Global Pharma Restructuring Intensifies: Novartis Cuts 320 Jobs in Ireland, Alkermes Trims 160 Amid Strategic Overhaul

Compiled by Keke

Related Reading:Merck to Cut 500 Jobs in the U.S., Effective After New Year’s Day

Novartis’s “Productivity Program” is regarded as a strategy to help boost the company’s profit margins, and CEO Vas Narasimhan is aligning the company accordingly. On October 23, Novartis announced it would further advance its productivity-driven cost-cutting measures, eliminating 320 jobs in Ireland.

Recently, a Novartis spokesperson confirmed to The Irish Times that, as part of a global restructuring, the company will shut down its production facility in Ringaskiddy, Ireland, by mid-2022. The move involves laying off 240 employees at its Active Pharmaceutical Ingredients (API) plant to consolidate its API business, and cutting 80 jobs in the “Global Services” division on the same campus, with plans to transfer remaining “Global Services” staff to European and Asian hubs by 2021. Both departments are part of Novartis Technical Operations, and the layoffs aim to streamline the organizational structure and concentrate resources on innovative research and development.

Novartis is located in Ringaskiddy, Cork, Ireland.

（Photograph: John Allen/Provision）

“This is a strategic decision and part of Novartis’ ongoing assessment of its global manufacturing network and transformation plans. The Ringaskiddy site currently employs approximately 550 people. This change could affect up to 320 employees, with the possibility of further job cuts,” Novartis stated in an email.

Novartis stated that it would ensure favorable severance packages for employees affected by the changes. Meanwhile, commercial services will continue to be provided at Ringaskiddy. The site will continue to manufacture medicines for the treatment of hypertension, heart failure, and acromegaly. However, in the long term, Novartis will continue to evaluate potential partnership opportunities and divestment options for the entire Ringaskiddy campus to enhance competitiveness and support a more sustainable future.

In 2016, Novartis launched the “Productivity Program” to further adjust its manufacturing network in response to its evolving product portfolio. Since then, Novartis has implemented adjustments in Japan, the United States, and other countries/regions, and closed four plants in Switzerland, affecting approximately 1,000 jobs. In September 2018, Novartis announced that it would close its manufacturing facility in Grimsby, UK, in 2020, resulting in around 400 job cuts. Novartis stated that while the production volume of high-volume products has decreased, greater emphasis has been placed on specialized and personalized innovative medicines. Additionally, the sale of assets such as factories and land will generate additional revenue for the company. Since last year, six companies have conducted site visits to the Grimsby facility and expressed interest.

On Tuesday, Novartis released its third-quarter 2019 financial report, showing improved earnings. Its Q3 sales reached $12.17 billion (net income of $2.041 billion), 10% higher than market expectations. The main drivers of sales growth were the psoriasis drug Cosentyx and the heart failure medication Entresto, with the latter’s revenue increasing by 61% year-on-year. Zolgensma, currently the world’s most expensive drug and a gene therapy, achieved first full-quarter sales of $160 million, far exceeding market expectations. During a conference call with analysts, Narasimhan specifically addressed the restructuring plan. He expressed confidence that Novartis is poised to see similar growth momentum in 2020 as it did this year.

However, not all recent developments at Novartis have been so optimistic. Production challenges with the company’s CAR-T product Kymriah, along with regulatory authorities’ recent “data scandal” concerns regarding the manufacturing of the gene therapy Zolgensma—which have delayed its market launch in Europe and Japan—are expected to erode Novartis’s profit margins. In response, JPMorgan analysts stated that Zolgensma may struggle to reach its $1 billion sales forecast.

Another Irish Pharmaceutical Company Announces Layoffs on the Same Day

In a similar vein, Irish biopharmaceutical company Alkermes announced on Wednesday that it would lay off 160 employees and reduce future hiring and expenditures, aiming to restructure the company and curb losses. Affected by this news of layoffs, its stock price rose by 6% on the same day.

Alkermes is primarily focused on central nervous system (CNS) disorders, with a portfolio of more than 20 products and drug candidates addressing severe and chronic conditions such as addiction, schizophrenia, diabetes, and depression. In the third quarter of this year, Alkermes reported a net loss of $53 million, wider than the $34 million loss in the same period last year, while revenue increased from $249 million to $255 million. The company expects full-year total revenue to be between $1.1 billion and $1.2 billion, including a $150 million milestone payment from Biogen for the final U.S. approval of its multiple sclerosis drug Vumerity (diroximel fumarate). However, the company’s stock price has fallen by more than one-third since the beginning of the year.

As of February 4 this year, the biopharmaceutical company had approximately 2,300 employees, and the restructuring will affect about 7% of them. Evercore ISI analyst Umer Raffat believes that Alkermes’ restructuring plan is a significant step. The company’s annualized revenue is approximately $1 billion, but its expenditures indicate that it is currently operating at a net loss.

Alkermes is expected to complete the majority of its workforce reductions by the end of this year, incurring $13–15 million in severance costs in the fourth quarter. These measures are projected to reduce costs by $150 million, with the restructuring ultimately saving hundreds of millions of dollars over the next few years.

Richard Pops, the company’s CEO, stated that the company views Vumerity as “a new revenue stream from royalties” and hopes to submit a marketing application to the FDA for ALKS 3831, a drug for the treatment of schizophrenia and bipolar disorder, this quarter.

References:

[1] Novartis says Ireland site will lose up to 320 jobs as productivity squeeze continues

[2] Alkermes to lay off 160 in cost-cutting restructure