Novartis has announced plans to eliminate 1,960 jobs in its divisions in the United States over the next year. The pharmaceutical giant said 1,630 sales positions in the field and 330 posts at its U.S. headquarters in New Jersey would be affected. These actions follow the elimination of 1,400 U.S. sales positions in 2010 and the cutting of 900 development positions in October of 2011.
Novartis expects the job cuts to save the company around $450 million per year beginning in 2013. The layoffs will cost the company a one-time charge of $160 million. No mention of the recent recall in the U.S. of several over the counter drugs manufactured by Novartis was made with the announcement. The recall was initiated after reports surfaced of a possible mix-up with powerful prescription pain medications at a manufacturing plant in Nebraska.
The restructuring is due in part to the anticipation of lower sales for two of the company’s hypertension drugs: the expiration of the patent for Diovan, a best seller, and the failure of a clinical study into Tekturna, another hypertension drug. The expiration of the patent for Diovan and increased competition from generics are expected to dramatically reduce the income from Diovan in the near future. Diovan increased Novartis’ net pharmaceutical sales by $1.43 billion, to 8.16 billion, in the third quarter.
The company announced that a reassessment of Tekturna’s future sales potential after the termination of the clinical trial into expanded usage of the drug would result in a $900 million charge in the fourth quarter. The clinical trial was canceled after the drug was found to increase complications in patients taking other common hypertension medications. Two other experimental medications will also be dropped.
Head of Novartis’ pharmaceuticals division, David Epstein, said in a statement, “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. 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.”