Novartis slashes jobs in latest industry cutback

By Sam Cage

ZURICH (Reuters) - Switzerland's Novartis AG will slash 2.5 percent of its global workforce, aiming for annual savings of $1.6 billion in 2010, becoming the latest major drugmaker to undertake a deep restructuring.

Novartis said on Thursday it would take a charge of $450 million in the fourth quarter for the measures, which aim to combat price pressures on drugs, higher research costs, tighter regulations and more generic competition.

The drugmaker will cut 2,500 jobs from its global total of 100,000.

Its shares were down 0.6 percent at 63.70 Swiss francs in early trade, slightly outperforming a weaker European drugs sector, which was off 1 percent.

"It just shows investors again that the industry is in a very tough situation and that cost savings are required, but not necessarily the answer to all problems," said Denise Anderson, analyst at Landsbanki Kepler.

A lack of significant new drugs, declining sales of lucrative flagship franchises and fierce competition have set off a wave of restructuring in the industry, including the world's two biggest drugmakers, Pfizer Inc and GlaxoSmithKline Plc.

"Given the number and size of patent expiries over the next five years, we certainly expect more cost-cutting measures from the industry," Anderson said.

Novartis's latest cuts come just two months after it revamped its U.S. drugs business, cutting 1,260 jobs to help generate annual savings of $230 million.