January 27, 2012: Novartis Pharmaceuticals is planning a restructure of its US business in anticipation of the patent expiration of its hypertension medication Diovan® (valsartan) and an expected reduction in demand for its type 2 diabetes treatment Rasilez®/Tekturna® (aliskiren) following termination of the ALTITUDE clinical study. The company is to reduce its cost base with current restructuring focused on the US market.
“We recognise 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,” said David Epstein, division head of Novartis Pharmaceuticals. “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.”
A central element of the plan is a restructuring of the General Medicines business in the US market, where Novartis Pharmaceuticals will continue to focus on expanding its presence in speciality businesses aligned with the product portfolio and pipeline. As a result, the field force is planned to be reduced by about 1,630 positions and headquarters functions will realign to support the new organisation, resulting in an additional reduction of about 330 positions. The changes are planned to take effect in the second quarter of 2012. Placement and other support services will be available to affected employees, as well as redeployment opportunities, where they exist, within the Novartis Group of companies.
The restructuring was prepared to respond to the loss of patent exclusivity for Diovan, expected in the USA in September 2012. The plan has been accelerated after the ALTITUDE study was halted following the recommendation from the Data Monitoring Committee overseeing the trial. The study was investigating Rasilez/Tekturna in a high-risk population of patients with type 2 diabetes and renal impairment. As a precautionary measure, Novartis Pharmaceuticals ceased all promotion of Rasilez/Tekturna-based products for use in combination with an angiotensin-converting enzyme (ACE) inhibitor or angiotensin receptor blocker (ARB). Novartis Pharmaceuticals, in consultation with health authorities, is now recommending that hypertensive patients with diabetes should not be treated with Rasilez/Tekturna in combination with an ACE inhibitor or ARB.
The restructuring is expected to result in an exceptional charge of about $160 million to be recognised in the results for the first quarter of 2012. It is planned to produce full-year savings of about $450 million as of 2013, about half of which is expected to be realised in 2012 due to reorganisation timelines. Together with ongoing productivity programmes, the company plans to continue to ensure that the product portfolio and research pipeline are fully invested in to sustain growth.
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