Biotech Values

[DewDiligence]

Novartis Mounts Ambitious Push Into China

[See #msg-27259204 for background material.]

http://online.wsj.com/article/SB20001424052748703740004574512952401305912.html

›Pharmaceutical Giant Commits $1 Billion, Citing Rapidly Growing Market Driven by Health-Care Reform

NOVEMBER 4, 2009
By IAN JOHNSON and JEANNE WHALEN

Novartis AG has become the latest pharmaceutical giant to pour resources into China, announcing Tuesday that it will spend $1 billion to make China a third global pillar for its research and development.

In an interview, Chief Executive Daniel Vasella said China's rapid growth is one key reason for the expansion. China could become one of Novartis's three biggest markets by 2014, he said. Revenue in the country has been growing at an annual rate of 30% in the last few years and will do so again this year, he said. He didn't give a total figure.

Partly driving this growth is China's health-care reform, which will expand health-care coverage beyond the relatively wealthy cities to the countryside. "Health-care reform in China will expand our business," Dr. Vasella said.

Increase in Staff

Dr. Vasella said the $1 billion investment, to be spread over five years, will boost to 1,000 the number of employees at the Swiss pharmaceutical giant's R&D center in Shanghai, from 160 now. That will put it on a par with Novartis's research headquarters in Cambridge, Mass., which is second-biggest after the company's headquarters in Basel.

"I think it will be a signal of China's rising importance in the pharmaceutical industry," Dr. Vasella said during a visit to Beijing, where the investment was announced. "You have to ask yourself where do you need to be down the road, and clearly it is here."

Dr. Vasella said the investment was made possible because of the rapid development of scientific talent in China. He said China's improving protection of intellectual property made the investment less risky.

Many big pharmaceutical companies have invested in Chinese research in recent years. The companies seek not only access to talented, low-cost scientists, but also better relations with doctors and government officials, who decide which drugs get prescribed and paid for.

More Studies in China

Drug companies are also carrying out more of their clinical studies in China these days because the cost of running trials is lower there and because it is easier to find patients to participate.

Swiss drug maker Roche Holding AG opened a research lab in Shanghai in 2004 and a center for running clinical trials in 2007. AstraZeneca PLC, of the U.K., opened a research center in Shanghai in 2006 and is building another $100 million site in Zhangjiang. [Also GSK (#msg-20969948).]‹