Job cuts overshadow Novartis results

Novartis Pharmaceuticals in East Hanover, New Jersey Novartis

The Swiss pharmaceutical giant, Novartis, will cut 1,260 jobs in the United States, it announced on Thursday together with its third quarter results.

The Basel-based company said it doubled its profit to $11.1 billion (SFr13.05 billion) in the first nine months of the year, but the result fell short of forecasts.

The job cuts are expected to save the company $230 million annually.

About 240 jobs will be axed in positions in headquarter functions at its US operation. The US sales force will be reduced by approximately 510 staff members and an equal number of third party representatives.

The decision is part of a reorganisation of the pharma development system in the US, which is responsible for getting new drugs through clinical trials.

The head of Novartis’ pharmaceuticals unit, Thomas Ebeling, will move to the company’s consumer health division. He will be replaced by Joe Jimenez.

The Swiss firm has suffered several setbacks to key drugs this year, impacting its share price which has dropped 11 per cent since January.

The launch of one key product – Galvus for diabetes – was delayed in the US because of safety concerns. Galvus has been approved for Europe but will not be resubmitted in the US before 2009. And last month, US regulators denied approval for the painkiller Prexige.

Generic competition

Novartis also had to forego sales of its bowel drug Zelnorm, after it was withdrawn from the US market, and sales of three of its medicines – Famvir, Lotrel and Lamisil – were affected by the launch of generic versions.

Novartis had been expected to post a net profit from continuing operations of $1.75 billion in the quarter. However it came in at $1.57 billion.

About half of the profit came thanks to after-tax gains of $5.2 billion from the divestments of its Medical Nutrition unit and Gerber baby foods to Nestle.

Sales rose in the third period by nine per cent to $9.61 billion.

Analysts say longer-term, Novartis still boasts a broad pipeline of experimental drugs. However, the commercial potential of these products may not become clear until clinical trials later in the decade.

It needs the new batch of drugs to succeed to make up for the looming loss of sales from older medicines, including the top selling blood pressure pill Diovan, which goes off patent in 2012.

swissinfo with agencies

Key facts

Q3 profit: $1.57 billion (-12%)
Q3 sales: $9.61 billion (+9%)

Novartis business figures 2006:
Net profit: $7.20 billion
Full-year sales: $37.02 billion
Operating income: $8.2 billion

In brief

Basel-based Novartis was created in 1996 through the merger of Ciba-Geigy and Sandoz.

In 2006 it had a workforce of just over 100,000 in 140 countries around the world. The staff in the US accounted for about 25% of the total.

The company is organised into four divisions: pharmaceuticals (prescription medicines), vaccines and diagnostics, Sandoz, (generic prescription drugs) and consumer health.

The name Novartis is derived from the Latin novae artes, meaning “new skills”.