Novartis to slash 2,000 US jobs, mostly in sales
Novartis ($NVS) is sharpening its jobs ax again. The Swiss drugmaker said it's chopping roughly 2,000 more U.S. jobs, most of them in sales, to cope with Diovan's impending patent expiration and Tekturna's diminished prospects. The company will take a $160 million charge to cover the job-cutting costs, plus another $900 million charge to account for lower Tekturna sales expectations.
The Diovan sales hit isn't insignificant: The drug racked up $6 billion in 2010 sales, and though CEO Joe Jimenez (photo) aims to keep as many Diovan scripts as possible, he's still only aiming for about $2 billion worldwide. Diovan is already facing generic rivals in Europe, and it falls off patent in the U.S. in September.
As for Tekturna, also sold under the brand name Rasilez, it's suffering from the Altitude study, which Novartis halted last month. Testing the drug in diabetes patients, researchers reported that more Tekturna users suffered strokes and kidney problems than the control group. Since Novartis stopped the study, analysts have slashed their sales expectations. "[Y]ou can easily take $1 billion" off the $1.4 billion previously expected by 2016, Kepler Capital Markets analyst Martin Voegtli told Bloomberg.
Jimenez has had a hawk eye on Novartis' cost structure since he took over as CEO. Last year, he promised to beat the $1.9 billion squeezed from spending in 2010, so payroll cuts were sure to follow. The latest round is Novartis' third since fall 2010, bringing the number of U.S. job cuts since then to about 4,200. Its move to slash more than 1,000 jobs in Switzerland, announced in October, raised the hackles of local officials and unions, and even prompted a work stoppage at a plant in Nyon.
This time around, Novartis sales reps aren't likely to go on strike to persuade the company to keep them; with the loss of Diovan and the withering of Tekturna, the company's marketing efforts will be more focused on specialty meds rather than primary care. Hence the loss of 1,630 jobs in sales, with the rest of the cuts coming from U.S. headquarters. The ax is set to fall in the second quarter.
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