Vas Narasimhan: the American trying to reshape Novartis

Before capturing the top job at Novartis in 2018, Vas Narasimhan had already left his mark on the Swiss drugmaker’s headquarters.

On the ground floor of a building at the company’s Basel campus is a glass-walled room packed with dashboards tracking the progress of the group’s clinical trials and known as the “control room”.

Dreamed up by Narasimhan when he was head of development at the pharma group, its design reflects his fondness for symbolism, said a former colleague. “Vas is a big believer [in] symbols to enforce culture, ”they added.

If the design was intended to promote a culture of transparency – and harness the power of data – Narasimhan now faces a very public decision that will go a long way to shaping the future of the drugmaker that has staff in 155 countries and is one of Switzerland’s best-known companies.

The American, who trained as a doctor at Harvard and joined Novartis in 2005, has to decide the fate of the group’s generics business Sandoz, which employs about 20,000 people and generates about $ 10bn in annual sales.

Founded by the Sandoz family, the business was one of two that merged to create Novartis in 1996. Its drugs, which are marketed under the Sandoz brand, are a staple of medicine cabinets in Germany, Austria and parts of Switzerland.

However, its stagnant sales and lackluster profits do not fit easily with Narasimhan’s promise to shift the company towards lower-volume but higher-priced medicines. Novartis had sought to offload parts of the US unit of Sandoz in 2018 but regulators scuppered the transaction.

Narasimhan insisted this week that he has “no bias” towards any of the options for Sandoz, which several of the world’s largest private equity firms are considering bids for. Other pharmaceutical companies have also expressed early interest.

“It’s a household name,” a top Novartis executive said of the generics business, adding that the Sandoz family retains a stake in Novartis. Last year, the Swiss Social Democrats went as far as saying the business should be nationalized.

Privately, some of the group’s executives believe spinning off the business is the most likely outcome. In 2019, Narasimhan spun off the group’s eyecare unit Alcon, which had also drawn interest from buyout firms.

But Narasimhan has shown he is prepared to spring surprises. Last November, Novartis announced it would sell its $ 21bn stake in domestic rival Roche, ending a two-decade old investment.

Novartis has since announced a $ 15bn share buyback plan, helping lift a stock that has only gained 10 per cent since Narasimhan took over and lagged the advance in the Stoxx Europe 600 Healthcare index.

Since 2018, the company has spent about $ 30bn on bolt-on acquisitions, preferring them to potentially transformative but riskier deals, in bid to counter the upcoming loss of exclusivity on some of its drugs. Last year, it paid $ 1.5bn for Gyroscope Therapeutics, a company developing a potential treatment for blindness.

“People give him a hard time, but he is incredibly smart,” one top-20 shareholder told the Financial Times. “He listens to investors.”

The 46-year-old spent some of his first year addressing the fallout from the company’s decision in 2017 to pay $ 1.2mn to Donald Trump’s then lawyer Michael Cohen, a move a report by Senate Democrats said was designed to buy access to the president’s inner circle.

A year later, Novartis faced a data-integrity scandal at its gene therapy subsidiary AveXis, which it paid almost $ 9bn for in 2018.

While pressure remains to renew the company’s pipeline of drugs, former and current staff say Narasimhan has made significant efforts to overhaul a corporate culture that critics say can be too rigid and hierarchical.

“Loosening the reins at lower levels is not something that’s easily done at Novartis,” says one former executive. “Everything gets checked. Not necessarily the order of what brand of photocopier paper for the laser printer, but almost at that level of detail. ”

Narasimhan has sought to introduce an “unbossed culture”, or what the company has described as creating leaders that put their teams’ success above their own. But current and former employees say the push has met resistance in a company long built on strict hierarchies.

“I’ve always been very impressed with his values,” said Richard Cash, one of Narasimhan’s mentors at Harvard co-author of a paper on how poorer countries get punished for reporting epidemic outbreaks.

When asked late last year what keeps him awake at night, Narasimhan ducked the question, saying that “sleep is the most important medicine.”

Known within Novartis for an even temperament, Narasimhan will need it as the pressure builds to reshape the drugmaker.

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