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Novartis AG (NVS) Layoffs Announced: More Cuts May Be Looming

7/14/2014 1:09:07 AM

Novartis AG Layoffs Announced: More Cuts May Be Looming Novartis Layoffs Announced: More Cuts May Be Looming

July 14, 2014
By Linda R. Bernstein, Pharm.D., Exclusive Story

"It was like a slaughter," one long time Novartis employee commented.

A source has reported that hundreds of Novartis employees worldwide recently lost their jobs. The majority of cuts were in Global Clinical Operations. Development IT laid off half their employees and the UK site and Suffern, NY plant were shut down, laying off all employees. All contractors were let go as well.

This first round of layoffs occurred June 30th after notice was provided the first week in April. The layoffs are part of a reorganization process as the company is reportedly trending toward a CRO-based model for Global Clinical Operations. According to the source, Novartis shut down the data manager department in its East Hanover, NJ site and purchased a data management CRO in India. Additional layoffs are expected September 1st, with a third round of cuts possibly in November.

Novartis is changing

Operating in more than 140 countries, Novartis is ranked number two among the top pharmaceutical companies for revenue in 2013 and is comprised of Pharmaceuticals, Oncology, Novartis Vaccines, Generics, Novartis Consumer Health, and Eye Care. Novartis Institutes for BioMedical Research (NIBR) is the global pharmaceutical research organization of the company. The company headquarters is located in Basel, Switzerland.

Novartis has about 135,000 full-time associates worldwide. Forty-six percent of associates are in Europe, 26 percent in Asia/Africa/Australasia, 20 percent in the United States, and 8 percent in Canada and Latin America. Approximately half of employees are in the Pharmaceuticals division.

The loss of even a few hundred jobs has a significant impact on Novartis.

What has triggered this shift in drug development processes at Novartis resulting in the need for outsourcing and related layoffs? BioSpace offered Novartis an opportunity to comment on the current situation.

Novartis has provided comment on this report as follows:

"The healthcare environment is changing rapidly and our product portfolio is also changing which is why we regularly evaluate our business to ensure that we are investing in areas where we can significantly advance patient care.

To ensure the necessary resources for planned product launches and other growth areas in 2014, Novartis Pharmaceuticals AG, our global pharmaceuticals division, announced plans in January to free up, prioritize and reallocate resources primarily in the pharmaceutical area. Those plans had implications for approximately 175 associates in the U.S. primarily in Development and certain other functions. Impacted associates were notified in April. These steps, while difficult, will help strengthen our organization by allowing us to invest in areas where we can significantly advance patient care.

Novartis is offering support for impacted associates including eligibility for enhanced severance packages, out-placement services and the opportunity to apply for open positions within the Novartis Group of companies through the end of their employment."

Other layoffs and why

The life science industry has gone through dramatic changes over the past decade that has resulted in the elimination of drug company jobs in the United States and abroad.

In its sixth biennial report, Battelle and BIO reported national and state statistics for the bioscience industry. U.S. drugs and pharmaceutical manufacturers employed more than 284,000 in 2012, almost a fifth of the national bioscience industry. There was steady job loss between 2001 and 2012 of 7.1 percent in the drugs and pharmaceuticals sector, with an even larger loss between 2007 and 2012 of 10.9 percent. There has been some stabilization in 2012 declining by just 0.3 percent.

The recession starting in 2008 likely played a part in explaining these job loss numbers, but the trend is also a reflection of increased outsourcing of research services among pharmaceutical and biotechnology companies to CROs. Category growth of the research, testing and medical labs sector was an impressive 28 percent from 2001 to 2012, or an annual growth rate of 2.3 percent. This subsector includes companies that provide a variety of service and solutions offerings such as contract R&D and clinical research expertise and assistance. The research, testing, and medical laboratories subsector has continued its rapid growth with employment rising to 467,563 in 2012.

In addition to outsourcing, “efficiency” and “restructuring” programs have resulted in further layoffs as reported by Biospace in June, 2014:

June 6, 2014: Amgen Inc. abruptly put about 70 people who work primarily in information services on paid leave this week. Those employees will lose their jobs, but will continue to collect paychecks through Aug. 8. The bulk of the cuts were at Amgen's headquarters in Thousand Oaks. "The majority of the positions were eliminated due to recently outsourced work," said spokeswoman Kristen Davis.
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June 26, 2014: Purdue Pharma will lay off 59 employees in Stamford, as part of its restructuring to eliminate a third of its research and development arm.

June 26, 2014: Abbott Laboratories laid off an unspecified number of workers at its Lake County headquarters complex on Tuesday, sources told the Tribune.

June 13, 2014: Teva could halve its manufacturing network as part of its $2 billion-a-year efficiency program says CFO Eyal Desheh, with most cuts hitting its core generics business.

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