Novartis On Track in Productivity Initiatives

As part of its first quarter earnings, Novartis reports that it is on track with productivity initiatives created with the formation of Novartis Technical Operations (NTO) and its Global Drug Development (GDD) organization, two enterprise-wide entities formed in 2016. The company has the goal of achieving more than $1 billion in annual cost savings by 2020 through NTO and GDD.

Under NTO, which has been operational since July 2016, Novartis is implementing a five-year synergy and savings roadmap. The function of NTO is to optimize capacity planning and lower costs through simplification, standardization, and external spend optimization across divisions,

The GDD, which was established in the fourth quarter of 2016, oversees drug development across the company’s innovative medicines and the biosimilars portfolio to enable better resource allocation and increased research and development productivity. The GDD has already enabled Novartis to fund several confirmatory development projects without increasing total development spend. In addition, the integration of all global development functions has accelerated the implementation of major technology projects designed to further improve the quality and efficiency of development operations.

The NTO and GDD are part of a larger productivity and cost-saving strategy that Novartis implemented in 2014 with the creation of Novartis Business Services (NBS), a cross-divisional shared services organization that allows Novartis to leverage its global scale and streamline and consolidate a number of business support services previously spread across divisions, including procurement, information technology, financial reporting and accounting operations, real estate and facility services, payroll and personnel administration. Some highlights for 2016 in the cost-savings efforts for NBS included: reduction of the number of information technology applications used; consolidation of facilities services from more than 100 suppliers to three; and initiation of the standardization of infrastructure services at select manufacturing sites. In addition, NBS continued to optimize its footprint through selective offshoring to five global service centers (Dublin, Ireland; Hyderabad, India; Kuala Lumpur, Malaysia; Mexico City, Mexico; and Prague, Czech Republic.

Source: Novartis and Novartis 20-F 2016 Filing with US Securities and Exchange Commission 

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