Company directors are usually a protected species, but biotech Novogen has not only cut two from its board — it’s persuaded the others to take a pay cut as well.

CEO James Garner told Stockhead the company had cut board costs by 50 per cent, although with the annual report due this month he was shy about putting a dollar figure on exact savings.

Mr Garner said the rare board reshuffle was part of an 18 month-long strategic transformation, and meant the company had the right mix of skills for where it wanted to position itself.

“Novogen really has transformed. It’s reflected in the management team, in how we do business… from an early stage drug discovery company to a company that is looking to work much more with big pharma,” he said.

Novogen (ASX:NRT) flagged in June that it was shrinking its board to three non-executive directors — chairman Iain Ross, Bryce Carmine and Steven Coffey — with Mr Garner as executive director.

In a statement to the ASX on Monday, Novogen said that number was “considered optimal to satisfy ASX, NASDAQ, and SEC regulatory obligations”.

How low can you go?

Julie Garland McLellan, a fellow of the Australian Institute of Company Directors and professional director, said companies were often told they need a laundry list of skill sets on their boards, from cybersecurity to media to accounting.

But “the optimal board size is the one that adds the most value”, he said.

“What you really need are people who have good judgement, and are able to make good decisions with incomplete data, and of course, unshakeable ethics,” she told Stockhead.

Small and new companies may also want to consider a board shakeup if they find they’re stuck in a rut.

“(Boards of new companies are) normally fairly weak because what tends to happen is the executives are totally focused on growing the company,” she said.

“The board will be the founder and some friends, so you will have skills gaps, or the founder and the most recent investors, so you have skills gaps and vested interests.”

From drug discovery to testing

Mr Garner joined the company 18 months ago, just as Novogen was embarking on a shift away from being a traditional drug discovery biotech startup to what is effectively a drug tester.

Traditionally, drug companies discover and develop their own IP to commercialisation, a process that on average takes 12-15 years. That process is high-risk, Mr Garner said, because only about 5 per cent of drugs in human trials make it through to pharmacy counters, which is not especially attractive to investors.

Instead, Novogen is offering to do elements of the drug testing phase — the part where companies find out if the drug actually works — and leave the discovery and commercialisation elements to others who do it better.

“We really just want to own a drug for three to four years, (with) companies that want to validate how it works,” he said.

Mr Garner was involved in this type of work at his previous role with Sanofi in Singapore, where he found it difficult to identify “entrepreneurial” biotechs similar to Novogen who could take on this part of the work.

And as evidence it works, Mr Garner cites Tesaro — operating on a similar concept, it raised $81 million when it listed on the Nasdaq in 2012 and is now worth $6 billion.

Novogen shares closed relatively unchanged on Monday at 4.5c.