In an unconventional move, Novartis recently said it will propose Giovanni Caforio, M.D., who recently stepped down as Bristol Myers Squibb’s CEO and chairman, to serve as its next board chair starting in 2025.
While chair-to-chair intercompany transitions may be rare in the Big Pharma world, other executive moves are not so uncommon, though sometimes they face a contentious process.
One obstacle that has complicated executive moves between drugmakers is noncompete agreements, which prevent workers from taking jobs at rival companies within a specific timeframe—and it’d be almost impossible for two Big Pharmas with sprawling businesses to be completely free of conflict.
Novartis and Bristol Myers are major CAR-T competitors, and each sell multiple sclerosis treatments as well, with the former’s aging S1P receptor modulator Gilenya and the anti-CD20 antibody Kesimpta battling with the latter’s newer S1P med Zeposia. Meanwhile, Novartis’ injectable Cosentyx and BMS’ oral tablet Sotyktu both target plaque psoriasis.
Noncompete clauses are common in contracts for C-level execs at biopharma companies—except in California, where such agreements are banned, according to Jared Speier, a partner in Stradling’s employment law practice group.
“It’s the easiest way for companies to protect themselves against their confidential and proprietary information from going to a competitor,” Speier said in an interview with Fierce Pharma. “[In] biopharma, your proprietary information is everything.”
While that may be the case in a strictly legal sense, there’s a much more nuanced landscape around the potential enforcement of these agreements. Of course, there are only so many people with experience running Big Pharma companies. That limiting factor clearly plays a role in companies’ willingness to work through noncompete concerns in their hiring process.
Common clauses, rare litigation
Noncompete agreements typically include limits for the timing of employment moves and geographic boundaries, Speier explained. Restrictions for one year to two years are standard for senior execs, he added.
There’s also typically a definition of exactly what constitutes competition and a specific description of a firm’s competitors. Such stipulations need to be as specific as possible because the broader they are, the less likely they will be enforceable, Speier said.
A penalties provision may include financial damages or clawbacks of past compensation, plus injunctive relief that enables companies to ask courts to stop the employment move.
Caforio likely has noncompete terms with BMS, although the exact terms aren’t known. By the time that he’s expected to become Novartis’ chair, more than a year will have passed since he left BMS.
A Novartis spokesperson declined to comment on whether the Swiss pharma anticipates a noncompete agreement being a hurdle before bringing Caforio on board, pointing only to his appointment as a proposal to be voted on at the company’s next general meeting in 2025.
Still, there’s a widespread sentiment within the biopharma world that although noncompetes are common, they’re rarely enforced at face value and mainly exist to ward off egregious behavior.
“I don’t know of any CEO that has viewed noncompetes as enforceable for years now,” Daphne Zohar, a serial biotech entrepreneur and founding CEO of PureTech Health, tweeted in April.
The number of lawsuits targeting breaches of noncompete terms “pales in comparison to the [number] of violations that there are,” Speier said. That’s partly because noncompete disputes are almost always resolved before going to court.
Many potential noncompete clashes are avoided as an exec may self-select out of the running for a position at a competitor. In addition, the hiring company may decide that the noncompete risk is too high to proceed with a specific candidate, Steve Brengle, a managing director for North America in the life sciences practice of the executive search firm WittKieffer, said in a separate interview.
A company may not decide to pursue a non-compete lawsuit for various reasons. One could be an R&D program winding down, or a business already on decline, and another could be the executive leaving on generally good terms.
“Someone might have really done a very good job, and they’ve set that company up for success,” Brengle said. “If that company knows it might already be first to market for that product, and that executive set them up for success, they might be willing to look the other way, because they don’t want it to get ugly on their reputation either.”
Caforio may belong to this category. When BMS announced the leadership transition last year, the company’s lead independent director Theodore Samuels noted that BMS nearly tripled its revenue during Caforio’s tenure, partly through its transformative merger with Celgene and other “highly strategic acquisitions and partnerships.”
Samuels also credited the former CEO for fostering a “high-performance culture and highly engaged workforce,” and for acting as “a strong advocate and champion for diversity and inclusion to drive innovation.”
“Mentors and mentees can travel between companies,” Brengle continued. “If there’s no real threat underlying it, or the world won’t end because of it, you never know down the road when that situation could be reversed.”
Still, it may also depend on the company, as some can be assertive with their noncompete rights.
Back in 2015, Bristol Myers sued its former immuno-oncology exec David Berman for taking a competing job at AstraZeneca. According to the lawsuit at that time, Berman’s noncompete clause included a 12-month stay before he could work at a competitor. The two sides apparently resolved the dispute, as Berman still went on to head up oncology at AZ’s MedImmune. Berman has headed R&D at another company, Immunocore, since 2019.
In general, companies want to keep their noncompete crusades to the minimum, because aggressive behavior may scare off talent, the experts said.
“People don’t necessarily, especially at a senior level, want to work in an environment where they can’t be trusted to do the right thing,” Brengle said.
Besides any fights in the courts, the industry has developed a self-policing mechanism, Brengle said. While pharma is a large industry, it’s still a “small world,” the headhunter said, and people don’t want to be associated with employment moves that may be perceived as being unethical.
“People keep track of who’s doing the right thing the right way and who’s not doing the right thing the right way, and those get noticed,” Brengle said.
Larger legal uncertainty
Meanwhile, noncompete clauses in the U.S. may be banished altogether after the Federal Trade Commission in April unveiled a new rule banning such practices nationwide. Lawsuits have been filed challenging the policy, and a judge in the Northern District of Texas is slated to rule on a motion for an injunction this week. If the FTC wins, the rule goes into effect this September.
The FTC ban grandfathers in existing noncompete agreements for “senior executives.” That means employees should not rip up their noncompetes yet, nor should employers give up entirely on enforcing them, Stradling’s Speier said.
As for Caforio’s case, who better to answer the question of any noncompete concerns than BMS?
“Giovanni retired from the BMS board of directors on April 1 as planned and will join the [Novartis] board as chair on April 1, 2025, a year from his retirement from BMS,” a BMS spokesperson said in a statement to Fierce Pharma. “We wish him all the best.”