The Book on Daniel

Oct 01, 2009

Dr. Daniel Vasella, who created Novartis 13 years ago, turning it into what many analysts consider the world's leading global healthcare conglomerate, is the sole industry CEO with any purchase on greatness. During a decade when the industry has lost its high margins, public trust, and business model, leading to the exit of an entire generation of pharma leaders, Vasella, 56, remains the outstanding exception.

In a Business Week cover story last June, business guru Ram Charan spared no superlative. "He is not a prisoner of the existing paradigm. Instead, he is trying to change it," he said. "The same way Steve Jobs did at Apple, Andy Grove did at Intel, and Sam Walton did at Wal-Mart."

Cliff Kalb, president of C. Kalb & Associates, compares Vasella to Roy Vagelos, who led Merck from the mid-'80s to the mid-'90s, when it was annually voted America's most trusted company. "They are both MDs, and they both emphasized science over marketing, picking financial winners because they addressed significant medical needs."

In fact, Vasella is the only physician to lead a major drug company, a distinction lending his public image a certain gravity. Vagelos set a precedent for pharma philanthropy in the developing world in 1988 when he ordered Merck to donate its drug for river blindness free of charge until the disease is eliminated; in 2000, Vasella made a similar commitment to eradicate leprosy. He built the Novartis Institute for Tropical Diseases in Singapore in 2002, to focus on neglected diseases. Novartis' new malaria drug, Coartem, is available at 20 percent below cost.

Plus, Vasella is a media darling. In 2004, Time magazine named him one of their "100 Most Influential People." He speaks three languages, collects rare books and Dutch Master paintings, and rides motorcycles. Above all, he is the most quotable of CEOs—frank, bold, and unscripted.

This summer, when animal-rights activists targeted him in a series of chilling attacks (including arson at his summer house and desecration of his family grave site), Vasella was quick to make a public statement, condemning them as "terrorists." (See "Animal Testing: Terrorism and the Militant Fringe")

Double Vision

But all this would be mere affectation if Vasella hadn't demonstrated a commitment to innovation. "Vasella saw where the industry was heading, how science itself was transforming the model," says Jeff Elton, former senior vice president of strategy and COO at the Novartis Institute of Biomedical Research

That visionary quality is even more noteworthy given the setting for Vasella's success. Long dominated by three chemical companies—Ciba-Geigy, Sandoz, and Hoffman-LaRoche—the business environment in Basel, Switzerland, was anything but congenial. Yet the potential Vasella saw in the merger of Ciba-Geigy and Sandoz was not to be measured by local standards. "He made the merger with an ambition far exceeding any fight about which side of the Rhine river you were on," says Elton.

He built Novartis on a business model of diversification—Gleevec, Gerber, and generics all under one metaphorical roof. "It's hard enough to run a pure-play pharma consistently," says Peter Young, president of Young & Partners. "But managing the volatilities of a diversified healthcare company successfully for more than a decade is very rare."

Vasella's apparent independence from the industry groupthink has alerted him to opportunities invisible to his peers. When generic manufacturers were viewed as barbarians at the gates, Novartis was quietly acquiring one shop after another, turning Sandoz into the world's number two generics manufacturer. Criticized for sleeping with the enemy, Vasella stood his ground. "I am a strong believer not only in intellectual-property rights [but] also in generics," he said in a McKinsey interview. "Once the monopoly of this knowledge and invention is over, somebody can copy it and sell it very cheaply, which in turn saves a lot of money."

Plus, Basel is a long way from Wall Street. As far back as 2002, Vasella was decrying the tyranny of quarterly earnings. "The men and women running public companies ... become preoccupied with short-term 'success,' a mindset that can hamper or even destroy long term performance," he told Fortune. "It may sound trite, but I truly believe my ability to keep shareholders' faith in our company depends not on whether I make the quarter but on who I am, what my guiding principles in life are, my behavior."