Healthy Skepticism Library item: 18929

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Publication type: news

Grogan K
Novartis to cut marketing costs, maintain R&D spend
Pharma Times 2010 Nov 18
http://www.pharmatimes.com/Article/10-11-18/Novartis_to_cut_marketing_costs_maintain_R_D_spend.aspx

Full text:

Novartis has unveiled plans to improve productivity by cutting its sales and marketing spend while continuing to invest in R&D, whilst expanding in the BRIC countries.

The Swiss major says it expects to “invest in innovation at the high end of the industry over the next five years, at a time when peers are cutting spending in R&D”. Its pharmaceuticals pipeline contains more than 142 projects, of which more than 35% are in Phase III or registration. Novartis plans to complete eight regulatory submissions in 2010, 13 in 2011 and nine are planned for 2012.

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The Basel-headquartered group added that the percentage of specialty and oncology products will rise from around 65% to more than 75% of expected pharmaceuticals sales in 2015. It also believes that its Sandoz unit will benefit greatly from the growth of biosimilars over the next five years with more than $64 billion in biologics sales to go off-patent by the end of that time period.

To pay for all this innovation, Novartis has announced plans to “further improve productivity which should further sustain operating leverage and drive greater value creation”. It has initiated a group-wide programme to review its “manufacturing footprint” and is creating ‘Manufacturing Centres of Excellence’. In addition, it aims to optimise the cost structure across divisions “and enhance utilisation rates at strategic sites to 80% of capacity”.

With the shift to more specialty care business, Novartis is looking closely at its marketing and sales (M&S) spending and will re-allocate resources geographically and simplify current processes. M&S spend since 2007 has continually decreased as percentage of sales from 29.2% to 25.2% as of the third quarter this year.

However, Novartis plans to strengthen its commercial position in fast-growing emerging markets and “develop significant businesses in China, Russia, Brazil and India”. The firm added that there will be cost-cutting in its general and administrative areas and it sees “the procurement area as an additional major source of continued productivity improvement and savings”.

Chief executive Joe Jimenez said that “by focusing on our strategic priorities we are well positioned to succeed in a rapidly changing healthcare environment”.