The issue had come up again and again in various management meetings and company seminars. Novartis had too many products and needed to reduce the product proliferation that had occurred. Thomas Ebeling, Chief Operating Officer, Novartis Pharmaceuticals, wondered what he should do.
The merger of Ciba- Geigy and Sandoz to form Novartis on December 20, 1996 had resulted in a significant increase in the pharmaceutical product portfolio of Novartis’s Pharma Sector. Combining the pharmaceutical product lines of Ciba- Geigy and Sandoz had given Novartis a leadership position in several therapeutic areas, including immunology and inflammatory dis-eases, as well as strong positions in central nervous system disorders, cardiovascular diseases, oncology, dermatology, and asthma. Novartis now had approximately 250 product brands (such as Sandimmun, Voltaren, Lamisil, and Foradil). The sales volumes of each of the different brands, however, were very different. In 1999, the top 20 brands accounted for 79% of pharmaceutical revenues while the remaining brands yielded 21% of revenues.
Novartis Exhibit 1 presents sales, anticipated sales growth rates, cost and other data for the 50 smallest global base business brands that account for CHF 422 million in sales (or approximately 2.7% of pharmaceutical product sales) in 1998. In addition to the base business brands listed in Novartis Exhibit 1, 15 other product brands contributed an additional CHF 2.4 million in revenues. Although these products generated very small revenues, they satisfied some important medical needs. For example, Visken had sales of CHF 114,000 in South Africa but it was unique among betablockers regarding the effect on serotonin 1a receptors for the onset of antidepressant action.

1. Please refer to the data on Pertofran and Visergil in Novartis Exhibit 1. Would you recom-mend that Novartis drop these products because the total cost of these products exceeds the total revenues?
2. What strategic factors would you consider in deciding whether to drop all 50 products shown in Novartis Exhibit 1 and the 15 other product brands described in paragraph 3 of the case?
3. Would you recommend that Novartis drop all the 50 products shown in Novartis Exhibit 1? What is the net present value gained or lost from dropping all these 50 products? Assume a discount rate of 12%. What are the factors that go into determining this rate?
4. Suppose Novartis was able to find a buyer for all the 50 products shown in Novartis Exhibit 1. What price should Novartis charge the buyer?
5. Comment on the incentive issues described in the last paragraph of the case. What, if any-thing, would you do to address these issues?
6. What would you recommend Thomas Ebeling should do with respect to the 50 products shown in Novartis Exhibit 1 and the 15 product brands described in paragraph 3 of the case?

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