Novartis to Shut Down China Early-Stage R&D Center with Layoffs in Late 2019 and March 2020

On November 18, 2019, VCBeat learned that Novartis China’s Early Development Center would shut down, with its R&D operations partially closed, while TCO/TM functions related to clinical operations would continue to operate normally. Additionally, Novartis China will carry out layoffs in late 2019 and March 2020.

It is reported that the Novartis Institutes for BioMedical Research (China) entered the Chinese market in 2006, with over 700 R&D personnel dedicated to the research and development of new drugs. Its drug development team in Beijing comprises nearly 180 employees, covering key functional areas in pharmaceutical R&D such as clinical development, clinical trial management, regulatory affairs, patient safety, and biostatistics. In April 2008, Novartis held a groundbreaking ceremony for its Shanghai R&D Center, which would focus on developing internationally competitive therapies for diseases prevalent in China, such as liver cancer. This represented Novartis’s largest investment in China to date and was one of the largest R&D centers established by multinational pharmaceutical companies in China at that time.

Some believe that the closure of the early-stage R&D center is linked to Novartis’s global layoffs. In 2018, Novartis announced the elimination of more than 2,200 positions at its Swiss headquarters, including 1,500 frontline pharmaceutical production employees and approximately 700 staff in commercial services. That same year, it shut down its early-stage R&D programs for antibiotics and antiviral drugs in California, resulting in around 140 job cuts. Novartis also announced plans to close a manufacturing facility in Cork, Ireland, by 2022, and to transfer certain global service operations from Ringaskiddy, Ireland, to operational hubs in Europe and Asia in 2022.

Some also believe that the closure of Novartis’s early-stage R&D center in China is linked to its “Productivity Program” launched in 2016. The program called for further adjustments to the manufacturing network in response to the evolving product portfolio. Since its inception, Novartis has undertaken strategic adjustments in Japan, the United States, and several other countries and regions, including the closure of four factories in Switzerland, which affected approximately 1,000 jobs. Additionally, Novartis announced in 2018 the closure of its manufacturing plant in Grimsby, UK, resulting in around 400 layoffs; in October 2019, it announced the elimination of 320 positions in Ireland, further advancing its productivity-driven cost-cutting measures.

Novartis stated that in recent years, the company has placed increasing emphasis on specialized and personalized innovative drugs, leading to a reduction in the production volume of mass-market products. The sale of assets such as factories and land will also boost the company’s revenue.

Novartis’ manufacturing challenges with its CAR-T product Kymriah, coupled with questions surrounding the “data scandal” in the production of the gene therapy Zolgensma that delayed its market launch in Europe and Japan, have raised concerns. Analysts at JPMorgan Chase indicated that Zolgensma may struggle to meet its $1 billion sales forecast. Consequently, industry insiders believe that Novartis’ closure of its early-stage R&D center in China is likely part of a strategic adjustment to address the company’s current situation.

However, this view has not garnered much support; more people believe that Novartis’ current move was long in the making.

Novartis is not the first company to shut down its early-stage R&D center in China; Roche and other multinational corporations (MNCs) have also closed their early-stage R&D facilities in the country. From Roche’s establishment of the first R&D center in a developing country in Zhangjiang in 2007, to Pfizer, AstraZeneca, and GSK subsequently joining this trend, and later to the gradual withdrawal of multinational pharmaceutical companies such as Eli Lilly and GSK, these global pharma giants seem to always “move in tandem.”

VCBeat contacted a former Novartis employee. Although he did not disclose further details, he confirmed that the closure of the early-stage R&D center was indeed unrelated to the “Productivity Plan.” Multinational corporations always deliberate carefully over their strategic layouts. Although Novartis has yet to respond to this matter, given the recent trend of large-scale withdrawals by multinational pharmaceutical companies from the Chinese market, Novartis’s move may well be related to this broader context.