US General Medicines restructuring results in reduction of 1,960 positions
Action reflects impending loss of Diovan patent exclusivity in US and expected impact on worldwide sales of Rasilez/Tekturna after ALTITUDE study termination
US restructuring to lead to an exceptional charge of USD 160 million in the first quarter of 2012 and to annual savings of approximately USD 450 million by 2013
Reassessment of future sales potential of Rasilez/Tekturna leads to an exceptional charge of approximately USD 900 million in fourth quarter 2011
In addition, as part of ongoing portfolio review, Novartis to take an exceptional charge of approximately USD 160 million related to termination of PRT128 (elinogrel) and SMC021(oral calcitonin) programs
Basel, January 13, 2012- Novartis Pharmaceuticals announced today that the company plans to strengthen its long-term competitive position in anticipation of the Diovan® (valsartan) patent expiration and an expected reduction in demand for Rasilez®/Tekturna® (aliskiren) following termination of the ALTITUDE clinical study. The company will reduce its cost base with the current restructuring focused on the US market.
"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," 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 important US market, where Novartis Pharmaceuticals will continue to focus on expanding its presence in specialty businesses aligned with the product portfolio and pipeline. As a result, the field force is planned to be reduced by approximately 1,630 positions and headquarters functions will realign to support the new organization, resulting in an additional reduction of approximately 330 positions. The changes are planned to take effect in the second quarter of 2012, and associates will be notified in early April, 2012. 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.
The restructuring was prepared to respond to the loss of patent exclusivity for Diovan, the market-leading hypertension medication, expected in the US 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. Patient safety is the highest priority for Novartis and we are in continuing dialogue with health authorities worldwide to establish the most appropriate next steps.
The restructuring is expected to result in an exceptional charge of approximately USD 160 million to be recognized in the results for the first quarter of 2012. It is planned to produce full-year savings of approximately USD 450 million as of 2013, about half of which is expected to be realized in 2012 due to reorganization timelines. Together with ongoing productivity programs, the company plans to continue to ensure that the product portfolio and research pipeline are fully invested in to sustain growth.
A reassessment of the future sales potential of Rasilez/Tekturna in light of the ALTITUDE results has led to an exceptional charge of approximately USD 900 million (of which approximately USD 800 million are non cash) to be recognized in the fourth quarter of 2011. The charge comprises impairments to intangible and manufacturing assets and excess inventory together with trial wind down and other exit costs. The accounting charge is triggered by lower sales expectations and does not seek to anticipate the results of our ongoing discussions with health authorities concerning Rasilez/Tekturna.
In addition, Novartis Pharmaceuticals will recognize an exceptional charge of approximately USD 160 million in the fourth quarter of 2011 related to termination of the PRT128 (elinogrel) and SMC021 (oral calcitonin) programs.
Disclaimer
The foregoing release contains forward-looking statements
that can be identified by terminology such as "to
restructure," "to strengthen,"
"impending," "potential," "to lead
to," "to take," "plans,"
"expected" "will,"
"pipeline," "future," "plan,"
"planned," "commitment,"
"expectations," "anticipate," or
similar expressions, or by express or implied discussions
regarding potential future savings from the announced
restructuring, or regarding the potential outcome of our
ongoing discussions with health authorities concerning
Rasilez/Tekturna, or regarding potential future revenues
from Rasilez/Tekturna, or regarding the potential future
impact of the ALTITUDE study on Novartis, or regarding
potential future charges which Novartis may incur as a
result of the ALTITUDE study or otherwise, or regarding the
potential development of future Novartis products. You
should not place undue reliance on these statements. Such
forward-looking statements reflect the current views of
management regarding future events, and involve known and
unknown risks, uncertainties and other factors that may
cause actual results with Rasilez/Tekturna to be materially
different from any future results, performance or
achievements expressed or implied by such statements. There
can be no guarantee that we will achieve any particular
level of savings as a result of the restructurings
announced in this release. Neither can there be any
guarantees as to the outcomes of our ongoing discussions
with health authorities concerning Rasilez/Tekturna. Nor
can there be any guarantee that Rasilez/Tekturna will
achieve any particular levels of revenue in the future.
Neither can there be any guarantee as to what future
impacts the ALTITUDE study may have on Novartis in the
future. Nor can there be any guarantee as to whether or not
Novartis may incur any additional charges in the future,
whether as a result of the ALTITUDE study or otherwise.
Neither can there be any guarantees that Novartis will
successfully develop additional products in the future. In
particular, management's expectations regarding
Rasilez/Tekturna could be affected by, among other things,
unexpected regulatory actions or delays or government
regulation generally; unexpected clinical trial results,
including unexpected new clinical data and unexpected
additional analysis of existing clinical data;
uncertainties regarding actual or potential legal
proceedings; the impact that the foregoing factors could
have on the values attributed to the Novartis Group's
assets and liabilities as recorded in the Group's
consolidated balance sheet, and other risks and factors
referred to in Novartis AG's current Form 20-F on file
with the US Securities and Exchange Commission. Should one
or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual
results may vary materially from those anticipated,
believed, estimated or expected. Novartis is providing the
information in this press release as of this date and does
not undertake any obligation to update any forward-looking
statements contained in this press release as a result of
new information, future events or otherwise.
About Novartis
Novartis provides innovative healthcare solutions that
address the evolving needs of patients and societies.
Headquartered in Basel, Switzerland, Novartis offers a
diversified portfolio to best meet these needs: innovative
medicines, eye care, cost-saving generic pharmaceuticals,
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Group's continuing operations achieved net sales of USD
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billion excluding impairment and amortization charges) was
invested in R&D throughout the Group. Novartis Group
companies employ approximately 121,000 full-time-equivalent
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