NOVARTIS: what next?

The incoming chief executive of Novartis, Vas Narasimhan, has vowed to slash drug development costs, eyeing savings of up to 25 per cent on multibillion-dollar clinical trials as part of a “productivity revolution” at the Swiss drugmaker.

The time and cost of taking a medicine from discovery to market has long been seen as the biggest drag on the pharmaceutical industry’s performance, with the process typically taking up to 14 years and costing at least $2.5bn.

In his first interview as CEO-designate, Dr Narasimhan says analysts have estimated between 10 and 25 per cent could be cut from the cost of trials if digital technology were used to carry them out more efficiently. The company has 200 drug development projects under way and is running 500 trials, so “that will have a big effect if we can do it at scale”.

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Dr Narasimhan plans to partner with, or acquire, artificial intelligence and data analytics companies, to supplement Novartis’s strong but “scattered” data science capability.

Separately, he faces a number of decisions that will determine the structure of the business he will inherit from outgoing chief executive Joe Jimenez in February.

Key choices include 

• whether to sell a 36.5 per cent stake in its consumer joint venture with GlaxoSmithKline; 
• whether to spin out Alcon, its eyecare unit; and 
• whether to sell its longstanding stake, amounting to 6 per cent of outstanding shares, in Roche, its Basel neighbour and rival. This stake has been valued at about $14bn.

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 Last year 67 per cent of Novartis’s $48.5bn revenue came from its innovative medicines division, made up of pharmaceuticals and oncology.

David Epstein, who spent 20 years at the drugmaker, latterly as head of pharma, and is now an executive partner at Flagship Pioneering, a venture capital business, says: “If you look at . . . where the growth and real profits have come from, it’s almost all coming from the pharma part of the business. So the question is: what do you gain by having a generics business, what do you gain by having Alcon?”

Previously Mr Jimenez has said that a spin out of Alcon could fetch between $25bn and $35bn. It says it would dispose of only 60 per cent of the business it bought for just over $50bn in 2010.

With months to go before he takes the helm, Dr Narasimhan, whose current role is global head of drug development at Novartis, declines to discuss his view on what he terms these “adjacencies”. He says, however: “I really think of our future as a medicines and data science company, centred on innovation and access.”(Más)