ZURICH 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.
The new restructuring plan comes after Novartis suffered a series of setbacks this year.
Key diabetes drug Galvus has been delayed because of safety concerns and Novartis also cut its full-year outlook after withdrawing bowel drug Zelnorm from U.S. shelves in March.
Novartis reiterated that it expected a new growth cycle to emerge in its drugs division in the second half of 2008.
Chairman and CEO Daniel Vasella said the group was taking the opportunity of a "short-term down-cycle" in its pharmaceuticals business to initiate a restructuring program, which would simplify operations and improve productivity.
The company's shares have fallen nearly 9 percent so far this year, versus a 7 percent drop in the DJ Stoxx European healthcare index.
Many job cuts will be made through normal fluctuations in staffing levels, Novartis said.
(Additional reporting by Ben Hirschler, Editing by Elaine Hardcastle)