Novo's new CEO confides that M&A will be part of growth search

Denmark’s Novo Nordisk surprised some folks when it selected Lars Fruergaard Jorgensen as its new CEO. Now Jorgensen is surprising others with a new strategy for taking the staid pharma player into M&A for growth.

The company has already recast its R&D to look at areas that are ancillary to its core business in diabetes. Jorgensen acknowledged in an interview with Reuters that the company needs to do some “bolt on” deals that can expand on that strategy.  

"It is not my ambition to go out and do deals where we would not be bringing significant value in terms of disease understanding, commercial infrastructure or manufacturing. The more of those boxes you can tick the better," Jorgensen explained.

He would not comment about a report last week from Reuters that Novo is scoping out blood therapy biotech Global Blood Therapeutics (GBT). The California biotech is working in sickle cell anemia as well as other areas. GBT, which saw its stock jump 2% on the news, has a market cap of about $1.4 billion.  

He did acknowledge that it needed to find some deals to help with growth. “Across our business we need to increasingly look for external innovation,” he told Reuters.

Jorgensen, who took on the CEO mantle Jan. 1, comes on at very difficult time for the drugmaker. Novo has seen its growth stymied by a very competitive diabetes market that has allowed U.S. payers to work exclusive deals to cut their costs. The drugmaker has offered very weak forecasts for the year. It has also laid off 1,000 employees in the U.S. to cut costs.

On top of all of that, its history of price hikes has also drawn Congressional scrutiny and legal action from both investors and consumers. A class action lawsuit by a retirement fund alleged the company hid price-fixing in the insulin market. That was followed by legal action from consumers who made similar claims against Novo and competitors Sanofi and Lilly, saying the companies made “astounding” insulin price increases.

Novo was counting on veteran exec Jakob Riis, who was named last fall to head of North American operations, to negotiate the company’s path through the difficult U.S. environment. But Riis was among those most surprised by the appointment of Jorgensen. He recently resigned, acknowledging that he left in disappointment over not being named to the top spot himself.

It is not as if Novo is completely adrift in the U.S. Despite the payer pressures, that region delivered 4% growth last year, a 37% share of the company’s overall expansion. But with payer and political pressures mounting, the company has projected overall sales growth for the year of -1% to 4% in local currencies,translating to 1% to 6% on a reported basis.