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.
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.
3. Shifted focus. When a company is reorganized, more often than not, Nader says, people focus on the organizational structure, but “in my experience, what makes success is not what we’re doing, it’s how we’re doing it. The how can be translated into values and the values become the culture of the company.”
4. Created a culture of values. The new NPS Pharma focused on six core values: integrity, respect, reliance on excellence and teamwork. “We had experts, but we needed them to work together,” he says. “We didn’t want any Madonnas.” In the end, they added a seventh value: “fun,” because Nader felt people needed to enjoy what they were doing.
5. Maintained brand consistency. “NPS” used to stand for Natural Product Science. That name was eliminated when the company reorganized. Although the initials no longer meant anything, Nader was hesitant to eliminate them because of the logistical and financial costs involved with a name change. “We were tight on cash and we didn’t want to revert the few resources we had for something that was not a priority. We always thought we could do it later on, it but it just never happened.”
By adding a tagline— “Born from science. Built for patients.”—they were able to refocus the brand while still keeping their existing brand strength.
6. Made visibility and communication a priority. Nader developed a policy of meeting with every employee one-on-one a month after they joined the company. Then every couple of weeks, he would meet (and still meets) with a random group of employees for a “What’s On Your Mind” luncheon. “It keeps me in touch with what’s going on in the organization,” he says. To rebuild trust, he also sits down with shareholders, investors and partners individually. Altogether, he conducts up to 400 meetings a year. “The only way to rebuild the grand image of the company is for them to believe in us, and for me to do my job explaining what we’re trying to do with them and for them, and to keep them informed in a very transparent way,” he says.
7. Went global through outsourcing. In just 15 months, NPS expanded globally and now has 215 employees in 30 countries. Outside experts are now relied on for all non-core activities, including drug discovery and R&D, while core competencies remain in-house, including late-stage clinical development, regulatory, commercialization and compliance.
“My motto is to be successful by being different exceedingly well,” Nader says. “We have an absolutely crystal clear mission and vision for where we’re headed and we make sure every employee understands it. We hire people who share the same values as the company.” Turnover at the company is about 4%, compared to the industry average in pharma of 10%-15%.
Excellence, Nader says, is not negotiable. “Our goal is to execute with zero margin for error. We make mistakes, everyone does. But when we identify a mistake, we correct it immediately and proactively.”
Nader offers the following advice to others who are attempting a turnaround: “Start with a blank sheet of paper. If you don’t, then you start with the past, and it’s very difficult to build the future when you have the past in the way. And be true to your values, that’s not negotiable. With that, the sky’s the limit.”
Dr. Nader is CEO of NPS Pharmaceuticals Inc. He received the EY Entrepreneur Of The Year 2013 National Life Sciences award.