Novartis chairman vows to preserve top R&D budget in retrenchment

Joerg Reinhardt

At Novartis, only the top executives are allowed to discuss R&D strategy in any kind of a meaningful way. So when they talk, everyone--including the company's big research staff around the world--pays very, very close attention.

So listen up: The new chairman at Novartis ($NVS), Joerg Reinhardt, sat down with The Wall Street Journal to review the company's careful restructuring--R&D is being concentrated in Basel, Shanghai, Boston and La Jolla, CA--and committed Novartis to maintain research spending at its current level near the $10 billion mark. That mark falls just behind Roche's research budget, the top R&D spender in the biopharma world with a 2013 budget of $10.23 billion. And it must be particularly welcome news in La Jolla.

Reinhardt says R&D spending will remain level at a time many pharma rivals are cutting back. And everyone in the company should expect to see the work consolidated in key regions, something that is likely to reassure workers in designated areas while raising fears for everyone outside the protected zones.

"A larger group of people benefiting from the infrastructure that's been created at a research place is a better approach than having small groups with limited infrastructure spread around the world," Reinhardt told the Journal. And it gives the giant a chance to work more closely with the academics in those areas.

The new strategy--overseen by a unique special committee--has already led to some significant alterations, especially with the closure of its research unit in Horsham, U.K., and some shifting of jobs and personnel in the U.S. The company has reportedly laid off thousands of staffers in recent months, including 500 at its home base in Basel.

This strategy falls right in line with the brave new world of Big Pharma as defined by most of the top companies these days. That hub strategy inspired AstraZeneca to concentrate its forces in Cambridge, U.K., sacrificing Alderley. Sanofi ($SNY), largely foiled in an attempt to reorganize R&D in France, has been shifting into Boston. Pfizer ($PFE) and Roche ($RHHBY) have both eliminated big outlying research posts in major retrenching efforts.

- here's the story from The Wall Street Journal (sub. req.)