Novartis AG (NOVN) will cut 1,960 jobs in the U.S. and take $1.22 billion of charges to prepare for generic competition to its best-selling Diovan blood-pressure drug and reflect the lower sales potential of the Tekturna medicine.
Fourth-quarter 2011 results will include a $900 million charge for Tekturna, Novartis said today in a statement. The job cuts will lead to a charge of $160 million in the first quarter of 2012 and annual savings of $450 million by 2013. Novartis said it’s also taking a $160 million charge in the fourth quarter to end research on two experimental drugs.
Novartis last month halted a clinical trial of Tekturna because some patients experienced more non-fatal strokes and kidney complications. The drug, first approved in 2007 for hypertension, is now being reviewed by the European Medicines Agency. Tekturna had sales of $449 million in the first nine months of the year.
“Earnings will come down,” said Martin Voegtli, an analyst at Kepler Capital Markets in Zurich, in a telephone interview. “The new products that are growing have a much lower margin than Diovan. We’re going to see a correction in the market.” He has a “hold” rating on Novartis.
Diovan had sales of $4.3 billion in the first nine months of the 2011. The drug lost patent protection in Europe in the fourth quarter and will do so in the U.S. this year. Analysts predict Tekturna sales of $1.4 billion by 2016 and “you can easily take $1 billion” off that figure, Voegtli said.
Job Cuts
The job cuts equal about 1.6 percent of Novartis’s workforce of about 119,400 people. Salespeople will account for about 1,630 jobs, with the rest coming from U.S. headquarters, the company said. The jobs will be eliminated in the second quarter.
Novartis shares have returned 1.1 percent in the past year, including reinvested dividends, compared with a 17 percent return for the Bloomberg Europe Pharmaceutical Index.
“We recognize that the next two years will be challenging in the Pharmaceuticals Division and we are proactively making these changes to further focus our pipeline on the best opportunities and align our market position on our growth brands,” said David Epstein, division head of Novartis Pharmaceuticals, in the statement.
Fourth-quarter 2011 results will include a $900 million charge for Tekturna, Novartis said today in a statement. The job cuts will lead to a charge of $160 million in the first quarter of 2012 and annual savings of $450 million by 2013. Novartis said it’s also taking a $160 million charge in the fourth quarter to end research on two experimental drugs.
Novartis last month halted a clinical trial of Tekturna because some patients experienced more non-fatal strokes and kidney complications. The drug, first approved in 2007 for hypertension, is now being reviewed by the European Medicines Agency. Tekturna had sales of $449 million in the first nine months of the year.
“Earnings will come down,” said Martin Voegtli, an analyst at Kepler Capital Markets in Zurich, in a telephone interview. “The new products that are growing have a much lower margin than Diovan. We’re going to see a correction in the market.” He has a “hold” rating on Novartis.
Diovan had sales of $4.3 billion in the first nine months of the 2011. The drug lost patent protection in Europe in the fourth quarter and will do so in the U.S. this year. Analysts predict Tekturna sales of $1.4 billion by 2016 and “you can easily take $1 billion” off that figure, Voegtli said.
Job Cuts
The job cuts equal about 1.6 percent of Novartis’s workforce of about 119,400 people. Salespeople will account for about 1,630 jobs, with the rest coming from U.S. headquarters, the company said. The jobs will be eliminated in the second quarter.
Novartis shares have returned 1.1 percent in the past year, including reinvested dividends, compared with a 17 percent return for the Bloomberg Europe Pharmaceutical Index.
“We recognize that the next two years will be challenging in the Pharmaceuticals Division and we are proactively making these changes to further focus our pipeline on the best opportunities and align our market position on our growth brands,” said David Epstein, division head of Novartis Pharmaceuticals, in the statement.