Novartis’ selling, general and administrative costs make up about 29% of sales, higher than many of its peers.
“The goal is to make the company more agile, more efficient and to drive faster growth,” Narasimhan told Bloomberg.
The plan has already led to the departure of multiple top Novartis executives, including chief medical officer John Tsai and oncology chief Susanne Schaffert. At the same time, the organizational revamp has created new functions, among them the chief strategy and growth officer role Gal has been hired to fill.
Gal, who has spent more than 20 years as a life sciences analyst and consultant, will take on that job at a time when Narasimhan already has narrowed Novartis’ focus. Since 2018, the company spun out its eye-care unit and sold its stake in a joint consumer health venture with GlaxoSmithKline. The generic-drug division Sandoz may be next, with an update on its fate expected by the end of the year.
Novartis has staked its future on the growth of its prescription drug business, which generated about $42 billion in sales last year and just over $10 billion in the first quarter of 2022. The company is gearing up for several key drug launches by 2026. Some already have begun, including cholesterol drug Levqio and prostate cancer medicine Pluvicto. Others could follow, like the cancer immunotherapy tislelizumab that’s under review in Europe.
Dealmaking will be part of that equation as well. While biotech valuations have fallen amid a sector-wide slump, Narasimhan indicated on the conference call that prices would have to drop even more for Novartis to make a deal. The company is targeting acquisitions no larger than $2 billion, he said.
