On its annual list of the world’s 100 top CEOs, Harvard Business Review tagged 5 biopharma execs--and one, Novo Nordisk CEO Lars Rebien Sørensen, took the No. 1 slot for the second year in a row. Thing is, two of those 5 are on their way out.
That includes Sørensen, who’s stepping down early, yielding his spot to Lars Fruergaard Jorgensen at the end of this year. And Biogen chief George Scangos, who clocked in at 21st place on HBR’s ranking, has also said he’ll step down, with a replacement yet to be named.
HBR analyzes long-term CEO performance, measuring returns, sustainability and governance over their entire tenure at the helm. In addition to Sørensen and Scangos, the ranking includes Actelion chief Jean-Paul Clozel (59th), Regeneron CEO Leonard Schleifer (67th) and Eisai helmsman Haruo Naito (87th).
Sørensen has presided over an era of growth and returns at Novo that has far outstripped the industry, and that’s one of the reasons why HBR selected him to lead the list again. But the company’s shares plummeted 20% this summer on worries about payer pressure and pricing. And as HBR spokeswoman Amy Poftak wrote in an email, Sørensen’s departure two years before the end of his contract is “a stark reminder that even spectacular past performance doesn’t ensure job security.”
To be fair, Sørensen had intended to step down before the end of his contract, but his presumed successor, Kåre Schultz, jumped ship last year to serve as CEO at fellow Danish drugmaker Lundbeck. Meanwhile, pressure on the diabetes-focused Novo was intensifying, so Sørensen agreed to stick around to help navigate.
Indeed, a diabetes market that turned rocky almost overnight has threatened Novo in a way it hasn’t seen before. Payer pressure on the company’s newest launches--in the U.S., its biggest market--has dampened expectations. A biosimilar basal insulin jeopardizes its contender, Levemir, and more importantly, the longer-acting product Tresiba. Stepped-up competition for its blockbuster GLP-1 drug Victoza only adds to the strain.
Sørensen’s decision to retire followed a management restructuring earlier this year designed to emphasize Novo’s international operations and bring several managers into the executive committee to help inform succession planning. The company considered external candidates but decided it was best to tap a CEO already steeped in the “Novo Nordisk Way” and its triple-bottom-line approach.
When Sørensen said he’d stay to help out after Schultz’s departure, the company was facing an “unprecedented number” of new launches, the CEO said during a call with analysts after the announcement that he was leaving. He said the time was now right for a change.
“I think the immediate challenge in the U.S. market has been dealt with,” Sørensen said at the time. “There’s a new group of launches taking place as we speak. ... So that will, of course, give a new set of launch challenges, which I think the new management team will be well-equipped to take care of.”
Meanwhile, Biogen has suffered its own declines recently, as its fast-launching multiple sclerosis pill Tecfidera ran into safety concerns, prompting a pullback in prescription growth. As Tecfidera began to flag and shares suffered, the company announced it would cut 11% of its workforce and pull out of some research programs.
Some analysts figure the company needs to make some deals or risk becoming a takeover target itself. Since the cutbacks announcement last October, Biogen has said it would spin off its hemophilia business, which could bring in $5.9 billion in cash to play with. The company’s Q2 results were solid. But the new CEO, whoever that happens to be, will have plenty of challenges ahead.
HBR put Scangos in the No. 21 slot on its list, with a rating of 84 for financial performance, 135 for sustainability and 273 for a composite measure of environmental, social and governance metrics.
“[T]he company is a very different company from what it was a few years ago,” Scangos said when his departure was announced. “We have a full and excellent management team. We have a pipeline that is, I think, quite exciting--but needs to grow. … I think the strategy is solid.”
Sørensen has repeatedly said that the Novo Nordisk team--not he himself, or any individual executive--is what matters to the company’s success, an outlook that’s antithetical to CEO rankings like this one, but perhaps fitting at a company with a “strong culture” that pays its CEO a fraction of the compensation at other pharmas, especially U.S. companies.
“To be honest, I think we’re highly overrated,” Sørensen told the HBR for its latest feature. “At least in my business, success is far more of a team effort than the public would like to believe, especially in America."
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