What Is Novartis AG (NYSE:NVS) After in China?

Novartis AG (NYSE:NVS) recently opened its $1 billion drug research facility in China, just outside Shanghai, almost seven years after it was announced. According to the company, the Shanghai research center can accommodate 1,300 workers, making it its third-largest research facility in the world. But what is Novartis pursuing in China?

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While multinationals are jostling for a slice of China, the world’s fastest expanding economy, Novartis appears to have doubled down there. According to CEO Joe Jimenez, their agenda in China is simple – they want to focus on the research of drugs that address diseases that are more widespread in the country. Those diseases include liver, lung and gastric cancers.

Jimenez is also looking to take advantage of the country’s rapidly rising drug spending. The rapid expansion of China’s middle class is credited for the increase in the country’s drug sales.

What about the threat of pricing pressure?

Pharmaceutical companies that sell expensive drugs appear worried about growing pressure over their drug pricing practices. The pricing pressure has been particularly intense in the U.S. and China. However, Novartis doesn’t see any threat of drug pricing pressure on its business. Jimenez said that as long as they don’t produce copycat treatments, their products will continue to be reimbursed in China and other markets.

Jimenez added that Novartis’ agenda will be to develop innovative treatments that specifically address China’s medical needs and he hopes that the market will be willing to pay the price for the innovative products.

Novartis is also hoping to take advantage of China’s drug innovation incentives to accelerate its growth in the country.

Acquisition deals

Novartis will also be looking for assets to acquire to bolster its business in China and elsewhere around the world. The company will initially be looking for deals between $1 billion and $5 billion in areas such as eye care and oncology.

Other than China, Novartis’ other major research centers are located in Cambridge, Massachusetts and Basel, Switzerland.

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