Novartis Clarifies Restructuring of China Early-Stage R&D Center, Shifts Focus to Clinical Development

Recently, multiple media outlets reported that Novartis China’s early-stage R&D center will shut down. Approximately 150 researchers at its Shanghai R&D center, who work in early drug discovery, will face job losses. A wave of layoffs is scheduled for late 2019, with another round to follow in March next year. While the Research division will be partially closed, the Clinical division’s TCO/TM operations will continue to function normally.

Subsequently, Novartis China issued an official response, stating that the operational focus of the Novartis Shanghai R&D Center would shift. Going forward, it would “focus on expanding the scale and scope of early-stage clinical development and late-stage clinical trials to accelerate new drug development.” Meanwhile, Novartis continued to emphasize China’s strategic importance in its future development plans. In its statement regarding layoffs, Novartis indicated that between 2019 and 2023, it expected to continue submitting 50 new drug applications in China and add 340 jobs within its local global drug development division and related business units. Novartis also stressed that “the Novartis Shanghai campus remains the workplace for more than 1,000 Novartis R&D personnel, as well as employees of Novartis Pharmaceuticals, Novartis Oncology, and Sandoz, which focuses on generic medicines.”

According to the official website of Novartis, in 2006, Novartis (China) BiopharmaceuticalMedicineResearch Center Established, Dedicated to Meeting China's UrgentPharmaceuticalsR&D of New Drugs. The R&D Center introduces advanced drug development technologies to China, cultivates a new generation of Chinese talent, and establishes collaborative partnerships with local universities, research institutions, and hospitals in China.

Over the years, the R&D Center has become a key hub for Novartis’ global R&D network in the Asia-Pacific region. Leveraging its strong capabilities in new drug development, it benefits pharmaceutical R&D in multiple countries and regions, including South Korea, Japan, and Taiwan, through various forms of collaboration and exchange.

Meanwhile, the R&D center is firmly established in Shanghai, engaging in extensive collaborations with local life sciences research institutions to lead regional new drug development. Currently, the Novartis Shanghai Campus, as Novartis’ third-largest global R&D center, has been completed and put into operation. It houses approximately 600 researchers among employees from multiple Novartis business units, working together to develop breakthrough medicines and uphold the company’s long-term commitment to China and Chinese patients.

Whether closing down or making adjustments, every move by multinational pharmaceutical companies in China serves as a barometer. Particularly under the influence of policies such as volume-based procurement and national reimbursement drug list negotiations, these multinational firms are not only gradually integrating the Chinese market into their global landscape in sync with the rest of the world, but also increasingly adapting to the “rules of the game” within the Chinese market. In today’s China, the continuous optimization of the innovation ecosystem is prompting more and more foreign enterprises to adjust their strategies in the country.

Three years ago, Novartis also shut down its biologics division in Shanghai. In addition, in 2017, GSK closed its neuroscience R&D center in Zhangjiang, Shanghai. In September of the same year, Eli Lilly closed its early-stage clinical research laboratory in Zhangjiang, Shanghai, shifting the focus of its R&D activities in China toward early-stage and clinical research driven more by local collaborations and partnerships. Also in 2017, GlaxoSmithKline announced that it would gradually phase out its Suzhou manufacturing facility over two years to consolidate its prescription drug production bases, and would close its neuroscience R&D center in Zhangjiang, Shanghai, by the end of November that year.

However, on the other hand, the strategic layouts of some multinational pharmaceutical companies have revealed a different trend. For instance, AstraZeneca has established a Commercial Innovation Center in Wuxi; Sanofi has set up a global research institution in Suzhou; Merck & Co. has launched multiple open innovation centers; Johnson & Johnson has deployed its JLABS global networked open innovation ecosystem in Shanghai; Novo Nordisk has established the INNOVO Center in Beijing; and Roche has built an Early Research Center in Shanghai...

Regarding this starkly contrasting landscape, analysts note that on one hand, although policy incentives, product advantages, capital infusion, and rapid overall economic growth have attracted foreign pharmaceutical companies to establish R&D centers in China, the high investment, slow returns, and insufficient capabilities have long made these local R&D centers the primary targets for adjustment by multinational pharmaceutical corporations. On the other hand, against the backdrop of accelerated drug approval processes, the expansion of volume-based procurement, and national medical insurance negotiations, multinational pharmaceutical companies are also accelerating the introduction of more innovative drugs into China to maintain their competitiveness. More critically, as domestic start-up pharmaceutical enterprises rise, an efficient innovation network involving collaboration between multinational pharmaceutical companies and Chinese academic institutions, healthcare organizations, biopharmaceutical companies, and incubators is taking shape. With deeper integration of foreign pharmaceutical companies into the Chinese pharmaceutical market, there is a need to expand the frontiers of drug R&D and achieve both enrichment and acceleration of their development pipelines.