While the U.S. government was announcing its kickbacks lawsuit against Novartis, the Swiss drugmaker was putting the finishing touches on a few press releases of its own. First, earnings: The company ($NVS) managed to keep its quarterly sales on par with last year's, despite some key patent losses. Second, CFO Jon Symonds is out and current pharma CFO Harry Kirsch steps up to take his place. And third, incoming Chairman Joerg Reinhardt won't collect half the compensation of his predecessor.
Buried in that earnings release was the news that Novartis' troubled consumer-drugs plant in Lincoln, NE, will cut 300 jobs over the next two years, as the facility scales down to produce only solid and powdered drugs. Mixed results on its recent FDA inspection prompted Novartis to "simplify the Lincoln footprint" while continuing to farm out several drugs--including the cult favorite Excedrin Migraine, the cold-and-cough brand Triaminic and the antifungal treatment Lamisil--to speed their return to market.
The changes in Lincoln make sense. But analysts were mystified by the CFO change. Symonds is well-liked by investors. As Reuters reports, Citi analyst Andrew Baum speculated that Jimenez wants his own team in place, now that ex-Chairman Daniel Vasella has made his exit. The official reason is that Kirsch pushed productivity at the pharma division, and Jimenez wants him to do the same for the entire company. Whether "productivity" is code for more job cuts remains to be seen; the company announced 2,300 layoffs last year, mostly in pharma sales and manufacturing.
The top of the quarterly-results news--the fact that sales held up at $14 billion--hinges on a mysteriously absent generic rival to the blood pressure blockbuster Diovan. Ranbaxy Laboratories, which has had production problems of its own, hasn't yet launched its copycat version, and it has exclusive generic rights. Diovan lost patent protection in October, and a generic version of a combo pill has hit the market, but Ranbaxy's copy is still MIA. Sales of that product line did drop, to $918 million from $1.19 billion, but not nearly as much as they would have otherwise. Novartis expects that to change beginning next quarter, however, as Ranbaxy's 6-month exclusivity expires.
Yes, Novartis can cite some impressive growth in newer products; the multiple sclerosis pill Gilenya, for instance, racked up 71% growth to $421 million. Sales of the cancer treatment Afinitor more than doubled, to $303 million, and the Gleevec/Glivec follow-up Tasigna increased by 39% to $284 million, while taking a bigger share of the Novartis leukemia franchise, 26% versus 21% last year. And quarterly earnings grew slightly, partly because of cost-cutting in sales and administration.
Apparently, the company's cost-cutting extends into the chairman's office, too. After yearly protests about Vasella's pay--and a firestorm of criticism over a now-canceled $78 million noncompete agreement with him--the company says it's paying Reinhardt 3.8 million Swiss francs ($4 million) annually, half in cash, half in stock awards. That's less than half of Vasella's 2012 pay package. Reinhardt will collect another €2.6 million ($3.4 million) over the next three years, to make up for long-term compensation lost when he left Bayer for the Novartis job. That's something of a trend; AstraZeneca's ($AZN) new CEO, Pascal Soriot, will receive £4 million in compensation for losses when he left Roche ($RHHBY).
- see the Novartis earnings announcement
- read the Reinhardt release
- get more from Reuters
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