Jimenez hands Novartis reins to Narasimhan


Novartis’s outgoing chief executive Joe Jimenez is leaving on a high, under a week after bagging the first CAR-T approval for Kymriah. But there is still work to do for the Swiss company’s new leader, Vasant Narasimhan, including deciding what to do with its troubled Alcon eyecare unit and its $14bn stake in Roche.

During Mr Jimenez’s eight-year tenure Novartis’s share price has risen 50% to SFr80.85, but is currently off the all-time high of SFr101 seen in 2015. Since then, generic competition for Gleevec has begun to take its toll and Entresto’s launch has disappointed – more issues that will now fall to Mr Narasimhan, currently Novartis’s chief medical officer.

But the incoming leader, with his background in drug development, seems likely to focus on the company’s pipeline once he takes the reins in February. The group’s bet on cell therapy was recently vindicated by the FDA approval of Kymriah, the first CAR-T product to get the go-ahead (World’s first CAR-T approval sweeps away more cell therapy doubts, August 30, 2017). 

With sales of Kymriah forecast to reach $945m in 2022, according to EvaluatePharma sellside consensus, much of the group’s pipeline could struggle to come close – although hopes are also high for the multiple sclerosis project BAF312, and expectations for the wet age-related macular degeneration candidate brolucizumab have shot up since positive pivotal data were reported in June.

Novartis's top-10 pipeline prospects
Project Pharmacology class Indication(s) 2022e sales ($m)
Aimovig/erenumab* Anti-calcitonin gene-related peptide MAb Migraine 526
Phase III
Brolucizumab Anti-vascular endothelial growth factor antibody fragment  Wet age-related macular degeneration, macular oedema 937
BAF312 Sphingosine-1-phosphate 1 & 5 modulator Multiple sclerosis 924
Arzerra S.C. Anti-CD20 MAb Multiple sclerosis 572
ABL001 BCR-ABL inhibitor Chronic myeloid leukaemia 275
SEG101 Anti-P-selectin MAb Sickle cell disease 265
BYL719 Phosphatidylinositol 3-kinase (PI3K) alpha inhibitor Breast cancer 153
QVM149 Long-acting beta 2 adrenoceptor agonist (LABA), long-acting muscarinic antagonist (LAMA) & corticosteroid Asthma 139
QMF149 Long-acting beta 2 adrenoceptor agonist (LABA) & corticosteroid Asthma 124
LCI699 Hydroxylase inhibitor Cushing's syndrome 91
*Being co-developed with Amgen; Source: EvaluatePharma.

Novartis has also highlighted its efforts elsewhere in cancer, pinpointing its anti-PD-1 MAb PDR001 as one to watch; Novartis is trialling the project, which until the beginning of this year had been under the radar, in combination with a slew of other agents.

And the group has another potential new oncology asset in Ilaris, which recently surprised with data at the ESC meeting suggesting that the anti-IL-1 beta MAb, being evaluated in cardiovascular disease, could also cut cancer deaths (ESC 2017 – Cancer death decrease might not save Cantos, August 27, 2017). Novartis has said it plans to start a phase III trial of Ilaris in non-small cell lung cancer in the first quarter of 2018.

Unanswered questions

Investors will no doubt hope that Mr Narasimhan’s appointment will herald more pleasant surprises for Novartis’s pipeline, but the new leader will still have to deal with other lingering issues at the company.

Top of the list is surely Alcon, with the group due to give an update on its plans for the division by the end of the year; Novartis has previously hinted that it might choose to float the unit, which finally seems to be turning around. This puts the decision under Mr Jimenez’s remit, but Mr Narasimhan will have to execute on the plans.

Also at issue is the Roche stake, built up by Mr Jimenez’s predecessor Daniel Vasella as part of his plan to merge the two companies, which never came to fruition. Speculation that Novartis will sell its holding, which amounts to around 6% of Roche, has intensified in recent months.

However, during Novartis’s second-quarter results call, chief financial officer Harry Kirsch declined to give an update, saying only: “It continues to be a financial investment with a strategic element to it. We look for ways to maximise shareholder value on it.”

Then there is the 36.5% stake in the consumer joint venture with Glaxosmithkline, worth around $10bn, which Novartis has the option to offload next March.

What Mr Narasimhan opts to do could offer an insight into his stance on M&A – amassing cash might indicate that he is interested in making a large acquisition. This would be a change from Mr Jimenez’s strategy, with the outgoing leader eschewing megadeals while also being outspoken on the lack of attractive assets in the group’s $2-5bn sweet spot.

But with his track record in R&D, the new chief seems just as likely to go for smaller, earlier-stage targets, or focus resources on Novartis’s in-house projects.

To contact the writer of this story email Madeleine Armstrong in London at madeleinea@epvantage.com or follow @ByMadeleineA on Twitter

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