Novartis Board Was Shocked by Vasella’s Decision to Leave
Novartis AG (NOVN) Chairman Daniel Vasella, who spent more than two decades building Europe’s largest drugmaker, said he will step down next month because finding the right successors coincided with a good pipeline for the company and his own timing.
The unexpected announcement Jan. 23 came after six months of planning and strategic work by directors, Vasella said. He shocked the board in October when he told them he wanted to start the process, and several directors tried to talk him out of leaving, he said.
“One board member finally said, ‘I think Dan has made up his mind,’” Vasella recalled in an interview yesterday at the World Economic Forum’s annual meeting in Davos, Switzerland.
Vasella, 59, built a company that diversified into eye care, vaccines and generic medicines, and outperformed the industry in developing new patented drugs. He also drew controversy for the size of his pay, and criticism for acquisitions that some investors say haven’t paid off. The stock gained the most in 16 months when his departure was announced.
Bayer AG (BAYN)’s Joerg Reinhardt, the former chief operating officer of Novartis who left three years ago after he was passed over for the chief executive officer’s job, will come back as chairman. Vasella’s tenure will end after Novartis’s annual meeting Feb. 22. Joe Jimenez took over from Vasella as CEO in 2010.
Vasella said he would have been up for election to another three-year term as chairman and he didn’t want to do the job for only one year before turning 60 next August.
“Many people thought I would stay until I was 70, but that is too late to start doing anything else,” he said.
The drugs developed under Vasella’s tenure are starting to pay off. Sales from recently introduced products rose 13 percent to $16.3 billion last year, and the Gilenya pill for multiple sclerosis exceeded $1 billion in revenue for the first time, Novartis said Jan. 23. Over the next two years, the company may submit as many as 20 regulatory filings, with 18 potential drug approvals.
Vasella said he is most proud of one note in the hundreds of e-mails he received after yesterday’s announcement noting that he was “always great to the cleaning people.” He is also proud of the malaria medicine, Coartem, that Novartis provided that saved one million lives as well as unlimited leprosy medication through the World Health Organization.
“I guess that made it worth changing professions,” said Vasella, a physician by training.
Vasella said he is in good health, and he has many interests to choose from. He said he didn’t think he would return to practicing medicine, as he would need retraining.
His employment contract calls for Vasella “to continue to make available his know-how to Novartis” and to refrain from competing with the company for “a multiyear period,” according to the 2012 annual report. In return, he will receive “fair market compensation,” according to the report.
He’s also entitled to a retirement benefit consisting of a one-time payment of 12 million francs ($13 million) in the form of an insurance policy, according to the annual report from 2010.
He has no immediate plans except to enjoy “staying at home and not going anywhere,” Vasella said in the interview.
“There is always an end,” he said. “Then it’s a choice of timing.”
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