Roche takes its hunt for a new chairman further afield

Mon Jul 22, 2013 4:30am EDT

* Decision due in the autumn

* Favourite candidates on board turned down job

* German skills, knowledge of Switzerland an asset

* Controlling family to make final decision

By Caroline Copley

ZURICH, July 22 (Reuters) - Swiss drugmaker Roche faces the prospect of hiring an outsider to replace its chairman of 16 years after its most suitable board members turned down the job.

The 117-year old company - the world's largest maker of cancer drugs - set itself an autumn deadline to find a successor to Franz Humer, an influential, hands-on former Roche chief executive who says he will not stand for re-election next year.

But the search hit an early stumbling block when the CEOs of Shell and Nestle, who both sit on Roche's board, said they weren't interested. Few of the remaining board members have both the international business experience and knowledge of Switzerland deemed crucial for a future chairman, meaning Roche may have to opt for an outsider.

It's a tough call, considering the challenges ahead. Though it will be a non-executive role, the new chairman will have to negotiate both local politics as Swiss lawmakers hammer out a new corporate tax law, and a global industry in which Roche's top-selling medicines are expected to face competition from cheaper copies from 2016.

Roche has struggled to diversify beyond its cancer expertise. It recently halted development of a diabetes drug and is to review its research into cardio metabolic diseases . It has been seeking financing for a potential bid for Alexion Pharmaceuticals Inc, which would mark a shift into treatments for rare diseases.

"The new chairman will have to put a focus on the long-term perspective, on where the industry is going to be in the next 10-15 years and ask how can Roche still be in the driving seat," said Fabian Wenner, an analyst at Kepler Cheuvreux.

Another challenge will be bridging differences in culture between Roche's home town of Basel and San Francisco, the base for its employees at Genentech, whose revolutionary cancer drugs have dominated Roche's pipeline since the Swiss firm took it over in 2009.

SPRECHEN SIE DEUTSCH?

The Hoffman-Oeri family, descendents of the firm's founder Fritz Hoffman-La Roche, hold 50.01 percent of the company's shares and will have the final say on who is chairman. Long-term stability is their priority, and they are unlikely to give the nod to anyone who does not speak German or is too old.

Initial suggestions that Roche could bring in Art Levinson, the 63-year-old chairman of Genentech - also appointed chairman of Apple in 2011 - who has a high-calibre network, have been dismissed as too radical, according to one source close to the board.

"Art Levinson would be awesome and clearly would have an opinion. But I doubt they would elect someone with such a strong mindset," said Wenner.

Nabbing an executive from cross-town rival Novartis is similarly improbable, given historic tensions between the two.

Candidates from the fields of bio- and medical technology, are more likely to be considered, said Lucas Schellenberg, managing partner at executive recruitment firm Stanton Chase International in Switzerland.

He cited George Scangos, CEO of Biogen Idec as a possible contender, although his American nationality and age - he is 65 - may put him out of the frame. Biogen did not respond to a request for comment.

Swiss business magazine Bilanz touted as an outside contender Renato Fassbind, a former Credit Suisse finance chief who spent the early part of his career at Roche and is now vice chairman of reinsurer Swiss Re.

Although he would fit easily into the Swiss culture at the top of Roche, his chiefly financial background might work against him, said one industry insider.

Bilanz also suggested Michel Orsinger, a former Novartis employee. Though he ticks the box of being a Swiss national, his current role as chairman of Johnson & Johnson's orthopaedics unit DePuy Synthes Companies puts him in a lower league than that of Roche.

Roche is short on inside options, after Pascal Soriot the 54-year-old French former head of its pharmaceutical division left to become CEO of rival drugmaker AstraZeneca last August.

That leaves board member Christoph Franz, 53, CEO of Deutsche Lufthansa AG, as the most promising internal contender. Although he is German-speaking and has based his home in Zurich since 2004, Franz is currently in the middle of a strategic overhaul of the German airline which is leaving him little time for other things, said one person close to the company. Lufthansa declined to comment.

It could be that in the end, Roche's search for a chairman throws the spotlight instead on its CEO since 2008, Austrian Severin Schwan who is a lawyer and economist by training.

Though Roche has made clear it plans to keep the offices of chairman and CEO separate, the fact that its new chairman may come from outside the company means Schwan, who was elected to the board this year, may have more of a chance to put his own stamp on things at last.

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