Novartis aims for $1 billion in savings from centralization plans
- Novartis CEO Joe Jimenez hopes the Swiss pharma company's new integrated manufacturing plan will save $1 billion by 2020. Speaking on a investor call, Jimenez said the savings would help support margin expansion and free up resources for launches.
- First announced in January, this new "TechOps" organization aims to focus Novartis' business units, integrate drug development, and centralize manufacturing. Transferring Optha Pharma from Novartis' Alcon arm to its Pharma division was an initial step in this plan, along with moving 19 mature products over to Sandoz.
- Complementing these moves, Novartis has reduced the number of suppliers for its global sites from 100 all the way down to 3.
Novartis had a tough first quarter. Net income fell by 13% compared to a year ago as its top oncology earner Gleevec faced new generic competition in the U.S. Steady gains from other cancer drugs helped offset the fall.
But troubles at Alcon and a slow launch for Novartis' heart failure drug Entresto weighed on the company's earnings growth.
Streamlining costs could help. The TechOps reorganization will go live on July 1 along with the plans to centralize manufacturing, according to In-Pharmatechnologist.
"We think these changes will generate significant savings," said Jimenez on the call.
This plan has been complemented by Novartis Business Services' ongoing work, which was created in 2014 to integrate the company's far-flung operations. In addition to dramatically reducing the number of third-party suppliers, Novartis has also started building out a network of 5 global service centers.
The supplier cutdown enables Novartis to lower costs with those it maintains. "The leverage that we have in terms of offering these companies significantly greater business, we're able to take costs down considerably," Jimenez said.
- in-Pharma Technologist Novartis aims to save $1bn by 2020 with integrated manufacturing plan