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Novartis to Slash 2,000 Jobs in Cost-Saving Plan

Swiss drug maker Novartis (NVS) revealed on Monday a stronger third-quarter profit on higher sales, and said it will cut 2,000 jobs to save $200 million a year.

In an effort to improve productivity and absorb pricing pressures, Novartis said it is reducing activity over the next three to five years, including the termination of those 2,000 jobs, mostly in the U.S. and Switzerland. 

Those layoffs are expected to be partially offset by the addition of 700 new positions in lower- cost regions and other countries.

The company will relocate some production, such as technical R&D, data management, clinical trial monitoring and drug regulatory affairs, which will include the closure of two sites in Switzerland and one in Italy. It also plans to move some research activity to the U.S. from its home country.

“These actions are necessary to ensure that we adapt our organization to continue delivering on our mission of bringing innovative new drugs to patients," Novartis CEO Joseph Jimenez said in a statement.

Global drugmakers have cut thousands of jobs as they prepare for patents of some of their top-selling products to expire and try to offset lower medicine costs. Jimenez warned that pricing pressures will likely continue through the rest of this year.

Novartis says the restructuring activities will help to streamline the company by balancing worker-load with projects and reduce costs so that it can reinvest resources into new scientific platforms.

The company will book a turnaround charge of about $300 million in the fourth quarter.

The announcement comes as the pharmaceutical giant reports higher net income of $2.48 billion, or $1.02 a share, compared with $2.32 billion, or 99 cents a share, in the same quarter last year. 

Excluding one-time items, Novartis said it earned $1.45 a share, which is just below average analyst estimates polled by Thomson Reuters of $1.46. The company’s results were impacted by higher costs and negative foreign exchange impacts.

Novartis attributed the quarterly gains to leading pipeline results in new approvals, such as its high blood pressure treatment Rasitrio and breast cancer drug Afinitor, which it says expands its ability to meet patient needs and sustain long-term growth.

Recently launched products contributed $3.6 billion, or 25%, to the company’s total net sales of $14.8 billion, and were up 31% from the year-earlier period. Novartis’ revenue was up 18% from $12.58 billion in the same quarter in 2010, which matches the Street’s view.

"Once again, the breadth of our business and product portfolio allowed us to deliver strong financial results and operating leverage, as well as significantly advancing the pipeline in the quarter,” Jimenez said.

Follow Jennifer Booton on Twitter at @Jbooton