J&J, Merck KGaA roll out new China plant projects

Johnson & Johnson's Janssen unit and Merck KGaA are joining the parade of companies rolling out new manufacturing facilities in China, a market that could become the world's largest in a decade. The moves come in the face of an investigation there that has put a pall on business lately.

Johnson & Johnson ($JNJ) will build a new facility in Xi'an, the capital of the Shaanxi province. Ernie Knewitz, vice president of global media relations, said the 267,000-square-meter plant will cost between $200 million and $300 million. The company said construction will kick off in 2014. It will replace a Xi'an-based Janssen Pharmaceutical facility built in a joint venture by J&J and a Chinese partner in 1985. The plant is slated to become Janssen's supply-chain hub, not just for China but other Asian markets.

Merck says it will build an €80 million ($107.67 million) plant in Shanghai that will focus on production of diabetes drugs Glucophage, Concor and Euthyrox. It will also make drugs for heart and thyroid conditions. It will be about 40,000 square meters and have room for a 20,000-square-meter expansion. Construction is slated to begin in 2014 and to be completed in 2016, and commercial production will start in 2017. "This new facility will become Merck Serono's second largest pharmaceutical manufacturing site in the world," said Allan Gabor, general manager and managing director of Merck Serono in China.

China has leaned on drugmakers to transfer their technology to China and not just import drugs into the country. Drugmakers have responded with billions of dollars' worth of projects. Last year, Novartis ($NVS) announced a $500 million biologics manufacturing plant alongside a traditional drugmaking facility in Singapore. Sanofi ($SNY) announced this spring that it had four new plants that it expected to come online this year in China. In June, Boehringer Ingelheim said it would erect a €35 million ($44.9 million) biologics facility in Pudong that it expects to be operating in 2016. Japan's Eisai announced it would build a small facility near one it already has in Suzhou, Jiangsu.

Drugmakers do not appear to be delaying expansion plans despite an investigation into bribery there by drugmakers that got started this summer with very public allegations that GlaxoSmithKline ($GSK) had put together a slush fund of nearly $500 million that it used to bribe doctors and officials. As Reuters points out, citing consultant McKinsey, China's healthcare spending is slated to hit $1 trillion in 2020, from $357 billion in 2011. "In 10 years it's conceivable that China will become the largest pharmaceutical market in the world," Benjamin Bai, a Shanghai-based partner at law firm Allen & Overy, told Reuters. "Do you think (drug firms) can afford to get out of China? No. Even if it's difficult, they will find a way to adapt."

- here's the Janssen release
- here's the Merck release
- read the China Daily story
more from Reuters

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