Drug company Novartis has been arguably the most admired businesses in its industry since the early 2000s. It was created in 1996 from the merger of competitors Ciba-Geigy and Sandoz in what was then the biggest takeover in corporate history. The deal established a trend for the pharmaceutical industry, and a series of similar mergers by competitors pushed Novartis down the rankings a little. However, under CEO Daniel Vasella the group established a reputation as one of the industry's strongest performers, with a strong suit in innovative marketing and successful new launches. Novartis was the first of the major drug companies to establish a leading position in generic as well as patent-protected pharmaceuticals. It also completed a series of large deals with fellow Swiss group Nestlé, selling its Gerber baby food and medical nutrition businesses, while also agreeing to acquire the food giant's ophthalmology division Alcon for almost $52bn, the largest purchase in Swiss corporate history. Vasella's successors have overseen further, equally dramatic reconstruction of the group, not least sizeable asset-swapping deals in 2014 with GlaxoSmithKline and Eli Lilly to spin off the group's OTC and animal health divisions, and refocus the business to on prescription pharmaceuticals. Alcon, which had reported disappointing performance since acquisition, was spun off to shareholders in 2019. The Sandoz generic business may eventually follow suit. Novartis's prescription portfolio currently house no fewer than 14 blockbusters, more than any other company. They are Cosentyx for psoriasis (sales of $4.0bn in 2020), MS treatment Gilenya (sales of $3.0bn), cardiology drug Entresto ($2.5bn), opthalmology drug Lucentis ($2.1bn), asthma treatment Xolair ($1.25bn) as well as seven cancer drugs with sales between $1bn and $2bn: Tasigna, Promacta/Revolade, the combined drugs Tafinlar & Mekinist, Sandostatin, Jakavi, Gleevec/Glivec and Afinitor/Votubia. Two patent-expired drugs - Galvus and Diovan - also still sell more than $1bn a year, primarily in emerging markets, while Exforge is now just under that figure. Upcoming products include gene therapy Zolgensma, anti-inflamatory Ilaris and cancer treatment Kisqali. In 2019, Novartis agreed to purchase optical drug Xiidra from Takeda for up to $5.3bn, and acquired The Medicines Company, developers of a promising cholesterol reducing compound for $9.7bn. Combined revenues for 2020 - now excluding Alcon - were $48.7bn with net income of $8.1bn. The "innovative medicines" division - proprietary pharmaceuticals - accounted for 80% of revenues and the Sandoz generic business for the remaining 20%. Vasant Narasimhan became CEO in 2018. The group retains a one-third stake in Swiss rival Roche, acquired against that company's wishes in the 2000s. Roche has firmly rebuffed any suggestions of a merger of the two groups. However the two groups share ownership of two key products, Lucentis and Xolair.
Capsule checked 12th March 2021
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Historical profile information for Novartis
Adbrands Daily Update 16th Aug 2019: Starcom retained the global Novartis Pharmaceuticals account with the creation of a new dedicated unit, NovartisONE2. Starcom already handled the business, though some assignments were managed by Wavemaker and specialist media agency CMI. These will transfer to the new agency, which combines teams from Starcom and newly acquired Epsilon. "Just as Novartis seeks to reimagine medicine, we too seek to reimagine and transform how we deliver data-driven marketing strategies for our clients," said Starcom CEO John Sheehy. "Rooted in a data-led, digital-first approach, NovartisONE2 unites Starcom and Epsilon to deliver capability that is agile, collaborative and relentlessly focused on driving business outcomes, along with delivering personalized experiences at scale for Novartis' complex and evolving consumers." The account has global billings of around $600m, the bulk of that sum in North America.
Adbrands Daily Update 9th Aug 2019: Novartis blotted its otherwise generally pristine copybook with confirmation, following an internal investigation, that some data from studies of new gene therapy Zolgensma had been manipulated by researchers to deliver better results. Senior management had been aware of problems for more than two months when the drug was approved by the US FDA in late May, but it didn't inform regulators of the faked results until June. The controversy is exacerbated by the fact that Zolgensma is the world's most expensive drug, at a cost of $2.1m for a one-time treatment. CEO Vas Narasimhan said Novartis delayed the admission to regulators in order to complete its internal investigation. Novartis also revealed that the brothers who headed the unit responsible for developing Zolgensma left the company in early May as soon as the falsification had been confirmed by an internal investigation. The FDA has announced its own full investigation into the affair to discover exactly who knew what about the falsification and when, and said it will use "its full authorities to take action, if appropriate, which may include civil or criminal penalties."
Adbrands Weekly Update 5th July 2018: Novartis confirmed plans to spin off its eyecare division Alcon. It acquired the business in 2011 from Nestle for an extraordinary $50bn, but Alcon has struggled to live up that valuation, delivering several years of disappointing performance. The decision to divest was widely expected. Novartis CEO Vas Narasimhan said Alcon will be spun off to shareholders as a separately traded company next year, with a new HQ established in Novartis' own home country of Switzerland. However, Novartis will itself retain the collection of ophthalmic drugs it acquired as part of the business, leaving the separated company to specialise in devices and surgical equipment. Valuation is expected to come in at around $20bn, significantly less than the price paid, even without the pharmaceuticals unit.
Adbrands Weekly Update 17th May 2018: AT&T and Novartis suffered serious reputational damage after it was revealed they agreed to hire Donald Trump's personal "fixer" Michael Cohen in an attempt to get a better understanding of - and possibly win favour with - the newly appointed president. Cohen appears to have aggressively cold-called numerous companies following Trump's election success, offering to impart inside information on the new President. Ford said they too had been contacted but declined his proposal. Cohen appears to have made himself made a small fortune in the process - he was paid $600,000 by AT&T and an astonishing $1.2m by Novartis. Yet both companies said they had gained no useful insights from the arrangement. Indeed, Novartis said they decided after a single meeting that Cohen offered no value. Yet they continued to pay him a $100,000 monthly retainer, apparently because they feared the repercussions of a lawsuit. "That was the mistake," Novartis' then-CEO Joe Jimenez told Bloomberg. "It was clear [Cohen] oversold his abilities... We should have just definitively parted ways with this guy as soon as we knew he was not going to be a help." More embarrassing still, it turns out that the company to which they made payments for his consultancy was the very same which paid out $130,000 in hush money to former porn star Stormy Daniels. AT&T CEO Randall Stephenson issued a memo to all staff admitting "our company has been in the headline for all the wrong reasons these last few days and our reputation has been damaged... Hiring Michael Cohen as a political consultant was a big mistake." The two top lawyers at AT&T and Novartis respectively who had negotiated the relationship with Cohen have left in the wake of the revelations.
Adbrands Weekly Update 17th Nov 2016: Swiss drugmaker Novartis hinted that it might be considering the sell-off of its substantial ophthalmology division Alcon. It acquired that business in 2010 in a mammoth $51bn buyout from Nestle. However, according to Novartis chairman Joerg Reinhardt, the business "has not developed over the last two years as we had expected". He told Swiss newspaper SonntagsZeitung, “we will keep all options open. In the long run, the question arises whether we are the best owner for Alcon."
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