New Novartis Cuts Target 2,500 Jobs

Continuing a downsizing trend among large pharmaceutical companies, Novartis has announced a restructuring program targeting $1.6 billion in cost savings by 2010. The initiative, which will focus on streamlining corporate functions in management, research, and sales, will eliminate 2,500 full-time positions, or 2.5% of its workforce, according to Novartis.

The job cuts are in addition to the 1,260 positions Novartis said in October would be eliminated from the company's U.S. pharmaceutical marketing and sales organization. A spokeswoman says the new cuts will affect all Novartis businesses other than the vaccines and diagnostics division and the company's Sandoz generic drug business. About 500 jobs will be cut in Switzerland, where Novartis is headquartered.

The restructuring program, called Forward, is in response to "increasingly challenging industry conditions," the firm says, including price pressure on drugs, increasing R&D costs, and competition from generic drugmakers. In its report on the first nine months of 2007, Novartis said operating income in its pharmaceuticals division grew just 2% over the same period last year.

"We have taken the opportunity, given the short-term down cycle in our pharmaceuticals business, to initiate this project," CEO Daniel Vasella says. "This will simplify our organization and redesign the way we operate." He adds that the program will increase speed and productivity at the company in anticipation of accelerated growth in the second half of 2008.

Many of the changes outlined by Novartis have to do with the creation of companywide shared functions in areas such as purchasing and information technology. In the pharmaceuticals division, the company says it will develop a more geographically-tailored marketing approach, eliminating duplicate efforts among sales organizations worldwide. Some marketing functions will be outsourced, according to the company.

The Novartis Institutes for BioMedical Research, based in Cambridge, Mass., will focus on disease areas with significant new opportunities, according to the company, and will take advantage of synergies among research efforts globally.

The company expects to take a restructuring charge of $450 million in the fourth quarter of 2007.

Novartis' move follows by about one year the announcement by Pfizer of a significant restructuring and downsizing initiative targeting $1.5 billion to $2 billion in savings by the end of 2008 and the elimination of 10,000 jobs. Earlier this month, Bristol-Myers Squibb announced a $1.5 billion cost-cutting regime that includes the elimination of about 4,300 jobs.