|Novartis CEO Joe Jimenez|
Novartis CEO Joseph Jimenez implored employees in 2012 to pay deeper attention to quality after significant problems in manufacturing left the company under a regulatory cloud and took a deep bite out of earnings. Things have generally gone well the last couple of years, but the company said on Tuesday that there had been a relapse that resulted in two Sandoz plants in India being nailed last week with a warning letter.
Novartis ($NVS) acknowledged the issues on Tuesday in its earnings announcement, and Jimenez touched on them during Q3 earnings discussion. He said the FDA issued the warning letter for the sites in Kalwe as well as one in Turbhe, a plant that Sandoz intends to close. Jimenez said he expected the warning letter would soon be published by the agency.
Jimenez gave no details about the agency's concerns but said that the company has been working on fixing the problems since the FDA raised red flags during an inspection in August 2014. The warning letter didn't include any additional concerns, Jimenez said. The company continues to ship products from the plants, and no supply issues have resulted from the episode.
In July, Novartis indicated it would close the plant in Turbhe by the end of 2016 and lay off about 170 workers. The site manufactures active pharmaceutical ingredients (APIs) and antibiotics, and Sandoz said in a statement that it was transferring the work to other sites in the country. Besides Kalwe, it also has a site in Mahad.
On Tuesday, Jimenez indicated that the problems in India were a "bad exception" for a company that has been focused on quality manufacturing. In the third quarter, he said the company had successfully completed 60 inspections by international authorities, including 12 by the FDA.
Jimenez put a special emphasis on bringing up the company's manufacturing standards after a bad stretch in 2012. During a 9-month period, the drugmaker received a three-plant FDA warning letter and took an earnings hit after having to close its key OTC plant to deal with a manufacturing mess that kept it from being able to supply some of its most popular consumer products. In 2013, Novartis received another warning letter, this one for a Sandoz plant in Austria. Now Sandoz has yet another mark on its record.
- here's the Novartis release
- here's the call transcript from Seeking Alpha