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Novartis cuts 2,000 US jobs after patent loss

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Novartis cuts 2,000 US jobs after patent loss
Andrew Hecht (File)
14:39 CET+01:00

Swiss pharmaceutical company Novartis has again drastically reduced its workforce in the United States to deal with the expiry 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 US, the Basel-based company has again downsized its American operation.

The group plans to eliminate 1,630 positions resulting in the loss of a further 330 medical sales management posts in the US.

The step is to take effect from 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. This "blockbuster" was the best performer for the group reaching sales $1.4 billion in the third quarter.

The US 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 US) 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 totalling $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, had already in late October announced the elimination of 2,000 jobs mainly in Switzerland and the United States.

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

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

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 US groups 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.

In Friday afternoon trade on the Swiss Stock Exchange, Novartis shares fell by 1.22 percent to 52.70 francs in a market up 0.22 percent.

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