After 14 years at the helm, Daniel Vasella, chief executive of Swiss pharmaceutical company Novartis AG (NVS) will step down on February 1 and hand over the reins to Joe Jimenez, the head the company's pharmaceutical division. Vasella will continue in his role as chairman, concentrating on strategic priorities.
Vasella, who led Novartis since its inception in 1996, had spearheaded significant deals, including the 2005 acquisition of German generic-drug maker Hexal AG and its U.S. affiliate Eon Labs Inc. and the 2006 purchase of American vaccine maker Chiron Corp.
Novartis' acquisition of an additional 52% stake in eye care company Alcon Inc. (ACL) in a deal valued at $28.1 billion or $180 per share, in early January, marks Vasella's swan song.
Novartis listed its ADRs (American Depositary Shares) on the New York Stock Exchange in May 2000. Not stuck to being a pharma pure play, the Swiss drug giant under the leadership of Vasella has diversified its business - from vaccines to generics and to consumer health. The company's business includes four divisions - Pharmaceuticals, Vaccines & Diagnostics, Sandoz and Consumer Health.
Joe Jimenez, who is taking up the baton as CEO at a time when the company is entering a new growth phase, will also have to deal with the challenges posed by pricing pressure and looming patent expirations of some of the company's key drugs. The patent on Novartis' hypertension drug Diovan, which fetches $6 billion in annual sales, expires in major countries of the EU during 2011, in the U.S. in September 2012, and in Japan in 2013.
The company's breast cancer treatment Femara, which makes over $1 billion in annual revenue, will be falling off the patent cliff in 2011 in the U.S and in major European markets, while generic versions have already been launched in some smaller European markets. Yet another drug, which faces generic incursion, is Sandostatin LAR formulation, the long-acting version that represents a majority of Sandostatin sales. The patent covering Sandostatin LAR, an approved treatment for acromegaly, expires in July 2010 in major markets outside the U.S., and in 2014 and beyond in the U.S. Sandostatin has annual sales of over $1 billion and Sandostatin LAR accounts for nearly 90% of its sales.
Novartis ended 2009 on a high note, delivering double-digit net sales and earnings growth for the just-concluded fourth-quarter.
In the fourth-quarter ended December 31, 2009, whose results were released as recently as January 26, the company's net income rose 54% to $2.3 billion and basic per share earnings increased 53% to $1.01, compared to the year-ago quarter. Core net income for the quarter was up 47% to $2.9 billion and core basic per share earnings also rose at the same pace to $1.26 from the comparable quarter a year before.
Net sales for the quarter grew 28% to $12.93 billion, thanks to the rapid uptake of recently launched drugs and strong deliveries of A (H1N1) pandemic flu vaccines.
Having achieved over 30 major new product approvals in the U.S., Europe and Japan last year, Novartis expects 2010 to be a year of significant progress and foresees net sales to increase at a mid-single-digit percentage rate.
The year 2010 will also see Novartis strengthening its healthcare portfolio and position in eye care, a sector with dynamic growth due to the increasing patient needs of an aging population, as it completes acquisition of a majority stake in Alcon in the second half of 2010.
Novartis has been pursuing Alcon since 2008 as it was found to be a strategic fit. Novartis makes contact lenses through its CIBA Vision division and with the addition of Alcon, the firm will control more than 70% of the global vision care sector in pharmaceuticals, surgical products, contact lenses and OTC brands.
In April 2008, Novartis acquired 25% stake in Alcon from Swiss food giant Nestlé for $10.4 billion or $143.18 per share. As part of deal in 2008, Novartis was also given the exclusive right to acquire from Nestlé, the remaining 52% Alcon's stake for about $28 billion or $180 per share between January 2010 and July 2011. Now that Novartis has exercised its call option to buy the 52% stake, its next move is to gain full ownership of Alcon.
Meanwhile, Novartis' offer of $11.2 billion or $153 per share for the remaining 23% minority stake of Alcon has been termed "grossly inadequate" and "fundamentally flawed" by Alcon's independent director committee. Under the Swiss merger rules, Novartis requires only two-thirds shareholder approval and a simple majority vote of the board.
Whether Novartis will up its bid for the minority stake in Alcon or play hardball by using Swiss rules to its advantage, remains to be seen.
The full acquisition of Alcon is expected to be about 9% dilutive to fully diluted earnings per share, but 1% accretive to core earnings per share in the first year after closing the deal.
Prompted by strong business expansion, Novartis has proposed a 5% dividend increase - representing an annual dividend growth of 12% and the thirteenth consecutive dividend increase.
As mentioned earlier, Jimenez is assuming charge at a time when the company is entering a new growth phase. According to Novartis, it has a full pipeline with 145 projects in pharmaceutical clinical development, of which 60 involve new molecular entities.
Analysts have already hinted that as CEO, Jimenez' priority should be cost-cutting. Joe Jimenez, who took over as head of Novartis' pharmaceuticals unit in October 2007, has been credited with improving efficiency by achieving significantly higher operating margins in pharmaceuticals business. With the company's top priority being continued improvement in organizational productivity, analysts expect Jimenez to stage an encore performance in the CEO role.
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June 12, 2026 17:14 ET Major central bank action was the focus this week in economic news. The European Central Bank became the first major central bank to move in response to the rising inflationary pressures in the backdrop of the conflict in the Middle East. In North America, the U.S. inflation and trade data as well as Canada’s central bank decision gained attention. The Chinese trade data was the main news in Asia.