Novartis-Pharmaceutical Company Strategic SWOT Analysis Report
Summary
- Novartis led the consolidated BRIC pharmaceutical markets in 2009 with sales of $2.1bn representing 3.5% of the market.
- Cardiovascular drugs were the largest therapy area in Novartis’ portfolio in the BRIC countries with sales of $430m in 2009, a year-on-year growth of 15.1%. Diovan and Co-Diovan led the therapeutic category for the company.
- Anti-neoplastic drug Glivec was the leading brand in the company’s BRIC portfolio with $162m sales in 2009, however this was a 21% year-on-year decline in sales.
- Brazil was the largest market for Novartis in the BRIC countries accruing $831m in sales, 40.4% of the company’s 2009 sales. It reported a 5.7% increase in the year-on-year growth and a CAGR of 20% during 2005–09 in this key market.
- Novartis’s key products Rasilez and Gilenya were approved in China (July 2010) and Russia (September 2010) respectively. The company has increased its investment in R&D centers based in China and Brazil considerably.
Company overview
The merger of Ciba-Geigy and Sandoz created the Swiss pharmaceutical major Novartis in 1996. Novartis’ healthcare division comprises of four subunits namely prescription products, generics (Sandoz), vaccines & diagnostics (Chiron) and consumer health. Novartis’ target therapeutic areas are oncology and hematology, cardiovascular and metabolism, immunology and infectious diseases, respiratory, neuroscience and ophthalmic and molecular diagnostics. In recent years Novartis has undertaken major acquisitions thereby diversifying its healthcare business. The company has marked its presence in the global generics market with Sandoz, created via the amalgamation of the various generic companies acquired by Novartis.. Table 17 gives a overview of Novartis.|
Table
17: Overview of Novartis
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Headquarters
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Switzerland
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Global sales
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$38.5bn
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BRIC sales
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$2.1bn
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Market share (% of total global sales in
BRIC)
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5.3
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Major therapeutic focus
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Cardiovascular drugs
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Source: IMS Health, copyright ©,
reprinted with permission
Therapeutic focus
Drugs for the cardiovascular system accounted for 20.9% of the company’s sales in the BRIC markets accruing $430m in sales in 2009. A year-on-year growth of 15.1% in the cardiovascular segment was primarily driven by Diovan and Co-Diovan which recorded year-on-year growth of 21.3% and 14.7% respectively. The anti-neoplastic drug class’s sales declined by 18.2% in 2009 owing to the poor sales performance of Glivec, its flagship anti-neoplastic brand.Geographic focus
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Table
18: Novartis’ sales distribution across BRIC countries, 2009
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Country
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Sales 2009 ($m)
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Sales growth, 2008–09 (%)
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Sales share, 2009 (%)
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CAGR, 2005–09 (%)
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Brazil
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831
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5.7
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40.4
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20.0
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Russia
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750
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-14.4
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36.5
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24.5
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China
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337
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27.9
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16.4
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20.8
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India
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138
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1.2
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6.7
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6.2
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Total
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2,056
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-0.3
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100.0
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20.4
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Source: IMS Health, copyright ©,
reprinted with permission
Brazil accounted for 40.4% of Novartis’ sales in the BRIC
countries amounting to $831m in 2009. Russia was the second largest market for
Novartis contributing sales of $750m in 2009. The company’s Russian operations
had a 14.4% fall in sales in 2009 owing to declining sales for key brands
including Glivec and Theraflu. Novartis had strong growth of 27.9% in China in
2009. At current growth rates and constant currency, sales from China will
double by 2012. The strong performance of cardiovascular brands including
Diovan and Cibacen were the main drivers of the company’s growth in China.Marketed focus
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Table
19: Leading brands of Novartis in the BRIC market, 2009
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Brands
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Sales 2009 ($m)
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Sales growth, 2008–09 (%)
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Sales share, 2009 (%)
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CAGR, 2005–09 (%)
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Glivec
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162
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-21.0
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7.9
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38.0
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Voltaren
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127
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-2.2
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6.2
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6.4
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Diovan
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115
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21.3
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5.6
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40.9
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Co-Diovan
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65
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14.7
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3.2
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31.0
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Sandostatin
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60
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15.6
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2.9
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14.9
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Diovan Amlo
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51
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22.9
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2.5
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66.9
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Sandimmun
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50
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-28.7
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2.4
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2.6
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Theraflu
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48
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-7.9
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2.3
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24.1
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Linex
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48
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-13.3
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2.3
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26.7
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Zometa
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45
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25.1
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2.2
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92.1
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Top 10
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771
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-2.8
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37.5
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24.3
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Others
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1,285
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1.3
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62.5
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18.3
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Total
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2,056
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-0.3
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100.0
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20.4
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Source: IMS Health, copyright ©,
reprinted with permission
R & D
Novartis has a diverse pipeline with products indicated for the treatment of a wide range of diseases affecting the respiratory, cardiovascular and nervous system. It also has products indicated for the treatment of cancer and infection. Novartis has more than 100 products under development with over 20 of them being new molecules. Onbrez Breezhaler has shown superior clinical efficacy in the Phase III trials when compared to salmetrol in breathlessness. Novartis’ novel oral multiple sclerosis drug Gilenya received FDA approval with a priority status in September 2010.|
Table
20: Novartis’ late stage R&D pipeline
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Molecule
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Indication
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Canakinumab
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Refractory gout
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Agomelatine
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Major depressive disorder
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Vadimezan
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Non-small cell lung cancer
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Patupilone
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Ovarian cancer
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Efungumab
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Invasive candidiasis
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Salmon calcitonin
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Osteoarthritis
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glycopyrronium bromide
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Chronic obstructive pulmonary disease
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Source: Company reports
Growth drivers
Novartis completed the acquisition of the specialist eye care company Alcon from Nestle in August 2010. Earlier having acquired a 25% stake in the company in 2008, Novartis completed the acquisition of the 52% share held by Nestle for $28.3bn. Alcon specializes in ophthalmic prescription, surgical and consumer products catering to over 180 countries globally. The deal is strategically designed to strengthen the ophthalmic arm of Novartis which will now capitalize on Alcon’s marketing potential to launch its product Lucentis for diabetic macular edema. The acquisition will lead to value creating synergies through joint sourcing and procurement plans. This synergy will generate $200m annual pre-tax cost savings to the company.Sandoz formed by the amalgamation of the generic firms acquired by Novartis is one of the leading generic companies globally. Novartis in a bid to buffer its branded prescription sales from competitive products and generic threats is bolstering its generics division with acquisitions. The Austrian generics major Ebewe’s acquisition supports these plans with Sandoz gaining the company’s oncology generics and its R&D and production site in Austria. Ebewe, with its strong presence in over 100 countries including the emerging markets will help add new products to Sandoz’s generic pipeline.
Expansion in the BRIC markets
Novartis in 2009 announced an investment of $1bn in R&D activities in China spread over the next five years. The investment will also include relocation and a significant expansion plan for the Novartis Institute of BioMedical Research (CNIBR). Upon expansion, the CNIBR will become Novartis’ third largest research unit globally. The CNIBR is focused on drug development for diseases that are highly prevalent in China. The company also invested $250m in its Changshu global technical center that conducts technical R&D pertaining to manufacturing APIs. Novartis is also expanding its API production facility in Resende Brazil which exports the precursors used for the manufacture of Diovan among other molecules.Novartis has developed an innovative business model for tapping the potential in rural India called ‘Arogya Parivar’ or ‘Healthy Family’. The program currently covers 25m Indians in over four states. It aims to distribute drugs in rural regions at a price no less than that in urban India, but in smaller packets. Initially it covered 24 products from the Sandoz generic and consumer health divisions that dealt with tuberculosis, malnutrition, gastrointestinal and respiratory disorders. The company notes that its product offerings have been expanded, internally and through partnerships. Operating through 170 centers currently, the company expects to extend this to 200 with a coverage of over 50m people by the end of 2010. Each of these centers has health educators who work in collaboration with local professionals.
Novartis is planning to enter the herbal pharmaceutical sector in India through the introduction of a range of ayurvedic OTC products. OTC market in India was worth $2.9bn in 2009 and growing at 7.1% annually according to IMS estimates. Novartis’ foray into the ayurvedic OTC segment will be an India specific market plan with products for skincare, fungal infection and drugs for lifestyle disorders.
Vaccines: Chiron in 2006
Novartis strengthened its position in the vaccines and biopharmaceuticals market through the acquisition of Chiron in 2006. With a view to generate long-term growth in the field of therapeutic vaccines, Novartis decided to maintain Chiron’s vaccines and diagnostics business as a separate division and not merge it with its mainstream pharmaceutical portfolio. Novartis is taking further steps to expand its vaccines business by investing in the emerging countries with a particular focus on the BRIC markets. Novartis aims to tap the infectious diseases (including viral and bacterial infections) market in the emerging countries as these diseases still account for the majority of deaths in these regions. It recently acquired an 85% share in Zhejiang Tianyuan bio-pharmaceutical, a leading vaccine company in China. In Brazil, Novartis has set up a vaccines plant in Pernambuco and anticipates plant functionality by 2014Product launches
Novartis’ antihypertensive brand Rasilez received Chinese regulatory approval in July 2010 for use alone or in combination with other drugs to treat high blood pressure. According to the WHO’s estimates, cardiovascular diseases were the third highest cause of death in China in 2009. With increases in per capita income and changing lifestyle, hypertension (cardiovascular disease) has become one of the leading causes of deaths in the country with over 150m sufferers and leading to over 2m deaths every year. The cardiovascular market is the third largest therapeutic segment in China with a market share of 11.7% and Rasilez (aliskiren) is the first in class of direct renin inhibitors. This drug reduces left ventricular hypertrophy (a cause of abnormal thickening of heart muscles) and also helps protect diabetics and the obese from the toxic effects of abdominal fat.Russia was the first country globally to approve Gilenya, a novel oral dosage product indicated for multiple sclerosis. Gilenya belongs to a new drug class and has also received FDA approval. Novartis plans to market the brand in Russia by early 2011.
SWOT
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Table
21: SWOT analysis – Novartis
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Strengths
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Weaknesses
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Novartis acquired the oncology &
immunology injectables division of Ebewe Pharmaceuticals including its
Austrian manufacturing site. Novartis expanded its generic oncology portfolio
and its reach in emerging markets through this acquisition.
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Failure of Galvus to capture considerable
share of the diabetes market as anticipated.
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New product approvals including Menveo
and Onbrez thus enhancing company revenues.
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Gleevec’s patent application rejected in
India.
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Opportunities
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Threats
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Increased investment of $1bn in China
over the next five years, thus expanding its base in the country.
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Patent expiration of its flagship
products Diovan, Co-Diovan and Femara
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Approval of Gilenya in Russia and Rasilez
in China thus adding new revenue streams.
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Acquisition of eye-care company Alcon
bolsters Novartis' ophthalmic franchise.
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