Novartis Trims Workforce To Fit A Changing World

| About: Novartis AG (NVS)

By Michael Fitzhugh

Novartis (NYSE:NVS) will cut 2,000 jobs in the United States and Switzerland as it adds 700 new positions in lower cost countries, such as India and China.

The Swiss pharma giant employs about 121,000 people globally. It announced the cuts in tandem with its third quarter earnings report, which showed a net profit up 12 percent to $3.54 billion and sales of $14.84 billion, an increase of 18 percent relative to the same quarter a year ago.

The layoffs will accelerate an ongoing cost-cutting campaign, saving the company more than $200 million a year. The company will take a one-time restructuring charge of $300 million in the fourth quarter.

The staff cuts are part of a broader move to outsource functions including technical research and development, data management, clinical trial monitoring, drug safety, epidemiology, and drug regulatory affairs. The company will also relocate some research activities from Switzerland to the United States, it says. In addition, the company will close plants in Switzerland and Italy.

Net sales in the company's top six emerging markets rose 23 percent to $1.5 billion in the third quarter representing 10 percent of its total net sales during that period. Sales have been particularly strong in China, where revenues grew 42 percent in the third quarter compared to the third quarter of 2010, the company says.

Novartis isn't alone in cutting back jobs in high-cost economies only to ramp up its ranks in lower-cost countries. In August, Merck said it would shed 13,000 jobs, with 30 to 40 percent of the cuts to occur in the United States. Like Novartis, Merck maintains plans to hire in China. Roche is also shifting resources to China, where it intends to add as many as 750 new jobs while paring back its U.S. workforce.