Boehringer's China expansion hits as probes leave market in turmoil

Germany's Boehringer Ingelheim two years ago started on a major addition to its operations in China as that rapidly expanding market looked like the promised land to many drugmakers. But the new facilities are coming online even as drugmakers have become the focus of bribery scandals that have put a deep chill over the industry there.

Wolfgang Baiker, member of the Board of Managing Directors, responsible for Biopharmaceuticals and Operations

Company officials Thursday touted its €70 million ($95 million) investment in its research and development and manufacturing and operations in Shanghai, but acknowledged the market is suffering right now. Still, they remain optimistic and the company said it plans to pile even more money into R&D there next year. "We will invest further into the site in 2014 to set up a development lab for biopharmaceuticals," Director Wolfgang Baiker said. "All these activities show Boehringer Ingelheim's commitment to supporting innovation and growing our business further in China--one of the most important pharma markets in the world."

The company said it will add more than a hundred jobs at the plant, building employment to 350. It expects to be able to triple production by 2018 to 220 million packages. The upgraded plant also includes a packaging and distribution center.

The new facilities come online just after Chinese authorities started a bribery investigation of GlaxoSmithKline ($GSK), claiming its used a travel agency to funnel $489 million in bribes and favors to Chinese doctors and officials. China quickly expanded the probe to include multinationals Novartis ($NVS), Sanofi, Eli Lilly ($LLY) and Germany's Bayer HealthCare. Drugmakers have said the deepening investigations have made it much more difficult to do business there. 

Boehringer spokeswoman Heidrun Thoma acknowledged to that the investigations have cast a pall over the industry in China. She said she believed the problems were isolated and companies just need to get on top of compliance. "All the major multinational companies operating in China have very strong compliance departments. The issue now is how to enforce the rules and make sure people don't find loopholes to go around the regulations," Thoma told the publication.

Boehringer claims to be among the fastest growing drug companies in China, a market it has been in since 1984. And the current expansion is not its only project there. In June it created a strategic alliance with Zhangjiang Biotech & Pharmaceutical Base Development Company (ZJ Base) in Pudong, Shanghai, which will build the facility under BI's tutelage. The plant will help develop and manufacturer biologic drugs using mammalian cell culture technology. BI will invest €35 million ($44.9 million) in the plant, which it expects to be operating in 2016.

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