Wednesday was earnings day for Novartis, but the numbers were a bit of an afterthought amidst a flurry of news— including reports that the company is being sued for kickbacks that allegedly gave an edge to its kidney transplant drug Myfortic, has appointed a new CFO, and is making what it calls a move to “simplify” things at a plant in Lincoln, NE (read: layoffs).
So, a brief rundown:
The US alleges that Novartis disguised kickbacks as rebates. The US Attorney in Manhattan, which brought the suit, argues the company “induced at least 20 pharmacies to switch thousands of kidney transplant patients to its immunosuppressant drug Myfortic,” Reuters reports. As an example, the case alleges the company offered a pharmacist a 5% rebate of the pharmacist’s annual sales. The lawsuit accuses the drug maker of violating the federal anti-kickback lawsuit because the alleged activity would have caused Medicare and Medicaid to pay “kickback-related claims.” A quick search of the FBI’s healthcare fraud site shows the company has run afoul of the government before: in 2010 Novartis paid $72.5 million to settle False Claims allegations over improper marketing of cystic fibrosis drug TOBI between 2001 and 2006. The New York Times notes that in this most recent case, were Myfortic swapped for Roche’s competitor drug CellCept, “switches from the brand name…would not have appreciably raised federal costs.”
The company is also replacing chief financial officer Jon Symonds with Harry Kirsch as of May 1. Jefferies analyst Jeffrey Holford wrote in his Wednesday assessment that the move was unexpected. Symonds has been CFO for 17 years and will stay on as an advisor through the end of the year.
Moreover, Novartis is going to “restructure and simplify the Lincoln manufacturing plant.” The company said the change means the site will be able to “focus on operational excellence with minimal product complexity,” and the location will make solids and powders for its Sentinel, Excedrin and Theraflu products. The new focus means 40% of the workforce—300 jobs—will be cut. The company said the FDA’s recent inspections didn’t turn up any manufacturing problems, but the regulator had complaints regarding how quickly and completely the company handled consumer complaints related to the Nebraska plant. The company recalled several products made at the plant in January, such as Excedrin, because packaging included products other than those on the label.
Finally, financial news included a 2% jump in sales for the quarter to $14 billion compared to the same period last year. A 9% increase in volume kept pharmaceutical sales in line with last year’s performance, at $8 billion for the quarter, while vaccines sales rose 10% compared to the same period last year. Revenue leaders included eye drug Lucentis, which saw sales grow 7% over the same period last year to reach $596 million; MS drug Gilenya, which had $421 million in sales, a 71% increase compared to the same period last year; oncology med Afinitor, which had sales of $303 million for the quarter; and cancer drug Tasigna, with sales of $284 million, a 39% increase over last year. Sales of the patent-free blood pressure medication Diovan fell 19%, to $918 million.
