With Joe Jimenez at the helm, Novartis ($NVS) has consistently vowed to back its multibillion-dollar R&D empire, avoiding the wholesale restructuring that has upended research operations at many of its rivals. But that doesn't mean that the pharma giant has sworn off job cuts. Today it unveiled plans to chop 2,000 high-cost jobs in the U.S. and Switzerland devoted to technical R&D, clinical trial monitoring, data management, regulatory issues, epidemiology and safety, while hiring 700 low-cost employees in China and India to pick up the slack.
Those new workers in Asia will step in to fill the gaps being created in data management and clinical trial monitoring, sending a chilling message to its white collar group in the U.S. and Europe about the future of job growth in pharma. Jimenez, of course, has specialized in finding thousands of workers who could be axed while consistently delivering better returns and new drug approvals for investors. In the most recent quarter, revenue swelled by 12%. But the CEO has sounded the alarm that cash-strapped European governments have been beating down prices, forcing Novartis to keep an eye on finding new ways to grow a company while reducing expenses.
That formula has been widely cheered by analysts, who see a workable strategy that delivers bottom line results. "Pharma companies are reacting to maximize profitability, which is something they should be doing anyway," Deutsche Bank's Tim Race tells Bloomberg.
The cuts will trim $200 million out of the company's top line. From Novartis's perspective, the cuts reflect a simple reality. In order to reinvest in R&D, you have to continually streamline operations. Notes Novartis: "The measures we are taking to streamline our organization and enhance productivity will further allow Novartis to reinvest resources into new scientific platforms for future growth."
That statement sends a clear message that more cuts in high-cost countries lie ahead.