Western Drug Firms Position Themselves in China’s Marketplace
Merck & Co., Inc. (NYSE:MRK) became the latest in a series of Western drug companies to enter into partnership talks with existing Chinese companies to introduce new products into the growing market. Sinopharm Group Co. (PINK:SHTDF) and Merck announced a statement of mutual interest in which the two agreed to discuss possible business arrangements.
The talks are centered around the commercialization of certain vaccines in China, including Merck’s human papillomavirus (HPV) vaccine, which protects against cancer and other diseases. While Merck and other Western companies have in-house operations in China, Sinopharm’s extensive distribution and existing brand equity could scale growth more quickly.
Sinopharm Group, which is jointly owned by China National Pharmaceutical Group Corporation and Shanghai Fosun Pharmaceutical, is the largest pharmaceutical company in China with revenues that reached 35 billion RMB in 2007. First formed in 1998, the group also has operations in Africa, France, Germany, Hong Kong, Vietnam and the United States.
The rush to China began in 2002 when Novo Nordisk established a research and development facility in Shanghai that was quickly followed by others, like Roche, AstraZeneca, Eli Lilly and Pfizer. Meanwhile, Chinese government officials are encouraging research and development activities instead of simply manufacturing activities within the country’s borders.
China is also rapidly becoming a consumer of drugs, especially as middle income growth takes off. China’s pharmaceutical industry is expected to reach $120 billion by 2020, while it will also become the world’s second largest market after the United States, according to Sinopharma’s Biao Chen. Combined, these factors make it a very important emerging market for drug companies, like Merck.
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