Novartis announced Nov. 3 a five-year, $1 billion investment in China, upping the ante for multinationals trying to build strong foundations in China's burgeoning R&D space.

The Swiss company broke ground on an R&D facility in 2007 at the Zhangjian Hi-tech Park in Shanghai with an initial investment of almost $100 million. In two short years, Novartis feels the need to significantly expand the operation.

The Novartis Institute of BioMedical Research was established to specialize in basic R&D for infectious diseases, such as hepatitis B, and cancers prevalent in China (Also see "Novartis Shanghai R&D Center To Focus On Diseases Prevalent In China" - Scrip, 6 November, 2006.).

[Editor's note: PharmAsia News conducted a two-part interview with Novartis Head of Corporate Research Paul Herrling and En Li, VP and head of research for NIBR, in 2008 about tailoring R&D for emerging markets (Also see "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)" - Scrip, 5 May, 2008.), (Also see "Novartis’ Paul Herrling And En Li On R&D Strategy In China, India And The Pacific Rim: An Interview With PharmAsia News (Part 2 of 2)" - Scrip, 8 May, 2008.).]

The expansion - expected to increase R&D staff from 160 to roughly 1,000 - will make the Shanghai facility the company's third largest R&D center, behind its centers in Cambridge, Mass., and Basel. According to Novartis, the new facility will be the "largest comprehensive R&D center in China."

Novartis also plans to broaden the type of research it is conducting in China, adding work in analytics and biomarkers, in vivo pharmacology, protein production, genomics and imaging.

Novartis' SEC filings show $7.2 billion in R&D investment for 2008, so a $200 million per year increase in China is not insignificant. The company spent more than RMB 3 billion ($439.3 million) in China last year overall, including marketing and sales (Also see "Novartis To Step Up Investment In China" - Scrip, 16 June, 2009.).

While the new Shanghai facility will expand the company's internal research capabilities in China, Novartis also hopes the facility will increase its collaborations with Chinese research institutions. The company announced a joint research agreement with Fudan University in 2008 to use molecular genetics initially to develop targets for liver cancer therapy.

China's leading universities are traditionally the main source of the country's innovation, in part because of the substantial government funding they receive for research. The universities are growing savvier, developing sophisticated technology transfer offices in the mold of the U.S., and they are reaching out to international collaborators (Also see "China's Universities and Pharma: A Change In Power Balance?" - Scrip, 16 October, 2009.).

In October, Novartis signed a memorandum of understanding with South Korea's Ministry for Health, Welfare and Family Affairs to invest $100 million in R&D and collaborations with local industry and research institutions (Also see "Novartis Signs MOU To Invest $100 Million In R&D, Exchanges With Korean Scientists By 2013" - Scrip, 13 October, 2009.).

Novartis also announced a $250 million investment that will nearly double the staff at a center in the Southeast China city of Changshu, focused on technical R&D and manufacturing of APIs.

According to a report by Bernstein Research, Novartis is looking to expand commercially to local community clinics in hope of capturing a share of China's RMB 850 billion medical reform plan.

Novartis' overall sales in China increased 29 percent to about $418 million in 2008, roughly 1 percent of the company's global revenues.

- Daniel Poppy (d.poppy@elsevier.com)

Novartis Lines Up $1 Billion For China R&D

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