Novartis Reorganizes US Pharma Biz, Replaces CEO

Three months after enacting a global reorganization and more than a year after implementing its new commercial model, Novartis is now reorganizing its US Pharma operations. In an email sent to employees this morning, David Epstein, who heads the global pharma biz, announced that Ludwig Hantson - who has headed the US Pharma unit for the past two years - is leaving and that a replacement will be named before the end of the week. Meanwhile, four new business units are being created; the details are below. And 383 positions are being eliminated, although about 250 individuals will be effected.


Dear Colleagues,

Across Pharma a key objective is to innovate for patients and win in a changing environment. As you are aware, NPC initiated several changes last year through the Customer Centric Initiative (CCI) and Shape the Future Together strategy. Given the importance of our US business, we asked the US leadership team to assess the organization and its structure to continue to compete effectively given the expected changes in our product portfolio over the next several years.

Based on their assessment, the NPC leadership team is making leadership and organizational changes to provide clear competitive advantage and deliver stronger results. These changes support NPC's need to maximize our evolving portfolio, align all functions with our new commercial model, and reduce our cost structure as we reinvest in high-growth opportunities.

In addition, Ludwig Hantson has decided to leave the organization for an external opportunity.

The following changes, effective May 1st, support the goals outlined above: Four New Business Units to Address Portfolio Shift and Growth Opportunities.

We will create four new Business Units to address our changing portfolio and growth opportunities: Primary Care, Multiple Sclerosis, Psychiatry/Neuroscience and Respiratory/Transplant/Infectious Disease.

We are aligning our Primary Care Operating Units (OUs) under one new Head of Primary Care. The Head of the Primary Care Business Unit will also have responsibility for Primary Care Marketing and Patient Services & Mature Products. This should facilitate faster decision-making and more integrated sales and marketing.

We are also reducing from five to four Primary Care OUs to achieve greater balance in the span of control for our General Managers. It will also facilitate governance of our top-line business strategy across the OUs while maintaining focus on our local customers.

Brian Goff, previously responsible for Primary Care Marketing, will lead the Primary Care Business Unit reporting directly to the Head of Pharma North America and President of NPC. Jeff Bailey (Northwest OU), Christopher Kaplan (Northeast OU), Gary Menichini (Southwest OU), Gerry Melillo (Southeast OU) and Cynthia Hogan (Mature Products & Patient Services) will report into Brian and will remain part of the Commercial Executive Committee (CEC).

The former West OU Managing Directors, RDAM and LTC Directors will be re-aligned across the four OUs. We are working with our associates in the West OU office to find alternative positions. Tony Yost will leave the organization. We wish Tony continued success in his career.

Our Primary Care business is critically important and will represent more than half of our sales. We will continue to invest in Primary Care as many of our competitors have shifted their attention elsewhere. This provides us with competitive advantage that we can leverage in the future as we develop primary care medicines in an era of fewer competitors.

In the area of Specialty Medicines, we are replacing our Specialty Medicines OU with three new Business Units: Multiple Sclerosis, Psychiatry/Neuroscience, and Respiratory/Transplant/ID. Each Specialty Business Unit will report directly into the Head of Pharma North America and President of NPC. This ensures dedicated focus on important future growth drivers.

Dagmar Rosa-Bjorkeson, previously responsible for BD&L, will lead the expanded Multiple Sclerosis Business Unit. We will grow our Multiple Sclerosis field force by approximately 160 associates in preparation for the Gilenia launch. Lisa Pilla will be responsible for the Psychiatry/Neuroscience Business Unit. Jesus Leal, who previously led the NPC Transplant and Immunology (IDTI) Business Unit, rejoins the organization to lead the new Respiratory/Transplant/ID Business Unit.

Jayson Dallas has decided to pursue his career outside Novartis. We would like to thank Jayson for his contributions and wish him continued success.

We will combine New Products and BD&L under Carol Lynch, who will report directly into the Head of Pharma North America and President of NPC, enabling further support and focus on portfolio growth.

Align Medical with New Operating Model

Under the leadership of John Orloff, we are taking important steps to appropriately align medical and commercial and to adapt our medical structure to mirror our new operating model. Field Medical will go from five to four OUs. This will allow better alignment on priorities, increase span of control for the Regional Medical Heads, and enhance collaboration among teams. In headquarters, Primary Care and Specialty MS&A groups will realign into four therapeutic Medical Units: Primary Care, Multiple Sclerosis, Psychiatry/Neuroscience and Respiratory/Transplant/ID. These new units will report into Medical and coordinate with our Business Unit Heads to best meet the needs of our customers and patients.

Focus Functions on Growth Drivers While Reducing Cost Structure

To maximize investment in high-impact growth areas, we are implementing a brand prioritization approach that will allocate resources based on the brand's growth potential and lifecycle stage. This means we will elevate support for some brands and reduce support for others. We will ensure that critical patient needs are met but we can no longer sustain the old approach to resourcing. You will be hearing more about this from your functional leaders.

In addition, to further free up resources, we are reducing headcount by 383 positions, mostly in headquarters. We anticipate minimal headcount impact on the commercial sales organization, where we will work to minimize disruption and maintain focus externally on our customers.

As an organization, we have been carefully managing vacancies and instituting other measures to avoid the even more significant cuts we have seen among our competitors. Still, we are making reductions that will impact approximately 250 individuals. These employees will be notified starting today, with most discussions completed by tonight.

Change is difficult especially when it impacts individuals and I want to personally recognize these colleagues for their contributions and commitment. To help with the transition, we are providing significant support, including enhanced severance packages, out-placement services and, as feasible, redeployment opportunities within the Novartis Group.

Ultimately, the changes we are making demand a shift in mindset from doing more with less to prioritizing our focus and resources on areas of our portfolio that will have the greatest impact for patients now and into the future.

I want to thank Ludwig for his contributions to NPC and Novartis, and wish him continued success. We expect to name a new Head of Pharma North America and President of NPC, before the end of the week. Ludwig will be available in the short-term to help with the transition.

Please join me and the General Medicines leadership team for a Town Hall to be held tomorrow, April 15th from 11:15 am – 12:15 pm in the 438 Auditorium. You are also welcome to send questions in advance to the Communications Mailbox.

In closing, I am counting on you to successfully manage the transition and prepare our US organization for future growth driven by an innovative product pipeline that is among the very best in our industry.

David Epstein