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Novartis Buys into New Pharma World Order

In paying $5.1 billion for vaccine maker Chiron, Novartis is pursuing a unique business strategy which recognizes the growing role of governments, both as purchasers and as price-setters. The same strategy assumes, too, that pharma must seek alternative growth sources to branded prescription drugs.

To understand Novartis AG 's $5.1 billion bid for Chiron Corp. requires more than merely calculating a financial return. In buying the vaccine maker, Novartis is pursuing a unique business strategy which recognizes the growing role of governments, both as purchasers and as price-setters. [See Deal] The same strategy assumes, too, that pharma must seek alternative growth sources to branded prescription drugs. Generics, OTC drugs and vaccines will start to look more appealing as industry dynamics shift.

Certainly, Novartis finds the vaccine market attractive. The recent flu scare, and President Bush's $7.1 billion plan to combat a...

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