Novartis may route new drugs through subsidiary

Contrary to investor expectations, Novartis may launch some of its new-patented drugs in India through its wholly-owned subsidiary, Novartis Healthcare, instead of listed entity Novartis India.

“This is a policy shift for Novartis regarding its listed Indian company which has always enjoyed access to several launches over the years,” analysts said. This could be a dampener for minority shareholders as the listed company will be deprived of new launches from the parent’s pipeline — a major growth driver especially in the new patent regime scenario.

The recall on Novartis’ exclusive marketing rights (EMR) in India for cancer drug Glivec, and delay in the government’s announcement of the Drug Price Control Order (DPCO) and data exclusivity may explain the company’s shift, analysts said.

About plans to introduce products through its unlisted entity, company officials said, “Novartis periodically evaluates the India scenario regarding the regulatory environment and market potential for its products. The decision to launch products is based on internal evaluation of a composite set of factors.”

There is no clarity on when the new products will be introduced in India through the subsidiary. “Timing of product launches are strategic decisions which cannot be shared in advance as this could result in loss of competitive advantage in the market,” the Novartis spokesperson said.

However, Novartis is expected to launch Lucentis, a drug for age related mascular degeneration (AMD), a leading case of blindness in people over 55, through the arm soon . Lucentis is expected to garner significant sales globally as the drug may be worth $1.84 billion by 2010. Lucentis could also rake up significant sales in India. “The prevalence of AMD was found to be 1.1% in south India and 4.7% in North India,” Mahesh Sawant, programme manager, Healthcare Practice, Frost & Sullivan, told ET.

Novartis recently unveiled plans for new product approvals and global launches over the next two years. “Many of these are for best-in-class medicines that would advance treatment standards for patients with hypertension, diabetes, cancer and other diseases,” a statement said.

The products include a new treatment for chronic myeloid leukaemia, Tasigna; an osteoporosis drug, Reclast (Aclasta); two hypertension drugs, Tekurna and Exforge’ and an anti-diabetic drug Glavus. Glavus is being touted as Novartis’ next $1-billion drug blockbuster. “In India, the oral anti-diabetic market is valued at Rs 750 crore growing at around 14%,” said Mr Sawant. As a result, if Novartis launches Glavus through its subsidiary, the impact on its listed company’s sales growth could be considerable.

This could have also a negative impact on other pharma MNCs’ valuations. While E-Merck has already decided to launch its new products in India through its 100% subsidiary, uncertainty prevails in Aventis and Pfizer. While most launches have been committed through listed entities, the MNCs also have wholly-owned arms in India. Earlier this year, Wyeth reversed its decision to launch vaccine pneumococcal Prevnar through its listed entity, after minority investors’ protests. Only GlaxoSmithKline has not announced plans to form a 100% subsidiary in India yet.