Unlocking the promise of innovation

Novartis expects China to play key role in its global development plans and drug research program

For Joseph Jimenez, chief executive officer of Novartis AG, making a visit to China is an opportunity to seek ways to participate in the country's ongoing economic transition and shape the multinational pharmaceutical corporation's future strategy.

China is contributing an increasing share to Novartis' global business. "Five years ago, China was in the top 20. Now it is in the top 10, and in five years, it is going to be in the top three," Jimenez said.

In particular, Jimenez said, the Novartis Shanghai research and development center, officially named as Novartis Institutes for BioMedical Research (China), which is to complete the first phase of its construction later this year, will serve as a perfect meeting point of the company's global vision and China's pledge of a consistent open policy in its economic transition.

The focus of the R&D facility is precisely innovation, and it will help bring innovation to the whole economy. It will have international staff members, but the majority will be Chinese. "We are training many of China's national medical scientists and they are not expats," Jimenez said.

Apart from focus on innovation, there is also a focus on the quality of life, and the objective is to improve healthcare for Chinese citizens and their overall level of well-being. Some drugs that will be developed by the Shanghai labs are designed to meet the more widespread demand in transitional societies like China, or countries that have met their basic health needs and are moving toward the demand pattern of the more developed economies.

In China, for instance, drugs for such prevalent chronic conditions as hepatitis B and gastric cancer will remain in high demand for some years to come.

World vision

But the R&D center, a $1 billion investment project, is not just a Shanghai thing, or just a China operation. It will also be involved in some very early stage experimental work, Jimenez said.

It is to serve as a key component in Novartis' global strategy, which allows its key research facilities in Shanghai, in Cambridge, Massachusetts of the US, and in Basel, Switzerland to be connected.

The visionary tripartite R&D structure will allow Novartis to run a rolling system in which "once Cambridge closes for the evening, the other two sites are still working", Jimenez said. "That's the way we will get more productivity by having these three very powerful sites."

And that is what is meant by productivity driven by innovation, based on a world vision that Novartis has been pursuing, very aggressively as well as calculatedly, for the last couple of years.

"Two years ago, when we stepped back and looked at what the world was going to look like in 10 years, it was very clear what would happen," Jimenez said. "Not only will there be a larger population, but also an aging population, and in more and more countries, a high percentage of people aged 50 and above that has never been seen on the planet. And China may also be moving quickly in that direction."

Out of such demographic and historical algorithms, people can expect healthcare spending to double in 10 years. That would translate into tremendous burden on all governments in the world to provide health-related policies and services, especially for their aging populations.

"So when you look at that environment, think what it takes to succeed in that environment, I said you need two things:

"You need innovation power in the business where you are competing. Only if we can develop big, breakthrough new products will we get reimbursement," he said.

When the health system in all countries is under increasing pressure for cost, hardly would a pharmaceutical company get reimbursed by providing just "me-too" products.

"The second thing that you must have is global scale. Because as healthcare systems reduce prices and spending, you'd better have multiple geographies to generate returns on your R&D," he said.

And that is how the company's investment in its Shanghai R&D facility, which is unprecedented in any developing economy, fits in its worldwide business strategy.

Novartis is running about 200 individual development projects currently, or what Jimenez claimed to be "one of the strongest pipelines in the industry".

But maintaining a full pipeline is an immensely expensive business, as every successful new drug, if one includes all the failures its developer suffers, would end up incurring a total cost of $2 billion.

Usually, "only about one in every 10 projects makes it from discovery all the way through to development," Jimenez said.

But he hastened to add: "I think we have got a great portfolio now for the next 10 years. We will have a good 10 years."

Local scientists

Novartis' pipeline is sustained by up to 7,000 scientists worldwide. And it will not be long until more people from Shanghai join the company's research army.

When the Novartis Shanghai R&D center opens, it will be staffed by 600 scientists. But that will be just to start with, Jimenez said.

A second set of buildings will be erected "a little bit later". And by the time when the whole site is completed, Novartis will have more than 1,000 scientists working in its Shanghai R&D division. "We're going to find some great talent there."

With Novartis Shanghai in place, some Chinese scientists do not have to spend as much time abroad. And some students do not even have to get educated abroad. "They'll stay here in China and get educated to become scientists here," he said.

Right now, Novartis employs 7,600 people in China, in its seven wholly owned and joint-venture facilities, of which more than 200 are research staff.

edzhang@chinadaily.com.cn