Novartis CEO defends manufacturing lapses

Novartis CEO Joe Jimenez

Novartis ($NVS) appears to be swamped by questions of manufacturing quality. Manufacturing topics dominated much of the earnings discussion Novartis CEO Joseph Jimenez had with reporters Wednesday. He was defending the quality of Novartis' flu vaccine, which both Italy and the company's homeland of Switzerland have banned from sale after Novartis said there may be possible side effects. And he acknowledged that company executives were incapable of predicting when upgrades at its over-the-counter products plant in Nebraska would be done and when the plant would go back online.

"What I would like to do is stop making projections because we have proven that we're not able to accurately project," Jimenez said on a conference call Wednesday, Bloomberg reports. Jimenez earlier said the plant, which closed in January because of serious manufacturing flaws, would open midyear, and when that was wrong, he said the fourth quarter.

The plant accounts for about 25% of the company's OTC products and its closure resulted in  a 22% drop in OTC sales in the last quarter, a quarter in which Novartis' overall sales dropped 7% to $13.8 billion and profit fell 8% to $3.26 billion as generic competition did its trick on the company. On top of spending to upgrade the plant, Novartis paid contractors to make three products--foot fungus cream Lamisil, flu treatment Triaminic and its popular Excedrin products--to get them back into retailers' hands.

On Wednesday, Italian authorities said they were "banning" the sale of Novartis' Aggripal, Fluad and Influpozzi based on information they received from the company that the vaccines "can produce collateral effects." The agency said it would carry out further tests to determine the "quality and safety" of the nearly half-million doses of vaccine. Switzerland followed suit. The company in a statement to FiercePharmaManufacturing said it gave Italy "an assessment which supports the quality, the efficacy and the safety of the vaccines." Jimenez defended them in his call saying, "Manufacturing vaccines is a difficult process and there are deviations."

But that is not the only manufacturing problem for the company. The FDA earlier sent Novartis' generic division Sandoz a warning letter for plants in Canada, Colorado and North Carolina. All of the manufacturing issues the company is experiencing led Alexandra Hauber, an analyst at JPMorgan Chase, to write to investors: "That brings the number of divisions with manufacturing quality issues to three out of five. The strong profitability trends are overshadowed by manufacturing issues."

Earlier this year, Jimenez, recognizing that quality problems were dragging the company's earnings and reputation down, tried to rally the troops around a new initiative "designed to help change the way we think about quality and the way we demonstrate our commitment to it."

- read the Bloomberg story

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