Novartis in $65M deal with MIT

CAMBRIDGE, Mass. (CNNMoney.com) -- Novartis will pay MIT $65 million over the next 10 years to develop a new manufacturing system the company believes will provide a big boost to its production of drugs.

Novartis said Friday that the deal with the Massachusetts Institute of Technology will streamline manufacturing by minimizing the use of raw materials and the generation of waste.

The company said it would develop a continuous process to replace its time-consuming "batch-based" system, in which pharmaceuticals are shipped to numerous locations throughout the manufacturing process.

The current method is subject to "multiple interruptions," Novartis said.

"The idea would be to go from start to finish, from the molecule to the pill, in a continuous process," said CEO Daniel Vasella.

The manufacturing of many of Novartis' products is spread across the globe, requiring stop-and-start production and time-consuming shipping between factories. For example, the company's popular drug Diovan is manufactured in six different countries, said Tom Van Laar, head of global operations.

Vasella said the process might be streamlined by producing drugs in small facilities devoted to a single product, rather than making multiple types of drugs within a single factory. He said he hopes that the streamlining will lead to more domestic production.

Novartis (Charts), a Swiss company with nearly $20 billion in sales during the first half of 2007, is one of the more diverse companies in the drug business. The company's operations straddle name-brand pharmaceuticals, biotech and low-cost generics, and it also has a strong presence in vaccines and diagnostics.

This allows Novartis to hedge its bets if one or more of these areas takes a hit, such as the Food and Drug Administration's rejection of the experimental osteoporosis drug Prexige on Sept. 27.

The company's top-selling drug is Diovan, a high-blood pressure drug with $2.4 billion in second quarter sales, a 24 percent jump from the same period last year. Novartis' chronic myeloid leukemia franchise, known as Gleevec and Glivec, jumped 14 percent in the second quarter to $1.4 billion.

Tooley said Novartis also has a "broad and deep" pipeline, with 10 new drug launches expected during 2007-08.

The stock is up 9 percent year-to-date, lagging behind the drug sector's gain of 14 percent and the S&P gain of 24 percent.

Novartis is one of the largest European drug companies in terms of annual sales, along with Sanofi-Aventis (Charts) and GlaxoSmithKline (Charts).