The report this week that Novartis' ($NVS) vaccine and diagnostic operation is one the company's execs might want to unload will not surprise employees at its Emeryville, CA, operation, where four dozen workers on the vaccine side have been given layoff notices.
The employees will be let go next month, although many will get a chance to relocate to other Novartis U.S. operations, the company told Genetic Engineering & Biotechnology News. "Novartis plans to strengthen the focus of the Emeryville site on its Diagnostics business and will continue its operations there related to pharmaceutical and medical research," the company told the publication in a statement. About 900 people currently work at the site.
Novartis CEO Joe Jimenez recently indicated to Bernstein Research analyst Tim Anderson that the vaccines and diagnostics unit, along with others, is on the table for possible divestiture. In a note to investors, Anderson said: "[W]e were struck by how openly Mr. Jimenez seemed to acknowledge that its consumer health, animal health, and vaccines & diagnostics businesses are on the block. It seems that Novartis will be making final decisions with those units fairly soon."
The new Novartis chairman Joerg Reinhardt has been sorting through the company's assets as part of a strategic review. Reinhardt in an interview with Bloomberg recently indicated his guiding principle is be a major player in a business or get out. And Novartis certainly is not a major player right now in vaccines.
The Swiss drugmaker created the vaccine unit out of its buyout of Chiron in 2006 but just hasn't been able to gain much traction with it. According to its financial reports, sales in the unit were up 14% for the first half of the year, but it still reported an operating loss of $240 million in the first half of 2013 after a $250 million loss for all 2012.
The vaccines division got into issues with European authorities last year. Many countries followed the lead of Italy and halted use of four Novartis vaccines for a couple of weeks after the company indicated they might "produce collateral effects."
Still, the unit would likely draw interest from one of the bigger players. While Novartis' vaccine revenues trail those of competitors, it is forecast to have the highest growth rate through 2018 tied to anticipated sales of Bexsero and Menveo, two meningococcal meningitis vaccines. The company's vaccine revenue hit $1.4 billion in 2012 and has been forecast to more than double to $3.14 billion by 2018.
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