Novartis' Head of Corporate Research Paul Herrling and En Li, VP and head of research for Novartis Institutes for BioMedical Research Shanghai, sat down recently with PharmAsia News on the sidelines of the China 2008 Pharmaceutical R&D Summit in Shanghai to discuss Novartis' R&D plans in China and the Pacific Rim.

Herrling, who also serves as chairman of the Novartis Institute of Tropical Diseases in Singapore, was in town to give a keynote address to the summit and visit Novartis' China R&D center, which broke ground on its permanent headquarters in Shanghai's Zhangjiang Hi-Tech park April 2 (PharmAsia News, April 14, 2008). Novartis has said it plans to make an initial investment of $96 million to build the R&D center, focusing on treatments for diseases with a high prevalence in China.

PharmAsia News: In your keynote talk today, you mentioned Novartis' efforts in China to develop Western medications based on traditional Chinese medicine. Can you elaborate on your strategy?

Paul Herrling: China wanted for a while at first for us to come here and establish our research institutes because of a number of reasons we've heard like patents [and] talent development. And we weren't quite sure at what level China was - it was clear that it was going to be a tremendous market, because, mostly in the U.S., a significant part of our scientists in the lab are Chinese.

And at that time, that was about 10 years ago, of course, there was nothing for them here to come back to. And that's why they were all there. So we started by setting up yearly mini-symposia where we would put 10, 15 Chinese scientists, 10, 15 Novartis' scientists in an air of choice. And just sit together for three days and talk. And actually the first of these discussions started around traditional Chinese medicine, how could we make use of that for our kind of drug discovery efforts. And that's how the Shanghai thing started.

And essentially it was a way to expand the diversity of our chemical libraries. Because what's turned out is that, during the combinatorial chemistry climb, people could all of sudden make a lot of compounds. But at the same time, the hit rates would trend to zero because the criteria on which these libraries were made were chemical, not biological. So the chemists would do what would be easy to stick on beads and to vary it easily and quickly, which was not necessarily the same that biology needed.

And Novartis was a company that actually never gave up their natural compounds, whereas most big pharma companies got rid of their natural compounds. We still have a group now of more than 50 people. And they were very much a proponent of trying to do exactly what I described in my talk, use traditional Chinese medicine as a guide to where to find active ingredients. …

So we did this symposia for 10 years and during these 10 years in which I started doing that … you wouldn't recognize China then, between then and now. Because as I always like to describe it, when you went to Beijing at that time, you know the big avenues? With the small streets on the side and the big central one? Well, when I came here the first time, the center one was filled with bicycles and the few cars had to go on the side. And now you go look at it.

And all of China has changed that way, completely. And in our era, it was very clear what we saw in the symposium, like three, four years ago, is that now the Chinese were doing major efforts to create an environment in China to get Chinese scientists abroad back into the country. …

Another aspect 10 years ago that was very clear - health, pharma was absolutely not a priority in China at that time. Food, housing, heavy industry, all of that [were] and they had no resources for research-based companies. They bought what they needed or they copied what they needed locally. And that changed. So over these 10 years talking to the Minister of Science & Technology, the Health Minister, you could see that the interest changed.

And at a certain time, about three years ago, I recommended to our bosses, now is the time for En Li's institute. And they decided, yes, they would do that and actually we decided to establish our own research institute here.

PharmAsia News : Given the debate in China about whether to build an R&D facility or a virtual one, why did Novartis decide on a bricks-and-mortar approach?

Herrling: If you think that this environment is going to be important for pharma in the future - and it is, we're totally convinced that it is one of the most important emerging markets - and it's also clear that the culture and the specifics are different than in the U.S. and in Europe. And my conviction is you can't learn without getting wet. That is, the best way to get into the mindset, to understand the local science, talent and the needs also of the patients, is by actually doing research here.

So that was the decision then that we would do that, and create this institute first as a real antenna to what the environment here is, and to learn the peculiarities. In fact, what En's institute is focusing on first - he mentioned patients - is to focus on diseases that are more predominant in China than they are in the West. And that's hepatic cancers and nasopharyngeal cancers. And to try to understand what the differences are, in particular. So these are a few thoughts. And it's going to be an integrated research and development [center].

PharmAsia News: And you're breaking ground this week?

Herrling: Day after tomorrow.

PharmAsia News: When will that be operational?

Herrling: It is. We have over 90 people.

En Li: We have an R&D center already set up last year, last May. We have a building that we rented - 5,000 square meters and we already have 90 people. … So the groundbreaking is more for our permanent site. For the new campus.

PharmAsia News: How big do you anticipate growing?

Herrling: Around 400 people. But you know how it is. It might be much more - there will be space for more.

Li: That will be over two years.

PharmAsia News: There has been a lot of talk during the conference about turnover and competition for talent, especially for scientists with experience in the pharma industry. How do you compete for the best talent in China?

Herrling: Well, En is a perfect example. He was at our research center in Cambridge. And we got him to go back, excited him to go back, to China.

Li: Our strategy is to bring people back, experienced people, to China. But you cannot do this for many years. We want to bring people to fill quick positions, either leadership positions or technology-based positions. And then we will set up training programs, such as post-doc training programs and we will work with the [development] park to also contribute to maybe training for more skilled workers. Not necessarily post-docs, but workforce training.

So this is all in the planning phase and we're very committed to do that, because this is the only way eventually we'll succeed.

PharmAsia News: Even though we're in China, we'd like to ask for your take on the Glivec dispute in India [Also see "Insider Analysis: The Glivec Patent Saga – Effectuating “Efficacious” Patent Norms In India" - Scrip, 22 October, 2007.]. Dr. Herrling, you were a key spokesman for Novartis during that debate, what will be the ultimate impact of the decision?

Herrling: I think, my personal view, it was actually a good outcome. We lost, as you know. That is, we lost the immediate case, that is, they refused to decide and, in essence, they left the amendment in place, which does not allow patenting of incremental improvements, and we all know how important that it is.

But the debate - and I went to India several times and I talked to all the media in Europe and the U.S. about it, it distinctly allowed us to make our point. Where we got a lot of fair interest by - and except for fanatics who want to abolish the industry by abolishing all the patents, but forget those, we'll never convince those - but the real interested public, because of this debate, read about it and got some arguments about why we're fighting for this, because it's really important, including for the patients. And my personal conviction is, this is going to be extremely important for India, which way they're going to go in the future for R&D-based pharma companies.

So my personal view is, this is a good outcome. Had we won, we would have been crucified by the MSFs [Medecins Sans Frontieres] of this world and the NGOs and everybody would have gone off on us.

Nevertheless, I think as more and more Indian pharma companies move from pure copying to being innovation-based, they will gradually adapt their IP rights to what is needed for their own success. And the fact that we have at least IP protection for novelty, for completely novel compounds, is not due to our efforts. That's due to the efforts of the local pharma companies, like Dr. Reddy's, who actually want to make the jump from generics to innovative.

And so I think it will get there, it's just a matter of time. Of course, you know India, it's balanced, it has these two sides.

Now, from the legal point of view, it's the case that India has a very good legal system. A very evolved one. Once they decide they want to go all the way, the patent protection will be pretty good in India.

Because they have patent law. But because of their own generics industry, they had a very specific discrimination against research. In India they have had patents forever. But in pharmaceuticals, they protected only the process, not the actual molecule. And that's because they wanted to make that money by copying.

So this is a sign that they know patent law very well, and have been using it for those interests. So the moment that they go all the way, that will be okay.

PharmAsia News : How about in China?

Herrling: In China, now, they go directly for full innovation protection. But they need some time to train sufficiently. Just like with the R&D side, this thing needs some time to train sufficient patent lawyers. And for the courts also to get experience on how to adjudicate.

You also see that, while the law is very clear, the implementation of the law in many provinces is still not completely "there" where we want it. Shanghai, I think, is one of the better ones.

Li: But, still not like the U.S.

Herrling: But, still not perfect. So with the help of the government, I think it will get there eventually. And again, for their own interests.

PharmAsia News: What's next for Novartis in India? There had been reports in the financial press that, after the Glivec decision, Novartis might pull away from India to focus resources elsewhere [PharmAsia News, Aug. 27, 2007]?

Herrling: No. I think that was slightly exaggerated. We were thinking also about setting up a research center there. And eventually, we probably will, but certainly not now. In order to do this research, we need to have a full commitment of India as a nation that they are willing to protect innovation. And as long as they don't do that, well, we go where we get the reassurance of the government that that's where they want to go.

Then there is, of course, clearly the issue of emerging markets and talent. There is a huge opportunity in China. I think in India, too, by the way.

PharmAsia News: Is Novartis going to continue to try to patent compounds in India, like Tasigna?

Herrling: Oh, absolutely. Of course, not all our compounds - actually a significant part of our compounds - are not incremental innovations, but really breakthroughs. And of course those we will quite certainly [patent in India]. The galling thing was that Glivec, which was one of the biggest breakthroughs of all, was considered not so, you have to go into [scientific] things, crystal forms and stuff….

But no, of course, no, no, there's no way that we're going to - we cannot abandon India. But just the pace of doing our own research activities there has been dampened, let's say.

PharmAsia News: Can you tell us more about the discussions you've had with Thailand regarding its compulsory license stance, and how you avoided one for Glivec [PharmAsia News, Feb. 4, 2008]?

Herrling: Thailand was another thing. Thailand was using provisions in the current international patent law, in WTO, of compulsory licensing, which was designed originally for crisis situations, like for HIV or some epidemic. But the issue there is that they now started to do compulsory licensing for things like diabetes, which is not the same level, and which it never was intended for.

So, obviously, there was a big discussion and many pharma companies discussed with them that, if that's what they were going to do, their own patients would not get anything. Because the way of avoiding compulsory licensing is to not bring the compound to the country at all. And then you also need to have a very good generics company [that] can copy things. In Thailand, it is not quite that easy.

So, obviously, there is discussion ongoing about this and trying to negotiate and explain to people that it's also probably not in their own interest to quash innovation. Because it's a short versus long-term thing. Short-term, yes, you can get any drugs that you want at generic prices. Long-term, you'll have no new drugs.

PharmAsia News: Can you talk about Asia and China in particular, given some of the scaling back that many big pharma companies, including Novartis, have been doing as far as staffing and cutting costs. How does Asia fit into your strategy, given that environment?

Herrling: The Asian region is one of the most promising emerging markets. And I think this Asia is getting more and more priority, actually. If there is one place where the pharma industry will in the future be able to grow, as Europe gets more difficult and as we expect after the U.S. elections, the environment might also get tougher. …

But, still, I think reasonably you have to expect that in the West, it's going to be more difficult. And so obviously being present in emerging markets, which will have huge needs for medicines is a strategy that is a priority with us.

PharmAsia News: Novartis recently announced it would close an R&D facility in Japan [PharmAsia News, Jan. 14, 2008]. Can you talk about the decision and whether you still see Japan as an opportunity on the R&D side?

Herrling: It was a matter of choice, really. As you know, we cannot exponentially continue to grow investments in R&D. And we had to make choices. … And we also closed, for instance, our research institute in Vienna. We, since the last five years, have not quite, but nearly doubled the research discovery investment. But you cannot continue to do that forever.

So at one point you have to focus. And we've done that always; we close some initiatives and give priorities to others. And for the reasons I just mentioned in terms of emerging markets and areas of growth, we just thought that China was one place you had to invest. And that means that we had to reduce investments elsewhere - by the way, it's not at all a complete retrenchment from Japan. There are huge development activities ongoing there, clinical studies and so on. The group [that is closing] was only about 60 or 70 people.

PharmAsia News: On one of the slides from your presentation this morning it mentioned Indonesia. Can you tell us about your R&D operations there?

Herrling: So Indonesia, I didn't talk about it today, but we have a tropical research institute in Singapore, which works on malaria, dengue and TB, which are neglected diseases. That is one of our major contributions to access to medicine, in addition to [the anti-malarial] Coartem (Also see "Novartis Institute For Tropical Diseases Could Have TB Drug In Clinic By Late 2007" - Scrip, 9 February, 2007.).

And we put the institute in Singapore because it is close to the patients that have these diseases, and I believe that you have to be there if you want to understand what they need. And that's a place where you could recruit the most sophisticated scientists that we could get, the best talent is in Singapore.

However, the largest majority of the patients in these three diseases do not live in Singaporean conditions. And so we created a small research institute that was in a hospital in Makassar Sulawesi, the old island of Celebes, in a city that much more represented the majority of the patients who live in tougher conditions than is the case in Singapore and other parts of the world. … It's capacity-building for them, and it's learning what the real conditions for patients are for us.

So, for instance, in Indonesia, you don't know how much resistant TB you have. And if you have it, you don't know what type. It's never been done. So we are going to do epidemiological studies from that center and collaborate with the government, we collaborate with the Eijkman Institute in Jakarta to do the sequencing work. It's really another antenna into this part of the world. In this case, really a model for the less fortunate patients, if you want, in terms of environment.

But, again, Indonesia is a country that is maybe not in the time zones our marketing colleagues would like to see. But in time, we as a pharma company need to think that it's going to be an emerging market, too - there are 200 million people. And so it is important to be there and understand what the conditions are. And so as the institute in Singapore is not-for-profit and [targeting] neglected diseases anyway, that was a very logical thing to do because it is relatively close to Singapore and a real antenna into that world.

- Joe Hecker (pharmasia@elsevier.com) & Joshua Berlin (j.berlin@elsevier.com)

[Editor's Note: This is part one of a two-part interview. Look for part two in an upcoming issue of PharmAsia News.]

Novartis’ Paul Herrling And En Li On R&amp;D Strategy In China, India And The Pacific Rim: An Interview With PharmAsia News (Part 1 of 2)

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Novartis’ Paul Herrling And En Li On R&D Strategy In China, India And The Pacific Rim: An Interview With PharmAsia News (Part 1 of 2)