Novartis Cuts 2,000 U.S. Jobs After Patent Loss

Jan. 13, 2012
After cutting 2,000 positions in late October -- mainly in Switzerland and the United States -- the Basel, Switzerland-based company again has downsized its American operations.

Swiss pharmaceutical maker Novartis again has drastically reduced its workforce in the United States to deal with the expiration of an important patent and its failure to get traction on other drugs, the firm said on Friday.

After cutting 2,000 positions in late October -- mainly in Switzerland and the United States -- the Basel, Switzerland-based company again has downsized its American operations.

Novartis plans to eliminate 1,630 positions, resulting in the loss of 330 medical-sales management posts in the United States. The move will take effect in the second quarter and is expected to save the group $450 million annually from next year.

Novartis' action stems from losing the patent of its lead drug for hypertension, Diovan. The drug was the best performer for the group, reaching sales of $1.4 billion in the third quarter.

The U.S. patent for Diovan, which ended in Europe at the end of last year, will expire in September, making it vulnerable to competition from generics.

These are, however, not the only setbacks for Novartis. The group has faced difficulties with another hypertension drug -- Rasilez (Tekturna in the United States) -- and in December stopped the Phase III clinical study of a drug used in patients with diabetes, due to side effects.

Two other drugs under development -- the anticoagulant Elinogrel and Oral Calcitonin used for osteoporosis and arthritis -- also failed to reach the Phase III clinical studies' stage and were removed from the company's portfolio.

These setbacks led Novartis to collect special charges totaling $1.2 billion.

These include a $160 million charge in the first quarter of 2012, another $900 million for Rasilez and $160 million for ending the Elinogrel and Oral Calcitonin projects. The latter two write-offs will be accounted for in the fourth quarter of 2011.

"We recognize that the next two years will be difficult for the pharmaceutical division," division director David Epstein said in the company's statement.

"These are difficult but necessary decisions, freeing up resources for investment in our future business," Epstein said.

Novartis, which employs 121,000 people worldwide, in late October announced the elimination of 2,000, jobs mainly in Switzerland and the United States, raising concerns among Swiss.

The group is not the only one facing the thorny problem of patent expiration.

According to the Fitch ratings agency, 15 major companies worldwide are facing "significant challenges" this year due to an unprecedented period of patent expirations.

In 2012, the pharmaceutical sector will feel the impact of the loss of four patents in the top 10 drugs, amounting to $50 billion in business. Besides Novartis, the U.S.-based Eli Lilly, Bristol-Myers Squibb and Pfizer are affected.

The restructuring of Novartis in the United States due to the loss of the Diovan patent was expected, according to analysts at Wegelin Asset Management. But the extraordinary charges and problems with Rasilez are likely to "disappoint" investors, they noted.

Copyright Agence France-Presse, 2011

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