Novartis: New cost-saving unit will not target manufacturing network

By Dan Stanton

- Last updated on GMT

Novartis has reduced its network by 24 plants since 2010
Novartis has reduced its network by 24 plants since 2010

Related tags Novartis

Novartis has divested, restructured, or mothballed 24 manufacturing plants since 2010 but says its new NBS cost-saving business will not focus on streamlining and consolidating sites.

Novartis has “restructured, exited, or divested 24 manufacturing sites since [its] footprint programme started in 2010,”​ CEO Joe Jiminez told investors during a conference call discussing end of year results yesterday, while David Epstein – Head of Pharmaceuticals – said the firm would continue to reallocate resources to get the firm’s “manufacturing base in a better place.”

They also spoke of the Novartis Business Services (NBS), created last July in order to reduce costs by up to $6bn (€5.3bn) through synergies across the Swiss Pharma Giant, which began operations this month.

However, Novartis spokesman Eric Althoff told in-Pharmatechnologist.com that the NBS organization would not directly affect the firm’s manufacturing network, despite continuing “to improve capacity utilization at its manufacturing sites.”

“NBS is shared services organization is to help us operate more efficiently and improve profitability to free resources that can be reinvested to drive growth and innovation,”​ he explained. “There are many Functions and Domains that are common across Divisions. We aim to leverage internal synergies and ensure close interaction with our business partners.”


Already this year the firm has earmarked an OTC manufacturing plant in Humacao, Puerto Rico​, for closure by 2019, outsourcing the manufacture of the products made there to either Eli Lilly or Virbac.

In 2014, the Suffern, New York​ facility that made one-time bestseller blood pressure drug Diovan (valsartan) announced it was closing its doors last year, as did a consumer health facility in Lincoln, Nebraska​, and a pharma manufacturing site in Taboão da Serra, Brazil.

Impairment charges and inventory write-offs in relation to the network reduction programme stood at $183m for 2014, bringing the total to $698m in exceptional costs since 2010.

“Novartis currently has roughly 100 manufacturing sites across its divisions – following the closure of the transactions with GSK, expected in first half of 2015,”​ Althoff told us. “We expect to operate around 90 facilities in our network.”

For the full year, the company reported net sales across all units of $58bn, with the pharma division contributing $32bn, remaining flat year-on-year. Operating income for the pharma business dropped 10% from 2013, standing at $9.3bn.

Network breakdown

According to an SEC filing​, as of the end of 2014 Novartis’s manufacturing network comprised of five bulk chemical and 14 pharmaceutical production facilities plus one biotechnology site in Huningue, France.

“Major bulk chemical sites are located in Schweizerhalle, Switzerland; Grimsby, UK; Ringaskiddy, Ireland and Changshu, China,”​ the filing reveals, while “significant pharmaceutical production facilities are located in Stein, Switzerland; Wehr, Germany; Singapore; Torre, Italy; Barbera, Spain; Suffern, New York; Sasayama, Japan and in various other locations.”

On top of this the firm has primary OTC plants located in Lincoln, Nebraska; Nyon, Switzerland; Humacao, Puerto Rico; and Jamshoro, Pakistan, while its generics division, Sandoz, consist of 45 manufacturing sites across 19 countries.

There are also nine facilities producing pharmaceutical products for the firm’s eye care business Alcon, and a further 12 making surgical equipment and other surgical medical devices. Novartis’s vaccine business, currently being divested to GSK and CSL Limited, consists of a further six facilities.

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