Management Shake Up at Novo

Management Shake Up at Novo

This morning we learned that Novo Nordisk (NYSE: NVO) CEO Lars Rebien Sørensen, will retire from the company by the end of 2016. According to a company issued press release;

“Novo Nordisk A/S today announced that Lars Rebien Sørensen, president and chief executive officer, will retire from the company by the end of 2016. Lars Fruergaard Jørgensen, currently executive vice president and head of Corporate Development, will succeed him, effective 1 January 2017. The company also announced a number of other executive-level changes, effective immediately.”

It’s the last sentence in that paragraph that is actually more telling – again according to the press release here are the other management changes;

“Jakob Riis, currently executive vice president and head of Region China, Pacific & Marketing, is appointed executive vice president and head of North America Operations. He succeeds Jesper Høiland, who steps down from Executive Management and whose future role in Novo Nordisk will be announced at a later date.

Maziar Mike Doustdar, currently executive vice president and head of International Operations, continues in this role, but with enlarged responsibility for an expanded International Operations unit, now covering all territories except for North America and organised in the following five regions: Europe; Latin America; Africa, Asia, Middle East & Oceania; Japan & Korea; and Region China.

Jerzy Gruhn, currently executive vice president and head of Europe, steps down from Executive Management and will continue as head of Europe, now as senior vice president, reporting to Maziar Mike Doustdar.”

Looking over the entirety of the changes we are neither shocked or surprised. The fact is Novo needed this shakeup to deal with the issues facing the company.

While the company remains a global leader in diabetes the environment they operate in has changed dramatically over these past few years. Novo has long been known for developing premium products which in the old days received premium reimbursement. The insulin market, one of their legacy franchises, was the main revenue/profit driver. With the insulin market moving towards commodization, the company’s GLP-1 franchise has become the new leader. Yet, like the insulin market the GLP-1 market is also moving towards commodization.

Simply put the company can no longer operate under the assumption that premium products will receive premium reimbursement. They can no longer operate in a vacuum ignoring just how competitive the diabetes drug market has become. They must be cognizant of the impact biosimilar insulin’s will have on their core franchise. They must recognize they need to supplement their strong portfolio of injectable therapies with oral therapy options. To effectively compete in the future lean and mean is the order of the day.

Thankfully Novo is in a very strong position even with these challenges. Their oral version of semaglutide, their long-acting GLP-1, is a truly exciting product with mega-blockbuster potential. They have one of the best brand names in diabetes. Their insulin pen portfolio is one of the best, if not the best, in the industry and delivery systems matter. With a global presence and solid reputation this well-run company is not in need of a major overhaul, more like a tune-up. Adjustments must be made to deal with the changing market dynamics.

The fact that so many changes were made at once tells Diabetic Investor that the company is not sticking their heads in the sand, they recognize that change is needed. Novo is one of the best diabetes companies on the planet and while change may not always come quickly at the company they aren’t stupid. As we have been noting with regularity if legacy companies like Novo are to survive and prosper in the future they must break from the past and adapt to the future. As Momma Kliff used to say and she’s been quoted by many “I want to plan for the future because that’s where I’m going to be living.”