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Case
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Reference no. 9-608-136
Published by: Harvard Business Publishing
Originally published in: 2008
Version: 4 March 2008
Length: 22 pages
Data source: Published sources

Abstract

Novartis is a science-based drug company, which has important implications for its business strategy. It is one of the largest pharmaceutical companies in the world with over USD38B in sales in 2007. Pharmaceuticals account for slightly over USD24B of that total. In 2007, corporate R&D spending was USD6.43B, or almost 17% of net sales. Novartis executive leaders believe in scientific progress and that large-scale investments in science will therefore result in long-term pay-offs in terms of profits and discoveries that benefit mankind. Novartis' business strategy is closely tied to its research strategy, which emphasizes extensive internal discovery and development capabilities leading to organic growth along with explicit external alliances and collaborations to supplement its core capabilities. Like its competitors, Novartis faces many challenges in terms of moving research from the bench to the bedside. Five years after undertaking the restructuring of the discovery research organization, CEO Daniel Vasella is pleased with its progress, including many more development projects in the pipeline and new molecular entities. Nevertheless, the company faces a number of challenges, including generic drugs, patent infringements in developing countries, and pricing pressure from governments and health insurers in the United States. Given these challenges, Novartis must decide how much to spend on R&D overall, how to arrive at the right mix between organic growth and external collaboration and in-licensing, and how to measure success when it takes so many years to develop and launch a successful drug.
Size:
100,000 employees, USD36 billion
Other setting(s):
2008

About

Abstract

Novartis is a science-based drug company, which has important implications for its business strategy. It is one of the largest pharmaceutical companies in the world with over USD38B in sales in 2007. Pharmaceuticals account for slightly over USD24B of that total. In 2007, corporate R&D spending was USD6.43B, or almost 17% of net sales. Novartis executive leaders believe in scientific progress and that large-scale investments in science will therefore result in long-term pay-offs in terms of profits and discoveries that benefit mankind. Novartis' business strategy is closely tied to its research strategy, which emphasizes extensive internal discovery and development capabilities leading to organic growth along with explicit external alliances and collaborations to supplement its core capabilities. Like its competitors, Novartis faces many challenges in terms of moving research from the bench to the bedside. Five years after undertaking the restructuring of the discovery research organization, CEO Daniel Vasella is pleased with its progress, including many more development projects in the pipeline and new molecular entities. Nevertheless, the company faces a number of challenges, including generic drugs, patent infringements in developing countries, and pricing pressure from governments and health insurers in the United States. Given these challenges, Novartis must decide how much to spend on R&D overall, how to arrive at the right mix between organic growth and external collaboration and in-licensing, and how to measure success when it takes so many years to develop and launch a successful drug.

Settings

Size:
100,000 employees, USD36 billion
Other setting(s):
2008

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