Novartis To Eliminate Another 2,000 Jobs

Novartis To Eliminate Another 2,000 Jobs

October 26th, 2011 // 12:24 pm @

n a bid to grapple with its pipeline and pricing pressures, Novartis is going to cut 1,100 from Switzerland, where its operations are headquartered, and another 900 jobs from the US. The move extends a round of layoffs that began a year ago with the elimination of 1,400 US sales reps and another 550 jobs at a manufacturing site in the UK .

As part of the latest cuts, Novartis will shut two manufacturing sites in Switzerland and another in Italy, and transfer production to other locations or outsource the work to third parties. Similarly, some R&D jobs in Switzerland and the US will also be outsourced. Some R&D jobs will be shifted to the US, where Novartis is in the process of consolidating such work at its New Jersey campus. In fact, about $750 million is being spent to expand that facility . Some jobs will also move to Cambridge, Massachusetts.

At the same time, the drugmaker says some 700 jobs will be added in “low-cost countries,” such as India and China over the next three to five years. As you know, the pharmaceutical industry is banking on so-called emerging markets for increased growth, although a recent report forecast that pre-operating margins from these countries are expected to hit 35 percent by 2020, compared with 60 percent in the US, suggesting faster growth, but pressured profits. In any event, the cuts are forecast to save Novartis more than $200 million annually. As the end of last year, Novartis employed about 120,000 people.

“It is clear we are facing an increasingly difficult environment, and it is likely to get even tougher. The global debt crisis is creating even greater pricing pressures on our industry and governments are looking to cut costs everywhere. We are also facing patent expiries, although our recently launched products will increasingly compensate for this,” Novartis ceo Joe Jimenez wrote in a note to employees today .

The cuts are not surprising, though. During a recent investor conference, Jimenez noted that Novartis had taken various steps over the past 18 months or so to slash expenses. For instance, more than $1.6 billion was saved by reworking procurement, mostly from the pharma unit. Since November, six manufacturing sites are in the process of being exited. Selling, general and administrative expenses have dropped from 5.2 percent of sales to 4.9 percent since 2009. And marketing and sales expenses fell from 29.3 percent of sales to 27.2 percent during the same period .

The cutbacks were announced along with earnings in which Novartis reported a weaker-than-expected 7.9 percent rise in third-quarter net profit, which hit $2.46 billion compared with $2.28 billion a year earlier. Analysts had forecast $2.81 billion, but the strong Swiss franc changed that. Revenue, meanwhile, rose 18 percent to $14.84 billion, up from $12.58 billion a year earlier, matching estimates. Separately, Novartis disclosed that two lung drugs being developed by Novartis and its partner Vectura face delays in the US, but details were not disclosed .

The job cuts add to a late-year surge of layoffs in the pharmaceutical industry, where headcount reductions had, overall, slowed compared with the pace of the past few years, according to Challenger Gray & Christmas, the outplacement consultants that track monthly changes in each industry. Earlier this month, we noted that pharma layoffs have totaled 19,076, and this includes the 13,000 job cuts planned by Merck, some of which are taking place in other countries. Since then, however, AstraZeneca announced plans to eliminate 400 jobs and Amgen is whacking 380 positions.

Source: Pharmalot

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