LARS REBIEN SØRENSEN
As the new chair of the Novo Nordisk Foundation and Novo Holdings, Sørensen discusses his five-year strategy for progress.
Novo Nordisk’s ex-CEO also highlights his best bit of advice for future leaders of the sector.
So what? Having stepped back from the pharma industry, Sørensen is uniquely positioned to discuss the trials and tribulations already causing a stir, and the events most likely to disrupt the industry in the near future.
Lars Rebien Sørensen, a Novo Nordisk AS veteran who was CEO of the diabetes giant from 2000 to 2016, became chair of Novo Holdings in July 2018 and was also appointed chair of the board of the Novo Nordisk Foundation. He reveals his vision for the future of Novo Holdings and discusses the challenges of moving from the C-suite to chairship roles.
Sørensen joined Novo Nordisk in 1982, beginning his career in enzyme marketing. He was later appointed a member of corporate management and was given the special responsibility for health care in 1994. He obtained his master’s degree in forestry from the Royal Veterinary and Agricultural University in Denmark in 1981, and a bachelor of science degree in international economics from the Copenhagen Business School in 1983.
Sørensen joined the boards of the Novo Nordisk Foundation and Novo Holdings in March 2017 and was elected vice-chair of the foundation in March 2018. He succeeded Sten Scheibye, who departed both boards on July 1, as chair of both the foundation and Novo Holdings. Sørensen will focus on implementing the foundation’s new five-year strategy for 2018 to 2023.
Under this five-year strategy, the Novo Nordisk Foundation has three main goals:
- To enable Novo Nordisk AS and Novozymes AS to reach world-class business results
- To develop knowledge-based environments in which innovative people can carry out research and translate discoveries into new treatments and solutions
- To inspire and enable children and young people to learn
Scheibye will be a tough act to follow. Under his watch, the foundation’s annual payouts grew from DKK687 million ($106 million) in 2013 to DKK1.3 billion in 2017. In the same period, the total assets of Novo Holdings grew from DKK201 billion in 2013 to DKK358 billion at the end of 2017. However, under its five-year strategy and Sørensen’s leadership, the foundation expects its annual grant investments to reach DKK5 billion in 2023.
The Novo Nordisk Foundation is an independent Danish foundation with corporate interests. It has two key objectives: to provide a stable basis for the commercial and research activities of the companies in the Novo Group; and to support scientific, humanitarian, and social causes. Novo Holdings is a Danish, private, limited liability company wholly owned by the Novo Nordisk Foundation. It is the holding company of the Novo Group, comprising Novo Nordisk, Novozymes, and NNIT, and it manages the foundation’s assets.
Having stepped back from the pharmaceutical industry, Sørensen is in a prime position to reflect on his time as a leader within the sector, highlighting the issues on the horizon for big pharma and also his tips and tricks learnt from more than a decade as CEO of a top 20 drug developer.
Q: In Vivo: What drew you to these new positions at the Novo Foundation and Novo Holdings?
A: Lars Rebien Sørensen: It is most likely because of my tenure with Novo Nordisk, where I've worked for 35 years. This gave me the opportunity to join the Novo Nordisk Foundation, which owns about 27% of the equity and controls 70% of the votes of Novo Nordisk. It enabled me to get a board seat on the foundation, and I'm now in a position where I will be taking over the chairship of the foundation. With the role as chair of the foundation comes also the chairship of Novo Holdings, which is an investment company that we have created to hold all the assets, reinvest and ensure that the foundation can live up to its philanthropic obligations.
Q: So, wearing both hats, what are your immediate goals as you move into these new roles?
A:Firstly, it is a huge privilege. During my tenure as a working executive and an employee of Novo Nordisk I took part in the business of creating value, now I'm getting the opportunity to look through the barrier as benefits are being funneled back into society at large. Looking at investments that will create, hopefully, a vibrant bioscience ecosystem in Denmark, perhaps even broader within specific areas. So, it's a huge, huge privilege and obligation to have.
A:My goals are focused specifically on the next five years. We have a statutory retirement limit of 70, so I have about five or six years to make an impact together with my colleagues on the board. It is only during the recent five to seven years that the foundation has been able to accumulate wealth and dividends from the operating companies, and it is starting to make a very significant impact in the biotech and life science environment in Denmark and abroad. My role is to ensure that we continue the very successful period that we've been going through under the leadership of the previous chair. It is going to be a tall order; of course, we have more financial firepower but the circumstances are likely to be more challenging because of the macro-economic situation that we're facing now as opposed to what we faced during the last five to 10 years.
Q:Along those lines, what kind of challenges are you expecting and preparing for?
A: I think it is going to be interesting for us to see if we can find long-term investments where we believe we can generate value. We have as a mandate to invest in very early, even seed money, in starting up or topping up biotech and life science companies in Denmark and Scandinavia. We can find ways of doing that but it is not going to necessarily provide a return. It is more of a philanthropic exercise where we hope to build an ecosystem that Denmark will benefit from. More difficult, though, are the larger financial investments where we are competing to some extent with the venture capital and the general capital players. For life science investments right now, asset values are extraordinarily high. And given the flush of capital available and low interest rates, we have to be very, very careful in selecting investments where we have insight or experience that we can bring to bear in developing some of these companies or being part owners of these companies.
Q: The foundation’s five-year strategy – could you talk a bit about the salient points of this plan?
A: If you look back five years, and even longer, the primary focus of the foundation's philanthropic activities and (in those years) relatively modest financial activities was undertaken by Novo Holdings. The financial group was focused on seeing if it could develop an ecosystem around metabolism and science, which was directly linked to the commercial interests of the operating companies. Now, with a new strategy, we are recognizing that the foundation in its capacity for grants and supporting science has become so large that we need to, and we can, expand our areas of interest. I see this involving natural sciences and including sustainable scientific or technological activities, so that we see research expanding to create a more sustainable society.
A: If we were to only funnel our philanthropic activities into one area, say metabolism, we would probably have a diminishing return in terms of innovation and new knowledge than if we were looking more broadly. In the past we were very adamant that our activities should have a societal health benefit and we sought to do that through biomedical research. Now you can easily argue that this can be done through combining bio-informatics with biomedical research and also perhaps diagnostics like genomics. We can combine different disciplines to get better outcomes from the resources we are spending. So, I think in a way you could say that we are diversifying our areas of interest but it's also, perhaps, even an acknowledgment that the real breakthroughs will come from cross-disciplinary projects and science.
Novo Nordisk Foundation’s Grant Focus Areas
- Biomedical and health science research and applications
- Patient-centered and research-based care
- Life science research and industrial applications promoting sustainability
- Natural and technical science research and interdisciplinarity
- Education, outreach and innovation
- Social, humanitarian and development aid
Q: When you talk about revenue-generating new assets, what are you looking for here?
A: Approximately 25% of the assets under management by the foundation is what is being dealt with by Novo Holdings – the other 75% is being held as equity in Novo Nordisk or in Novozymes, and we are not in a position to do anything with that ownership other than remain stable owners for the future. So, it's the 25% of the assets, which equates to some DKK100 billion, that we have an obligation to try to reinvest. This is being invested all the way from entrepreneurial idea generation and seed money, through to first companies with first rounds of financing, and also venture capital base enterprises and even listed companies. In the future it's of course our obligation to try to identify, based also on risk assessment, companies where we can take a long-term position. Also, if there are to be financial circumstances in the near-term future, which will become more difficult for these companies to finance themselves to create real companies and jobs, and value for society.
Q: What are you expecting to be the biggest differences between being CEO of a company like Novo Nordisk and being chair of a foundation group?
A: There is one very important distinction between being a CEO and being a chairman of any organization, as a CEO you usually have an enormous ability to make your views heard and to make decisions. In a foundation it is more of a collegiate approach. We as the board of the foundation use our tools and experiences for the betterment of the enterprise that we are engaged in. This role is quite different from being an executive, so for me personally this is going to be an interesting experience because I've primarily been an executive all my life.
A: Then there are also several similarities because the way we operated at Novo Nordisk was as a collegiate. For example, the entire leadership team of the company was employed directly by the board and so in that sense you could say it's not that different. As a chair I need to see if I can recruit some of the best talent in device and medical technology, as well as bioscience and finance. Then use those talents to make sure that we've made the right decision. But it's not my ideas, it's our joint agreed ideas that will be promoted.
Q: What key learnings from your many years at Novo Nordisk do you still carry with you today and find yourself using?
A: I really enjoyed all my years with Novo Nordisk but what really kept me going, if you will, was the curiosity and the excitement about science. I've marveled over time at the capabilities of our scientists. We took a narrow perspective in the area of metabolism, diabetes and related disorders. We had a very, very in-depth understanding of the science in the area that we were engaged in, and this contributed to many of us, it motivated many of us.
A: For me personally, being able to apply my curiosity or explore in broader areas than what I used to work in is exciting. It's just fascinating. And having worked 35 years for the company, it is of course an obligation for me to ensure that the values that have been created by the company and its employees are also put to good use for the betterment of the stakeholders of the existing company.
Q: Having stepped away from an executive role, is there one myth about working within the pharmaceutical industry that you are keen to set straight?
A: The pharmaceutical industry has a public reputation that is sadly not where it should be. I think the pharmaceutical industry is doing a phenomenal job, and is doing things for the general public and society that cannot be under estimated. However, due to a number of controversial reasons – for example animal testing, human trials, financial/personal financial gain, etc. – it has not gotten the reputation, unfortunately, it deserves in society and that saddens me in some ways. This is something for the current leaders of the pharmaceutical industry to work on, not me; but I will support any work in that regard that they may undertake.
Q: Talking of future leaders, what's the best bit of advice you were given as a CEO that you would pass on?
A: That’s a tough one. The one thing that we agreed on, the team and I, when I took over 17 years ago at Novo Nordisk, was that we needed to find out who the customer was. We decided that the patient was the customer and if you look at it that way, then of course your relationship with the medical profession changes somewhat. The doctors are not our customers, even though they write the prescriptions, but they are our partners in ensuring that the patient gets the proper treatment. I would say to anyone working in the pharmaceutical industry, make sure that you work in the interest of the patient.
A: And then you have to adopt your strategies. Some of those strategies can be quite difficult to deal with, because, say for instance, intellectual property rights are the protection of innovation and pricing of new innovations, and how do you make those available for those that have not the financial means or insurance. Those are difficult decisions but at the end of the day, if you're not living up to the expectations of the consumer, the patient, then you end up in a difficult position.
Q: Are there aspects of the CEO role you will miss?
A: Not really. During my time as an executive at Novo Nordisk, I think I made more than 100 quarterly announcements because I was part of the leadership team before I became CEO. So, I miss the people that I dealt with during all those years, but the job itself, it's hugely demanding and I don't miss the job. However, I have been blessed in the sense that I'm able to continue working with science and health in a less strenuous way you could say. I am excited to be heading a philanthropic organization that largely gives back to society.
Q: Looking ahead, what are your predictions for the pharmaceutical sector?
A: It's very clear that there are some commercial challenges in relationship to the biggest market in the world, the US market. The old systems for distribution of drugs and health insurance plans are not functional in the sense that distribution schemes do not allow all the patients to have clear transparency of the pricing and get access to the drugs that they can afford or they need. That is then challenging for the general global business model of the pharmaceutical industry in that the US has traditionally been the engine of innovation. Not that innovation is not taking place anywhere else but that the US has got the financial capacity to fund innovations, which are then rolled out subsequently in Europe and elsewhere – to just put it simply. So, the current discussion in the US about the commercial model and the willingness to finance innovation in the US, I think is a fundamental one which is a challenge for the industry. This must be dealt with very diligently and carefully by the leaders of the pharmaceutical industry in the US because it has global ramifications.
A: Then I think of course in terms of science, there are some very, very disturbing areas that need attention; neurological sciences, dementia and Alzheimer's, and others are causing an enormous societal toll and it seems like we're having less and less scientific endeavor to try to find fundamental ways of dealing with these diseases. Alzheimer's, for instance, is an area where there's no real significant progress to my understanding.
A: Then there's another area where we're finding a way to do something in the foundation; we've just announced a $150 million investment or commitment into developing new antibiotics. Developing a new set of antibiotics is going to be crucial. The assessment is that by 2050 there will be more deaths from infections than if you take cancer, HIV/AIDS, malaria and tuberculosis altogether, so infectious diseases are going to be a huge issue for our children and our grandchildren. And the business model of developing such new concepts is flawed for many reasons, therefore nobody wants to invest in it. So, we are taking it upon ourselves to support that. Antibiotic development is an area where foundations like ours may have to step in and do some of the fundamental work to develop new concepts.
A: The Wellcome Trust and the Bill & Melinda Gates Foundation, for example, are working on different elements of the same issues from their sphere of focus and interest. Our foundation is similar in size. I think we could also work together with some of these other big international foundations and topic agencies to try to define the right priorities, how can we assist, and how can we help at the same time living up to our own obligation of remaining solid financial foundations for our operating companies.