The Novartis executive team is learning the hard way the same lesson that the Johnson & Johnson team absorbed earlier this year when trying to convince analysts, investors and customers that a troubled manufacturing plant would be ready to resume production at a specific time - it just doesn't work that way.
And so, Novartis ceo Joe Jimenez acknowledged that a key facility in Lincoln, Nebraska, which makes various over-the-counter and animal health medications, but was cited for a slew of embarrassing manufacturing violations, will not open later this year, after all. "What I would like to do is stop making projections because we have proven that we’re not able to accurately project," he confessed in a conference call this morning.
The disclosure comes just one month after Jimenez sent an internal memo to employees to stress that 'quality matters' in response to difficulties that Novartis has had with several plants in different countries, including Canada and Austria (look here and here). Yesterday, in fact, the specter of still more troubles arose when the Italian health minister banned Novartis flu vaccines over concerns about side effects (see this).
In a bit of spin, though, Novartis (NVS) characterized the government move as a "temporarily halt" in distribution in a press release issued late yesterday and emphasized that no adverse events have been reported (read here). But Switzerland and Germany (see this) have now made the same move and the incident clearly unnerved the drugmaker as it struggles to play whack-a-mole with its global manufacturing operation, which has received various FDA warning letters. The vaccines are made in Italy.
This comes after a recent data-handling discrepancy occurred in Rosia, Italy, which caused some vaccines to be temporarily and voluntarily held for several months. The drugmaker undertook a so-called good manufacturing practice, or GMP, investigation and reported the findings to the European Medicines Agency and the Agenxia Italiana del Farmaco before shipments resumed two months ago.
The Nebraska plant, however, has proved the most vexing. An FDA inspection report released months ago revealed that Novartis failed to open inspections into consumer complaints of foreign products found in its solid-dosage form meds. There were 26 such complaints in 2010 and 13 in 2009. And the drugmaker failed to investigate 166 complaints of foreign tablets in its meds since 2009. The FDA also noted that Novartis never found a root cause.
As we wrote previously, Novartis also failed to extend investigations into all batches of products potentially affected by any problem. One example was a mix-up involving Execedrin Migraine Tablets and Excedrin Migraine Caplets. The drugmaker did examine the incident, but the FDA maintained its conclusion that the mix-up was not within its control was not plausible, because the meds were all packaged on the same line (read more here).
Meanwhile, Novartis has been using outside contractors to make a few products, such as the Excedrin headache remedy, but sales at its consumer health division dropped 22 percent in the most recent quarter, the fourth consecutive quarterly decline. This is hardly surprising, given that the Lincoln plant accounts for about 25 percent of OTC sales, which were $938 million in the third quarter, down from $1.2 billion a year ago (see results).
To cope, Novartis has reorganized management - earlier this year, Naomi Kelman resigned as head of the OTC unit just one year after joining the drugmaker (back story) and then made another series of changes this past spring at various levels of its over-the-counter and global manufacturing units (see this).
Although fixing widespread problems is acknowledged to be difficult, the approach taken by Novartis has not inspired confidence. “Eventually manufacturing issues like these tend to fix themselves, and slippage happens more often than not, so this is neither a big negative nor a great surprise, but it does raise credibility issues,” Sanford Bernstein analyst Tim Anderson wrote in an investor note this morning.
J&J (JNJ), you may recall, continues to suffer from the same phenomenon. The health care giant repeatedly predicted its troubled Fort Washington, Pennsylvania plant - which was the source of many of the millions of product recalls - would be retooled and ready for business earlier this year, but then J&J execs had to backpedal after learning the harsh realities of fixing a troubled plant with systemic issues (read more here). The plant will not reopen until 2014.