|Novartis CEO Joseph Jimenez|
2013 revenue: $57.920 billion
2012 revenue: $56.673 billion
As meager as 2% is, Novartis ($NVS) was among the companies on this year's list to post growth. The pharma division beat that a bit with a 3% improvement. But with last year's changing of the guard in the boardroom, the top dogs say that is not enough, and so an effort is on to get the drugmaker more focused on the areas most likely to grow more quickly.
That means either selling or bolstering some of the units assembled under the previous administration, as well as shedding lots of jobs along the way to fatten the company's operating margins. New chairman Joerg Reinhardt is leading the strategic review and has said that the company's over-the-counter drugs, animal health and vaccines units are the weak ones of the group. CEO Joe Jimenez said in January that the company is looking at "potentially unique structures" for the units. It has been reported that Novartis considered solving its problem by swapping its animal health and vaccines business for Merck's ($MRK) consumer health biz, a unit that company wants to unload. It has already let loose of its blood diagnostics business to Grifols, the Spanish healthcare company, for $1.7 billion.
Putting pressure on the drugmaker is the expectation that generic competition to its blockbuster blood pressure med Diovan will finally arrive this year. It went off patent in September 2012, but regulatory issues faced by Ranbaxy Laboratories have prevented a launch of its generic, providing Novartis with more than a year of extra earnings for the drug. The patent on leukemia drug Gleevec is also about to expire. It has some new products, like its cancer drug Afinitor and multiple sclerosis pill Gilenya, to help it through the patent losses, but it is not enough.
And so job cuts are also part of the mix of improving margins. In February, Novartis put 4,000 jobs into play, with plans to cut or shuffle those positions, after having announced cuts of thousands more the past few years. The company has made some moves to bolster its pipeline, but Jimenez has also made clear that its massive R&D budget--$9.3 billion last year--will probably be squeezed along with the rest of the company. It may not be much longer before the grand plan is unveiled. Jimenez has said the blueprint for the new Novartis should be done by the end of the summer. If it ends up shedding units and people, and getting slapped around by patent losses, it may not be the second largest drugmaker by revenue after that.
-- Eric Palmer (email | Twitter)
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