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Rebuilt From the Ground Up: A Lesson in Turning a Failed Company Around

When a new CEO steps into a leadership role, chances are they aren’t inheriting a perfect situation. More often than not, there are challenges that went unresolved that the company is looking to the new CEO to fix.

That was the case when Dr. Francois Nader took over the helm at NPS Pharmaceuticals. After being told by the FDA that their lead product that had been in R&D for 10 years was not approved, they lost 80% of their market value and had to take drastic measures, including laying off 90% of the company.

“We kept the company’s core project management capability. That’s what we needed to be a public company—and we outsourced everything else.”

Since being named CEO in 2006, Nader trimmed the fat, outsourced non-core competencies and literally rebuilt the company from the ground up. His strategy turned the company around from a low as a $175 million market cap organization to one with a $3.5 billion market cap. Here’s how he did it.

1. Stopped the bleeding. Once they got the news about the drug not being approved, they had to act fast to reduce spending. “We let the commercial and medical teams go,” he recalls, then consolidated four facilities across the U.S. and Canada into one facility in New Jersey. These efforts reduced the number of employees from 200 down to 17. “Then we had to stop pursuing any new projects to reduce the cash burn.”

2. Chose a new direction. When the storm subsided, Nader had to start thinking about the future of the company. He considered three options: 1) cease making new products and simply collect royalties on past products; 2) divest all products and become a service business or; 3) re-orient the company into a new product line: the rare disease business.

There were two benefits to the third model: there was no competition, and the development costs and time were reasonable compared to development of broader products. They decided to go in that direction. “We kept the company’s core project management capability. That’s what we needed to be a public company—and we outsourced everything else,” Nader says.


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