Novartis and the Pharmaceutical Industry: Innovation is Key
Dr. Stephan Mumenthaler, Head Economic Affairs Copenhagen, February 26, 2008 Agenda
. Novartis at a Glance . R&D at Novartis . Aspects of Open Innovation . Policy Recommendations
2 | Novartis and the Pharmaceutical Industry: Innovation is Key | February 26, 2008 | Business Use Only Novartis at a Glance
. World’s third largest pharmaceutical company by sales
. One of 20 largest companies by market capitalization
. Ranked among most respected companies worldwide
. Unique portfolio to meet changing healthcare needs: • Leading innovative pharmaceuticals • High-quality, low-cost generics • Preventive vaccines • Consumer health products
3 | Novartis and the Pharmaceutical Industry: Innovation is Key | February 26, 2008 | Business Use Only Novartis‘ Key Facts
Sales by division 2007 (in %) Key facts 2007 bn USD Net sales: 39.8 14 Net income: - continuing operations: 6.5 - total 12.0 Consumer Health R&D: 6.4 Sandoz 19 2007 V & D 63 Pharmaceuticals Employees: 98 200 4 Countries: 140 Headquarters: Basel, Switzerland Ten leading countries: . USA . Spain . Germany . United Kingdom . Japan . Canada . France . Brazil . Italy . Turkey Source: Annual Report 2007
4 | Novartis and the Pharmaceutical Industry: Innovation is Key | February 26, 2008 | Business Use Only R&D in the Pharmaceutical Industry 2 - 4 years 4 - 7 years RESEARCH DEVELOPMENT MARKET Identification PRECLINICAL CLINICAL Phase of Introduction Selection PoC* Phase I II III IV
Probability 12% 75% 100%
10’000- Compounds 6-8 1.5 1 100’000
Costs ca. 1/3 ca. 2/3 > 1.2 billion $
* PoC = Proof of Concept
5 | Novartis and the Pharmaceutical Industry: Innovation is Key | February 26, 2008 | Business Use Only Novartis Pharma and Corporate Research: Worldwide Community 2007
Cambridge/Boston UK Oncology Respiratory Metabolism/Diabetes Disease Cardiovascular Disease Gastrointestinal Infectious Disease
New Jersey Singapore Oncology, NITD Genome & Tropical Diseases Proteome Basel Sciences Nervous system La Jolla Transplantation Basel Oncology GNF FMI Arthritis/Bone Functional Metabolism Genomics Functional Genomics >4000 scientists 2007: >1.2 bio USD 6 | Novartis and the Pharmaceutical Industry: Innovation is Key | February 26, 2008 | Business Use Only Innovation is complex and difficult to measure
Product innovation, not just product invention
Discovery of new innovative molecular entities Innovative collaboration models with Biotech Fast development in parallel processes Innovative drug delivery systems Rapid global market introduction and penetration Excellence in product commercialization Maximization of product life cycles
7 | Novartis and the Pharmaceutical Industry: Innovation is Key | February 26, 2008 | Business Use Only Innovation Strategy of Novartis Pharma
Strong internal R&D Centers (CH, US, UK, F, IND)… Diseases Areas Technology NS OPH AI&TX CV MD MuS RD ONC ID GI CHEM
testing access access scientific rapid entry new enabling lead concepts, - new fields technologies therapies new targets and IT tools
…aligned with in-out licensing, targeted M&A and external R&D collaborations
8 | Novartis and the Pharmaceutical Industry: Innovation is Key | February 26, 2008 | Business Use Only Innovation Through Strong Internal R&D Centers…
France: UK: • Analytical laboratories • Respiratory Japan: Switzerland: United States: • Development • Cross-disease area capability • East Hanover NJ: cross headquarters disease area capability • Cross disease area • Cambridge MA: capability biomarkers, translational medicine Mumbai: • IT capabilities • Clinical trial execution Total > 8000 Associates • Safety biostatistics (NICCI)
+ 59 other countries worldwide
9 | Novartis and the Pharmaceutical Industry: Innovation is Key | February 26, 2008 | Business Use Only …In-Out Licensing…
. Traditionally, Novartis’ focus was on own developments • From 20 top selling products 5 have been licensed
. Recently, Novartis put significant development efforts also in licensed products
First innovative treatment for hypertension in over a decade (Breakthrough: First direct renin inhibitor) Only in the US, approximately 72 million patients with hypertension
Source: Haase et al. 2007 / Analysis Group / Novartis International
10 | Novartis and the Pharmaceutical Industry: Innovation is Key | February 26, 2008 | Business Use Only …Targeted Mergers & Acquisitions and…
. Focus on growth areas in healthcare . Chiron Acquisition • Novartis enters strategically important vaccines business gaining access to novel blood-screening tools and strong market position
Source: Annual Report 2006 and 2007
11 | Novartis and the Pharmaceutical Industry: Innovation is Key | February 26, 2008 | Business Use Only …External Collaborations
Big Pharma & Big Biotech Big Biotech World
Clinical services Preclinical Biopolymers Development & Delivery
Informatics
Platforms & Diagnostics Services
Cells / Animal Models Antibodies / Vaccines
Phyto- DNA/RNA Pharma Screening & Libraries
Partners in innovation
12 | Novartis and the Pharmaceutical Industry: Innovation is Key | February 26, 2008 | Business Use Only Significant External Collaborations
. Novartis spends 30% of its R&D budget on external collaborations with 120 biotech companies and 280 academic centers
. Every external project is linked to a dedicated internal team
Source: Novartis International
13 | Novartis and the Pharmaceutical Industry: Innovation is Key | February 26, 2008 | Business Use Only - Best Practice Example for Open Innovation
Strasbourg Local Life Science Cluster in Basel, Alsace and Freiburg
BioValley Association Deutschland e.V. 4 life science global players are in a Alsace BioValley Colmar network with . academics (4 major universities, Freiburg i.B. 30 life science institutes) and 1 . about 400 SMEs (~ /3 founded since 1990)
Mulhouse Key success factors are . the geographic uniqueness, . highly developed infrastructure and Basel BioValley Basel . the Novartis Venture Fund
14 | Novartis and the Pharmaceutical Industry: Innovation is Key | February 26, 2008 | Business Use Only Novartis Venture Fund – An important source of innovation
. The Novartis Venture Fund is committed to investing in companies that develop innovative life science concepts for the benefit of patients
. Since its foundation in 1996, worldwide more than 150 entrepreneurial ventures have been helped to finance
. In 2007, a total investment of CHF 68 million was made
Success Story
2007 IPO NASDAQ Source: Activity Report Venture Fund 2007
15 | Novartis and the Pharmaceutical Industry: Innovation is Key | February 26, 2008 | Business Use Only Innovation Calls for Corresponding Framework . Reorganization of a former production site to an appealing and functional campus of knowledge . Modern, multifunctional open-plan offices offer an optimal setting for communication, knowledge transfer and cooperation
. Concentration of fragmented Swiss locations due to 1996 merger of Ciba-Geigy and Sandoz . A long term project, which makes place for 10 000 employees in 2030
16 | Novartis and the Pharmaceutical Industry: Innovation is Key | February 26, 2008 | Business Use Only Open Innovation is Standard Practice at Novartis
. Open innovation is standard practice at Novartis . The innovation strategy of strong internal R&D centers complemented by in-out licensing, targeted M&A and external collaborations increases the potential for innovation by sharing the risk of failure (sunk R&D costs)
Strong internal R&D centers In-out licensing External collaborations Targeted M&A
. However, innovation calls for an appropriate framework
17 | Novartis and the Pharmaceutical Industry: Innovation is Key | February 26, 2008 | Business Use Only Policy Recommendations
. Attractive framework conditions for leading class scientific companies which aspire to invest (e.g. IP, tax system)
. Provide investment incentives comparable to other countries (e.g. Singapore)
. Protect and foster innovation (e.g. differentiated pricing, reimbursement, market access)
. Increase attractiveness of location for leading researchers (e.g. international schools, infrastructure)
. Build education portfolio with focus on competence fields (foster natural sciences)
18 | Novartis and the Pharmaceutical Industry: Innovation is Key | February 26, 2008 | Business Use Only