Novo Nordisk Plans to Cut 1,000 Jobs Amid Diabetes Price Warby
Company is reviewing drugs to see which ones need culling
Pricing uncertainity to continue into 2018, CEO says
Novo Nordisk A/S plans to trim about 1,000 jobs, or 2 percent of the workforce at the world’s biggest maker of insulin, to cut costs as it faces increasing competition and resistance to high prices for diabetes products in the U.S.
Most cuts will be in research and development units and staff functions at its headquarters, as well as in the global commercial organization, the Bagsvaerd, Denmark-based company said in a statement on Thursday. The headcount reduction is part of a broader effort to pare expenses.
The move underscores the increasingly difficult operating environment in the U.S., Novo’s largest market, as payers become more selective about the drugs included in coverage plans for their clients and cheaper copycat medicines force the company to cut prices or lose ground to rivals. The pricing uncertainty is likely to extend into 2018, according to Chief Executive Officer Lars Rebien Soerensen.
Novo, which last month acknowledged having lost a “sizable” contract for its top-selling insulin NovoLog, has started a process to decide whether to proceed with development of certain drugs, he said in an interview with Bloomberg TV’s Guy Johnson on Thursday.
“The next line of products have to have an even greater height of innovation, which means those that do not have that height of innovation will have to be culled,’’ Soerensen said. “Otherwise, it’s going to be difficult for us to get reimbursement for our drugs. Me-too or me-better drugs will not be good enough in the future and hence we need to prioritize.”
Shares of Novo swung between gains and losses in Copenhagen trading, dropping less than 1 percent to 288 kroner at 10:27 a.m. local time. The stock has soared more than ninefold during Soerensen’s 16 years at the helm, even as he shunned mergers and ignored calls for diversification. Concern about the increasing competition has caused Novo to lose more than a quarter of its value this year, making it the second-worst performer in the Bloomberg Europe Pharmaceutical Index.
About 500 of the jobs lost will probably be in Denmark, the company said. The plan doesn’t affect the financial outlook for this year.
“We don’t believe we are cutting into the muscle,” said Soerensen, who will be handing the reins to company veteran Lars Fruergaard Joergensen at the start of next year. “We are adding resources to the most promising projects.”
Novo is reviewing whether oral insulin can be commercially viable, and how much investment would be needed, Mads Krogsgaard Thomsen, the chief science officer, said in an interview earlier this month. The drugmaker has shifted its focus to a pill version of an experimental diabetes drug -- semaglutide -- that stimulates insulin production in the pancreas, he said.