Novartis CEO: Watch out for more cost-cutting on the horizon
- Joe Jimenez, CEO of Novartis, says that he will continue to cut costs by trimming the company's back-office staff and consolidating business units.
- Earlier this year, Novartis struck a deal to transfer its vaccine unit to GlaxoSmithKline (GSK) for $5.25 billion. Novartis has also handed over a large portion of its consumer division to GSK. One obvious upside: Operational cost-savings.
- One division the company is keeping and investing in is oncology, with the goal of increasing sales and improving overall margins.
By this point, Novartis employees are used to the threat of job cuts. Last year, Novartis lost 2,200 employees to cuts, which included 1,700 in the U.S.
Admittedly, much of the demand for improved margins is investor-driven. In certain cases, Novartis is either transferring or adding jobs, through its Novartis Business Services group. Through this mechanism, a new operations center has been opened in India, with space for 8,000 workers.
On the revenue side, Novartis is betting on strong revenues from two melanoma drugs—Tafinlar (dabrafenib) and Mekinist (trametinib), which are intended to be used in combination for advanced, nonresectable melanoma. Of course, the larger goal is to cut costs in order to not only improve margins, but also to invest in profitable business units, such as oncology and cardiovascular (CVD) therapeutics.
In fact, Novartis is looking for its new CVD drug (not yet approved), LCZ696, to be its biggest launch ever. Clearly, the company is optimistic about the future.