Novartis to Cut 300 Jobs in OTC Plant Restructuring After Form 483

By Dan Stanton

- Last updated on GMT

Related tags Food and drug administration

Novartis to Cut 300 Jobs in OTC Plant Restructuring After Form 483
Novartis says both its Swiss plant and third-parties will support its consumer health lines as it restructures its Nebraska facility following a FDA Form 483.

Following an inspection by the US Food and Drug Administration (FDA) in February, Novartis received a Form 483​ observing nine cases of quality lapses at its Lincoln, Nebraska facility, seven of which were repeated observations from prior inspections in 2011 and 2012.

In its Q1 2013 results, the company attributed $51m of exceptional expenses to impairment charges and provisions for the restructuring of the facility, which specializes in the manufacture of consumer health drugs, and laid out its plans to restructure the site which involves both looking at outsourcing and cutting 300 jobs.

Out of ten sites inspected by the FDA, Lincoln was the one that Novartis CEO Joseph Jimenez said was still a problem. “We will reduce, downsize the site by about 300 positions over the next 24 months,”​ he told stakeholders in last week’s conference call, in order to “ensure the sustainability”​ of the facility in the future.

Jimenez added that though manufacturing at Lincoln had been suspended in December 2011, this recent inspection made “no negative observations on the manufacturing side of the business”​ but rather “a significant number of observations on consumer complaints”​ and the way they had been handled.

These violations included the slow identification in identifying problems with child-resistant caps, leading to recalls of Triaminic and Theraflu​ earlier this year. The Form 483 said that since 2010, 174 complaints had been made regarding the problem of child resistant packaging/cap failure.

Overseas and Outsourcing to Prop

Though jobs will be lost, Jimenez said manufacturing volume at the plant could be retained at possibly 70% following a restructure (estimated to cost a total of $100m) which will focus only on the manufacture of solids and powders - like OTCs Excedrin and Theraflu - to the detriment of syrups, creams and gels.

As for the other 30%, the company says it will rely on “a combination of Novartis facilities and third-party manufacturers”​ with good news for its facility in Nyon, Switzerland.

The facility - once marked for closure before Novartis backtracked on its decision​ last year – will pick up on Lincoln’s lost product lines, manufacturing high volumes of semi-solid and liquid products for the key strategic brands, including Voltaren, Otrivin and Theraflu (in syrup form).

With this strategy in place, Jimenez remained confident that damage to revenue caused by the suspension of production at Lincoln – estimated to be $1bn – could be reversed. By the end of Q4, he expects “to be shipping out of Lincoln about 50%”​ of total products produced before the detected issues.

He added: “I think you can assume that we will get back what we lost, the vast majority of it by the end of 2014.”

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