Drug Lord

THORSTON FUTH/LAIF FOR TIME
Vasella reflects on his business in the meeting room adjoining his office

On a sunny friday morning two summers ago, Daniel Vasella got quite a wake-up call. Outside his lakefront home near Zug, Switzerland, gigantic speakers blasted Wagner's Gotterdammerung loud enough to rattle the windows. From across the lake, several boats carrying protesters converged on his house. A helicopter delivered a barrel marked with a skull and crossbones to one of the boats. Baffled, Vasella watched as the barrel was ferried to shore and plunked on his lawn.

The stunt, it turned out, had been organized by Greenpeace to protest an old industrial dump near Basel that was said to be leaking chemical waste into the groundwater. The barrel carried water from a source by the dump in which, protesters said, they had found traces of drugs made by Novartis, the Swiss pharmaceutical giant that Vasella leads as chairman and CEO.

Vasella could have summoned the police. Instead, he stepped outside and asked the crowd, "Who's the boss here?" A man stepped forward, and Vasella told him the commotion was scaring his two younger children. Vasella invited the protest leader and two of his companions for breakfast on his terrace to talk things over. Vasella's wife Anne-Laurence served croissants to the rest of the group.

It was vintage Vasella: cool-headed, personable, direct adjectives that frequently crop up in descriptions of the drug executive. Vasella is exceptionally smooth in dealing with advocates for lower pharmaceutical prices as well as with regulators and lawmakers, whether in his native Switzerland or in the U.S., where he is embarked on a major expansion. He is fluent in German, French and English and says he can muddle through in Italian and Spanish. More important, he is fluent in many cultures, from the elaborate rituals of Japanese business to an American culture that is at once informal and legalistic. Despite his modest public demeanor, Vasella is an exacting boss who demands short, sure answers to his probing questions. And rivals know him as a ferocious competitor who in less than six years has transformed once sleepy Novartis into one of the world's most dynamic and admired drug companies. For all these reasons, Vasella, 48, has earned a reputation as the quintessential global CEO one who moves nimbly from corporate finance and strategy to science and marketing to p.r. and lobbying.

Novartis, which operates in 140 countries, last year booked sales of $19 billion, up 10% from 2000. While such competitors as GlaxoSmithKline, Merck and Bristol-Myers Squibb are entering a period of declining revenue growth as patents on their major drugs expire, Novartis is poised for several years of steady double-digit expansion. This year its shares in the U.S. are up about 10%--the best performance among major drug companies even as the Morgan Stanley Capital USA Health Care Index, a basket of big drug stocks, has fallen about 25%. Novartis is the 17th most valuable company in the world, up from 27th last year.

Its secret? An aggressive expansion in the U.S. and an innovative approach to R. and D. Novartis has launched nine groundbreaking drugs since 2000--three times as many as its nearest competitor and plans to launch 12 more by 2006. The company's relatively low debt and ample cash reserves have earned it a credit rating of AAA from Moody's. Morningstar analyst Todd Lebor praises the company's "excellent financial disclosure and conservative accounting" and notes that it has no unconsolidated debt. Pfizer's announcement last week that it will merge with Pharmacia sent several drugmakers looking for partners. But while Vasella doesn't rule out an acquisition, his firm is considered one of the few strong enough to succeed on their own.

Vasella knows, though, that he can't insulate Novartis from the rising public rebellion against drug prices. According to the advocacy group Families USA, prices of such branded drugs as Novartis' Miacalcin and AstraZeneca's Prilosec have grown at twice the rate of inflation, even as government controls have kept the same prescriptions much cheaper in most other countries. Patients in the U.S.--who account for roughly half the drug industry's annual global revenues of $364 billion are howling, and they are getting heard in Congress. But so is Vasella, who employs 19,000 Americans and recently opened a $250 million research facility in Cambridge, Mass. He routinely meets with U.S. lawmakers and regulators. Among drug-company CEOs, he has taken the lead in giving a little on prices to avert sweeping new regulations.

Vasella came late to the business world but was introduced early to illness and adversity. Born in 1953 in Fribourg, Switzerland, the son of a history professor and the youngest of four children in a Catholic household, Vasella developed asthma at 5, then fell ill with tuberculosis and meningitis at 8, each time spending a year away from home in recovery. He was 10 when his eldest sister died of cancer; three years later, his father died from complications after surgery. But the accidental death in 1982 of his second sister, who had attended medical school with him, was most painful. "That was somehow unreal," he recalls. "When I was young, I thought that the sum of mishappenings in our lives is constant, that there must be some kind of balancing justice."