Biotech Values

[DewDiligence]

NVS Lays Off 1,400 in US Sales Organization

[A one-time charge of $85M will be recorded in 4Q10; there is no quantification here of the ongoing cost saving, but I estimate it to be $280M per year. The layoff comprises about 8% of NVS’ total US workforce and about 1.4% of its total global workforce.]

http://www.pharma.us.novartis.com/assets/pdf/press-releases/Novartis-media-release-NPC-FFO-November%202010.pdf

›Novartis Pharmaceuticals Corporation restructuring US field force to align with changing product portfolio and strategic growth priorities

• Elimination of 1,400 General Medicines field force positions effective January 1 to align organization with changes in portfolio and evolving healthcare market

• New organizational alignment creates leaner, more flexible and productive organization

East Hanover, N.J., November 30, 2010 – Novartis Pharmaceuticals Corporation (NPC) announced today that it is restructuring its General Medicines field force in the US to reflect changes in the product portfolio and align resources with strategic growth priorities. The company will reduce its General Medicines field force by approximately 1,400 positions. These changes will be effective January 1, 2011.

The product portfolio within the NPC General Medicines business is changing due to pending patent expirations and pipeline products. [The most important US patent expiration in the next few years in Diovan in 2012; the most important product launch is Gilenya for MS.] There are new product launches expected within the Primary Care business and significant growth momentum within the Specialty Care business that will drive long-term success. Given these changing dynamics within the portfolio, it is critical to realign the General Medicines field force to sharpen focus on the greatest opportunities for growth. The restructuring is expected to result in a one-time cost of approximately $85 million. [NVS has not specified the ongoing saving from the layoff; my first-order approximation is $200K per employee pen annum, or $280M.]

“NPC has a robust pipeline and the future growth potential for our organization remains strong. Proactively evolving our business model will enable us to focus our resources on key launch products and capture opportunities in both primary care and specialty medicines," said Andy Wyss, Head of Novartis Pharma North America and President of Novartis Pharmaceuticals Corporation.

All reductions will be handled in a manner consistent with the Novartis commitment to fair and respectful treatment of associates. 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.‹