Novartis' decision to maintain its current sales force level could reflect the company's confidence in the continued growth of its pharmaceutical business.

The company sees potential cuts to competitors' sales forces as an opportunity to more effectively use its sales team, Novartis North American Pharmaceuticals CEO Paulo Costa said March 15 at the SG Cowen health care conference in Boston.

"If other companies decide to pull back on their sales forces, I think it presents us with an opportunity to leverage that asset," Costa said. "What I mean by that is, if there is less competition, we will make sure that we are going to get the most out of" our sales force, he declared. Novartis U.S. sales force includes over 6,000 reps.

Costa's statements come amid calls to rationalize selling, general & administrative costs by reducing sales force size.

There has been recent speculation that Pfizer is planning to restructure its sales and marketing team. One analyst report estimates Pfizer will reduce its 38,000-rep global sales force by 15%-30%, but the company denies any plans for restructuring of that magnitude.

GlaxoSmithKline CEO J.P. Garnier recently speculated that should Pfizer reduce its sales force, GSK would do the same (¹ Also see "Waiting For Pfizer: GSK Will Cut Sales Force Should Pfizer Act First" - Pink Sheet, 14 February, 2005., p. 17).

In January, Pfizer CEO Hank McKinnell told investors he sees no reason to significantly restructure Pfizer's sales team over the next three to five years, but did not rule out some changes (² Also see "Pfizer Sales Force Is “Critical” To Five-Year Strategy, McKinnell Says" - Pink Sheet, 24 January, 2005., p. 7). Pfizer Global Pharmaceuticals President Karen Katen also said Pfizer is open to cutbacks.

AstraZeneca CEO Tom McKillop has been a strong proponent of rationalizing SG&A expenditures. The company recently reduced the size of its contract sales force (³ Also see "AstraZeneca Cuts Sales Reps By Reducing PDI Contract; Will Others Follow?" - Pink Sheet, 10 January, 2005., p. 34).

Novartis has also questioned the use of large sales forces in the past. In 2002, Costa suggested that the rapid increase in sales calls following sales force expansions negatively affected companies' relationships with physicians.

"Declining results" from sales force expansion could lead to a "point where it does not make a lot of sense to be adding to the sales force," he said at the time (⁴ Also see "Novartis Is Rekindling Relationship Sales Model In Mega-Detail World" - Pink Sheet, 16 December, 2002., p. 35).

However, Costa's current belief is that Novartis still has "a very good return on investment on our sales force. We have a very strong asset," Costa said.

Novartis is forecasting continued double-digit sales growth in 2005, outpacing the pharmaceutical market.

The company expects its antihypertensive Lotrel to surpass the $1 bil. in annual sales milestone in 2005, joining the company's five "blockbuster" products: Diovan , Gleevec , Lamisil , Zometa and Neoral .

In addition, Novartis expects the breast cancer therapy Femara , the constipation therapy Zelnorm and the topical eczema treatment Elidel to reach the $1 bil. threshold by 2009.

The company plans to file three novel compounds in 2005: vatalinib (PTK787) for colorectal cancer, telbivudine (LDT600) for hepatitis B and desferasirox (ICL670) for thalassemia. Novartis also plans to file to extend Femara's indication to early adjuvant treatment of breast cancer.

However, two of Novartis' leading franchises - Elidel and Zometa - may face challenges to their continued growth in the coming year.

Following a recommendation from its Pediatric Advisory Committee, FDA announced plans March 10 to add a "black box" on potential carcinogenicity to labeling for Elidel (pimecrolimus) and Fujisawa's Protopic (tacrolimus) (⁵ Also see "Elidel, Protopic “Black Box” Could Be Test Of FDA’s Labeling Authority" - Pink Sheet, 14 March, 2005., p. 18).

Elidel scripts have dropped 15% since the advisory committee meeting and FDA's announcement, Costa acknowledged.

Concerns over Elidel carcinogenicity "certainly will have an impact, especially this year and potentially into next year," Costa acknowledged. "There's going to be some initial retraction, then people are going to become more comfortable with it and you're going to see it coming back again."

Sales of Novartis' cancer therapy Zometa (zoledronic acid) may also be negatively affected by concerns about reports of jaw osteonecrosis in bisphosphonate patients (⁶ Also see "Zometa, Aredia May Have Different Jaw Osteonecrosis Risk Profiles" - Pink Sheet, 14 March, 2005., p. 21).

Novartis To Maintain Sales Force In Face Of Potential Competitor Cutbacks

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