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Surprise Novartis CEO seen as "logical" choice



Daniel Vasella (left) said the time was right to hand on to a new CEO - Joe Jimenez (right)

Daniel Vasella (left) said the time was right to hand on to a new CEO - Joe Jimenez (right)

(Keystone)

The Stanford-educated new CEO of Novartis will have to steer the Swiss drugs giant as it integrates new businesses and fends off increasing competition.

Joe Jimenez, a 50-year-old American two years into his tenure as CEO of the pharmaceuticals division, was handed the job on Tuesday after chief executive Daniel Vasella announced he was stepping down on February 1.

Vasella, 56, has held the job for 14 years and will remain chairman. Chief operating officer Jörg Reinhardt, who had been tipped as a possible successor to Vasella, will leave the company and his position will disappear.

Analysts reacted positively to Jimenez’s unexpected appointment and Novartis shares closed the day up 2.06 per cent on the Swiss Stock Exchange at SFr56.85 ($54.40).

“At first I was a little surprised,” said Julius Bär analyst Christophe Eggmann of Jimenez’s appointment, but he called the choice “very logical”.

Jimenez joined Novartis's consumer health unit in 2007 and soon took over the pharmaceuticals business, overseeing the progression of several promising new medicines including multiple sclerosis pill FTY720, or Gilenia, and cancer drug Afinitor.

Key challenges

Eggmann told swissinfo.ch that in choosing Jimenez, Novartis had highlighted two key challenges: integrating Alcon, the eyecare firm it agreed to buy from Nestlé, and improving the bottom line.

On Tuesday Europe’s second-largest drugmaker posted a 54 per cent fourth-quarter profit increase to $2.32 billion (SFr2.42 billion).

Jimenez, whose background includes stints outside the pharma business, faces a tough industry landscape as more blockbuster medicines lose patent protection and the sector struggles to generate new products.

The group is looking at a slowdown in growth as patents on its Diovan hypertension pill and the Gleevec cancer medicine begin to expire in the United States in 2012.

“A focus on costs will be key,” Eggmann said. Jimenez has held executive positions in the consumer goods sector, including with bleach maker Clorox and the HJ Heinz food company.

“It’s a sign of the times of what Novartis will be going through in terms of the integration of Alcon, cost controls and patent expiries,” Andrew Weiss, a Zurich-based analyst with Bank Vontobel, told Reuters.

Jimenez said he intended to continue where Vasella left off in broadening Novartis’s business.

Diversification

"One thing we are aligned on is the strategy of the company, which is ... one of focused diversification," Jimenez told Reuters.

"We both believe that the portfolio now is broadly right to help us grow into the future, so I don't anticipate seeing significant changes there. I'm going to step back and think through how we're going to set the agenda for the next few years."

"We see this as positive, placing a well-respected progressive thinker as CEO," said Deutsche Bank analysts. "Together with new CFO Jon Symonds we expect Jimenez to tackle pharma costs."

Symonds, deputy chief financial officer, last year jumped to Novartis from Goldman Sachs. He will succeed Raymund Breu on February 1.

Activist investor group Ethos welcomed Novartis's decision to give shareholders a vote on executive pay, a hot topic during tight economic times and particularly for the drugmaker as Vasella's salary of over SFr20 million often draws criticism from the press and investors.

swissinfo.ch and agencies

Joe Jimenez

Joseph “Joe” Jimenez, an American citizen, graduated from Stanford University in 1982 and earned an MBA from the University of California, Berkeley in 1984.

He began his career at The Clorox Company, California, and later served as president of two operating divisions at ConAgra, Nebraska. In 1998, he joined the HJ Heinz Company, Pennsylvania, and was named President and Chief Executive Officer of the North America business.

From 2002 to 2006 he served as President and Chief Executive Officer of Heinz in Europe. Before joining Novartis, he served as a non-executive director of AstraZeneca plc, Britain, from 2002 to 2007, and was an advisor for the private equity organisation Blackstone Group, New York.

He joined Novartis in April 2007 as CEO of the Consumer Health Division. He was appointed to CEO of the Pharmaceuticals Division in October 2007. On January 26 2010 Novartis announced he would replace Daniel Vasella as CEO.

end of infobox

Novartis

Novartis was created in 1996 through the merger of Ciba-Geigy and Sandoz, and is currently organized into four divisions:

Pharmaceuticals (prescription medicines)

Sandoz (generic prescription drugs)

Vaccines and Diagnostics

Consumer Health

It is facing increased competition from generic drug makers and says it is looking to diversity its business portfolio.

The company employees 96,700 full-time staff.

end of infobox


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