SEPT. 13–CAMBRIDGE, MA– With the opening of its new worldwide research headquarters here just months away, Swiss drug maker Novartis Pharma AG has flown in a team of its top executives last week with a mission to form working relationships the region’s biotech community.

Before an audience of nearly 150 members of the local biotech industry, Novartis executives proclaimed the virtues of their company as a potential partner for the region’s firms. They emphasized the company’s ability to bring drugs to market — faster and more frequently in recent years than any of its big pharmaceutical rivals.

And the message rang clear with local executives.

“This is a large company, saying they think they are at the forefront of the industry, but to keep that going, they need to be here, where they can take advantage of the discoveries happening in this area and the people and talent that are going to provide them with future discoveries,” Richard Dweck, founder and chief executive of 3rd Millennium, a Cambridge bioinformatics firm, told The Boston Globe. “This is their step to stay ahead of everyone. It’s a huge affirmation of what people in this town are doing.”

Novartis announced in May that it is moving its worldwide research headquarters to Cambridge, making it the first, and only, pharmaceutical giant to make such a significant commitment to the region. [See “Novartis to build new research facility in Bay State, CleanRooms, June 2002, p. 1].

Attendees of Friday afternoon’s event say Novartis is also the only big pharmaceutical company to bring together its top executives to woo the biotech industry.

“When someone moves into the neighborhood, they might have a party for the neighbors and not see them again for 10 years,” says Joshua Boger, chief executive of Vertex Pharmaceuticals, a Cambridge company that has a research alliance with Novartis. “I don’t think that’s the likely outcome for Novartis’ party. I think they are extremely serious and sincere about partnerships being of strategic importance to them.”

Novartis’ move and its efforts to reach out to the biotech industry bring into bold relief the changing nature of the relationship between pharmaceutical corporations and biotech. In the early years of biotechnology, drug companies had the upper hand. They had the cash and resources biotech needed to develop and market drugs. Biotech firms often sold their discoveries on the cheap to get funding they needed to survive.

Many of those early deals left biotech executives feeling exploited. Pharmaceutical companies were seen as swooping in to scoop up promising discoveries at rock-bottom prices and reap the lion’s share of the financial rewards when the discoveries turned into approved drugs. As the industry evolved, deals became more equitable. But the perception lingered that the biotech industry needed its large pharmaceutical counterparts more than the drug giants needed biotech.

In the past year, however, the tables have turned. Big pharmaceutical companies are failing to produce a new generation of blockbusters needed to offset the loss of a number of huge-selling drugs to patent expirations.

Desperate to fill their pipelines, they are paying biotech firms huge sums of money for drugs in late stages of development. And the competition for those drugs is stiff. Bristol-Myers Squibb agreed to pay $2 billion for the cancer drug Erbitux in the now infamous deal with ImClone Systems only after losing its bid to buy another drug.

“Most of the big deals you’ve seen in the past year we’ve been looking at as well,” says Joerg Reinhardt, head of development for Novartis Pharma. “Any good product out there attracts a lot of interest.”

Five years ago, most pharmaceutical companies spent less than 10 percent of their research budgets on licensing deals. Today, companies spend an average of 15 to 20 percent of their research expenditures on licensing deals. And Novartis, which spends about a third of its research budget on outside deals, expects that in five years, most of its competitors will allocate at least 20 percent of their research spending for outside deals and partnerships.

Novartis currently has one of the strongest pipelines in the industry. Since the beginning of 2000, the Swiss company has launched 10 new drugs, more than twice the number of any other top pharmaceutical concern. It has another 17 drugs in development that the company hopes to bring to market in the next five years. But in an industry where failure is the norm and bringing a product to market takes a decade, Reinhardt says, “There is no room for complacency.”

Reinhardt along with Thomas Ebeling, head of Novartis’ global pharmaceutical business, and other company executives came up with The Art of Partnership program as a way to build relationships with biotech executives, lay the foundation for future deals, and raise Novartis’ profile. The commitment is a long-term one, they say. They did not expect to walk out of the event with a rash of new deals in hand. They wanted to send a message that Novartis is eager to work with the local biotech community, and that together, they can do more than they can alone.

Five years ago, Novartis was considered a staid and sleepy company. Potential biotech partners feared their discoveries might languish in the hands of the Swiss giant. But in recent years, Novartis has emerged as one of the industry’s successes. At a time when many rivals face declining revenue growth, Novartis is poised for several years of double-digit expansion. Part of Friday’s intent was to promote Novartis’ new image — dynamic, innovative, ferociously competitive, a desirable partner.

“It’s very smart,” says Janice Bourque, president of the Massachusetts Biotechnology Council. “It’s more than smart. I think it sets a tone, sends a message of engagement that is very different from the past. It says, ‘We are new, we are coming to your community, and we want to be a part of it. We don’t see ourselves as coming in and taking over. We see ourselves as a partner.” It’s a much more team-oriented approach.”

Novartis has partnerships with local companies, most notably an alliance with Vertex that could provide the biotech company with as much as $800 million for the discovery and development of eight drugs directed at targets in the kinase protein family. But local officials hope Novartis’ move to Cambridge means area companies will capture an increasing portion of its research dollars, especially at a time when many small firms have been battered in the public markets and are struggling to stay afloat.

And though there is no guarantee that Novartis will prove an additional source of revenue for these companies, more partnerships seems a natural outgrowth of the company’s newfound proximity to the region’s biotech community. Already, Novartis is bringing 400 jobs and investing $250 million into the research facility, which begins operations early next year. It plans to invest $4 billion here in the next 10 years.

“Biotech partnerships start with a crusader,” says Michael Lytton, a partner at venture firm Oxford Bioscience Partners. “The crusader is almost always a scientist so having several hundred Novartis scientists here can only be a good thing.”

But the challenges remain great, especially as companies seek to address the underlying causes of disease, rather than just treat the symptoms, said Mark Fishman, the Massachusetts General Hospital researcher and physician and Harvard Medical School professor who will head the new Novartis research operation. And they are not challenges that cannot be surmounted by a single company.

“We have no illusions about the challenges we face,” Fishman adds. “That’s the reason we are here — to work with you in an open and creative culture to take an idea and drive it as quickly as possible into a medicine.”