Novartis shakes up structure to strengthen US business

upamfva · 06-04-2022 04:20:23

Swiss drugmaker Novartis is simplifying its structure as part of plans to save $1bn in costs by 2024 and strengthen its business in the US, the world’s largest pharmaceutical market.To get more novartis news, you can visit shine news official website.

Three executives will leave the company as part of the restructuring, which will combine the oncology and pharmaceutical units into one innovative medicines division, with separate commercial organisations for the US and international markets.

Novartis’s chief executive Vas Narasimhan said the changes were central to the company’s growth strategy, which he hopes will deliver sales and margin growth above rivals in the medium to long term. The company is hoping to catch up with peers that have cut the proportion they spend on sales, general and administration expenses.

“If we could emerge from the coming years with a combination of the top five in the US and number one or in the top three in Europe, China and Japan, we will be a formidable company,” he said.

Narasimhan insisted the reorganisation was a “natural progression” for the company and was not in response to external pressure. The company has made significant divestments of its consumer health and eyecare businesses. The pharmaceuticals division’s focus on speciality drugs now gives it a more similar profile to the oncology unit.

“We’ve been on a transformation journey, really since 2014, to move from a conglomerate healthcare company to a focused medicines company,” he said.The company is also considering the future of its generics business Sandoz, which it could decide to sell or spin off, in a strategic review by the end of the year.

Novartis is also looking for a leader for a new strategy and growth division, which will be run in the interim by Lutz Hegemann, the head of global health.

The company expects these changes to ensure at least 4 per cent compound annual growth from 2020 to 2026. It said the restructuring will help it deliver margins at the high end of guidance of 30 percentage points in the medium term, and more than 40 percentage points in the mid to long term. But the changes will not affect forecasts for 2022.

Novartis (NOVN.S) said on Monday it was integrating its pharmaceuticals and oncology units into an innovative medicines (IM) business to simplify its structure, targeting savings of at least $1 billion by 2024.

"Integrating pharmaceuticals and oncology business units into an innovative medicines (IM) business with separate U.S. and international commercial organizations will increase focus, strengthen competitiveness and drive synergies," the Swiss pharmaceutical company said in a statement.It said it expects selling, general and administrative savings of at least $1 billion to be fully embedded by 2024 as a result of these changes.

The company based in Basel appointed Marie-France Tschudin as president of innovative medicines international and chief commercial officer, and Victor Bulto as president of innovative medicines in the United States.Shreeram Aradhye becomes president global drug development and chief medical officer. Susanne Schaffert, Robert Weltevreden and John Tsai are leaving Novartis, the company said.

Value creation through these operational improvements should ensure at least 4% sales growth in constant currency through 2026. Novartis also expects to deliver at the high end of its IM margin guidance of high 30s in the medium term and 40% or more in the mid- to long-term.