Novo Nordisk A/S Aims an Ax at R&D and HQ Staff Functions, Will Cut Up to 1,000 Jobs

Published: Sep 30, 2016

Novo Nordisk Aims an Ax at R&D and HQ Staff Functions, Will Cut Up to 1,000 Jobs September 29, 2016
By Mark Terry, Breaking News Staff

Over the next two months, Danish company Novo Nordisk plans to lay off approximately 1,000 employees.

Novo Nordisk, headquartered in Bagsvaerd, Denmark, employs about 42,300 people worldwide. It is a leader in insulin development and sales for the diabetes market. About half of the company’s revenue comes out of the U.S., which has about 30 million diabetes patients. However, prices are being cut by insurers and pharmacy benefit managers (PBMs).

About 500 of the job losses will be in Denmark. Overall they are expected to hit research-and-development operations and headquarter staffing, although some of the company’s global commercial operations will be affected as well.

“We deeply regret that good colleagues stand to lose their jobs, and it has been a difficult decision to make,” said Lars Rebien Sorensen, Novo Nordisk’s president and chief executive officer, in a statement. “However, we have concluded that it is needed in order for us to have a sustainable balance between income and costs. In the current situation, we have to prioritize investments in key product launches that will bring innovation to patients and drive our future growth.”

At the company’s six-month financial reports in August, the company lowered its annual profit forecast. Michael Friis Jorgensen, an analyst with Alm. Brand, estimated that the cuts would save the company about $105 to $150 million (US) annually. “That they cut hard in R&D poses a risk in the long term, as in whether they can keep momentum going. They are messing with their life-blood which means that there isn’t much fat left to cut off,” he told Reuters.

The company will be undergoing another big change soon, as well. Sorensen, who has been the company’s chief executive since 2000, and with the company since 1982, is stepping down in January. Lars Fruergaard Jorgensen, currently executive vice president and head of corporate development, will be replacing him.

The diabetes market in general is facing challenges. Paris-based Sanofi is also struggling. Late last week UnitedHealth (UNH) dropped. Sanofi’s Lantus from its list of covered drugs for 2017. It is instead steering its clients towards lower-priced drugs, in this case, pushing Basaglar, a similar insulin product marketed by Eli Lilly (LLY), which would be listed as Tier 1, which gives its customers lower out-of-pocket costs. Novo Nordisk’s Levemir was also moved from Tier 1 to Tier 2. In August, CVS Health (CVS) also dropped Lantus, replacing it with Basaglar.

And according to Bloomberg, Novo Nordisk lost a “sizable” contract for NovoLog, one of its bestselling insulin products.

“The next line of products have to have an even greater height of innovation, which means those that do not have that height of innovation will have to be culled,” Sorensen said in an interview with Bloomberg TV’s Guy Johnson. “Otherwise, it’s going to be difficult for us to get reimbursement for our drugs. Me-too or me-better drugs will not be good enough in the future and hence we need to prioritize.”

Earlier this year Novo Nordisk launched Tresiba, a new insulin product, in the U.S. The hope is that it will take some of Lantus’s market share. Tresiba is longer-acting, and seems to have a lower risk of hypoglycemia, or low blood sugar. However, Eli Lilly is also launching a less expensive copycat of Lantus, which is likely to exacerbate the competition.

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