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Novartis Aims to Recover Pace in China

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http://online.wsj.com/article/SB10001424052748703858404576213883923849302.html

›MARCH 21, 2011, 7:21 A.M. ET
By LAURIE BURKITT

BEIJING—Novartis AG expects growth in China to recover after business restructuring in the country slowed the Swiss drug giant's sales here last year, Chief Executive Joe Jimenez said.

The Basel-based pharmaceutical company plans this year to increase its sales force in China, with the aim of selling more drugs to local hospitals and health clinics, Mr. Jimenez said in an interview Monday. He declined to specify how many employees Novartis will add to the roughly 5,000 it has currently in China.

In response to government pressure to push more decision-making to the provincial level, Novartis last year switched management of its operations to regional offices from a central headquarters in Beijing, Mr. Jimenez said. As it focused on that restructuring, the company's growth in China in 2010 fell below the 30% rate of 2009.

Mr. Jimenez declined to disclose financial details, saying that growth remained in the double digits last year and that it would likely be stronger this year. Novartis's global sales in 2010 were up 14% from a year earlier to $50.6 billion. Net income was up 18% to $9.97 billion.

"We're up and running, and there is major opportunity to grow and win market share in China," Mr. Jimenez said.

China's importance has grown for Novartis and other companies as opportunities wane in the U.S. and Europe, where governments have been cutting reimbursements for branded drugs. Last week Novartis said it would cut about 500 jobs at its southern England operations in Horsham.

China's central government announced in 2009 a major overhaul of its health-care system to provide basic medical insurance coverage for 90% of its 1.3 billion people. The government has said it plans to increase its spending on health care by 16% in 2011, to roughly $26 billion. Part of that goes to reimbursements for pharmaceuticals.

Mr. Jimenez said Novartis plans to innovate for the country's growing chronic-disease problems and this year will launch three new drugs in China, one of them the diabetes treatment Galvus. China has the world's largest diabetic population, with nearly one of every 10 people afflicted [#msg-48221898], according to a study published last year in the New England Journal of Medicine.

Novartis also sees opportunities in China's vaccination market, one of the world's largest. China's government has expanded community health clinics in smaller cities and rural regions to provide more preventive care. Novartis is expanding its low-cost vaccinations to serve China's less-developed regions. In 2009 it acquired an 85% stake in vaccination company Zhejiang Tianyuan Bio-Pharmaceutical Co.

China's small-but-growing market for over-the-counter medicines also opens room for Novartis products like Theraflu, a powder that consumers add to hot water, he said, although the company hasn't completed plans to launch new over-the-counter drugs in China.‹