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Novartis cuts 7 per cent of its US workforce

Acts as generic competition for Diovan approaches and safety concern force a reassessment of Tekturna/Rasilez

Novartis is wielding the axe on its US operations, cutting 1,960 jobs as it prepares for generic competition to its blockbuster high blood pressure drug Diovan and safety concerns for successor Tekturna/Rasilez.

Most of the job losses are going in Novartis' salesforce, where 1,630 staff will be shed, while the remaining 330 posts are at its US headquarters in New Jersey. The layoffs represent around 7 per cent of Novartis 30,000-strong US workforce, and will take place in the second quarter of this year.

The restructuring is expected to achieve around $450m in annual savings by 2013.

Diovan (valsartan) is Novartis' biggest product with sales of $4.48bn in the first nine months of 2011, but the franchise is already starting to show the first effects of generic competition in Europe. In the US, patent protection is due to expire in September 2012.

While the Diovan patent cliff was anticipated, the company has been forced to take drastic measures as a result of unexpected problems with aliskiren, which is marketed as Rasilez in Europe and Tekturna in the US.

In December, Novartis was forced to halt a phase III trial of Rasilez in diabetics with renal impairment after the data suggested its drug increased the risk of non-fatal stroke, renal complications, high blood pressure and elevated blood potassium levels.

Sales of Rasilez reached $450m in the first nine months of 2011, but are now expected to fall back dramatically. In a statement, Novartis said that it had undertaken a "reassessment of the future sales potential" for the drug and as a result will take a $900m charge in its fourth-quarter results.

All told, the company expects to face $1.2bn in charges. Another $160m will be levied in the first quarter of 2012 as a result of the job reductions, with $160m booked in the fourth quarter due to the termination of two development programmes, namely anti-clotting drug PRT128 (elinogrel) and SMC021 (oral calcitonin) for osteoporosis.

Meanwhile, the company is also wrestling with manufacturing problems at its consumer healthcare division which have forced a recall of four brands, including painkiller Excedrin, in the US and Canada. Production at the plant in Nebraska which makes the products was suspended last week.

The head of Novartis' pharmaceuticals division, David Epstein, said: "We recognise that the next two years will be challenging in the pharmaceuticals division.

"These are difficult but necessary decisions that will free up resources to invest in the future of our business which we view as well suited to bring new valuable therapies to patients and payors," he added.

The latest round of layoffs at the pharmaceutical company come just over a year after it cut 1,400 US sales jobs from its general medicines force due to the effect patent expirations and planned product launches were having on its product portfolio.

16th January 2012


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