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Multinational drug firms go into overdrive

By Liu Jie (China Daily)
Updated: 2009-09-10 08:38

Multinational pharmaceutical firms are investing more on new facilities, research and development and human resources in the Chinese market, anticipating demand here to offset the slowdown in developed nations.

The world's third-largest drug firm, Novartis Groupb said it is putting money into overall strength enhancement in China, particularly R&D and sales. The company also plans to go on a hiring spree to fill up the newly created positions, according to Joseph Jimenez, CEO, pharmaceuticals division, Novartis.

The company plans to launch six new products in China this year and is significantly increasing the number of clinical trials conducted in the country.

"We will continue our investments for the R&D center in Shanghai and consider it as a long-term and scaled investment," said Jimenez.

The company's R&D center in Zhangjiang Hi-Tech Zone, set up in 2006, is one of three core R&D facilities it has around the world. The other two are in Basel, Switzerland, and Cambridge, England.

The Swiss drug firm expects to increase its existing employee strength of 2,700 in China by 20 percent every year until 2013. Most of the newpositions will be in sales, said Jimenez.

Eli Lilly and Company (Lilly) has similar plans like Novartis. The ninth largest drugmaker said its China unit - Lilly China - would double staff intake to 2,000 this year, even as experts debate whether the economy has bottomed out.

A large portion of the new hires are in sales and distribution as we expect to do a better job reaching patients in central and western areas of China, Lilly China president David Ricks said.

But he said Lilly China is growing in all aspects, so new employees will be needed in virtually every area from manufacturing and R&D to accounting and operations. The company had earlier pledged to inject $100 million in China for R&D from 2008 to 2012.

Other drug companies are also investing huge amounts of money on facility expansion. Pfizer recently set up a $60 million manufacturing facility in Dalian, in northeast China, while Bayer announced plans to invest up to 100 million euros over the next five years for its R&D center in Beijing.

Investment enthusiasm in the Chinese market is greatly stimulated by the big population base and fast economic development, according to Peng Haizhu, pharmaceutical analysts from Huatai Securities.

It is estimated that more than 200 million households in China will earn more than 40,000 yuan ($5,856) a year by 2025, with spending on private healthcare and medicines by urban consumers expected to record double-digit growth every year in the coming two decades, according to a PricewaterhouseCoopers (PwC) report.

The enthusiasm is specifically driven by China's three-year 850 billion yuan medical system reform package that aims to provide more accessible and affordable healthcare to the country's 1.3 billion people, Peng said.

He also said that drug companies' growth in China has prompted the corporate headquarters of many of these firms to deploy more resources in emerging markets.

China outperformed other emerging markets with a 22 percent increase in sales even as global numbers fell by 3 percent.

Sales by Novartis Pharmaceuticals in China jumped 29 percent year-on-year to 3.3 billion yuan in 2008, compared with its 6 percent global growth and the company is expecting a 30 percent rise in China this year. AstraZeneca's figures were 25 percent in China and 7 percent globally.

Year-on-year sales of Lilly China grew about 30 percent in 2008, while its global business rose 9 percent. GlaxoSmithKline (GSK) achieved a 12 percent growth in sales in emerging markets.

China's compound annual growth rate is forecasted to be about four times faster than that of markets in the US and Europe between 2007 and 2012, PwC said.

(China Daily 09/10/2009 page31)