Novartis said it will eliminate approximately 2500 full time positions from its global workforce as part of a plan aimed at an effort to save as much as $1.6 billion in 2010.
The Swiss drug maker said, continuous price pressures on drugs, increasing R&D costs, risk-averse regulatory environment and more aggressive generic competitors lead to the shedding 2.5 per cent of its work force.
Novartis said its plan, named as "Forward", is aimed at enabling Novartis to more rapidly meet the needs of patients and customers by focusing resources on priority activities that include the research and development of new medicines. The new initiative will enhance productivity by streamlining the organisation and redesigning the way it operates, said the company.
Forward is expected to simplify working processes and decision making by eliminating layers, concentrating on core activities and systematically capturing growth opportunities, particularly in emerging markets.
Forward will further enable Novartis to prepare for a new growth cycle in Pharmaceuticals expected to emerge in the second half of 2008. These actions will also generate significant cost savings and realign resources to better address the changing needs of customers.
"Novartis has experienced strong growth over the last decade and strategically focused activities in healthcare, building a portfolio that is focused yet diversified," said Dr. Daniel Vasella, chairman and CEO, Novartis. "Our portfolio and excellent pipeline of innovative drugs and vaccines provide us with a unique position, both as a platform for growth and to balance risks. We have taken the opportunity given the short-term down-cycle in our pharmaceuticals business to initiate this project. 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."
Novartis benefits from a positive outlook for its strategic portfolio that includes innovative pharmaceuticals, generics, vaccines and diagnostics, and consumer brands. Key growth drivers include the ongoing launches of new medicines following the industry-leading 14 positive regulatory approvals during 2007 in the United States and Europe as well as strong expansion in other businesses, particularly in Vaccines and Diagnostics and Sandoz, the generics division of Novartis.
As per the new plan, organizational structures will be streamlined in corporate functions as well as in the Pharmaceuticals and Consumer Health Divisions, particularly involving general management and administrative areas.
In the Pharmaceuticals Division, the effectiveness of the worldwide sales forces will be improved with a more geographic-tailored marketing approach. Duplication between global, regional and local activities will be eliminated, while certain non-core support activities will be outsourced.
Under Forward, the Consumer Health Division will remove organizational layers to streamline processes and eliminate duplications, while some product supply chains will be restructured to optimize capacity utilization. In certain business units, regional management structures will be modified in order to better focus resources on global or local activities.
The Novartis Institutes for BioMedical Research will focus on disease areas with significant new opportunities and review its research activities globally to take advantage of synergies among disease areas and locations to increase efficiency, the company revealed the new action plan in a recent statement.
Novartis will form a new cross-divisional operation to accelerate growth in small emerging markets, expanding the presence of all Novartis products in regions that include Northern and Sub-Saharan Africa, Central Asia and parts of Southeast Asia.
Implemented in 2008 and 2009, these initiatives are expected to generate a pre-tax annual cost savings of $1.6 billion and maximize resources available to support growth and customer-oriented activities. A pre-tax restructuring charge of approximately USD 450 million will be taken in the fourth quarter of 2007.
Many workforce reductions will be handled through normal fluctuation in staffing levels, which has traditionally averaged about 8 per cent of the Group's annual workforce, as well as vacancy management and social programs. All reductions will be handled in a socially responsible manner with fair and respectful treatment of associates. Novartis will consult with works councils and comply with local labour laws, said the company officials.
Novartis AG is a world leader in offering medicines to protect health, cure disease and improve well-being. In 2006, the group's businesses achieved net sales of $37.0 billion and net income of $7.2 billion. Approximately $5.4 billion was invested in R&D. Headquartered in Basel, Switzerland, Novartis Group companies employ approximately 100,000 associates and operate in over 140 countries around the world.