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Novartis cuts 2,000 U.S. jobs after drug setback | Reuters

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Novartis cuts 2,000 U.S. jobs after drug setback

By Katie Reid

ZURICH Fri Jan 13, 2012 7:57am EST

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A man walks past the logo of Swiss drugmaker Novartis AG in front of a plant in Basel October 25, 2011.

Credit: Reuters/Arnd Wiegmann

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ZURICH (Reuters) - Novartis AG plans to axe nearly 2,000 of its U.S. workforce ahead of the patent loss of top-selling blood pressure drug Diovan there and will take a $900 million charge after another of its key drugs failed to live up to expectations.

Novartis is the latest in a long line of global drugmakers to cut its sales force as the industry faces its biggest wave of patent expiries ever.

The Swiss drugmaker's news comes just weeks after AstraZeneca said it was slashing nearly a quarter of its U.S. sales force in a second round of job cuts in as many months, while Sanofi has also said it is cutting back on its sales force there.

Novartis plans to shed 1,630 jobs in its U.S. field force and another 330 positions are expected to go as it reorganizes the headquarters of its U.S. general medicines business. The changes are expected to take place in the second quarter of this year.

Diovan, which sells $6 billion a year, went off patent in Europe last year and it will lose exclusivity in the United States this September. Japan follows in 2013.

The Basel-based group expects the restructuring measures, which will result in a one-off charge of $160 million in the first quarter of 2012, to claw back annual savings of around $450 million by 2013.

Novartis' latest round of redundancies comes only a few months after it said it was cutting 2,000 jobs in Switzerland and the United States to keep costs under control in the face of growing price pressures.

The company has already cut thousands of jobs and shut several sites, notably in Britain. In 2010, it said it was cutting 1,400 jobs in the United States as it focuses increasingly on specialty medicines to boost profitability.

"Overall, we believe that accelerating the necessary restructuring measures will help in enhancing Novartis' operating margins as well as accelerating the shift towards a more specialty pharma centric player," West LB analyst Oliver Kaemmerer said.

DISAPPOINTING DRUGS

The group will also book a one-off charge of $900 million in the fourth quarter after a clinical trial showed patients taking its blood pressure pill Rasilez actually did worse, meaning sales of the treatment, tipped to reach more than $1 billion, are likely to plunge.

The Swiss drugmaker is currently in talks with regulatory authorities on both sides of the Atlantic about whether this drug, once seen as a Diovan successor, could end up being pulled from the market, a spokesman said on Friday.

The product setbacks plaguing the sector highlight just how difficult it is to develop the new medicines needed to make up for those going off patent.

AstraZeneca was dealt a double blow at the end of last year to treatments for cancer and depression, and Sanofi also stumbled recently with is experimental Aubagio pill for multiple sclerosis.

TOUGH TIMES

"We recognize that the next two years will be challenging in the Pharmaceuticals Division and we are proactively making these changes to further focus our pipeline on the best opportunities," David Epstein, the group's pharma chief said in a statement.

Novartis shares were trading 1.3 percent lower at 1103 GMT, underperforming a slightly weaker European healthcare index.

A clinical study showed late last year high-risk patients with type-2 diabetes and renal impairment had a higher chance of heart or kidney problems when taking Rasilez, known as Tekturna in the United States, with other blood pressure treatments.

The drug had total sales of $449 million in the first nine months of the year, but it was not profitable. Rasilez-based products were expected to account for around 2 percent of the group's pharma sales in 2011.

"We had significantly lowered our Rasilez/Tekturna sales estimates in December but with 2016 consensus peak sales estimate of $1.4 billion the market has not followed yet and we expect consensus to correct substantially," Kepler Capital Markets analyst Martin Voegtli said.

Novartis will also take another $160 million charge in the fourth quarter of this year after it stopped two further late-stage trials of PRT128, or elinogrel, and SMC021, or oral calcitonin.

Novartis' latest writedowns come just a few days after it said its consumer health unit would take a $120 million hit in the fourth quarter due to a recall of a number of products in the United States and a move to improve quality standards at manufacturing sites there.

But Vontobel analyst Andrew Weiss said the one-off charges would not hit Novartis' core results. Novartis is due to publish its full-year earnings on January 25.

(Reporting by Katie Reid; Editing by Hans-Juergen Peters and Mike Nesbit)

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We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see [web.archive.org] Comments (3) McBob08 wrote: But think of all the jobs that will be created by companies producing generic equivalents of the drug now! Jan 13, 2012 8:10am EST  --   SeaWa wrote: Punishing Americans! We already over pay for drugs, but darn it, we are going to pay the cost of their expiring patent. Imagine, one patent, one blood pressure drug, all that money. Just one drug. Amazing. Jan 13, 2012 12:10pm EST  --   hlnwlf1 wrote: Oh No Job Losses in Obama’s Relection Year how can this be I thought he was the GREAT JOB CREATOR. So much for this Dopes Change LOL Jan 13, 2012 1:05pm EST  --   This discussion is now closed. We welcome comments on our articles for a limited period after their publication. See All Comments »

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