Novartis CEO Joe Jimenez says he is committed to cutting costs to allow Novartis to keep its $8 billion per year R&D spend to keep its pipeline full and flourishing. He says Novartis has historically been able to deliver 1 product to market for every 6 that enter pre-clinicals (vs industry average of 1 in 23). He attributes this to Novartis philosophy of going after meds in areas of high unmet need regardless of the market size. Frequently, the company after gaining approval in the more narrow area is able to then find additional indications in bigger markets.
Jimenez contrasts this approach versus Pfizer which has announced R&D cuts of $1.5-$2 billion in order to offer returns in the face of Lipitor's patent expiration (not too mention stock buy backs and divestitures). Jimenez says, "We're going the totally opposite way, which is using our cost reduction to continue to keep our R&D spending at the top of the industry". Novartis continues to spend at a rate of aobut 20% of its pharma sales.
Jimenez notes Novartis has 147 compounds in clinical trials and analysts have pegged several as potential blockbusters (> $1 billion annual sales), such as Ilaris for gout and QVA149 for the treatment of COPD. Jimenes says he is confident the company can keep its high R&D spending while also delivering strong double-digit growth in sales and profits. This will also allow it to maintain itself as a diversified company with investments in generics, vaccines, diangostics, OTC, and animal health businesses too. See Wall Street Journal and Fierce Biotech.
Posted by Bruce Lehr April 4th 2011.