News

Posted On: 10/18/2007

Novartis to Make Job Cuts After 3rd Quarter Profits Slip

PharmaManufacturing.com

Swiss pharmaceutical giant Novartis on Oct. 18 announced more than 1,200 job losses in the United States after its third quarter results weakened on sharper competition from generic drugs.

Third quarter net profits dropped 12 percent compared to the same period last year to 1.57 billion dollars (1.1 billion euros), the company said in a statement. Analysts had been expecting a figure around 1.7 billion dollars.

Novartis also set aside exceptional provisions of 590 million dollars to increase cover for possible environmental costs.

Despite the tail-off in the third quarter, Novartis claimed that earnings over the first nine months of the year still reached record levels, with a seven percent increase to 5.61 billion US dollars.

Operating income over the same period was up nine percent to 6.47 billion dollars and net sales were up 13 percent to 28.14 billion dollars.

Commenting on the results, Novartis chairman and chief executive Daniel Vasella said: "Despite the anticipated weak quarter in pharmaceuticals, we showed a strong operational performance driven by our other businesses."

Novartis said it would cut 1,260 posts in its core branded pharmaceuticals division in the United States, where competition from cheaper generics is sharpest.

The move should allow the group to save about 230 million dollars a year, it added.

Operating profits on pharmaceuticals fell 13 percent in the third quarter, weighed down by the loss of three key drugs in the United States.

The US Food and Drugs Administration ordered the suspension of one of those drugs, Zelnorm, a bowel treatment, in March, on concerns about side effects.

Although some other sales were lost when Novartis' exclusive rights on some drugs expired, opening them up to generic competition, the company believes the launch of several new products should help boost growth in the second half of 2008.

Two years ago, Novartis also boosted its foothold in the generics market with the double-barreled 7.4-billion-dollar takeover of German generics specialist Hexal and its US counterpart Eon Labs, which were integrated into the Swiss giant's Sandoz generics division.

Nine-month operating income at Sandoz grew 48 percent compared to the same period last year to 789 million dollars, the strongest growth of any Novartis division, according to the latest group results.

Sandoz accounted for 5.2 billion dollars of Novartis nine-month sales, compared with 17.9 billion dollars for the core pharmaceuticals division.

Vasella said at the time of the Hexal-Eon deal that Novartis was aiming to seize leadership of the global generics market with a ten percent market share for Sandoz and combined sales of 5.1 billion dollars, based on 2004 data.

Novartis has long forecast booming demand for generics medicines, cheaper but equally effective copies of drugs whose patent has lapsed.

The company announced that the current head of the core pharmaceuticals division, Thomas Ebeling, would move to head the consumer health division.