In major shake-up, Novartis combines pharma and oncology units, leaving 3 top execs without jobs

Novartis CEO Vas Narasimhan is giving the Swiss pharma a huge makeover ahead of a possible spinoff of generics unit Sandoz, pushing out three C-level executives and preparing for layoffs.

Novartis will no longer have oncology and pharmaceuticals as two separate commercial departments. Instead, all Novartis novel drugs will merge into one innovative medicines unit to be managed under U.S. and international markets organizations, the company said Monday.

Simultaneously, Novartis is creating a new position in charge of corporate strategy, R&D portfolio strategy and business development, carving out some responsibilities from the head of drug development. The new role will be called the Novartis chief strategy and growth officer.

As a result, Susanne Schaffert, Ph.D., president of Novartis Oncology, is left without a job. Marie-France Tschudin, Schaffert’s counterpart on the pharmaceuticals side, will transition to head up international operations and also bear the title of chief commercial officer. As for the U.S. market, Victor Bulto, who was the U.S. head of pharmaceuticals, has been elevated to lead all U.S. commercialization across therapeutic areas.

The combination will trigger some job cuts, a Novartis spokesperson told Fierce Pharma, but it’s too early to speculate which roles and how many.

By lifting Bulto to the executive committee, Narasimhan is playing up Novartis’ ambition in the U.S. market, where it currently ranks 10th by revenue in branded drugs by the company’s calculations.

“I think it shouldn’t be underestimated that Novartis is elevating the U.S. organization for a company that’s historically been consistently No.1 outside of the U.S., particularly in Europe, but [has] not been able to be the top 5 in the U.S., the most valuable and important market in the biopharmaceutical sector,” the chief executive said during an investor call Monday.

Chief Medical Officer John Tsai, M.D., is also leaving Novartis. To fill his role, Novartis has brought back a 20-year company veteran in a move that suggests potential deeper venture into RNA interference (RNAi) therapies.

Shreeram Aradhye, M.D., will become Novartis’ new CMO starting May 16. Aradhye was most recently chief medical officer at RNAi specialist Dicerna Therapeutics, which was just acquired by Novo Nordisk for $3.3 billion.

Novartis already markets Leqvio, a PCSK9-targeted RNAi therapy developed with technology from Alnylam Pharmaceuticals. During a recent investor event, Narasimhan highlighted RNA therapy as one of the company’s key technology platforms alongside cell and gene therapy and radiopharmaceuticals.

As for the newly created role of chief strategy and growth officer, Novartis said the search is underway for the right talent. Lutz Hegemann, M.D., Ph.D., president of global health, will lead the function in the interim.

The chief strategy and growth officer will oversee the corporate strategy team, a new portfolio strategy and analytics team, a new strategic competitive intelligence team and an integrated BD team. The function will focus on strengthening Novartis’ pipeline, independent of the R&D and commercial teams. That independence is key, according to Narasimhan.

“I think the company could benefit from having an independent view on whether the assets we take forward either internally or externally [...] can really generate that multibillion-dollar potential we’re looking for and have that voice in the room so that we can then say 'no' to the projects that aren’t going to make it and have the resources available to really invest in the ones that we believe do,” Narasimhan said during the call.

In another internal reorg, Novartis said it’s integrating all general and administrative functions as well as technical operations and customer solutions “to generate economies of scale, drive productivity and create a strong technology and operational foundation.”

Taking a broader purview, Steffen Lang, currently head of Novartis’ technical operations, will become president of operations. Robert Weltevreden, who leads customer and technology solutions, will join Schaffert and Tsai on the trip out the door.

“The simpler organizational model we are unveiling today is central to our growth strategy as it will make us more agile and competitive, enhance patient and customer orientation, unlock significant potential in our R&D pipeline and drive value-creation through operational efficiencies,” Narasimhan said.

After the revamp, Novartis expects annual cost savings of at least $1 billion by 2024. The company also reiterated its ambition to achieve 4% compounded annual sales growth between 2020 and 2026. It expects a margin in the high 30s in the midterm and more than 40% in the mid- to long term.

“[The] new simplified structure and operational set-up supports Novartis strategy as a focused medicines company and is designed to power next phase of innovation, growth and productivity,” the company said.

The restructuring is a “proactive move” on the exec team’s part, Narasimhan said, stressing that it’s not under board or investor pressure. It’s “a natural next step” after the company launched a strategic review of generics-focused Sandoz and identified additional room for structural improvement, he added.

Novartis is still looking all options for Sandoz, ranging from retaining the business to separation, the Novartis spokesperson confirmed to Fierce Pharma. The company has said it will make a decision on the unit’s fate this year.

Editor's Note: The story has been updated with additional comments from Novartis CEO Vas Narasimhan during an investors' call.