Massive Layoffs in Marketing/Sales Division at Novartis

Oct 24, 2007

Last Friday, Novartis announced that it would lay off 1,260 jobs, primarily in the sales and marketing sectors, in an effort to save $230 million a year.

Of the jobs being cut, 750 will be internal, while the rest will be third-party sales representatives. The company says it will put more emphasis on its nonprescription market and biological medicines.

The company has been hit with some specific problems in the last few years, particularly the delay of its type 2 diabetes med, Galvus (which received an approvable letter in February), and the withdrawal of Zelnorm, for safety concerns.

"Even if you factor those things in and step back, I don't see the situation being a whole lot different than any of its peers," said Mike Luby, CEO of marketing information service company TargetRx. "Novartis has been blessed with new product launches, but the situation is still the same—it has an enormous infrastructure, pressure for growth, competitiveness on almost every front, and it has to figure out how to crack the code on making its sales force more effective and more efficient."

Novartis is bringing in Joe Jimenez, a former board member for AstraZeneca, as the head of pharmaceuticals. Although his background is primarily in finance, some analysts feel he might be the right guy for the job.

"Maybe it's time for a fresh view of the same question. The industry needs to identify areas of opportunity from the perspective of being more efficient," said Barbara Ryan, analyst at Deutsche Bank. "Pharma is feeling the pressures of a slowing top line—a function of generic competition, low productivity from R&D, and pricing pressures globally. In an effort to improve its return, industry needs to find more efficient ways to operate, including lowering head counts and addressing all processes whether they be manufacturing or selling and marketing or R&D."