Novartis: LEADing in Emerging Markets - Pharmaceutical Executive


Novartis: LEADing in Emerging Markets

Pharmaceutical Executive

Choice for the Customer

"A portfolio relevant to a diversity of local purchasing segments is a precondition for benefiting from the sheer momentum of growth in the BRIC countries." – Peter Catalino, global head of pharma strategy, Novartis
Hence, success for Novartis is a question of offering a range of options—including services beyond the pill. A leadership position in five distinct businesses—innovative pharmaceuticals, eye care, generics (the Sandoz unit ranks second in sales worldwide), vaccines and diagnostics, and consumer health (including veterinary products)—gives Novartis the advantage in providing these options in a way that accommodates stark differences in the demand profile of each country. Jimenez notes that Novartis "is comfortable in pursuing very different strategies depending on the country. For example, in China we are building a visible field-force presence, as the market is still very much driven by share of voice, while in Russia we are taking a more concentrated, key account management approach." Adds Peter Catalino, a physician who is the global head of pharma strategy for Novartis: "A portfolio relevant to a diversity of local purchasing segments is a precondition for benefiting from the sheer momentum of growth in these countries."

In addition, many analysts believe the recent—and costly—acquisition of Alcon carries huge potential for building a bigger presence for Novartis in the BRICs. "Eye care is a significant unmet medical need for millions of consumers in these countries, with Brazil being a particularly good example," Seamus Fernandez of Leerink Swann told Pharm Exec. "It looks like a crown jewel to us."

To ensure the full Novartis portfolio is properly leveraged, the company has a central coordinating unit, Group Emerging Markets. It pools resources from the five business units and then works with the affiliates to create customized solutions for big local customers. The goal is to make sure that size is not a disincentive and that Novartis operates with one face as a supplier of products and services.

The common thread to all this is that once Novartis commits, it does so full throttle. In contrast to the strategies of some Big Pharma rivals, it relishes a highly visible local presence with the kind of sizeable investments that span the range from manufacturing, to R&D, to public health infrastructure. These also attract positive attention from governments as a contribution to industrial policy and local development through technology transfer. In the past two years, the company has committed nearly $2 billion to build a manufacturing presence in Russia and Brazil and to conduct R&D in China with a vast brick-and-mortar facility in Shanghai. "These are not toe-in-the-water partnerships but rather a signal that Novartis is here to stay," says Catalino.

Priorities: The BRIC fit

The potential from emerging markets is critical to executing against Jimenez's three strategic priorities. He explains, "The first, extending our lead in innovation through pipelines that are best in class, requires us to build strong networks and pursue new ideas outside the traditional range; consumers in emerging markets use technologies differently and the lessons from that can lead to innovations that are applicable worldwide. The emerging bloc is also making big investments in basic R&D, so we have to be there if we want access to the talent pool. That's one of the drivers behind our investments in R&D in China. Our second goal, accelerating growth, can only benefit from our access to the rising disposable incomes of a billion-person-strong emerging middle class determined to invest in its own health. The third priority, improving productivity across our operations, will prove elusive unless we take appropriate advantage of the lower cost base and infrastructure in many of these countries. And any savings we make there are strategic, in that we apply them to fund investment in the medicines that emerging markets will need tomorrow."

The scale of commitment Novartis is making, particularly in the BRIC zone, is not without its share of risk. This is why, in addition to the investment, the company works with local stakeholders to improve standards for conducting business. Jimenez says Novartis considers four factors as crucial: predictable, non-discriminatory and transparent rules on market access; consistent and effective enforcement of intellectual property rights; a qualified and well-trained labor pool; and government support for good business ethics, including anti-bribery legislation, to be observed by all. The perspective explains why an erratic stance on patent protection has put India behind the other BRICs in winning the big, trend-setting investment dollars from Novartis.


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