Diabetes giant Novo said to consider up to 3,000 layoffs as US pricing storms gather: report
“Uncertain and unpredictable markets” are forcing Novo Nordisk to consider dropping its longterm financial target and cutting 3,000 jobs from its global workforce, according to a local media report.
Borsen, a Danish business newspaper, cited anonymous sources in reporting that the giant diabetes drugmaker plans to unveil its cost-cutting package alongside second quarter results in August. According to the sources, the plan would include an adjustment of its growth forecast, which Novo put at 5% as recently as May.
The gathering windstorms in the US on drug pricing, especially as they relate to Novo Nordisk’s bread and butter insulin products, are reportedly a concern leading to the new plan; the company acknowledged last month these pressures would cut its 2019 sales by 1% or 2%.
“The negative element is the report on the long-term financial target, because if true that would mean something has changed since May,” Sydbank analyst Soren Lontoft Hansen told Reuters.
A spokesperson declined to comment on “speculations,” but pointed out that CEO Lars Fruergaard Jørgensen has previously stated in the media that “we as part of our plans for 2019 will determine how to make up for the effect of the increased part D rebates through, for example, increased sales and cost savings.” The statement went on:
It’s premature to discuss what these plans may look like, because the Part D rebate is only one of many factors that we need to take into account when planning for the future. We are operating in a dynamic environment that brings new challenges and opportunities every day, which means we continually assess and adjust plans as needed. And whenever we make important decisions, we will communicate them at the appropriate time.
The report — which sent shares down 4% in pre-market trading — comes as Novo Nordisk has been pumping out bullish news for the past few months, including new collaborations on the stem cell therapy front, a licensing deal in hematology, and encouraging data paving a pivotal path to obesity for its newly approved GLP-1 diabetes drug semaglutide.
If the information is accurate, though, it would mark the second time Novo has disappointed investors in two years.
The 5% growth prediction that forms the baseline today was in fact half of what Novo promised investors back in early 2016. When it ditched the 10% guidance, its shares were battered, falling by 19%. And that was on the heels of an announcement that the company had to axe 1,000 staffers in its R&D organization.