Novartis' Q2 sales hit after Excedrin production woes

With generic competition eating into sales of its blockbuster Diovan, Novartis ($NVS) has been pushing to boost revenue from a variety of products. But manufacturing problems at a Nebraska plant contributed to a 4% decline in overall second-quarter sales for the Swiss drug giant.

Sales in consumer health, which is traditionally a steady business for drugmakers, hurt Novartis with a steep 24% drop to $904 million in the second quarter. Novartis blamed the decline in over-the-counter and animal product sales on problems at its Lincoln, NE, plant, where the company has produced Excedrin, NoDoz, Bufferin and Gas-X, among other meds.

Novartis says progress has been made on fixes to the plant, where production was suspended in December 2011 because of quality-control problems and wrong ingredients going into bottles of headache pill Excedrin, which was yanked off shelves along with other products from the facility. The company has kicked off production of some consumer health products and, along with supplies from third-party manufacturers, plans to start shipping some of the products in the fourth quarter.

As previously reported, Novartis has set aside $120 million for improvements at the Lincoln facility. Yet consumers are also paying a price for production delays. According to Fox News, migraine sufferers are shelling out hundreds of dollars for bottles of Excedrin that had retailed at pharmacies for $8.

The company's "prolonged difficulties at the Lincoln plant are disappointing," Alistair Campbell, an analyst at Berenberg Bank in London, told BusinessWeek via email. He noted a lack of "room to raise guidance" due to the problems.

Unfortunately for Novartis, it's production problems don't end in Nebraska. The company has been working on bringing three North American plants in its Sandoz unit up to snuff, slowing down production in the process. Novartis said it is on schedule to make improvements agreed up with regulators, and the company has brought in new leadership for global and site-level quality control and manufacturing.

- here's Novartis' release
- read BusinessWeek's report
- see The Wall Street Journal's take
- and the Fox News article

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