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Novartis to restructure U.S. business and cut more than 1,900 jobs
01-17-2012
by Jeffrey Bouley  |  Email the author
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BASEL, SwitzerlandóNovartis has announced that it will restructure its U.S. General Medicines business, resulting in the elimination of 1,960 positions, in an effort to strengthen its competitive position after the expiration of the Diovan (valsartan) patent and an expected reduction in demand for Rasilez/Tekturna (aliskiren) following termination of the ALTITUDE clinical study. This is expected to result in annual savings of some $450 million by 2013, about half of which is expected to be realized in 2012 due to reorganization timelines.
 
In addition, because of this and as part of "ongoing portfolio review," according to Novartis, the company will take an exceptional charge of approximately $160 million, in large part related to termination of the PRT128 (elinogrel) and SMC021 (oral calcitonin) programs.
 
"We recognize that the next two years will be challenging in the Pharmaceuticals Division and we are proactively making these changes to further focus our pipeline on the best opportunities and align our market position on our growth brands," said David Epstein, Division Head of Novartis Pharmaceuticals, in an official statement. "These are difficult but necessary decisions that will free up resources to invest in the future of our business which we view as well suited to bring new valuable therapies to patients and payors."  
 
A central element of the plan, Novartis says, is a restructuring of the General Medicines business in the important U.S. market, "where Novartis Pharmaceuticals will continue to focus on expanding its presence in specialty businesses aligned with the product portfolio and pipeline."
 
The end result is that the field force will be cut by approximately 1,630 positions and headquarters functions will be realigned to support the new organization, leading to a loss of approximately 330 other positions. The changes are planned to take effect in the second quarter of 2012, and associates will be notified in early April.
 
Outplacement and other support services will be available to impacted associates as well as redeployment opportunities, where they exist, within the Novartis group of companies.  
 
Patent expiry of Diovan, a market-leading hypertension medication, is expected in the United States in September 2012, but plans to restructure were accelerated after the ALTITUDE study was halted following the recommendation from the Data Monitoring Committee overseeing that trial, which was investigating Rasilez/Tekturna in a high-risk population of patients with type 2 diabetes and renal impairment. As a precautionary measure, Novartis ceased all promotion of Rasilez/Tekturna-based products for use in combination with an angiotensin converting enzyme (ACE) inhibitor or angiotensin receptor blocker (ARB). Novartis, in consultation with health authorities, is now recommending that hypertensive patients with diabetes should not be treated with Rasilez/Tekturna in combination with an ACE-inhibitor or ARB.
 
"Patient safety is the highest priority for Novartis and we are in continuing dialogue with health authorities worldwide to establish the most appropriate next steps," the company noted in its announcement of the restructuring.   
 
A reassessment of the future sales potential of Rasilez/Tekturna in light of the ALTITUDE results has led to an exceptional charge of approximately $900 million (of which approximately $800 million is non-cash) to be recognized in the fourth quarter of 2011. The charge comprises impairments to intangible and manufacturing assets and excess inventory together with trial wind-down and other exit costs. The accounting charge is triggered by lower sales expectations and does not seek to anticipate the results of our ongoing discussions with health authorities concerning Rasilez/Tekturna.
 
 
Code: E011712

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