Biotech Values

[DewDiligence]

Almost every other Big Pharma
has done it, so why not NVS?

http://online.wsj.com/article/SB119731361630919716.html

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Novartis Plans Revamp to Cut Bureaucracy

By JEANNE WHALEN
December 11, 2007

Novartis AG is preparing a companywide restructuring aimed at reducing layers of management and helping the company navigate an increasingly difficult pharmaceutical market, Chief Executive Daniel Vasella said in an interview.

Novartis plans to disclose more detail about the restructuring by mid-December and elaborate further in February, Dr. Vasella said. The company has already told employees in its internal newsletter to prepare for change.

Dr. Vasella, a Swiss physician whose views on the pharmaceutical business are closely watched, said Novartis must become less bureaucratic in order to handle new challenges facing the drug industry: aggressive competition from generic companies, increasingly safety-conscious regulators and more cost-conscious payers such as state health-care systems and insurers.

Novartis, which makes Diovan for blood pressure and Gleevec for leukemia, is one of the top five drug companies by sales globally. Most of its rivals are also looking to restructure and grow as they face harder times inventing and selling branded prescription drugs. Many are laying off staff, and some are diversifying into other areas of health care, including vaccines, generics and diagnostic tools.

The changes at Novartis would come on top of some job cuts and management changes the company laid out in October, when it reported disappointing third-quarter earnings. Dr. Vasella said he has continued scrutinizing the organization since then and is looking to remove several layers of management, with the main goal of positioning employees to make decisions more quickly and simply. The restructuring will involve some job cuts, but Dr. Vasella declined to say how many.

It follows a tough year for Novartis, which faced generic competition on some of its biggest drugs and failed to gain U.S. Food and Drug Administration approval for two new products. Earlier this year, it was also forced to withdraw from the market in the U.S. and Switzerland its drug for irritable- bowel syndrome, Zelnorm, after safety concerns.

"Now that we had quite a difficult year, a challenging year after so many years of gaining market share and growing very dynamically, we have an opportunity now," he said at company headquarters in Basel, Switzerland. "When things get tighter, and you get more pressure, then it's much easier to say look, it's just not going to continue this way. We need to rethink the way we do it."

One new rule Dr. Vasella has set: There should be no more than six layers of employees in any Novartis division, from the lowest-ranking person up to the division head. Novartis has four divisions: pharmaceuticals, generics, vaccines and diagnostics and consumer health, which includes over-the-counter medicines.
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