[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.]
›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.‹
[NVS is down 4% in the two days since this report was issued on Jan 27, based on the perception of weak guidance for 2011. Still, a conservative view for 2011 has NVS logging EPS of at least $5.50 (vs $5.15 in 2010). This equates to a forward P/E of only 10x, which is a bargain, IMO, for a blue-chip company that’s a major beneficiary of The Global Demographic Tailwind.
›ZURICH, Jan 27 (Reuters) - Novartis AG (NVS) warned that price cuts, U.S. healthcare reform and competition from generics were likely to dampen pharma sales growth this year as it missed fourth quarter earnings forecasts.
The Swiss drugmaker fell short of expectations on Thursday with a 10 percent drop in fourth-quarter core earning per share as one-off costs weighed. It will take a $2 billion writedown related to its buy of eyecare group Alcon this year. [This is a non-cash accounting item.]
Novartis still posted slightly better-than-expected fourth-quarter sales, which rose 10 percent thanks to the success of its newest products[and also from excellent results at Alcon], underscoring the group's ability to get products to market.
But it cautioned a number of factors would weigh on its pharma sales this year and Chief Executive Joe Jimenez told reporters the group was facing more headwinds in 2011 than in 2010.
"(Pharmaceuticals) reported sales growth will be lower as a result of the combined effect of price reductions seen in 2010, the full impact of healthcare reform in the U.S. and generic competition," the group said in a statement.
"Pharma revenues are in line with consensus, but local currency growth was weaker than our forecast," Vontobel analyst Andrew Weiss said.
"Core operating earnings however is behind our and consensus forecast. In terms of divisional impact it seems that all core operating margins are slightly weaker than expected," he said.
For the group as a whole[i.e. the entire company], Novartis expects constant-currency sales growth to be around the double-digit mark and it is aiming to improve the constant currency core operating income margin as it absorbs price cuts, generic competition and the loss of sales from its pandemic flu vaccine.
Novartis, which is trading at a slight premium to cross-town rival Roche, has strong growth prospects despite top cancer drug Femara and blood pressure treatment Diovan starting to lose patent protection this year.
Analysts see the group as well positioned to deal with the headwinds facing the industry thanks to its recent acquisition of eyecare group Alcon, a flow of promising new drugs, such as recently launched multiple sclerosis pill Gilenya, its diversification strategy and its emerging markets presence.
Prices have been under pressure across Europe as governments fight record budget deficits. Analysts are watching closely to see what impact this has as it could set the tone for other parts of the world, such as Canada and Japan.‹
Market Data 
Markets 
AI
