The Swiss pharmaceutical giant Novartis said it will invest $1 billion in China over the next five years including a significant expansion of the company’s biomedical research institute in Shanghai. On the heels of the announcement, the company also said it agreed to acquire an 85 percent stake in the Chinese vaccine maker Zhejiang Tianyuan Bio-Pharmaceutical for $125 million in cash.

 

Demand for healthcare in China is growing rapidly. As the country’s standard of living has risen with increased wealth so too has the burden of chronic diseases associated with lifestyle choices. The government is working to expand access to affordable, basic medical services to all citizens by 2020, and recently announced that it will spend approximately $124 billion over the next three years to further build the nation's health system. Novartis says it aims to support the government's health reform by sharing knowledge and best practices.

 

“We are confident that our expanded investment in R&D will result in innovative therapies for patients in China and other countries nurtured by the growing scientific excellence in China,” says Daniel Vasella, chairman and CEO of Novartis. “We are also pleased to contribute to the Shanghai government's aim to establish the city as the premiere R&D center for China's bio-medicine industry by 2012.”

 

The Novartis investment will include a significant expansion of The Novartis Institute of BioMedical Research in Shanghai, which is currently located in Zhangjiang High-tech Park. The Institute specializes in basic research and development of new drugs including small molecule and biological medicines to treat diseases that are highly prevalent in China. To allow for this large expansion, the BioMedical Research Institute will relocate to a new state of the art campus in Shanghai. Its activities are expected to span work in analytics and biomarkers, in vivo pharmacology, protein production, characterization and scale-up screening and chemistry and proteomics, genomics and imaging.

 

The Novartis institute is expected to extend and increase its collaborations with institutions in China. It is expected to be the third largest R&D center for Novartis, after the R&D center in Cambridge, Massachusetts, United States and the facility at the Novartis headquarters in Basel, Switzerland. It is expected to become the largest comprehensive R&D center in China. Estimates are that the number of R&D associate positions will increase to about 1,000 from 160 today.

 

Novartis also said it has invested $250 million in a new global technical center that is opening in Changshu. This center will focus on technical research, development and manufacturing activities of active pharmaceutical ingredients. The company said the co-location of the technical R&D and manufacturing enable significant pharmaceutical process improvements and operational efficiencies. The facility is expected to be a critical part of the global production and supply chain network.

 

The company’s acquisition of Zhejiang Tianyuan Bio-Pharmaceutical reflects recognition in the rapidly growing market in China, which the company says is the world’s third largest vaccines market, with annual industry sales of more than $1 billion. This market is expected to enjoy sustained double-digit growth in the future given the government’s commitment to improve access to quality healthcare. Since 2006, Zhejiang Tianyuan’s sales have approximately doubled to $25 million. Novartis said it will work with the company to expand its product portfolio and pipeline through targeted investments. The acquisition will also be used to introduce Novartis vaccines into China, where the company currently has a limited presence.