- Danish drugmaker Novo Nordisk will cut 1,000 jobs over the next two months, trimming mainly R&D and headquarters staff in an effort to lower operating costs, the company said in a statement Thursday.
- Novo cited "a challenging competitive market in 2017" for its drugs, particularly in the U.S. market where pressure from payers has increased. While Novo has said it expects broad market access for its all-important diabetes drugs in the U.S. next year, net prices are anticipated to be "moderately lower."
- The cutbacks come as Novo is preparing to overhaul its leadership. Longtime CEO Lars Rebien Sorensen will step down at the end of the year and current head of Corporate Development Lars Fruergaard Jorgensen will take over as the new chief. A number of other exces have also changed roles.
Novo's decision will reduce its 42,300-strong workforce by about 2.4%, a move which Sorensen described as "difficult" but necessary to reach "a sustainable balance between income and costs."
Net sales increased by 5% (in Danish kroner) over the first six months of 2016, but Novo has narrowed its guidance for expected sales and operating profit growth in 2016, acknowledging a recent contract loss in the U.S. for its fast-acting insulin NovoLog.
At that time, Sorensen described the U.S. diabetes market as "increasingly challenging", and said that "contract negotiations for 2017 have reflected an intensified price competition."
U.S. payers' decisions on their formulary lists for 2017 have signaled a tightening market, intensifying competition between Novo, Sanofi and Eli Lilly. CVS Health and United Health will both remove Sanofi's Lantus in favor of Eli Lilly's follow-on biologic version Basaglar.
Express Scripts, the other big pharmacy benefit manager in the U.S., plans to exclude Novolin and Novolog from its preferred drug list next year, and has long since excluded Novo's blockbuster GLP-1 antagonist Victoza, opening up the market leader to threat from competition.
The jobs cuts announced Thursday will affect R&D units, headquarter staff functions and positions in the global commercial organization, the company said. About 500 of the 1,000 employees affected are located in Denmark, although a company spokesperson confirmed that some U.S. employees will also be impacted.
Novo has high hopes for its new-generation insulin Tresiba, which was launched in the U.S. in January 2016 and has secured a 2.9% share of the total number of prescriptions in the basal insulin market there.
It is anticipating filing for U.S. and EU approval of its once-weekly semaglutide in the next 3-6 months and a combo product combining Tresiba with Victoza for treatment of type 2 diabetes could win approval in the U.S. by December.
Still, incoming CEO Jorgensen will face a tough challenge to drum up new growth in the U.S. Sanofi is also hoping for approval of its own combo insulin and Eli Lilly's launch of Basaglar could have knock-on effects for Novo, not just Sanofi.
Novo Nordisk stock fell by a little over 3% in early trading on the New York Stock Exchange Thursday.