Novartis to Cut 2,000 Jobs, Close Europe Plants

Novartis AG (NOVN), Europe’s second-biggest pharmaceutical company, plans to eliminate 2,000 jobs in Switzerland and the U.S. and add employees in China and India to offset the effect of drug price reductions.

The cuts, equivalent to about 1 percent of Novartis’s workforce, will be implemented over three to five years, and will generate annual savings of more than $200 million a year, the Basel, Switzerland-based company said in a statement today. Novartis plans to close a plant in Nyon, Switzerland, that makes over-the-counter drugs, and chemical sites in Basel and Torre, Italy. The company will take a fourth-quarter restructuring charge of about $300 million.

Austerity measures in Europe have forced Novartis to lower prices by about 5 percent this year, Chief Executive Officer Joe Jimenez said on a call with reporters today. He declined to forecast price cuts beyond this year.

“We really don’t know what’s going to happen, but I wouldn’t anticipate the pricing environment, particularly in Europe, getting better any time soon,” Jimenez said.

The company will cut 1,100 jobs in Switzerland, with the balance in the U.S., Jimenez said. Some research will be moved to the U.S. from Switzerland, and reductions will be made in technical research and development, data management, clinical trial monitoring, drug safety and regulatory affairs. Novartis will add 700 positions in China and India in data management and trial monitoring, he said.

Drug Approval Delays

Applications for U.S. approval of two experimental drugs for smoker’s cough, NVA237 and QVA149, will be delayed because additional data is needed, Novartis said. Vectura Group Plc (VEC), which licensed NVA237 to Novartis in 2005, fell as much as 26 percent in London trading.

Novartis fell 2.2 percent to 50.65 Swiss francs as of 10:30 a.m. in Zurich trading. The stock declined as much as 3 percent, the biggest intraday drop in a month. Before today, Novartis had declined 1.7 percent this year including reinvested dividends, compared with a 6 percent return for the Bloomberg Europe Pharmaceutical Index of 17 drugmakers.

Third-quarter earnings excluding some costs climbed 12 percent to $3.54 billion, or $1.45 a share, from $3.15 billion, or $1.36 a share, a year earlier, Novartis said in the statement. That was in line with the average estimate of $1.44 a share from 19 analysts compiled by Bloomberg.

Novartis said it expects full-year sales growth in the low double-digits excluding currency shifts. The company doesn’t forecast profit.

Sales rose 18 percent to $14.8 billion, meeting the average prediction of $14.8 billion among 21 analyst estimates.

Alcon, which includes eye medicines and Ciba Vision contact lenses, generated revenue of $2.5 billion. That would have been an increase of 12 percent had Alcon been part of the company for all of last year’s third quarter.

read more: Olympus Wealth Management