Cost Cutting at Actelion

Switzerland-based Actelion ( ALIOF ) recently declared that it has implemented the cost saving initiative announced by the company in July 2012. In relation to the cost-cutting move, Actelion further announced that it has reduced redundancies by 30 positions from the initial projection of up to 70 redundancies at its head office, thereby minimizing the job losses.

The company also announced that it has agreed on certain social measures in Switzerland such as severance payments, early retirement packages, out-placement support and other additional benefits after discussing with employee representatives.

The cost-cutting initiative is expected to result in Actelion’s global work-force being trimmed by 135 positions in total, out of which 115 positions are expected to be redundant in the company’s headquarters. Actelion further stated that the savings will materialize towards the end of the year and gain pace next year. The one-time charge resulting from the initiative is expected to be booked by the company in the third quarter of 2012.

Actelion stated that the cost saving initiative was a part of the company’s strategy for value creation outlined in May 2012. The cost-cutting initiative should enable the company to focus more efficiently on its major area of strength - pulmonary arterial hypertension (PAH).

We note that three (Tracleer, Ventavis and Veletri) of Actelion’s four marketed products are indicated for the treatment of PAH. The fourth drug, Zavesca, is used for the treatment of Gaucher’s disease.

Actelion backed the 2012 earnings view provided by it while releasing second quarter results in July 2012. The company continues to expect 2012 core earnings to grow in mid-single digits. Actelion also expects 2013 core earnings to be similar to 2012 levels in terms of local currency. 2014 and 2015 earnings at Actelion are expected to exhibit single-digit and double-digit growth, respectively.

Actelion, which competes with players such as Gilead Sciences ( GILD - Analyst Report ) and United Therapeutics ( UTHR - Analyst Report ) in the PAH space, carries a Zacks #1 Rank (Strong Buy) in the short run.