Joe Jimenez: Setting a new course

By Nick Pryke

As the industry prepares to tack for its biggest change in course to date, new ideas and leaders will inevitably prevail – but few will match the talent of the man Novartis is counting on to take the company through the challenging waters ahead.

“The style that I have adopted as CEO is, number one, to set the long-term vision. That includes where we are trying to take Novartis and what our strategy should be for continuing to extend our lead in innovation to drive growth and improve productivity.”
-Joe Jiminez

When Daniel Vasella announced in January of last year that he was stepping down after 14 years as CEO of Novartis, all eyes were glued to then COO Jörg Reinhardt, who was tipped as hot favorite to ascend to the top job. Had those eyes been fixed elsewhere, they might have noticed the company's Pharmaceuticals Division Head, Joe Jimenez, working away in the background with his usual sagacity and passion - giving no indication he was about to take the helm of the company. For the successful former Head of Novartis Consumer Health, and former Head of North American Business for H.J. Heinz Co., life had just cranked up yet another gear.

Indeed, the choice of Jimenez as CEO also cranked up Novartis shares, as analysts reacted positively to the unexpected appointment. Share closed the eventful day 2.06 percent up on the Swiss Stock Exchange - with the board later proudly stating that they selected Jimenez on his "outstanding performance track record, broad international business experience and ability to provide direction, align and engage people", with Vasella also quick to note that: "It's not a decision against anybody; it is a decision for somebody".

With the rate of change crashing through pharma's business models, Jimenez certainly has past experience on his side. "In consumer packaged goods," he begins, "you learn early on how important it is pay attention to how your external environment is changing because it changes very rapidly. That same lesson is absolutely applicable to the healthcare industry, particularly now as the industry is going through so many changes. You need to be able to look externally and see how regulators are changing, how payers are changing and how physicians are changing the way that they practice - that is without a doubt applicable across both industries. Another area is around the importance of innovation. Innovation drives consumer packaged goods' growth, which is true in healthcare too."

Of course, we're all explicitly aware of the need to foster new and open innovation in the life sciences sector, so it would make sense to appoint someone who spent their younger years learning precisely how to do just that. "Healthcare is going to be a place where innovation will be critical for the next 10 years. This is an industry that has fundamentals that are going to lead to increased demand for healthcare," continues Jimenez. "If you look at the ageing population and chronic illness increasing around the world - even in the emerging markets - there's going to be an increased demand that will require innovation to deliver on those needs."

Branching out

On the discussion of innovation in healthcare, Jimenez has an avid interest in one of the more transparent and technological innovations lapping at the shores of the life sciences sector - the infant world of telehealth. After all the debates, testing and calls for funding - especially since the beginning of health reform - the Obama administration has finally sat up and taken notice of its potential, pumping $795 million into broadband implementation and the progression of telehealth technologies throughout the nation. With a further $200 million coming from private investment, there's no doubt that the rules of attraction for both healthcare providers and pharma companies will change - a point Jimenez agrees with whole-heartedly.

"There are trends that are converging in healthcare today that are going to make telehealth a new growth area in the next five to 10 years," he says. "Specifically, if you look at the increasing demand for healthcare - it has to be delivered somehow, but governments are strapped due to the financial crisis. Everybody's looking for ways to improve patient care but at the same time lower total cost, because you've got governments around the world that are looking for ways to reduce costs, and that's an incentive to invest in telehealth. At the same time new technologies are emerging that are going to better enable telehealth.

"When you look at some of the pilots that are starting around the world on remote patient monitoring and you see how keeping patients out of the hospital and reducing visits can lower total healthcare costs, there is no escaping that this is going to be a new growth area in the future. At Novartis, we are looking at ways that we can bring new technologies in to help lower total cost and improve patient outcomes."

One of the technologies Jimenez talks of is a new iPhone app called Vax Trak, developed to help families track routine immunizations for their children. "If you think about that in terms of helping ensure compliance with vaccination regimens," reveals Jimenez, "that's one way that you can use technology to help improve overall patient outcomes." It's clear from the interests and attitude of the new CEO that he is comfortable stepping out of his comfort zone and experimenting with the new and innovative. But it's not only in his professional life that this rule of thumb pervades. Having moved from the US to the UK to serve as President and CEO of Heinz in Europe in 2002, and then to the Novartis HQ in Basel, Switzerland in 2007, he has had to learn the intricacies of adapting to new cultures - a seeming talent for the Californian graduate.

Adapt to change

"Growing up in the US, you don't appreciate the differences within Europe. In fact, there is no 'Europe'. Every country is different in terms of the culture. It's different in terms of practices, consumer behaviour and patient behaviour. One of the adjustments that my family and I had to make was to get into the local level and understand the traditions and customs and how either business is done or how people behave. It as quite an interesting experience and I think it's one that many Americans don't appreciate until they live in Europe."

Of course, the same can often be said for Europeans in the context of American culture - a sentiment that Jimenez is too much of a gentleman to admit. Yet the point remains that the transition to a different culture can be a shock to the system regardless of the context - so how did he cope with ensuring a smooth transition from head of pharmaceuticals to CEO of a whole company? A calm and collected Jimenez insists that is has been "a very natural transition".

"I feel like my time running the pharmaceutical division helped me create a very clear picture of how we want to move Novartis forward," he says. "I came into the pharmaceutical division at a time when the industry was changing very rapidly. We had to modify both our approach to developing new drugs, and also our commercial approach - that helped me get grounded in what has to happen over the next five years to enable Novartis to become the most successful and respected healthcare company in the world."

That statement alone is enough to give you a taste of where Novartis wants to go and what is expected of Jimenez. But where most would wince under the pressure, the former US collegiate swimmer takes it in his stride, drawing on the discipline he learnt through hours of laps and shaving milliseconds of his personal best at swimming meets. "All of those years of training really shaped my view of how you should run a business and how you should set a goal," reminisces Jimenez. "Work very hard to deliver on that goal and then celebrate the success by the time you're done. Hard work is definitely part of competitive swimming and that's carried through."

And while his days of competitive swimming have been replaced by competition in the business world, the taste for hard work and dedication to succeed certainly haven't left him - and neither has his ability to adapt. "My management style did have to change when I moved from division head to CEO, primarily because as CEO you are implementing and executing change through the division heads as opposed to doing it yourself with your functional leaders such as marketing, sales or human resources," he explains.

"The style that I have adopted as CEO is, number one, to set the long-term vision. That includes where we are trying to take Novartis and what our strategy should be for continuing to extend our lead in innovation to drive growth and improve productivity. The question that remains is how we're going to execute that: set the picture and then make sure that the rank and file in the organisation understand that and what their role is in helping us to deliver that future; so it's quite a different management style."

"I like to listen to a lot of our people up and down the organisation, so I frequently pull together groups of managers at all different levels and we'll undertake a session where we talk about what's working, what's not working and what's on their minds. It also gives me a chance to articulate my vision for where I want to take the company and then they can go off and talk to their associates in the company and help spread the word that way."

Which is precisely what happened back in 2008 with Project Forward - an initiative to cut back on costs while pushing the company forward. Not only did the finances of the company need to shift to accommodate this, but so too did its culture and attitudes. With the success box ticked ahead of schedule for that initiative in 2008, Novartis has continued to stride forward, hitting metrics and improving the financial climate for Novartis. But as Jimenez points out, it was never just about cost savings.

"It was also about changing the way we operate. One of the things that I did in the pharmaceutical division was streamline decision-making to eliminate a number of committees and layers of decision-making, which helped accelerate some of the key decisions that had to be made to move the business ahead. We also changed our commercial model in a number of countries away from the old pharmaceutical model, which was mirrored field forces that called on physicians, to more of a geographical approach that was consistent with where physicians and payers wanted us to go."

Watch and learn

But as anyone with a knack for recollection can track back, 2008 was the year of regulatory bombardment: the economic downturn, further confirmation that the pipelines were indeed drying up and the sound of purse strings being tightened all enticed an excessive amount of regulation to enter the industry. Fortunately, Jimenez reckons the upturn is on its way, with the regulatory environment taking more of a positive outlook on the industry and all it guides.

"If you look at what's happened with the FDA, Peggy Hamburg coming in as FDA Commissioner has had a significant effect on drug evaluation. It's less of a political process than it used to be and is now more based on science and the facts. The FDA is still very tough on new drug approvals, but the rules are now clearer than they were a few years ago with the new leadership, so I'm rather encouraged by the trends that I see in the regulatory environment. It doesn't mean that it will be easier to get new drugs approved, but it does mean that the rules of engagement are transparent - and that's a far better environment than if the rules were not clear.

This idea of transparency is certainly being taken on board by the pharma world at large - no doubt through necessity above all else - as innovation moves off the horizon and into the proverbial foreground, so it comes as little surprise that the FDA is taking steps to ensure it mirrors the change in environment. "I do feel that the FDA believes that innovation is key to driving the overall industry," asserts Jimenez.

"Once the patents have expired, generics play a very important role and I think the FDA has realised that. They have also realised that biosimilars are going to be an important part of the future as the biologics that are currently marketed start to lose patent protection. We're starting to see a clearer pathway to get biosimilars approved and launched, particularly in the US. That's extremely important for Novartis as our Sandoz division, which is our generics division, is a leader in biosimiliars around the world."

The potential worry for the Sandoz division, however, is that the competition for the generics market is becoming far more aggressive - especially for research-based companies - forcing uncharacteristically tactical moves for some of the smaller, less competitive R&D firms. But for Novartis, Jimenez stands firm on how to grasp security for the long term - and as usual, it all comes back to the basics.

"The key to continuing to build on innovation is to invest heavily in R&D and to find the right scientists to ensure that your pipeline is strong," offers Jimenez. "If we can deliver medicines that provide more than just a small incremental benefit, that really deliver on unmet medical need and allow us to protect those with intellectual property, is our best defense against generics". It's safe to say that Novartis has one of the strongest pipelines in the industry, but for Jimenez that doesn't prove anything when it comes to research.

"I've also made the commitment to keep our spending in R&D at the high end of the industry. Today, we spend about 17 percent of total sales in R&D across the whole company; if you look at just the pharma division, that number is 20 percent of sales, so we really are leaders in the industry in R&D, and that's the way we'll continue to innovate." But in order to do that, the multinational company will need to keep an eye on downward pricing pressures and a change in customer base - another flashback to the environment in the 2008 market, which Jimenez believes has intensified since.

"If you look at the debt crisis, governments in Europe have recently initiated significant price reductions on pharmaceuticals because they are debt strapped. They are looking for ways to lower the total healthcare burden. I continue to believe that the 'old days' in pharmaceuticals - where virtually everything was automatically reimbursed - are gone.

"We now have to take a different approach to pricing. We have to take more of an outcomes-based approach and help governments and payers around the world to pay for those drugs and new medicines that are going to deliver on unmet medical need. Right now, we've entered into a number of agreements with payers that are what we describe as 'innovative pricing mechanisms', where the payer is starting to pay on the positive outcome as opposed to paying on the transaction of purchasing just the pill. That's going to be one of the biggest trends over the next 10 to 20 years, so we're making sure Novartis is ahead of it."

And for the time being, it's a case of so far, so good. Collaborating with the Swiss Tropical and Public Health Institute, The Scripps Research Institute and the Genomics Institute of the Novartis Research Foundation, Novartis announced back in September that it had discovered a novel compound that shows significant promise as a next generation treatment for drug-resistant malaria - and that's just the tip of the iceberg. For the new CEO, the times they are a changing; and Jimenez couldn't be happier about it.