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Top Novartis lawyer exits over Trump attorney deal error

Reuters  |  ZURICH 

By John Miller

ZURICH (Reuters) - Novartis' top is leaving the Swiss drugmaker, saying a $1.2 million contract he co-signed with U.S. Donald Trump's was a mistake.

The contract with Michael Cohen's Essential Consultants, the same firm used to pay porn star Stormy Daniels, has distracted Novartis's efforts to improve its image.

"Although the contract was legally in order, it was an error," Ehrat, 60, said on Wednesday. "As a co-signatory with our former CEO, I take personal responsibility to bring the public debate on this matter to an end."

ended the $100,000-per-month contract, signed in early 2017 by Ehrat and former Joe Jimenez, this year. It was part of efforts to learn more about how the might approach U.S. healthcare, said.

U.S. lawmakers have demanded Novartis and AT&T, which also made payments to Cohen's firm, provide details and Ron Wyden, the top Democrat on the Senate Finance Committee, has initiated an investigation.

Ehrat, Novartis's since 2011, had been expected to leave within the next 1-1/2 years, while Jimenez stepped down on Feb. 1 and was replaced by Vas Narasimhan.

Novartis has said Narasimhan had nothing to do with the Cohen contract and said that the board of directors was not aware of it at the time it was signed.

Ehrat will be replaced by who Narasimhan elevated to the committee this year as he made cultural change a priority. Novartis said she had not been aware of the Cohen contact.

FRONT-PAGE TEST

Narasimhan called the contract a major mistake at a meeting with investors in Basel and said Novartis is developing a principles-, not rules-based system to avert corruption.

"There will always be a way around the rule, whereas if you ask the question, 'Is this the right thing to do, are you comfortable with this being on the front page of the newspaper?'... that's going to help get us to a better place."

Since 2015, Novartis has paid out hundreds of millions in settlements and fines as a result of kickback allegations in South Korea, the and and faces an investigation of alleged bribery in A trial for another U.S. kickbacks case is scheduled for 2019.

Novartis shareholders have urged Narasimhan to exert more "moral influence" over perceived ethical shortcomings that Jimenez in 2016 blamed on a "results-oriented" sales culture and some bad actors. [https://reut.rs/2Ipdn83]

Klinger cited changes to bonus schemes for Novartis's drug sales force that are meant to avoid potential for corruption.

"Any one can have no more than 40 percent (bonus), so we think that by doing this we have also embedded our values and behaviours for our sales reps," she said.

DEAL OR NO DEAL

Narasimhan highlighted a dozen medicines in its pipeline that Novartis believes have $1-billion-plus annual sales potential, placing it on track to grow sales and expand profit margins through 2022.

The company will also consider pruning non-core operations, including its U.S. generic pills business, while weighing further bolt-on acquisitions to strengthen its drug portfolio.

Novartis is also considering whether to spin off its eye surgery division, with any move likely in early 2019, while priority areas for M&A include cancer medicine, cell and gene therapies, liver disease and digital and data science.

Narasimhan made a big bet on with an $8.7 billion deal to buy last month.

But Novartis is unlikely to mimic deals such as Takeda's $62 billion takeover of which are transforming the pharmaceuticals industry, said.

"I don't think there is a domino effect if some others were to merge or acquire large scale, that our hands would be forced in any way," Kirsch told analysts.

(Additional reporting by in London; Editing by Michael Shields/Louise Heavens/Alexander Smith)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Wed, May 16 2018. 16:10 IST
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