How Novartis Vaccines & Diagnostics Turned Around the Ship it Got From Chiron
Matthew Stober had a dramatic story to tell when he came through San Diego to speak to pharma manufacturing executives at last month’s annual Vaccine Production Summit. As the global head of technical operations for Cambridge, MA-based Novartis Vaccines & Diagnostics, Stober was closely involved in the corporate turnaround that enabled Novartis to ship more than 150 million doses of H1N1 flu vaccine to more than 20 countries during last year’s global pandemic.
Creating a core operations team to drive the corporate reorganization proved to be critical when the H1N1 pandemic erupted in 2009, Stober said, “because we had never done anything like that before. We would never have gotten there if we had not started a culture of change two years before.”
Stober told me he joined Novartis in 2006, after the company paid $5.4 billion to acquire Chiron, the global biotech based near Berkeley in Emeryville, CA, to help reorganize Chiron’s troubled vaccine business. (The San Diego-based Genomics Institute of the Novartis Research Foundation operates under the auspices of the diagnostics side of the business, which is based in Emeryville.)
Stober began his case study, though, with a full-blown corporate crisis that began in Liverpool, England, in 2004.
That was the year British medicines and healthcare regulators shut down a Chiron vaccine production plant in Liverpool after some four million doses of Chiron’s flu vaccine failed a sterility test. The closure unleashed a torrent of critical press coverage and created a dire shortage of flu vaccine in the U.S., Stober said. It also prompted top executives at Novartis headquarters in Basel, Switzerland, to assess whether the pharma giant should continue to hold its roughly 43-percent ownership stake in Chiron.
But Novartis also saw a huge opportunity, since Chiron’s share price had plunged while Chiron developed a remediation program for its Liverpool plant and plotted its strategy for regaining the suspended manufacturing license from British authorities. In late 2005, Novartis made a bargain basement offer to buy the rest of Chiron for $4.5 billion; the deal eventually closed at $5.4 billion in April 2006.
That’s when the heavy lifting in the turnaround began, at least as Stober tells the story.
Stober, who was vice president of biopharmaceutical operations at GlaxoSmithKline before joining Novartis, says the handful of senior Novartis execs who moved into Chiron found a variety of ills: compliance problems; poor supply chain performance; segmented production sites with no unifying culture; a disengaged management with low accountability; and a weak alignment between technical operations and quality.
“People were afraid,” Stober told me. “They were afraid to make decisions. They were afraid to stand up to senior management, and that hurt the operation.”
The Novartis team initially focused their efforts on people and quality, Stober said.
“Just about every product had supply constraints for lots of different reasons,” Stober said. “Many of them, though, fundamentally were people-related challenges. So the very first thing that we did was take the leadership organization and just systematically put the right leaders in place—strong, technical, business leaders—and that all by itself made a change.”
From there, Stober said Novartis moved to establish a series of quality improvement programs, to stabilize the company’s supply channels, and establish quality controls.
By January 2008, Novartis had replaced the entire management team. Stober said Novartis Vaccines created its core operations management team through a global recruiting effort to hire executives with “a winning spirit who were willing and able to fix the airplane while flying,”
At the same time, Novartis also was busy filling its ranks with more technically trained employees (instead of only science-based skills). Among other things, Stober said they found in 2006 that Chiron employed just 98 engineers in a global workforce of nearly 5,500 employees. By 2009, however, the number of engineers had increased to 280.
“If you bring in 50, 60 top-flight folks out of schools from different parts of the world, bring them into your organization and do that a couple of times, people just begin to realize, ‘Wow, that guy is smart,’ and—It’s not that you’re afraid, but you just step up your game,” Stober said.
Of course, many of the former Chiron employees also were motivated to become Novartis true believers as they saw their co-workers and managers replaced. But more than 3,000 of the 5,400 employees of Novartis Vaccines & Diagnostics work in Europe, and Stober said, “In Europe, though, it’s a lot harder to replace, like, take people out. So what we were doing was reassigning people to roles with less responsibility. So folks who wanted to be part of something special, part of that leadership climate and culture, started to change the way they were doing business too, and it really made a difference.”
In terms of changing a corporate culture in which employees are resistant to change and unable or unwilling to communicate, Stober said the solution is to teach employees how they can work together.
“What we found was that there were lots of things that just got in the way,” Stober said. “They didn’t trust this person, or they didn’t understand, or the leader wasn’t down there with them.”
So Novartis embarked on employee training programs, using exercises that often required co-workers to give each other feedback. “You should have seen these people,” Stober said. “They were scared to death. But once they started doing it, they realized, I can go and talk to the person next to me… We had this climate where people were afraid to go tell someone something.” Throughout this process, Stober added, senior executives reminded employees that their work in providing vaccines for public health needs was a noble purpose.
By early 2009, Stober said the revamped company began to see gains in the number of inspections and in its technical operations, including reduced manufacturing cycles and capacity improvements.
So what did the turnaround really mean? To Stober, it means that Novartis responded with energy and confidence as the H1N1 swine flu outbreak became a global pandemic, with more than 182,000 cases and 1,000 deaths in 177 countries, by June 2009. As a result, Stober said, Novartis was the first company to report it could successfully manufacture the H1N1 antigen. It was also the first “top flu vaccine player” to publish results from a H1N1 clinical trial, and the first company with both U.S. and European approvals for its vaccine.
The big question remaining, though, is whether Novartis can now produce something it’s never had—a successful, multi-billion-dollar vaccine on the order of Pfizer’s Prevnar (a pediatric vaccine for certain strains of pneumococcal infections) or Merck’s Gardasil (a vaccine developed to prevent genital warts and cervical cancer that’s caused by the Human Papilloma Virus).
“Our meningitis portfolio is probably the closest thing we have that’s headed in that direction,” Stober told me. In releasing its 2009 financial results in January, Novartis said its Vaccines and Diagnostics business is expecting regulatory approval this year of a vaccine that targets four types of meningococcal meningitis. Novartis also has a candidate vaccine in late-stage development for Meningitis B. “Beyond that,” Stober said, “Our pipeline is packed full. We have so many different products that we are struggling to decide which ones we’re not going to develop right now.”
And that’s certainly a better problem to have.