Novartis taps Jimenez as CEO for industry challenges

BASEL, Switzerland Tue Jan 26, 2010 6:47am EST

Joe Jimenez, CEO of Novartis Pharma AG, speaks at the Reuters Health Summit in New York, November 9, 2009. REUTERS/Brendan McDermid

Joe Jimenez, CEO of Novartis Pharma AG, speaks at the Reuters Health Summit in New York, November 9, 2009.

Credit: Reuters/Brendan McDermid

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BASEL, Switzerland (Reuters) - Novartis AG handed drugs head Joe Jimenez its top job on Tuesday with a mission to guide the Swiss drugmaker through ever-increasing competition to its key medicines.

The chatty 50-year-old American steps up after just over two years running Novartis's dominant drugs unit and faces a tough industry landscape as more blockbuster medicines lose patent protection and the sector struggles to generate new products.

He takes over from Swiss Daniel Vasella, a medical doctor and the longest-serving CEO among big European drug companies, who steps down on February 1 after overseeing the acquisition of U.S. eyecare group Alcon Inc.

Vasella will remain as chairman.

"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."

The departure of Vasella, who headed Novartis since the merger that created it 14 years ago, marks the completion of a changing guard at the top of the European industry after rivals GlaxoSmithKline, Sanofi-Aventis, AstraZeneca and Roche all brought in new CEOs.

Novartis Chief Operating Officer Joerg Reinhardt, who had been tipped as a possible successor to Vasella, will leave the company and his position will disappear.

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.

His appointment at the head of a slimmed-down executive board came as the company reported a 54 percent rise in fourth-quarter net profit to $2.3 billion, helped by sales of its H1N1 swine flu vaccines -- not far from analyst expectations of a 53 percent jump to $2.4 billion.

Novartis shares rose 1.5 percent to 56.50 Swiss francs by 1030 GMT, outperforming a slightly stronger DJ Stoxx European healthcare sector.

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

Shareholder 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 20 million Swiss francs ($19 million) often draws criticism from the press and investors.

Novartis has agreed to buy a majority of Alcon from Nestle SA , using the acquisition to insulate against losing exclusivity on treatments like top-selling blood pressure drug Diovan, and has since come under fire for its lowball offer to minority shareholders.

Jimenez said he was happy with the current line up of new drugs and wide spread of the business into areas such as emerging markets and eyecare, which could all help offset lost Diovan sales when it loses patent protection in 2012.

The group still considered its Alcon offer -- originally worth $11.2 billion but dependent on share price moves -- as fair, Vasella said. Novartis has had no negative feedback from its own shareholders on the Alcon deal, said Vasella.

Novartis expects group sales to grow at a mid-single-digit percentage rate this year, but said profit was difficult to predict given the Alcon deal.

Sector investors will be closely eyeing results from another diversified healthcare group, Johnson & Johnson, due later on Tuesday, for more clues on whether tapping new markets away from prescription medicines is helping some drugmakers.

Novartis trades at a premium to GlaxoSmithKline, AstraZeneca and Sanofi-Aventis thanks to promising new drugs such as multiple sclerosis pill FTY720 and a broad business base, but lags Swiss rival Roche.

(Additional reporting by Paul Arnold; Editing by Dan Lalor and David Cowell)

($1 = 1.044 Swiss francs)

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