Another Novartis ingredient operation is being hived off as the Swiss drugmaker continues its drive to lop off manufacturing jobs to improve margins. This time it is selling an operation in China that it opened 10 years ago.
China’s Zhejiang Jiuzhou is buying most of Suzhou Novartis in Changshu, China, for 790 million yuan ($110.5 million), according to a Dow Jones report in China’s Morningstar. The operation has about 340 employees.
A Novartis spokesperson Friday confirmed the sale and said it expected to complete it by the end of the year. It said it believed Jiuzhou was better positioned to ensure jobs and growth at the plant.
The deal includes an agreement for the Chinese company to supply Novartis with ingredients. According to Dow Jones, the company said the deal will bolster its drug development and manufacturing capacities in China while improving its business prospects in Europe and the U.S.
The company is known to the U.S. FDA, which slapped it with a warning letter in 2014 for selling relabeled ingredients that were not quality checked before being shipped. It also was found to have data integrity issues.
The Suzhou unit was opened by Novartis in 2009. According to reports at the time, the company had invested about $250 million in the three-building site, which also includes R&D facilities. It had big plans then for the unit to support its global production, but times have changed, and so has Novartis' outlook on manufacturing.
Last year, CEO Vas Narasimhan announced the drugmaker had targeted about 2,000 manufacturing jobs that would be cut over four years as it transitions toward more complex biologics medicines and cell and gene therapies.
But the sale also comes as Novartis is making a big push to sell drugs in China. During a conference in the country last year, Narasimhan told Bloomberg he wanted the company to more than double its sales there over the next five years.
Novartis Friday reiterated its commitment to the country, saying, "With a long-established footprint, we are well positioned to capitalize on the opportunities brought by the healthcare boom in China as one of the few multinational companies in the pharmaceutical sector with an integrated presence..."