Two heads are better

What Novartis needs to do beyond reorganization to grow innovation

With Gleevec imatinib off patent, flagging ophthalmics sales and at least one slower than expected launch, Novartis AG is consolidating operations at the top to cut costs, while also splitting its R&D into two buckets: cancer and "other."

The pharma has already shored up much of its early and late stage oncology pipeline, but will need to do the same across many of its other disease areas.

Novartis had been prepping for generic versions of Gleevec well before they entered the U.S. market in February. Plugging the $4.7 billion sales hole was a major driver in the pharma's 2014 asset swap with Eli Lilly and Co. and GlaxoSmithKline plc, in which Novartis shed its low-performing businesses in exchange for a trove of marketed cancer drugs from GSK.

The swap left Novartis with three business divisions, each of which reported high single-digit growth in 2013 and 2014 - Alcon Inc., Novartis Pharmaceuticals and Sandoz.

In January, this new foundation started to show signs of weakness. Alcon's 2015 sales were down 1% from 2014, missing the company's guidance of 6% growth.

Additionally, new heart failure drug Entresto sacubitril/valsartan has been off to a slow start. While investors had blockbuster expectations for the therapy, Novartis reported sales of just $20 million between its July launch and Dec. 31, 2015.

Moreover, the pharma forecast slower growth for some of its older oncology drugs, such as Afinitor everolimus, as new therapies enter the market for breast and renal cancers.

On the company's 2015 earnings call on Jan. 27, CEO Joseph Jimenez announced a restructuring of Alcon, along with new executive positions and appointments to consolidate duplicative functions across the divisions. The Alcon pharmaceutical pipeline programs were moved under the Novartis Pharmaceuticals division, and its marketed drugs were transferred to the pharma's branded commercial drugs team. Alcon's clinical activities were refocused on devices.

To cut costs, Jimenez added two new global positions to integrate functions across the three divisions, including pharmacovigilance, regulatory and commercial back-office operations.

The next step, announced last week, is aimed at growth, not costs, and splits the pharmaceuticals division into the Novartis Pharmaceuticals and Novartis Oncology business units.

Novartis Pharmaceuticals will house

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