Novartis Joins Global Interest in Vaccines with Increased China Investments

Novartis (NYSE: NVS) continued its mega-investments in China by announcing it will spend $250 million to expand its global technical center in Changshu, and it will also pay $125 million to buy a 85% stake in a privately held China vaccine company, Zhejiang Tianyuan. Tuesday, Novartis said it would spend $1 billion over the next five years to expand its R&D facility in Shanghai, one of the institutions around the world that comprise the Novartis Institutes for BioMedical Research (NIBR).

Located outside of Suzhou, the Changshu Technical R&D Center focuses on the process and analytical R&D of innovative drugs. The provenance of the center includes both the substance and the manufacturing of the drugs.

Novartis’ interest in Zhenjiang Tianyuan in particular and vaccines in general follows a worldwide trend. Many companies in China are expecting healthcare reform to spark an upsurge in demand for basic public health products, especially vaccines. China is already the third largest market worldwide for vaccines, and sales are expected to continue to grow by double digits in the coming years.

Zhejiang Tianyuan is already profiting from that interest. Its revenues doubled from 2006 to 2008, when they reached $25 million. Net income figures were not released. However, Novartis is paying five times last-year’s revenues, showing that China vaccine companies are currently a hot commodity.

The company’s major revenue producer is a flu vaccine, though it also manufactures vaccines for hemorrhagic fever with renal syndrome (prevalent primarily in East Asia), Japanese encephalitis and meningococcal meningitis. It has three new vaccines awaiting approval, and the company reports another five vaccines are in development.

Disclosure: none.