Novartis AG, the drugmaker that plans to launch four major medicines, will open a US$100 million research center in Shanghai next year to attract Chinese talent to replenish its product pipeline.
The site, set to become the eighth in the company's research network, will be staffed by scientists recruited from Shanghai-based institutions, Novartis said yesterday.
The new facility will allow the company to benefit from the growing number of highly skilled Chinese scientists, chief executive officer Daniel Vasella said. That may give the Basel, Switzerland-based company an advantage in finding new products at a time when best-selling drugs are going off-patent and research costs soar.
"The most important aspect is that in Shanghai there is a pool of scientific talent emerging," Vasella said in a telephone interview on Sunday.
The site will also help Novartis build contacts to research institutions and doctors in a key market. Worldwide drug sales will rise 5 percent to 6 percent next year to as much as US$685 billion, according to a report last month by research firm IMS Health Inc. China will be one of the fastest-growing markets, increasing 15 percent to 16 percent to about US$16 billion next year.
In China about 85 percent of people pay for drugs themselves, so makers aren't pressured by insurers or the government to lower prices as much as in other parts of the world.
Swiss rival Roche Holding AG runs two factories and one research facility in China. Roche said China revenue is estimated to reach 400 million Swiss francs (US$319 million) this year, driven by sales of the drugs.
In May, AstraZeneca Plc, the UK's second-largest drugmaker, said it would spend US$100 million in the next three years on research in China.
Novartis plans to introduce new treatments for diabetes, cancer and two for hypertension. Analysts expect the products each to bring sales of more than US$1 billion a year. The shares have outpaced larger rivals GlaxoSmithKline Plc and Sanofi-Aventis SA because of growth in heart drug Diovan and tumor-busting Gleevec.
Scientists at the Novartis center will study diseases including cancers caused by infections. Experts estimate hepatitis-induced liver cancer causes the death of 300,000 people in China each year.
The institute will open a smaller facility in May next year, the company said, before starting work on laboratories for 400 scientists.
The center will be headed by En Li, a native of Shanghai who now works at Novartis' Boston research site. The institute will also draw native Chinese returning from abroad, Fishman said.
It may take three years before the performance of the research can be reviewed, and about 12 to 15 years for it to develop new medicines, Vasella said. A similar research institute in India is "unlikely," Vasella said.
Novartis' predecessor Ciba opened its first office in Shanghai in 1938 to sell dyes, and the company is the fourth-largest supplier to Chinese hospitals. Novartis collaborates with the Shanghai Institute of Materia Medica to test traditional medicines, among other partnerships.
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