High-profile personnel changes at Novartis drive analyst speculation as CEO delivers consistent message
In quick succession to the announced departure of chairman and former CEO Daniel Vasella in January, Novartis announced on Wednesday that Jon Symonds would leave the company at the end of 2013 after four years as CFO.
Despite CEO Joseph Jimenez using the company’s Q1 analyst call to drive home the message that Novartis remains committed to its current growth strategy, the departure of Symonds was a key focus for analysts in notes that were subsequently circulated to investors, and has fuelled speculation that further changes could be afoot.
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Speaking about his pending departure at the end of the year, Symonds suggested that it was a positive time for a new CFO to take over. That man is the current CFO of Novartis’ pharmaceuticals division Harry Kirsch, who will preside over an emerging post-2013 growth narrative, added Symonds.
There remains some scepticism, however, and Bernstein analyst Tim Anderson suggested that the reason for Symonds departure is not completely clear. Furthermore, added Anderson, close proximity to the departure of Vasella raises the question ‘what next?’
Operationally, analyst reaction to Kirsch’s appointment was mixed. Echoing comments made by both Jimenez and Symonds on the Q1 conference call, analysts at Credit Suisse pointed to a strong record in driving productivity gains within the pharmaceuticals division (during a period characterised by EU austerity measures and generic competition) as a strong precedent for his impending role.
But it is the surprise nature of Symonds departure that analysts have found more difficult to interpret – one conclusion being that Jimenez is keen to appoint his own team and move the company away from the dominant shadow of Vasella (seeViewPoints: Was he worth it? Vasella commits loyalties to his Novartis legacy) Symonds was viewed by many analysts as a driver of improved capital allocation, with some suggesting that his operating role would be enhanced by the departure of the chairman.
Expectations of structural change and divestments will be reignited by the Symonds announcement, note analysts at Deutsche Bank. One particular conundrum for investors is the 33 percent shareholding that Novartis holds in its compatriot Roche. Jimenez has ascribed an intangible value to the shareholding, which allows the company to have some say in any acquisitions Roche would choose to make that required the issuance of new shares. Investors may feel that the money could be spent more effectively elsewhere, particularly as Novartis’ financial stake in Roche is something of a Vasella heirloom and reminder that the former CEO often talked up the possibility of a Swiss mega merger.
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