Novartis balances the risks and rewards of pro bono R&D

Paul Herrling, who heads Novartis's $200 million initiative to develop drugs for the developing world, recently sat down with Forbes to discuss the pharma company's pro bono R&D strategy. Steering clear of HIV, where a number of research initiatives were already underway, Herrling's group decided to focus on TB and dengue fever, later adding malaria to the mix. But Herrling makes it clear that even though the company isn't ever going to see a financial return on the program, dozens of scientists are charged with carefully calibrating an R&D strategy that has the best odds of success for the greatest number of new therapies.

Novartis is leveraging partnerships with various NGOs to help extend its reach, Herrling tells Helen Coster. "There is a limit to what we can do if we want to maintain profitability as a company," he adds. "It cannot be a commercial organization's responsibility to solve access to medicine problems where there is no market. We are trying to partner with PDPs [product development partnerships] and NGOs to work together to try to solve this problem. We would go out of business if we tried to address this problem on our own."

Herrling also had some interesting thoughts on the economics of drug development, noting that pharma companies have to seek that one new blockbuster that can cover the costs of a slate of development failures.

"For every one drug that makes it to market, seven or eight other drugs will fail, and they cost the same to manufacture," he says. "When you're working in a rich country, your shareholders will bear this risk because if you have one drug that makes it, you recover the risk through sales."

Novartis so far has been the only company to gain one of the FDA's priority review vouchers for its work on these new drugs for poor countries. But the same fundamental risks involved in drug development for rich nations apply to its program to help the poor. You can only get the complimentary priority review if your therapy is approved. The long string of failures sure to plague any development program earns no reward.

- here's the Q&A from Forbes