Novartis to Close US Generics Unit, Keep Roche Stake

18.10.2017 -

As generics pricing pressure increases, Swiss drugmaker Novartis said it will close a US plant at Broomfield, Colorado, owned by its Sandoz subsidiary and employing 450 people. It was initially unclear how many jobs might be lost in the closure, which is scheduled to take around two years. Drug ingredients manufacture will be concentrated at a plant in Wilson, North Carolina.

Novartis said it is currently experiencing above-average pricing pressure in its US portfolio, and with several products no longer competitive in saturated markets has decided to discontinue or divest these limited growth products.

The Swiss group joins other international drugmakers in putting curbs on generic production. Struggling Israeli giant Teva recently announced a massive cutback.

In the US, Novartis is apparently focusing its efforts on its biologics portfolio. In May of this year, the company said it planned to add around 40 jobs at its Morris Plains, New Jersey, facility. The site develops the processes needed to produce the company’s CAR-T immuno-oncology treatment, approved by the US Food and Drug Administration (FDA) in late August. The drugmaker will also add around 350 jobs in biologics manufacturing and development, for the most part in Switzerland.

Meanwhile, after assessing the market, Novartis has decided to put plans to sell its $14 billion stake in Swiss rival Roche (a third of that company’s share capital) on the back burner. Chairman Jörg Reinhardt told the Swiss newspaper Handelszeitung management has concluded that holding onto the stake is a better option.

Unloading the shares could have netted between $12 billion and more than $14 billion, analysts calculated.

Novartis had been considering selling the Roche stake as part of an ongoing strategic review that observers said is likely to continue next year under its new CEO, Vas Narasimhan.

Since 2014, the drugmaker has swapped most of its vaccines portfolio for GlaxoSmithKline's (GSK) oncology slate, sold its flu-shot business to Seqirus, its animal health arm to Eli Lilly and merged its consumer health business into a joint venture managed by GSK.

Late last year, Novartis was rumored to be seeking to unload its $496 million portfolio of central nervous system drugs and in spring of this year was seen as aiming to sell some respiratory drug rights. Analysts also regard the eyecare unit Alcon as potentially being considered for sale or spinoff. Current Novartis CEO Joe Jimenez is due to make an announcement on this in the near term. Some think the company’s stake in the GSK venture – worth as much as $10 billion – could be put on the sale block.

Additionally, reports suggest that Novartis may be eyeing a deal for the radiotherapy developer Advanced Accelerator Applications, which specializes in radioactive tracers used in diagnostic scans.