After more than a year spent trying to fix quality control problems at its plant east of Lincoln, Novartis appears to be throwing in the towel.
The Swiss pharmaceutical company announced Wednesday it will drastically scale back operations at the plant at 10401 U.S. 6 east of Lincoln and lay off 300 employees during the next two years, a 40 percent reduction of its workforce of about 750 people.
Novartis said the reduction in production at the Lincoln plant would enable the site to "focus on operational excellence with minimal product complexity."
In a news release, the company said that going forward it would make only Excedrin and TheraFlu in Lincoln, as well as the animal health product Sentinel.
"We have made the decision to focus this plant away from a pretty complex plant, where we produce five different technologies, to only two," CEO Joe Jimenez said in a conference call with financial analysts. "We are going to produce only solids and powders."
That means many well-known over-the-counter drugs that have been manufactured in Lincoln -- including Maalox, Bufferin and Triaminic -- no longer will be made here.
Novartis said many of those drugs already were being made by third-party manufacturers, which it declined to name.
Sentinel, an oral medication that prevents fleas and worms in dogs and cats, is the only product currently being shipped from Lincoln. Novartis did not give a timetable for restarting production of Excedrin and Theraflu products in Lincoln.
Jimenez said that despite the product cuts, the Lincoln plant still will produce 70 percent of the volume it did before the shutdown. He said the remaining 30 percent will go to third parties or other Novartis plants.
Julie Masow, a Novartis spokeswoman, said although much progress has been made addressing problems at the Lincoln plant, "we still have more remediation work to do."
The company said that it underwent another inspection by the Food and Drug Administration in February, which noted nine issues, mostly relating to the timeliness and completion of handling customer complaints.
That was a major issue among those that led to the plant being shut down in December 2011.
Two FDA inspections that year, about five months apart, noted numerous instances of the company not addressing consumer complaints and, in some cases, ignoring them.
Those complaints included broken tablets as well as numerous instances of mixed tablets in drug products. In several incidents, FDA inspectors said Excedrin caplets were mixed in with Excedrin tablets or gelcaps. In another case, there was a report of unnamed foreign tablets in a package of the antacid Prevacid.
The most recent FDA inspection report was not available, but Novartis said it noted no problems related to manufacturing processes.
Masow said that by streamlining operations at the Lincoln site and cutting the number of products produced there, the company will be able to create stronger quality systems and capabilities "that will ensure its long-term success."
She said the job cuts would come in phases, with plans to lay off 100 people late next month. Another round of about 100 layoffs is planned for early 2014, with the final 100 layoffs planned for by mid- to late 2015.
Masow said the majority of the jobs to be cut would be in production.
Those who lose their jobs will be offered a compensation package that includes severance pay and a retraining allowance, Masow said. Novartis also will continue to contribute to medical and dental costs for a period of time, she said, and will continue access to the Employee Assistance Program. The company also is hiring an outside firm to provide outplacement assistance to laid-off employees.
Novartis said Wednesday that impairment and severance costs related to the Lincoln operations would total about $100 million and that the company took a $51 million charge for those costs in the first quarter.
That will come on top of the losses the company already has incurred because the plant was closed. For the calendar year 2012, the company's net sales were down almost $900 million for the consumer health division, which includes the Lincoln operation. Operating income was down almost $700 million for the division.
Novartis' announcement Wednesday marks the largest downsizing by a local company since Kawasaki offered buyouts to 320 employees in May 2009.
“We are obviously disappointed at today’s news regarding the downsizing of the Novartis workforce," Lincoln Chamber of Commerce President Wendy Birdsall said in a statement.
"There have been very obvious issues with the Lincoln operation of Novartis that have been well publicized. These go well beyond the community and are part of the global decision-making of the company.
"We have offered to help wherever we can and continue to offer any services that the chamber, Partnership (for Economic Development) or community at large can provide in order to get the facility back to full strength.
"We will begin working with our state and local workforce development resources to identify new opportunities for any displacements of people at the plant when they occur.”