Novartis ($NVS) has rid itself of more than two dozen manufacturing sites in the past few years, closing or selling some facilities and handing off a bunch to GlaxoSmithKline ($GSK) as part of their big asset swap. Now the Swiss drugmaker says it intends to organize what is left into one overreaching operation in expectation of saving some serious money by 2020.
CEO Joseph Jimenez outlined the plan on Wednesday as the company delivered its Q4 and year-end financials, results that fell short of expectations on the top and bottom lines as results at its Alcon eye unit cratered.
The drugmaker said it will try to streamline both R&D and manufacturing in hopes of squeezing out $1 billion in extra costs in the next four years. Without offering specifics, Novartis said it would centralize its manufacturing operations across divisions into a single technical operations unit.
"The new unit is expected to optimize capacity planning and lower costs through simplification, standardization and external spend optimization. Centralization is also expected to improve our ability to develop next-generation technologies, implement continuous manufacturing and share best practices across divisions," the company said in the statement.
Novartis has been working to squeeze its manufacturing into a smaller footprint. It noted in its announcement the sale last year of Kaysersberg Pharmaceuticals, part of its Alcon unit, to Recipharm for €18 million ($19.7 million). Sweden-based Recipharm got a manufacturing plant in Kaysersberg, France, along with a line of products that it will supply to Novartis through a long-term manufacturing agreement. It said the products will add about €36 million ($39.4 million) in sales for the company. Novartis has also eliminated some plants by selling its animal health unit to Eli Lilly ($LLY) in 2014 and by trading off and selling its vaccine businesses.
Nothing was said on Wednesday about the possibility for job losses under the new structure, but that is usually a consequence of trying to make operations more efficient. Novartis closed a Ciba plant in Canada last year, canning 300 workers there. Its Sandoz unit also said it was closing two plants in Germany and one in India, whacking about 770 jobs in the process. It said on Wednesday that it had about $204 million in restructuring charges last year "mainly related to our manufacturing footprint initiative."
- here's the earnings announcement