Health

Novartis Moves Out: India Drug Market to Grow to $20 billion

By Dweep Chanana ⋅ August 22, 2007 ⋅  Email this post ⋅  Print This Post ⋅ Post a comment

More drama from Novartis in India.

First, Novartis’ objection to the Intellectual Property Appellate Board (IAPB) on the appointment of Mr. Chandrasekaran has been rejected. This is a further setback to its legal challenge to the Glivec patent decision (covered here).

Second, CNNMoney, amongst others, is reporting that Novartis has decided to move “hundreds of millions of dollars in planned investments” in R&D away from India. This is following of Novartis’ loss of the challenge to the Indian Patent Act that was recently thrown out by the Chennai High Court.

Commenting after an Indian appeal court ruled against a patent claim by the Swiss pharmaceutical group, CEO Daniel Vasella told the newspaper that ‘concrete plans’ for investments in research in India will now go elsewhere instead.

‘We will invest more in countries where we have protection,’ he said, without specifying further.

After the verdict and legal loss Novartis had expressed concern the judgement would discourage investment. This move is clearly meant to follow through on the implied threat in that statement -but is hardly symptomatic of a wider industry trend, which Novartis would like to see.

In the long term, this will probably harm Novartis more than India. For one, it is unclear how big a move this will be. The company has substantial planned investments in India, including a Rs. 500 crore R&D project in Hyderabad. Just how much will be affected is unknown, till Novartis says just how much investment it will move away.

Second, Novartis may need India more than India will need Novartis. A McKinsey report covered in the FT says India’s drug market will be worth USD 20 billion by 2015.

India’s pharmaceuticals market will more than triple to $20bn by 2015 on the back of rising personal incomes, the spread of chronic diseases and the growth of hospitals and clinics across the country, according to McKinsey, the consultancy. India’s projected growth would rank it 10th globally in 2015, from 14th two years ago, McKinsey said in a report released on Wednesday. The retail sales value of India’s drug market was $6.1bn in 2005 and $3.4bn in 2000.

The forecast by McKinsey implies a compounded annual growth rate of 12.3 per cent, compared with 9 per cent from 2000 to 2005.

Clearly, that is a lot of money even for Novartis to ignore.