Company: Merck & Co. ($MRK)
Investment: $1.5 billion over 5 years
Themes: Vaccines, diabetes and joint ventures
Merck made a major play to boost its standing in China last December when it outlined plans to invest $1.5 billion in the country over the next 5 years. The investment will fund an Asian R&D headquarters in Beijing, which, when fully operational, will employ 600 scientists. Merck views the R&D center as a source of new drugs for all markets, not just China.
"[What] we will be looking to do in China, as we do throughout the world, is identify opportunities to develop drugs to treat diseases that would be applicable globally. We see opportunities to include China in our worldwide clinical trials for our drugs and vaccines," Merck President Peter Kim told Reuters. The U.S. drugmaker will also use the site to bring its existing products to China.
As well as infrastructure, the $1.5 billion will fund research from basic early discovery through to clinical trials. Merck, like many of its rivals, is particularly interested in the Chinese vaccine and diabetes markets. And, in a move also adopted by its peers, Merck has hooked up with a local company to help it enter the market. The Merck-Simcere joint venture will manufacture and sell branded drugs for diabetes and other diseases.
For Merck to succeed it must capture market share. And with obesity-related Type 2 diabetes affecting one in 10 Chinese adults, it could even afford to sacrifice a little pricing power. "There continues to be [pricing] pressure in countries like China, … but what's key is the volume growth. And what we're trying to do is to ensure that there's significant opportunity for our volume to increase much faster than what the price pressure is, and that's how we've been successful," Merck CEO Kenneth Frazier said in a statement.