Business gurus often suggest that healthcare import some of the MBA-type approaches--such as "best practices"--that are common in other industries. So is it any surprise that a particular benchmark known as the cash conversion rate would invade pharma? Especially when the executive at the helm of a particular drug division comes from the consumer-products industry?
Joe Jimenez, head of pharmaceuticals for Novartis, is aiming to halve his company's rate of cash conversion--the time between production of a product and receipt of payment--from its current 200-plus days. The idea, as explained to the Financial Times, is to free up more money for reinvestment and cut the need for outside financing. "The cash conversion cycle has not been a focus for pharmaceuticals," he told the paper. "But this will help us self-fund acquisitions."
Jimenez was inspired, he says, by his days at HJ Heinz. He's planning to import some other business nuts-and-bolts as well. In doing so, he's not alone; as you know, more and more Big Pharma executives are coming from outside the industry. Pfizer CEO Jeff Kindler (McDonald's) and CFO Frank D'Amelio (Alcatel-Lucent) are just two notable examples. And consultants prod pharma from outside as well; just witness the recommendations that drugmakers boost free cash flow. Any examples from your company? Let us know.
- read the FT piece