Novo Nordisk on Thursday unveiled plans to reduce its workforce by around 1000 employees in an effort to cut costs, with about half of the layoffs expected to be in Denmark. The company noted that it is looking to cut operating costs via a number of measures as it faces a "challenging competitive environment" in 2017, especially in the US.
CEO Lars Rebien Sørensen said "we deeply regret that good colleagues stand to lose their jobs, and it has been a difficult decision to make." The executive added "however, we have concluded that it is needed in order for us to have a sustainable balance between income and costs. In the current situation, we have to prioritise investments in key product launches that will bring innovation to patients and drive our future growth."
According to Novo Nordisk, the cuts are expected to hit R&D units and headquarter staff functions, as well as positions in the global commercial organisation. The drugmaker indicated that the majority of layoffs will be communicated to staff over the next two months.
Commenting on the news, Alm. Brand analyst Michael Friis Jorgensen "that they cut hard in R&D poses a risk in the long term, as in whether they can keep momentum going. They are messing with their life-blood which means that there isn't much fat left to cut off." Jorgensen estimated that the cuts would save Novo Nordisk about 700 million Danish kroner ($105 million) to 1 billion kroner ($151 million), equivalent to between 2 percent and 3 percent of next year's earnings before interest and tax.
In August, Novo Nordisk lowered the top end of its profit and sales guidance for the full year due in part to "intensifying competition" within the US diabetes market. For related analysis, read Spotlight On: Analysts rush to remodel the diabetes market as Novo Nordisk is forced to play the pricing game.Editor's Details
Last updated on: 29/09/2016
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