Novartis Case

Not growing rapidly High competition from Low Cost Generic Medicines High investments in R & D

Long Time of 6 12 Years from Research to Commercialization

Only 1 got Commercialized from 10,000 Originally Synthesized Compounds Generic Medicine Market was growing rapidly than Branded Medicine Market Patent Infringements in Under Developed Countries

Four Divisions - $38.07B Sales

Pharmaceuticals ($24.03B) 63% of Sales Sandoz ($7.17B) 18.8% of Sales Consumer Health ($5.43B) 14.3% of Sales Vaccines and Diagnostics ($1.45B) 3.9% of Sales

R & D spending was $6.43B 17% of Net Sales

Clinical Trials 9 in Phase I and 5 in Phase II to launch a Drug
Costs about $500 600M

Collaborations with Biotechnology Companies and Academic Institutions was necessary

Pool in New Talented Scientists Develop Medicines for New or Incurable Diseases Mitigate Risk of Developing Drug

Headquartered in Cambridge and 5 other locations around the world

Each Center focused on specific Diseases

5 Expertise Platforms Reported Directly to CEO Vasella New Chemicals getting to Clinic increased to more than 50%

Understand Molecular Causes rather than focusing on Markets Chain of Genes might be Root Cause of several Diseases Find Common Pathway between Diseases, chances that Medicine will work are very high

Find Cure for Rare Diseases

Larger and more profitable Disease Populations Reducing Development Cause and Shaving 1 2 Years in Development Time

Reorganized around 9 specific Disease Areas and Functional Platforms

A System of Co-Equal First Authorship to promote Collaboration Bigger Centers to take advantage of Synergies, rather than lot of Small Centers External Scientific Advisory Board to review Research Programs regularly

Mission To address unmet medical needs, with a particular focus on the developing world and neglected diseases

Three Institutes
FMI in Basel, Switzerland GNF in La Jolla, California NITD in Singapore

Funded by Novartis Research Foundation to focus on high-risk Projects in areas of New Technologies compatible with the long-term interests of Novartis

To foster Collaborative breakthrough Basic Science Functioned like a University Lab Mission of doing leading edge basic science of relevance to biomedical applications
Exploratory Work resulted in Gleevec

Was fairly Autonomous

Vision was a smaller Research unit with its close ties and location would create an Entrepreneurial Climate and under the right Leadership open new Horizons Focused on translating breakthrough ideas into Applications Schultzs vision was to create the Bell Labs of Biology, where people with different backgrounds could come together and discover interesting things Focus on Identifying Drug Targets that Novartis could screen and develop Dont focus on specific Disease, but be Opportunistic Over 70 Patents and 400 Employees in three areas: Technology, Biomedical Research and Translational Research

A public-private partnership with Singapore Economic Development Board Focused on Drug Discovery for Tropical Diseases

Earlier didnt develop because of Negative Projected Returns, so allocated separate Budget
Training programs to Graduate and Postgraduate Scientists from Developing Countries

A Scientific Review Board to review Operations

Focus on Development of novel Therapeutics and Platforms

Two Investment Teams led by MDs Final Decisions made in consultation with Advisory Board and NIBR Leaders

Portfolio of 70 Companies, with total Equity Investments of more than $300M

From Lower Risk to Higher Risk, Seed and Early Stage Financing

More than 400 Collaborations and Alliances around the world

Gain access to New Talent and know-how Develop new Products in Strategic Disease Areas Acquire Platform Technologies Access New Markets

In-Licensing contributed 17% of Novartis sales Most of the science that translates into Medicines is build at Universities Partnerships with Academic Institutions
10 Year Partnership with Scripps Novartis MIT Center for Continuous Manufacturing

Corporate Strategic Alliances

Long Term Alliance with Intercell AG 10 Year Alliance with MorphoSys AG

Company Novartis GlaxoSmithKline Boehringer Ingelheim Bristol-Myers Squibb Company Merck and Company

Net Sales (US $ Billions) 38.07 29.5 7.3 19.42 21.19

R & D Expense 17% 12% 15% 12% 12%

Expense on R & D is in synchronization with Industry and the Vision of the company 29 Drugs are in Phase III, so company should grow substantially in 2008 Focus on acquisition of Drugs
Novartis has No Sales of Acquired Drugs whereas companies like Johnson & Johnson and Roche have 22% and 30% of their Total Sales by Acquired Drugs respectively

Try and Enhance under developed Markets