NOVARTIS TO INVEST US$36MN IN BRAZIL, CRITICISES PATENT THREATS

Switzerland-based drug major Novartis has pledged to invest some BRL100mn (US$36.78mn) on its Brazilian operations in 2005, but has criticised the government's willingness to break patents on HIV/AIDS treatments. Nevertheless, the company has also indicated that it would participate in some social schemes, including a program to expand community drug provision. However, despite a willingness to engage authorities, the company has also criticised local regulations on research and development, citing issues regarding the BRL3mn (US$1.10mn) expansion of its international tropical disease research activities in the country.

However, the government's apparent willingness to infringe patents, apparently in order to sustain its free HIV/AIDS treatment program, remains the key immediate cause of friction between much of the multinational sector and the government. Recent "constructive" meetings between senior Novartis executives and Brazilian President Lula da Silva appear not to have led to concrete progress on the issue.

Nevertheless, Novartis appears prepared to continue to constructively engage the authorities while it consolidates its local market presence. Although this year's planned spending is only a marginal increase on last year's total, the company is due to open new units at its production facility in Resende, Rio de Janeiro state, which have reportedly cost some BRL54mn (US$19.86mn). The facility will produce and export valsartan, the active principle in Novartis' lucrative hypertension treatment Diovan. Meanwhile, the company's generics unit, Sandoz, already produces some 34 products for the local market.

Novartis is the third-largest pharmaceutical company in Brazil in terms of revenues, and held a market share of some 5.7% in 2002. Local unit Novartis Biociências generated revenues of US$317mn in 2003.