Novartis is to pull millions of planned investment dollars out of India in reaction to intellectual property (IP) fears. The decision may leave China as the cat that got the cream.
In November last year Novartis announced plans to splash its cash in Asia, intending to invest $100m (€79m) in China and INR5bn (€90m) in India to establish large new R&D centres. The Swiss drug heavy made an agreement with the Andhra Pradesh government in India to buy 150 acres of land in Hyderabad to build a new research facility along with an IT backup centre. According to reports at the time, this was to be the largest foreign investment in an R&D facility in India and create 5,000 new jobs.
Things have since gone sour for Novartis in India, who now plans to invest more in countries where it has IP protection. The decision was confirmed with the Financial Times in an interview with Novartis chief executive Daniel Vasella this week and comes in the wake of the company's defeat in an Indian court earlier this month in an ongoing patent dispute with the government. Novartis has been fighting India's patent office over the IP on a new version of its leukaemia drug Glivec (imatinib). In its ruling to deny the firm patent protection, the court stated that the new version only displayed "incremental innovation" and therefore did not qualify for additional IP coverage.
Vasella insisted the decision was not a retaliation measure, rather a precautionary measure: "It's not a punishment, it's just a question of the culture for investment. Do you buy a house if you know people will break in and sleep in your bedroom?", he told the Financial Times. Novartis has already appealed the rejection once and so it will no longer be pursuing the matter any further. Instead the firm has decided to cut its losses and scale back its presence in the country.
It is unclear at this point exactly what resources will be diverted from India and where they will be redirected although it is believed that China - India's constant rival for new world domination in the pharma industry - will be a major beneficiary. Nobody from Novartis immediately returned a request from Outsourcing-Pharma.com to comment. However, the $100m pledge the firm made in China last year was the company's largest commitment in China to date indicates that it certainly has faith in the country.
Novartis is already recently built two new facilities in Shanghai's Zhangjiang Hi-Tech Park and the site is now the eighth within Novartis' R&D network. In addition, the firm also recently constructed an $83m development and production plant in Changshu, Jiangsu Province. "The level of scientific expertise in China is rising rapidly and Shanghai is clearly emerging as a new epicenter of science globally, and is a magnet for the best and the brightest investigators," said Dr. Mark Fishman, president of the Novartis Institutes for BioMedical Research.
Novartis is also already active in China through a number of collaborations, including a six-year research partnership with the Shanghai Institute of Materia Medica (SIMM) to identify and test traditional medicines for pharmacological properties as well as partnerships with drug manufacturer WuXi PharmaTech, the Chinese University of Hong Kong National Institutes of Biological Sciences (NIBS) and Kunming Institute of Botany. The country's 2001 entry into the World Trade Organisation (WTO) and the government's efforts to tackle intellectual-property deficiencies, as well as the establishment of a Chinese drug regulator - the State Food & Drug Administration (SFDA) - have all helped to breathe new life into China's pharmaceutical industry.
Indeed, China is now moving from simply a low-cost manufacturing base into a place where companies are increasingly staring to trust certain aspects of their R&D and clinical trial activities in order to gain cost benefits in these areas also.