Monday afternoons at Swiss drugmaker Novartis now feature the Ronny Gal Show.
Starting at 2:30 p.m. in Basel, an industry news and intelligence report written by Gal hits the inboxes of 250 senior officials, who rush to read which deals the chief company strategist says Novartis should pursue, what science it should investigate and what rivals are doing.
Gal, a hard-charging Israeli-American who was an outspoken Wall Street analyst, never worked in pharma before a year ago. Now he—and his no-holds-barred reports—are helping propel the remodeling of one of the world’s biggest and most hidebound drugmakers.
Among the moves triggered by the reports was a recent multibillion-dollar deal for promising kidney drugs.
“Ronny’s shaking the tree, and maybe the tree needed to get shaken,” said Novartis Chief Executive Vas Narasimhan.
Hiring the outsider Gal was the most unusual step Narasimhan has taken to shake up the company and produce more blockbuster medicines.
At stake is whether the company will rebound from a series of disappointing drug launches and underperforming deals that had flatlined shares, prompting investors to complain to Narasimhan and the CEO to reassess his stewardship.
“I had to be willing to just rethink all the things in my mind that I said Novartis had to be about,” Narasimhan said.
Before he became chief strategy officer at Novartis last year, Ronny Gal had never worked in the pharmaceutical industry.
Photo: Beat Schweizer for The Wall Street Journal
Novartis shares have been rising over the past nine months, largely because of positive study results for drugs including Kisqali for breast cancer and the rollout of cancer radiotherapy Pluvicto.
Yet challenges remain. Novartis faces declining revenue later this decade, after several products lose patent protection, including heart drug Entresto, which had $4.6 billion of Novartis’s $50.5 billion global sales last year.
Novartis is one of the world’s biggest pharmaceutical companies by sales, celebrated for drug research that produced game-changing medicines like the Gleevec cancer therapy.
Narasimhan took the helm in 2018 after joining Novartis in 2005 from McKinsey. Just 41 years old when he became CEO, he quickly began making a mark by shedding its consumer business and making other moves to double down on fast-growing but risky patent-protected pharmaceuticals.
He also grabbed headlines, spending billions of dollars on deals to beef up its pipeline with cutting-edge technologies like gene therapies.
But its pipeline and several deals didn’t live up to expectations, analysts say. A closely watched anti-inflammatory drug called Ilaris failed cancer trials. And the rollout of a cholesterol fighter called Leqvio, the centerpiece of a roughly $10 billion acquisition in 2019, has been sluggish after a delayed U.S. launch.
“Nothing dramatic went wrong but not many things went particularly right,” said Redburn analyst Simon Baker.
As 2021 drew to a close, the company’s share price hovered around similar levels as when Narasimhan became chief executive and lagged behind rivals like Pfizer and Eli Lilly.
While working remotely from his son’s bedroom overlooking the Rhine in Basel, Narasimhan contemplated the company’s disappointing performance and met virtually with Novartis’s largest investors. They said the company wasn’t living up to its potential, he recalls.
Novartis headquarters in Basel, Switzerland.
Photo: Stefan Wermuth/Bloomberg News
Narasimhan reassessed how Novartis had long worked. He questioned principles that had guided the company, such as its academic-like pursuit of science with little regard for the commercial prospects, and its research across a range of diseases to reduce the risk that some drug candidates don’t pan out.
“The first step was for me to accept the fact that we didn’t get all of it right,” he said.
Novartis’s labs have been a major target for change. The company had the most approved drugs during every five-year period since 1999, but the new drugs’ average peak sales weren’t in the industry’s top five.
Narasimhan tapped Fiona Marshall, a veteran of Merck & Co., to lead the company’s research hub in Cambridge, Mass. Novartis has rejigged how its scientists work, dialing back their budgets for noncore research and tying their bonuses to the start of pivotal testing, not the completion of earlier studies.
The company also pared back by nearly half the number of disease areas it would target, focusing on lucrative conditions like cancer and immunology. It decided to dial back in eye-care, selling off dry-eye drug Xiidra for roughly half of what it paid for the medicine four years earlier.
In its areas of focus, Novartis decided to step up its hunt for drugs in earlier stages of development, and pursue deals that would add candidates to the company’s own and increase the odds of one working out.
Hiring Gal was the most unconventional move. During his 18 years at Sanford Bernstein, Gal built a reputation as a pushy yet astute analyst willing to call out sensitive subjects like high drug prices and hefty deal premiums.
“I asked myself, if there was one person I would want sitting next to me, challenging our thinking, coming up with new ideas, why not pick the person whose reports I’m reading anyway?” Narasimhan said.
Ronny Gal’s team at Novartis includes a mix of company veterans and hires from Wall Street.
Photo: Beat Schweizer for The Wall Street Journal
Gal said employees have embraced many of his ideas. Yet his direct and challenging approach hasn’t always fit seamlessly into Novartis, where employees tend to be agreeable. “I am learning to moderate my style, because you’ve got to meet the organization halfway,” he said.
Gal oversees a staff of about 30 people, a mix of Novartis veterans and no-nonsense hires from Wall Street.
One of the team’s roles is helping the company decide whether to take an experimental drug into human testing. Novartis used to wait for results from the first testing in humans before making a decision. Now, Gal’s team forecasts future sales before starting human studies.
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The weekly reports grew out of responses to inquisitive emails from Narasimhan. His, and later other executives’, affinity for the notes led Gal to create a second, toned-down version without sensitive information for a broader audience.
“I tend to be cynical, and I use a lot of humor,” he said. “It can’t go to all of Novartis.”
The five- or six-page reports opine on roughly 10 topics ranging from emerging technologies and rivals’ acquisitions to which programs Novartis should accelerate.
Gal’s team had been tracking kidney disease research, and then a Seattle company called Chinook because Novartis has its own experimental kidney drug. The team first mentioned Chinook in a report on Jan. 15, which detailed the small company’s research efforts and described its lead drug candidate as promising.
Gal said the weekly reports, which kept calling out the promise of Chinook’s kidney drug research, put the company on the radar of Novartis officials, accelerated their interest in an acquisition and helped lead to a $3.2 billion deal announced in June.
Narasimhan said Novartis will remain active in deal making, though more selective than a few years ago.
“You can’t go back and change the beginning, but you could start where you are and change the ending,” he said.
Write to Jared S. Hopkins at jared.hopkins@wsj.com
