Layoffs and retrenchment

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BASEL—December 13, 2007—As part of its continuing efforts to streamline the company and redesign its operations, Novartis announced the cutting of another 2500 full-time positions or 2.5% of its full-time staff. The company hopes that most of the cuts will come through the normal fluctuations of staffing levels, including vacancy management and social programs. "We have taken the opportunity given the short-term down-cycle in our pharmaceuticals business to initiate this project," says Dr. Daniel Vasella, company chair and CEO. "This will simplify our organization and redesign the way we operate. Forward will increase speed and productivity in anticipation of accelerating growth in the second half of 2008."
BASEL—The year continues to be a difficult one for the pharmaceutical industry as more companies have been forced to re-examine their business plans in the face of a changing market. In its latest quarterly report, Novartis AG announced that the loss of flagship drugs and the onslaught of generics will force the company to revamp its U.S. operations, and topping the list of changes is more than 1200 job cuts.
The cuts will likely be spread across the company's U.S. headquarters, its U.S. sales force, and third-party representatives, for a savings of about $230 million in 2008. The cuts will also be joined by a managerial shake-up, with Joe Jimenez taking over as head of the company's pharmaceutical from Thomas Ebeling, who will move to the consumer health division.
Meanwhile, on this side of the Atlantic, Tennessee-based King Pharmaceuticals announced it was going to accelerate a planned strategic shift to focus the company on neuroscience and hospital/acute care products. Among the changes will be a 20% reduction in the company's workforce of ~2700 as well as other administrative expense cuts that will translate into $75 million to $90 million in 2008. The change comes as King continues to deal with recent patent challenges to its Altace brand. In September, the U.S. Court of Appeals ruled against the continued validity of the patent, and the company has filed a petition seeking reconsideration.
"In light of last month's decision and the uncertainty that it creates with respect to the future of our ALTACE franchise, we are accelerating our plan to sharpen our focus on neuroscience and hospital/acute care," says Brian A. Markison, company chairman, president, and CEO. "This strategic shift was initiated several years ago in anticipation of the eventual loss of ALTACE exclusivity."
Note: As we go to press, GSK announced that it too was looking at significant layoffs--no numbers were mentioned--as it tries to deal with a 5.8% drop in third-quarter net profit following its slumping sales of Avandia and generic competition. As part of a program to save the company (pre-tax) about $1.4 billion annually by 2010, GSK is also looking to streamline manufacturing as well as several other measures.

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