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Novartis slashes 1,260 jobs in US

Despite reporting a jump in Q3 FY07 net profits, helped by sales of divested assets, Swiss-headquartered Novartis has shed 1,260 US jobs to save costs on weak drug sales.

Despite reporting a jump in Q3 FY07 net profits, helped by sales of divested assets, Swiss-headquartered Novartis has shed 1,260 US jobs to save costs on weak drug sales.

Novartis' net profit surged to reach USD 6.9bn from USD 1.9bn in Q3 FY06. The divestment of the company's Gerber baby foods and Medical Nutrition units to Nestle resulted in post-tax additions of USD 5.2bn.

Without the Gerber and Medical Nutrition cash infusion, Novartis' real net profit dropped 12 per cent to rest at USD 1.6bn, down from USD 1.8bn in Q3 FY06. Similarly, EPS in Q3 FY07 was USD 0.68 a share, compared with USD 0.77 a share in the equivalent quarter of FY06.

Sales increased nine per cent to reach USD 9.6bn, compared with USD 8.8bn in the previous quarter. Sales growth was a meagre two per cent: USD 6bn, compared with USD 5.8bn. Operating profit from the pharmaceutical business bottomed out 13 per cent to settle at USD 1.5bn from USD 1.8bn in Q3 FY06.

The cuts will be applied to pharmaceuticals marketing and sales jobs in order to save USD 230m a year.

Novartis also revealed that Joe Jimenez will become the CEO of pharmaceuticals, replacing Thomas Ebeling who will now be the new CEO of the Consumer Health business.

According to Novartis' guidance, the pharmaceutical division's net sales will be depressed in FY07 and in H1 FY08 by the suspension of IBS treatment Zelnorm (tegaserod) from the US market.

Generic price erosion in the same region will also affect sales for blood pressure medication Lotrel (amlodipine/ benazepril), anti-fungal Lamisil (terbinafine), antibiotic Famvir (famciclovir) and seizure medication Trilepta (oxcarbazepine). Combined annual US net sales in FY06 for the products were approximately USD 3.1bn.

Novartis expects mid-single-digit growth in FY07 net sales for group continuing operations and low-single-digit growth in the pharmaceuticals division, both in local currencies.

The news was not all bad: the company restated expectations for record operating and net income from continuing operations in FY07, not including the divestment gains.

30th September 2008

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