Novartis AG's Pharma Head Exits as Drug Business is Split into Two

Published: May 24, 2016

Novartis Pharma Head Exits as Drug Business is Split into Two May 18, 2016
By Alex Keown, Breaking News Staff

BASEL, Switzerland – Underscoring its commitment to oncology therapies, Novartis split its pharmaceuticals division into two separate business units, one focused on drug development and the other dedicated to treatments for cancer.

The dedicated cancer division reflects the importance of oncology to Novartis following its successful integration of the oncology assets acquired from GlaxoSmithKline , Novartis said Tuesday.

Novartis said the split into two separate units is intended to help drive company growth and strategy. Additionally, the two divisions will provide an “an increased focus and improved execution for both the Novartis Oncology and Novartis Pharmaceuticals business units,” the company said in a statement. Earlier this year, Novartis predicted a slow 2016 as the company faces $3 billion in patent expirations, including blood-cancer treatment Gleevec.

Novartis acquired GSK’s oncology business in 2015 as part of a three-part deal. GSK bought Novartis’s global vaccines business, excluding the influenza vaccines; it created a Consumer Healthcare joint venture with Novartis, and sold its oncology business to Novartis.

In addition, Novartis announced the departure of David Epstein, who had been the head of the pharmaceuticals division. Novartis said Epstein has decided to leave Novartis and explore new challenges in the United States, which is a likely indicator Epstein is not in the running to replace Sir Andrew Witty at the helm of GSK. During his tenure at Novartis, Epstein has been involved with the launch of several drugs, including Gleevec, Gilenya, new psoriasis treatment Cosentyx and the company’s new heart medicine Entresto.

Since its approval by the U.S. Food and Drug Administration in July, sales of Entresto have been sluggish in part due to reimbursement issues. Analysts predict the drug could generate $5 billion in annual revenue by 2020, however earlier this year Epstein predicted Entresto sales for 2016 would only be around $200 million, Reuters reported.

That could change though, since Express Scripts, the country’s largest pharmacy benefits manager, added Entresto to its preferred formulary for 2016.

With Epstein out, Novartis brought in two executives to helm the new business divisions. Paul Hudson was named chief executive officer of Novartis Pharmaceuticals and Bruno Strigini was tapped as CEO of Novartis Oncology. Hudson was wooed away from a position as an executive vice president of North American operations for AstraZeneca and Strigini, who had been head of Novartis’ oncology, will lead the new business unit, which includes oncology as well as gene therapies. Both executives will report to Joe Jiminez, Novartis’ chief executive officer.

Epstein’s departure comes less than a month after Christi Shaw, head of Novartis’ U.S. operations, stepped down citing personal reasons. Shaw, who served as head of U.S. Novartis Corporation and Novartis Pharmaceutical Corporation since 2014, will be replaced by two people, Fabrice Chouraqui and Tom Kendris. Another departure was Jeff George, who stepped down from the helm of Novartis’ eye-care company, Alcon , in January. Following George’s departure, Novartis tapped former Hospira executive Michael Ball to help turn that division around after the company again fell short of earnings expectations.

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