Leadership Shake-up at GSK and Novartis China Signals New Strategic Realignment Among Multinational Pharma Giants

Source丨Original work by Healthnews21

Author/Ji Yuanyuan‍‍‍‍‍‍‍‍‍‍‍‍‍‍

From the beginning of 2024 until now, major multinational pharmaceutical companies have frequently made strategic adjustments and personnel changes. Recently, several multinational giants such as Novartis, GSK, and Johnson & Johnson have successively announced the replacement of their "leaders" in China.

On May 14, reporters from the 21st Century Business Herald learned that Hubert He, President of Novartis International Markets, announced a series of personnel changes to employees. Effective June 1, Ingrid Zhang (current President of Novartis China) has been appointed as Chief Commercial Officer (CCO) of Novartis International Markets, leading the Commercial Launch Strategy (CLS) team and will be based in Basel. Leo Lee, current President of Novartis Japan, has been appointed as President of Novartis China. During the transition period, Keizo Miyazawa will serve as the interim President of Novartis Japan, overseeing Japanese operations.

On May 10th, Mike Crichton (Ke Rui Kang), Senior Vice President of GSK Greater China and Intercontinental Region (GSK GCI), announced a major personnel change to employees. Cecilia Qi (Qi Xin), the current Vice President of GSK and General Manager of China, has been appointed as Vice President of GSK Greater China and Intercontinental Region and Head of Vaccines Business, while Sherman Yu (Yu Hui Ming) will take over her position as Vice President of GSK and General Manager of China.

As the "top leaders" of the Chinese branches of the aforementioned two multinational pharmaceutical companies began to be arranged by their companies to step out of the "national border," there were also heads of Chinese branches of multinational pharmaceutical enterprises who voluntarily submitted their resignations. At the end of April this year, it was reported that Song Weiqun, Chairman of Johnson & Johnson China and President of Johnson & Johnson Medical Technology China, had submitted his resignation to the company, seeking external development opportunities.

Insiders from GSK, Novartis, and Johnson & Johnson have all confirmed to the 21st Century Business Herald reporter that the news of executive changes is true.

In recent years, the accelerating changes in the healthcare industry and the Chinese market have also been driving strategic and organizational adjustments among pharmaceutical companies.A pharmaceuticals industry analyst at a securities firm told the 21st Century Business Herald that as China's new round of healthcare reform enters a critical phase, especially under the pressure of reforms such as bulk procurement, medical insurance negotiations, and methods of medical insurance payment, generic drugs are rapidly declining while innovative drugs are accelerating their rise. The entire industry is facing an urgent need for transformation and upgrading.

"Intensified changes in China's pharmaceuticals industry in the coming years will drive the industry to face many unprecedented challenges during its rapid development, especially frequent talent mobility and team changes. How to strengthen organizational and talent capabilities to stand out amidst fierce competition has become a pressing issue for multinational pharmaceutical companies," the analyst said.

In recent years, with the continuous impact of China's medical insurance cost control, bulk procurement, and pharmaceutical anti-corruption policies, the world's second-largest pharmaceutical market that multinational pharmaceutical companies face has undergone profound changes. In particular, domestically produced generic drugs that have passed the consistency evaluation and locally innovative drugs that are continuously approved for marketing have also brought multiple competitive pressures to multinational pharmaceutical companies.

Prior to the announcement of changes in GSK's leadership in China, GSK's organizational structure in China had already been adjusted.At the beginning of 2024, industry sources revealed that GSK China would disband its CNS product LBT sales team. Starting from January 1, 2024, its original organizational structure will be restructured into three core business divisions: specialty medicines, vaccines, and respiratory. Meanwhile, the previous goal of "achieving domestic sales of £3 billion by 2030 and becoming the top multinational pharmaceutical company in China" has been revised to "breaking into the top ten multinational pharmaceutical companies in China."

"Pharmaceutical R&D is an industry with a long cycle and high risks. Given the current market environment, both multinational pharmaceutical companies and local innovative drug companies are seizing the opportunity presented by this round of industry reshuffle to reshape their product pipelines, sales systems, sales teams, and strategic directions. Just after announcing plans to adjust the structure of its China operations, news of senior management changes emerged, indicating that GSK has more considerations regarding its strategic layout in China," said an anonymous senior executive of a pharmaceutical company to the 21st Century Business Herald.

In recent years, Novartis has also been accelerating its strategic adjustments to promote innovation and transformation. Like most multinational pharmaceutical companies, Novartis has chosen to "eliminate the non-essential," terminating non-core projects in its development pipeline to enhance its focus on four core therapeutic areas: cardiovascular, renal, and metabolic diseases; immunology; neuroscience; and oncology. After completing the spin-off of Sandoz in 2023, it is also considered to be a critical moment for the company to face a global performance review. During this period, the change of leadership in the China region is also seen by the aforementioned pharmaceutical executives as an urgent need for transformation and upgrading.

For Johnson & Johnson, a strategic spin-off was also carried out in 2023. In August 2023, Johnson & Johnson officially announced the completion of the stock swap offer for the spin-off of Johnson & Johnson and Kenvue. According to the annual financial report released for the first time as a pharmaceutical giant focused on medical technology and pharmaceuticals after the official completion of the consumer health business spin-off in 2023, the total revenue for 2023 was $85.2 billion, a year-on-year increase of 6.5%; net profit was $13.3 billion, a year-on-year decrease of 18.6%. This financial performance has raised questions about Johnson & Johnson's profitability. Analyzing its performance, it is not difficult to see that due to international competition and the impact of the patent cliff, Johnson & Johnson's market may face the dilemma of "internal and external troubles." Therefore, Johnson & Johnson also needs to find the next engine to support continued growth in performance.

In response to the current market pain points of multinational pharmaceutical companies, the aforementioned analyst further pointed out to the 21st Century Business Herald reporter that due to policy and market changes, a large-scale adjustment of multinational pharmaceutical companies' strategies in China is inevitable. The personnel adjustments at GSK and Novartis clearly indicate that, in order to maintain control over their position in the Chinese market, multinational pharmaceutical companies need to carry out a round of restructuring of their existing staff.

“As for whether these executives' positions are 'promotions,' it also depends on whether the person in charge of the Chinese market will need to report to them. However, regardless of how the adjustments are made, it is undeniable that the more challenges the market presents, the more multinational pharmaceutical companies need to consider: as the focus of the value chain gradually shifts, how can the talent gap be filled? With favorable industry policies promoting development, how can organizations remain efficient and agile?"This is a systemic issue that requires the system to comprehensively consider various aspects such as talent attraction, organizational structure, team building, and incentive evaluation," the aforementioned analyst said.

Since 2021, a group of targeted innovative drugs have gradually been included in medical insurance, and their usage increased in 2022, starting to truly contribute to the revenue, profit, and cash flow of innovative drug companies. Meanwhile, under the dual pressures of fiscal and medical insurance expenditures, the state's support for innovation has become more refined, and the future standards for innovation will be further raised. This is conducive to changing the severe homogenization in the development of drugs targeting the same point, benefiting pharmaceutical companies that truly possess innovative capabilities.

Against this backdrop, China's innovative drug market is gradually entering a "selective high-quality innovation" era. Homogeneous products are progressively losing their competitive edge, while new technologies, scarce technology platforms, differentiated therapeutic areas, and innovative drug delivery methods could all potentially offer companies a better competitive landscape. Companies with deep technological expertise are expected to stand out.

Industry data also shows that, due to the impact of centralized procurement, multinational companies' growth rate in 2021 was lower than that of local companies. Looking at different types of companies, local companies dominate the hospital pharmaceuticals market, with sales reaching nearly 680.5 billion yuan in 2021, a year-on-year increase of 12%. However, over the past five years, their share of total sales has shown a declining trend.

In this realistic situation, there is a view within the industry that the adjustment in China's innovative drug sector also reflects the continuous improvement in the R&D capabilities of domestic pharmaceutical companies. This has led multinational pharmaceutical companies to face increasingly fierce competition in many mature drug categories. Against this backdrop,How to reposition the strategic positioning of the China market globally and make corresponding business adjustments has become a tough challenge for multinational pharmaceutical companies, and this is also a test for the "leaders" in the China region.

"Behind the talent flow, it reflects multinational pharmaceutical companies continuously adjusting their strategies and talent structures to respond to new trends in industry development," the aforementioned analyst told the 21st Century Business Herald reporter. The biggest challenge multinational pharmaceutical companies face in selecting talent in the China region is the mismatch between the stage of enterprise development and talent, which leads to personnel turnover and restructuring. Although this brings temporary pain to enterprises, in a sense, it is not necessarily a bad thing for the industry. The flow of personnel facilitates the exchange of successful experiences, technological innovation, model upgrades, and capability alignment, which is healthy for the entire industry and worth encouraging.

Previously, Xiao Kun, Managing Partner of Deloitte's Life Sciences and Healthcare Industry Consulting, stated in an interview with the 21st Century Business Herald that in the past 5-10 years, China’s innovative drug market has experienced both peaks and troughs. Currently, due to the complex policy environment in the pharmaceutical market, increasing competition in innovative drugs, and growing difficulties in capital market financing, this instability has, to a certain extent, led to involuntary executive turnover. Future executive appointments and team building will directly reflect companies' assessments of market trends and the policy environment, as well as their latest strategies for product development and marketing models.

"Talents with strong professional competence that align with the trends of the times and the development needs of enterprises will become increasingly welcomed. In the long term, the industry’s development also presents different requirements for talents," said Xiao Kun. According to a global survey by Deloitte, organizations are moving towards a new model of work and labor operations, one that prioritizes skills over positions, forming a new 'skills-based organization.' Currently, some pharmaceutical companies have already started undergoing corresponding organizational transformations, and it is expected that more companies will follow suit with similar plans in the coming years.

However, some industry insiders remain optimistic about the long-term development of the pharmaceutical sector. At a recent industry forum, many participants noted that pharmaceuticals are a long-cycle track. The key focus now is how to bide one’s time, optimize core corporate strategies, and adjust the allocation of candidates' capabilities to achieve the best state for enterprise growth and talent strategy.

Biogen's Asia-Pacific President Ding Weibo pointed out at the forum that, specifically at the micro level, this involves the criteria for selecting and employing corporate talent. Enterprises must base their talent selection on the current state of industry development and formulate strategies according to the stage and environment in which the enterprise is situated. When enterprises are at different stages such as early-stage R&D or rapid expansion, they need to tailor their talent selection accordingly; moreover, there are differences in the environments of various types of enterprises, such as foreign companies, state-owned/central enterprises, and private enterprises, so talents need to possess a certain degree of adaptability and learning ability to quickly adjust to environmental changes. Additionally, human resources managers should also select talent based on corporate culture, forming consistent standards for attracting talent will effectively enhance efficiency.