Novartis’ traditional pill manufacturing will shoulder the brunt of a cost-cutting effort announced Tuesday as it looks to a future in biologic drugs and higher margins.
The Swiss drugmaker said four plants in Switzerland and one in the U.K. would be hit with job cuts as it trims down a manufacturing network that operates below capacity while generics steal market share and patients rely more on more complicated injected drugs.
The company said the cuts at plants in Switzerland would affect about 1,000 jobs, but that was a net number that took into account 450 jobs being added at a cell and gene therapy unit in Stein. That means about 1,450 jobs cuts are being made at the affected plants in Basel, Schweizerhalle, Locarno and Stein. It said it would train as many of the targeted workers as possible on the new technology platform at Stein.
It is also closing a pill plant in Grimsby, England, where another 400 positions will be whacked, the BBC reported.
“We are continuing our efforts to globally transform Novartis into a more efficient, agile organization that can sustainably innovate and deliver breakthrough medicines to patients,” CEO Vas Narasimhan said in a statement. “We recognize the impact of today’s announcement on potentially affected associates and their families. Even though these intended changes are expected to happen over four years, we wanted to communicate at an early stage and in a transparent manner. We will do everything possible to help our associates who might be impacted manage through this difficult transition.”
Unions weren’t buying it. “There will be massively damaging side effects for Swiss workers, the drug industry and Switzerland’s export economy,” the union Employees Switzerland wrote in a statement, Reuters reported. “We’re not going to let Novartis destroy Basel as a center of industry.”
Narasimhan pointed out the restructuring is part of a program announced in 2016 to save about $1 billion annually by making its manufacturing network more efficient. Novartis is following a playbook written by its peers as competition from generics and intense pricing pressure from payers has turned once-profitable off-patent products into valueless commodities.
Last year it announced it would close a plant in Broomfield, Colorado, where 450 people worked. Earlier this month it agreed to sell about 300 drugs, Sandoz’s dermatology development center and manufacturing facilities in Wilson, North Carolina, as well as in Hicksville and Melville, New York, to India’s Aurobindo for $900 million. About 750 employees from those plants and dermatology sales representatives will move to Aurobindo.
The future of medicine is in biologic drugs, even cell-based drugs, with complex manufacturing processes. Novartis itself last year won approval for a CAR-T immuno-oncology treatment, the $475,000 Kymriah. Last year it added 40 or so jobs to a production site in Morris Plains, New Jersey, to produce that medication.
But that process has nothing to do with traditional drugmaking. Instead, it requires that blood be taken from a patient, cryopreserved, shipped to a special laboratory, reprogrammed and manufactured in the lab and then shipped back for infusion into the patient, all in the shortest time possible to try to outrun aggressive cancers.
Last month, Novartis said it will spend CHF90 million ($91.5 million) over three years on an existing building at a production site in Stein, Switzerland, to ensure speedy delivery in the EU of the CAR-T drug. The company expects to initially have 260 positions and create up to 450 new jobs by 2021.
In an effort today to soften the blow of the cuts in Switzerland, Novartis pointed out that in the last five years, it has invested more than $1 billion in new manufacturing technologies in Switzerland. Examples of the technologies include a flow-through chemistry platform in Schweizerhalle, expansion of a continuous manufacturing facility in Basel, and the cell and gene therapy unit in Stein. It also has added a device-assembly building and launch facility in Stein.