Novartis Reports Procurement Savings: Updates Manufacturing RationalizationBy
Novartis reported an update of the performance of Novartis Business Services (NBS), the company’s shared services organization, inclusive of procurement, as part of its third-quarters financial update. At the end of the third quarter, NBS had approximately 9,400 full-time-equivalent associates, transferred from within the Novartis Group. In the third quarter the company generated approximately $500 million in procurement savings.
The cost within the scope of NBS was stable from the prior year. Moving from division-specific services to a cross-divisional model, NBS continues to scale up the offshoring of transactional services to its five selected Global Service Centers in Mexico City, Kuala Lumpur, Prague, Hyderabad, and Dublin.
In addition, the company continued to optimize its manufacturing footprint. In the third quarter, the company announced the planned exit of its Sandoz manufacturing site in Turbhe, India. For continuing operations, this brings the total number of production sites that have been or are in the process of being restructured, closed or divested to 24. Exceptional charges amounted to $40 million in the third quarter and $299 million in the first nine months. Exceptional charges recorded cumulatively since the program began amount to $874 million. In total, the company’s productivity initiatives generated gross savings that contributed approximately $850 million in the third quarter.
Also on the manufacturing front, in the third quarter, a total of 60 global health authority inspections were completed, 12 of which were conducted by the US Food and Drug Administration (FDA). All 60 were deemed acceptable or good. On October 22, 2015, the FDA issued a Warning Letter to the company’s Sandoz Division concerning its Indian sites in Kalwe and Turbhe. The Warning Letter observations follow an agency inspection at both sites in August 2014 and are related to deficiencies in current good manufacturing practice (cGMP) for finished pharmaceuticals. The Warning Letter does not contain any new issues versus the 483 observations issued following the inspection in August 2014, which Sandoz has been addressing since then. Sandoz said it will continue to work closely with the FDA to ensure all observations are resolved to the agency’s full satisfaction.The company said that no supply disruptions are expected.