Novartis remediation drags on longer than expected

With the costs of manufacturing, and not manufacturing, weighing significantly on the company's earnings, Novartis ($NVS) CEO Jospeh Jimenez (photo) says the company is getting the plants it has open to do a better job while continuing to shed manufacturing facilities on just about every continent in the world. It is a speech others have had to make during this earnings period.

In reporting an 8% first-quarter earnings decline to shareholders, Jimenez acknowledged the company's inability to meet GMPs at a variety of Novartis and Sandoz plants played a big role in that dip, Bloomberg reports. Sales in its consumer health division, where a lot of the issues reside, fell 20%. The FDA's 483 concerns at its closed OTC plant in Lincoln, NE, are well documented but are taking longer to fix than expected. Issues with three plants in its Sandoz generic unit also have the company spending money to bring standards up to FDA expectations, Jimenez said in an analyst call.

New manufacturing and quality control management has been added up and down the ladder, Pharmalot reports, to coordinate the Swiss drugmaker's "committed remediation efforts." The effort is paying off, but the ramp-up in Lincoln is going to be a bit slower than first believed, the CEO said. Meanwhile the company has turned to contractors to help boost supplies.

Efforts to streamline the manufacturing network also are helping the bottom line, Jimenez said. The drugmaker has "exited 7 sites, exited or divested, and 7 more are currently in execution phase," he told analysts.

It is not as though analysts have not heard this story before. Just last week, Johnson & Johnson ($JNJ) executives were explaining that ongoing remediation and lost sales in its consumer health division also were a drag on earnings.

- here's the Bloomberg story
- get details from Pharmalot
- read the conference call transcript
- here's the Novartis slide presentation (PDF)