Daniel Vasella

Chief Executive Officer of Novartis

Born in 1953 in Fribourg, Switzerland; son of Oskar (a history professor) Vasella; married Anne-Laurence, 1978; children: one daughter, two sons. Education: University of Bern, M.D., 1979.

Addresses: Office—Novartis International AG, CH-4002 Basel, Switzerland.

Career

Doctor, University of Bern, 1984-88; joined Sandoz Pharma, 1988; named chief executive officer of Sandoz Pharma, 1994; named chief executive officer of Novartis, 1996; named chairman of Novartis, 1999; co-authored Magic Cancer Bullet: How a Tiny Orange Pill is Rewriting Medical History, 2003.

Awards: Named one of the world's "100 Most Influential People" by Time, 2004; voted Europe's most influential business leader of the last 25 years by readers of the Financial Times; Pharmaceutical Executive of the Year, Pharmaceutical Achievement Awards, 2004.

Sidelights

In eight years, Daniel Vasella went from being a doctor to becoming the head of Novartis, one of the world's biggest drug companies. He has managed the company with a doctor's interest in research into new treatments and a tough-minded businessman's aggressive, innovative thinking. Thanks to his leadership, Novartis has released a drug that fights a rare cancer without hurting healthy cells, and his company has dozens of new drugs almost ready for market at a time when competitors are running low on new products. In early 2005, he led Novartis in a bold move into the generic drug market, again showing his competitive streak and calculated risk-taking.

Vasella, who was born in Switzerland in 1953, had to face illness and death at a young age. He came down with tuberculosis and meningitis as a child. When he was ten, his older sister died of cancer. Three years later, his father, Oskar, a history professor, died of complications from surgery. He says watching his sister fight her illness led to his interest in medicine, and he went to the University of Bern Medical School. (Another sister, who went to medical school with him, died in an accident in 1982.)

After getting his medical degree, Vasella worked in pathology and internal medicine, eventually becoming the University of Bern's chief resident. But he was developing an interest in business, so he left the hospital to join the drug company Sandoz Pharma, where his wife's uncle was chief executive officer. He started working at the Sandoz office in New Jersey, where he became product manager for an anti-pancreatic cancer drug. He knew that his success depended on the drug's success, so he had researchers, production chemists, and marketers work together to find new uses for the drug, instead of the usual practice of the three groups working in isolation. They discovered that it could also treat the side effects of certain cancers, and its sales skyrocketed.

Returning to Switzerland in 1993, Vasella worked in top corporate positions, using the methods he had developed with the cancer drug on all of Sandoz's drug-development efforts. He became CEO of Sandoz in 1994, and when Sandoz merged with rival Ciba-Geigy to form Novartis in 1996, Vasella was named the new company's CEO. His family ties to Sandoz made some feel he had gotten the job out of nepotism, but others disagree. "To anyone who followed the company at the time, Dan was the live wire," SG Cowen analyst Peter Laing told Unmesh Kher of Time. "He had the most international outlook, and there really wasn't anyone at Ciba to challenge him."

Making the new company work was difficult. Sandoz had a hierarchical leadership style that Vasella thought discouraged initiative, while the culture at Ciba seemed to discourage strong decision-making. Both companies had started off as chemical companies and gone into drug manufacturing; now, they were pharmaceutical companies that still had some chemical production business left over. Vasella reorganized the company, laying off 12,500 workers and firing several managers, and formed a venture fund that helped ex-employees start new businesses. For a while, when Vasella would travel to Novartis offices around the world, he would fire managers immediately if he did not like what they did or said, until he was told that workers had started to fear his visits. "Now I ask that they not be fired until several weeks after I come back" to Switzerland, he told the Wall Street Journal.

At first, success was slow to come. Novartis' sales increased only slightly in 1998 and 1999. Vasella invested in life sciences with the idea that new biotechnology would link the drug business with agricultural and nutritional products. But the life sciences market floundered. Vasella realized it and abandoned his goal. Novartis sold off its agricultural arm in 2000.

At the time, Novartis' competitors in the pharmaceutical industry dismissed it "as a sleepy European giant without the marketing and sales firepower to compete in the U.S.," wrote Kerry Capell of BusinessWeek. But thanks to Vasella's decision to spend heavily on research and marketing, Novartis scored a huge success when it released the cancer drug Gleevec in May of 2001.

Gleevec worked on relatively rare forms of cancer such as chronic myeloid leukemia and gastrointestinal stromal tumors. But the way it works is unique and promising. It is the first drug that had been proven to destroy a certain kind of tumor. Other cancer drugs destroy healthy cells and cancer cells alike, but Gleevec attacks the proteins that make tumors grow.

Vasella's leadership was a key ingredient in Gleevec's success. According to the magazine Chief Executive, after the Sandoz/Ciba-Geigy merger, Vasella talked to some Ciba-Geigy researchers, who told him about the drug compound that eventually became Gleevec. Although it seemed the drug would only appeal to a narrow market because it treated a rare disease, Vasella pushed for testing and production of it to move forward and personally answered the letters from cancer patients who asked to be included in the trials.

In 2003, Vasella told the story in a book, Magic Cancer Bullet: How a Tiny Orange Pill is Rewriting Medical History, co-written with Robert Slater. Clifton Leaf, a writer for Fortune, called the book "a heroic saga," attracted to the story of a corporate culture championing a life-saving drug. Publishers Weekly acknowledged it was an inspiring story, but complained that the book "reads largely as an extended press release for Novartis" because of its "repetition and stilted writing" and lack of "the details and depth of feeling needed to make that story come alive."

As CEO, Vasella is known for putting a lot of money into research and development. In 2004, Novartis was spending $3 billion on research, or 19 percent of its drug sales, compared to an industry standard of 13 to 16 percent. He moved the company's research and development headquarters from Basel, Switzerland, to Cambridge, Massachusetts, to take advantage of the Boston area's heavy concentration of medical researchers and personally recruited a top scientist from Harvard Medical School to run the lab. As a doctor, Vasella can oversee research better than other drug company CEOs, his admirers say, because he can ask his research teams complex questions.

Relying so much on research and development (as opposed to, say, acquiring other companies and their patents) is risky for a pharmaceutical company because it means betting on rare successes to come out of its labs. But so far, Vasella's approach is paying off. Novartis moves its drugs through research and development in two-thirds the time of the average drug company, in part thanks to a strategy of testing a drug on several diseases at once. It had 64 drugs in the medium or late stages of development in 2004, compared to 37 and 14 at competitors Roche and Merck, respectively.

Vasella's accomplishments are more striking in comparison to his competitors, who have struggled with decreased profits and competition from generic drugs. Novartis "has had to face many of the same issues bedeviling its peers, including expiring patents on big-selling drugs," according to the Wall Street Journal. "But Dr. Vasella has steered the company through these problems, in large part by jettisoning its staid Swiss culture and transforming the firm into a bare-knuckled, American-style marketing powerhouse,"—a reference to his strategy for getting company researchers and marketers to work together to create more effective marketing strategies for products. For instance, the company dropped an ineffective ad for Lamisil, Novartis' treatment for fungal infections, and created a brochure salesmen could give to doctors about the condition. Sales of Lamisil went up afterward. "I love Switzerland and I think people know that I'm patriotic," Vasella told Harris. "But this is about making decisions that are essential to the business. We are going to be as, or even more, American as any company."

Vasella's success has won him a lot of praise. In 2004, Time named Vasella one of the world's "100 Most Influential People," the only drug company executive on the list. Readers of the Financial Times selected him as the most influential business leader in Europe in the last 25 years. Capell of Business-Week wrote that he is "an unusual mix: an aggressive manager who still keeps something of the gentle bedside manner he developed as a general practitioner." Vasella also has a casual, calm persona; Capell described him as "an unbuttoned type who likes roaring around the Swiss countryside on his BMW bike."

To build on his achievements, Vasella moved to expand Novartis. He tripled its United States sales force to 6,200, seeing the United States—the world's most lucrative drug market—as key to the company's future. He also acquired some North American companies. He bought a majority stake in Idenix Pharmaceuticals of Cambridge, Massachusetts, which was working on new drugs to treat hepatitis B and C, for $225 million, and bought Sabex, a Canadian drug company, for more than $500 million.

Many business analysts expected Vasella to make a big move to merge with another major company, but he came back empty-handed from his hunt for a big deal. He looked longingly at Roche, also based in Basel, and began buying its stock, but Roche's CEO and the family who owns the majority stake in the company were opposed to a merger. As of early 2005, Novartis had only managed to acquire 33 percent of Roche. He also pursued a merger with French drug company Aventis, but he backed off after the French government, preferring that the company remain French, put up hurdles to a deal.

In January of 2005, as Novartis announced record profits and sales for 2004, Vasella got the drug industry's attention by speaking out about recent scandals involving other companies' patented drugs. He warned his competitors, who had been accused of not releasing enough research information about side effects, that they needed to become more open. But he also told critics of the drug industry to back off from calls to ease patent protection. That, he said, would discourage companies from researching new drugs, hurting patients in the long run.

The next month, Novartis made a bold move. It became the world's biggest maker of generic drugs by spending $8.3 billion to buy Hexal, a German company that makes generic pharmaceuticals, and Eon Labs, Hexal's United States affiliate. The generic drug market is expected to be lucrative in the next several years, as patents on many popular drugs worth tens of billions of dollars expire. Novartis says it is pursuing a third route to success, instead of focusing only on patented drugs or diversifying by going into other medical technologies, the usual strategies of major pharmaceutical companies.

Vasella, whose salary was about $2.6 million in 2004, believes Novartis has a bright future. The company predicted that by 2008 or 2009, it should have eight blockbuster drugs on the market—that is, drugs with annual sales of $1 billion or more. In early 2005, it had five. The possible future drugs include the first pill to fight multiple sclerosis, a new asthma treatment, and drugs to fight cancers and high blood pressure.

Sources

Periodicals

America's Intelligence Wire, February 22, 2005.

BusinessWeek, May 26, 2003, pp. 68-70.

Chief Executive, July 2004, p. 30.

Financial Times, January 21, 2005, p. 24; February 22, 2005, p. 28.

Fortune, May 12, 2003, p. 144.

Publishers Weekly, March 24, 2003, p. 65.

SCRIP World Pharmaceutical News, August 13, 2004, p. 10.

Time, July 29, 2002, p. B6.

Wall Street Journal, August 23, 2002, p. A1; June 15, 2004, p. B1.

Online

"Daniel Vasella, M.D," Forbes.com,http://www.forbes.com/finance/mktguideapps/personinfo/FromPersonIdPersonTearsheet.jhtml?passedPersonId=213443 (February 25, 2005).

Novartis.com, http://www.novartis.com (February 27, 2005).

"Vasella, Daniel," World Economic Forum Knowledge Navigator, http://www.weforum.org/site/knowledgenavigator.nsf/Content/Vasella20Daniel (February 25, 2005).

—Erick Trickey