Novartis to cut 1960 jobs in US, record charges of $1.2 billion
By Matthew Dennis
Created 01/13/2012 - 03:33
Novartis announced Friday that it will cut around 1960 jobs in the US as part of a restructuring of its general medicines business in preparation for the loss of patent exclusivity on Diovan (valsartan) in the country in September. The company said it will also record charges totalling more than $1.2 billion, mainly due to a "reassessment of the future sales potential" of Rasilez (aliskiren), which is sold in the US as Tekturna, following termination [1] of the ALTITUDE study last year.
The restructuring, which will affect around 1630 positions in Novartis' US field force and 330 jobs at its headquarters, is expected to result in a charge of about $160 million in the first quarter of 2012. The company said that the changes are planned for the second quarter, with staff being notified in early April. The drugmaker, which indicated that the job cuts will lead to annual savings of around $450 million as of 2013, noted that in the US it "will continue to focus on expanding its presence in specialty businesses aligned with the product portfolio and pipeline."
"We recognise 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," remarked David Epstein, head of the company's pharmaceuticals unit. Novartis said that the restructuring had been prepared to respond to the expiry of the US patent on Diovan, but had been accelerated after the ALTITUDE study was halted in December. The trial was stopped after an independent data monitoring committee concluded that patients with type 2 diabetes and renal impairment were unlikely to benefit from the addition of Rasilez to standard anti-hypertensives.
Rasilez, which was approved in 2007 in the EU and US for the treatment of hypertension either as a monotherapy or in combination with other therapies, had sales of $449 million in the first nine months of the year. The ALTITUDE trial also showed that patients who took Rasilez in combination with standard of care had higher rates of adverse events, including non-fatal stroke and renal complications. At the time, Novartis said it would halt the promotion of products containing Rasilez for use in combination with an angiotensin converting enzyme (ACE) inhibitor or angiotensin receptor blocker (ARB). The company said that in consultation with health authorities, it "is now recommending that hypertensive patients with diabetes should not be treated with Rasilez/Tekturna in combination with an ACE-inhibitor or ARB."
The drugmaker said it will record a charge of approximately $900 million in the fourth quarter of 2011 related to "lower sales expectations" for Rasilez. Novartis noted that the charge "does not seek to anticipate the results of our ongoing discussions with health authorities concerning" the drug. In December, the European Medicines Agency [2] and Health Canada began reviews of aliskiren-containing medicines following the outcome of the ALTITUDE trial. A company spokesman added that Novartis was in discussions with regulators about whether the drug should be withdrawn from the market.
Novartis also said that as part of an ongoing portfolio review, it will halt development of its PRT128 (elinogrel) and SMC021 (oral calcitonin) programmes, and record a related charge of approximately $160 million in the fourth quarter of 2011.
CEO Joe Jimenez has been reducing costs at the drugmaker since he assumed his role in 2010, including the announcement of 1400 job cuts [3] in the US in November 2010 and the elimination [4] of a further 2000 positions in Switzerland and the US in October last year. Jimenez has also been looking to boost sales from specialty medicines, such as the multiple sclerosis drug Gilenya (fingolimod) and the cancer drug Afinitor (everolimus), to replace revenue from Diovan, which lost patent protection in Europe last year. Diovan generated around $6 billion in sales in 2010.
Commenting on the latest news, Helvea analyst Karl Heinz Koch said that the combination of job cuts and strategic shift into specialty care "should increase confidence that margins in pharmaceuticals are sustainable even as Novartis goes through the Diovan patent expiry." Analysts had predicted that sales of Rasilez could reach $1.4 billion by 2016, but Kepler Capital Markets analyst Martin Voegtli suggested that "you can easily take $1 billion" off that figure now. "Earnings will come down," Voegtli noted, adding that "the new products that are growing have a much lower margin than Diovan. We’re going to see a correction in the market."
By Matthew Dennis
Created 01/13/2012 - 03:33
Novartis announced Friday that it will cut around 1960 jobs in the US as part of a restructuring of its general medicines business in preparation for the loss of patent exclusivity on Diovan (valsartan) in the country in September. The company said it will also record charges totalling more than $1.2 billion, mainly due to a "reassessment of the future sales potential" of Rasilez (aliskiren), which is sold in the US as Tekturna, following termination [1] of the ALTITUDE study last year.
The restructuring, which will affect around 1630 positions in Novartis' US field force and 330 jobs at its headquarters, is expected to result in a charge of about $160 million in the first quarter of 2012. The company said that the changes are planned for the second quarter, with staff being notified in early April. The drugmaker, which indicated that the job cuts will lead to annual savings of around $450 million as of 2013, noted that in the US it "will continue to focus on expanding its presence in specialty businesses aligned with the product portfolio and pipeline."
"We recognise 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," remarked David Epstein, head of the company's pharmaceuticals unit. Novartis said that the restructuring had been prepared to respond to the expiry of the US patent on Diovan, but had been accelerated after the ALTITUDE study was halted in December. The trial was stopped after an independent data monitoring committee concluded that patients with type 2 diabetes and renal impairment were unlikely to benefit from the addition of Rasilez to standard anti-hypertensives.
Rasilez, which was approved in 2007 in the EU and US for the treatment of hypertension either as a monotherapy or in combination with other therapies, had sales of $449 million in the first nine months of the year. The ALTITUDE trial also showed that patients who took Rasilez in combination with standard of care had higher rates of adverse events, including non-fatal stroke and renal complications. At the time, Novartis said it would halt the promotion of products containing Rasilez for use in combination with an angiotensin converting enzyme (ACE) inhibitor or angiotensin receptor blocker (ARB). The company said that in consultation with health authorities, it "is now recommending that hypertensive patients with diabetes should not be treated with Rasilez/Tekturna in combination with an ACE-inhibitor or ARB."
The drugmaker said it will record a charge of approximately $900 million in the fourth quarter of 2011 related to "lower sales expectations" for Rasilez. Novartis noted that the charge "does not seek to anticipate the results of our ongoing discussions with health authorities concerning" the drug. In December, the European Medicines Agency [2] and Health Canada began reviews of aliskiren-containing medicines following the outcome of the ALTITUDE trial. A company spokesman added that Novartis was in discussions with regulators about whether the drug should be withdrawn from the market.
Novartis also said that as part of an ongoing portfolio review, it will halt development of its PRT128 (elinogrel) and SMC021 (oral calcitonin) programmes, and record a related charge of approximately $160 million in the fourth quarter of 2011.
CEO Joe Jimenez has been reducing costs at the drugmaker since he assumed his role in 2010, including the announcement of 1400 job cuts [3] in the US in November 2010 and the elimination [4] of a further 2000 positions in Switzerland and the US in October last year. Jimenez has also been looking to boost sales from specialty medicines, such as the multiple sclerosis drug Gilenya (fingolimod) and the cancer drug Afinitor (everolimus), to replace revenue from Diovan, which lost patent protection in Europe last year. Diovan generated around $6 billion in sales in 2010.
Commenting on the latest news, Helvea analyst Karl Heinz Koch said that the combination of job cuts and strategic shift into specialty care "should increase confidence that margins in pharmaceuticals are sustainable even as Novartis goes through the Diovan patent expiry." Analysts had predicted that sales of Rasilez could reach $1.4 billion by 2016, but Kepler Capital Markets analyst Martin Voegtli suggested that "you can easily take $1 billion" off that figure now. "Earnings will come down," Voegtli noted, adding that "the new products that are growing have a much lower margin than Diovan. We’re going to see a correction in the market."