By Charles Craig

Novartis AG's president, Daniel Vasella, isn't like other pharmaceutical company executives when it comes to banking on biotechnology for bailing out his industry's drug development efforts.

Research and development chiefs at Basel, Switzerland-based Roche Holding Ltd. and London-based SmithKline Beecham plc have declared biotechnology, and genomics in particular, the drug discovery sciences of the future, accounting for most, if not all, products in their pipelines by the 21st century.

"I don't believe all drug inventions will come from biotech," Vasella told BioWorld Today. "There's still a place for traditional chemistry and combinatorial chemistry."

Vasella acknowledged biotechnology is an essential tool in drug companies' laboratories: gene sequencing and genetic modification of animals for human disease models are commonplace.

But when asked how much of Novartis' drug development pipeline will be filled by products from biotechnology and genomics research, Vasella said he has not made that calculation.

"I've never looked at it," he explained. "If you have an investment in a special technology and you've made up your mind it's crucial . . . and I believe [biotechnology] is . . . it isn't necessary to make a quantitative judgment. It's academic."

Vasella, the former head of Sandoz Ltd.'s pharmaceutical division, emerged as leader from the 1996 mega-merger of Sandoz and fellow Basel, Switzerland, drug maker Ciba-Geigy Ltd. The new entity, Novartis, headquartered in Basel, is considered the second largest drug company in the world, behind Glaxo Wellcome plc, of London.

In 1995, a combined Sandoz-Ciba recorded about $11 billion in pharmaceutical sales and a total $27 billion in revenues from products in the three core areas of health care, nutrition and agribusiness.

Despite Vasella's reluctance to be pinned down to a percentage of biotechnology products in Novartis' pipeline, as head of Sandoz's pharmaceutical division he made significant investments in the science, particularly gene therapy.

In 1995, after Genetic Therapy Inc. received a broad U.S. patent on ex vivo gene therapy, Sandoz paid $295 million to take control of the Gaithersburg, Md., company at a 38 percent premium to its trading price.

Four years earlier, Sandoz paid $392 million, or $65 per share, for a 60 percent interest in Systemix Inc., of Palo Alto, Calif. This year Novartis paid considerably less, $19.50 per share, to buy the remaining 27 percent it did not own for $76 million. Systemix's attraction was its U.S. patents on a substantially pure population of stem cells and the technology to isolate those cells for therapeutic uses, including gene therapy.

Ciba-Geigy's contribution to Novartis' gene therapy capabilities was a 1995 purchase of 49.9 percent of Chiron Corp., of Emeryville, Calif., in a deal valued at $2.1 billion.

The enthusiasm for gene therapy in the early 1990s has been tempered by growing awareness of the complexities of the human genome. As for commercialization of gene therapy, Vasella is less optimistic than the U.S. Federal Trade Commission about the speed with which such drugs will be available widely.

The FTC, in forcing Novartis to share its technology with competitors to resolve antitrust concerns, estimated the market for gene therapy products at $45 billion by 2010.

It will take "many years," Vasella told BioWorld Today, before gene therapy is in widespread use. The first products target severe diseases that are relatively rare. Those won't be ready for patients until 2000, he predicted. And it will be five to 10 years before gene therapies tackle more common disorders.

"We view gene therapy realistically," Vasella explained. "This is not going to be a huge market from day one."

Gene therapy, he added, is only one method for taking advantage of genomics. Therapeutic proteins and small molecules for gene regulation also are important, he said.

Novartis' gene and cell therapy research, he observed, also will help the company's continuation of Sandoz's push into xenotransplantation.

Novartis' most advanced gene therapy product, developed by Genetic Therapy, involves use of the herpes simplex virus-thymidine kinase gene in brain tumors to make the cancer more susceptible to ganciclovir. The drug is in Phase III trials.

In 2000, Novartis will have the option of becoming majority owner of Chiron. Vasella said Novartis will make its decision based on an evaluation of Chiron's performance and future growth expectations at the start of the 21st century.

More Alliances, Less Acquisitions For Novartis

In the meantime, the potential exists for partnerships. For example, Chiron has diagnostics, which "we don't have," he noted, and gene therapy, which is "complementary and to a certain extent competitive."

As for the recent management shake-up at Chiron, Vasella said he was "not involved personally."

Last month, Chiron announced CEO Edward Penhoet will move to vice chairman of the company and a new chief executive will be hired. Chairman William Rutter will remain in his post, but give up some operational responsibilities to the new CEO. Rutter, Penhoet and Pablo Valenzuela, a Chiron senior vice president, founded the company in 1981.

In discussing Chiron, Vasella said, "As a company grows to a full-blown pharmaceutical company with sales and research and development and production, it's like the transformation of a caterpillar to a butterfly. Some changes occurring are just incremental. New people will have a new outlook and will have new ideas to grow the business."

In Novartis' continuing search for new product technologies, Vasella said making sure the most promising are selected is "an extremely difficult task."

He has relied on experts within his company and on outside friends. Research published in scientific journals is a primary source. But "scouting" a potential partner also is essential.

"I used to [visit companies] regularly," Vasella explained. "I would visit three or four during a week or 10 days. It's very complementary to the published research. I was amazed to see some labs very busy and in other places the labs were empty, like a ghost company. On paper you wouldn't know that."

Vasella said Novartis will keep its "eyes open" for new science and he would rather license new biotechnologies than take over the company developing them.

"We will do more alliances than acquisitions." he said. "It's easier, faster and much more flexible to do alliances." *