German Merck to start work on new China plant

Karl-Ludwig Kley

Merck KGaA will start construction next month on a plant to make diabetes drugs in China, a market it says is key to its future. The market is so important that the executive board of the German drugmaker held an event there to reiterate that point to Chinese officials.

"Together with government officials, customers, partners and our highly motivated local colleagues, we will explore ways to further address critical healthcare needs of the Chinese population--both with our high-quality drugs and our life science tools for biopharmaceutical R&D," Karl-Ludwig Kley, chairman of Merck KGaA's executive board, said in a statement.

Merck KGaA pointed out that the €80 million ($107.67 million) plant it is building in Shanghai will be its second largest in the world. It 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. The company expects to wrap up construction in 2016 and start commercial production in 2017.

Merck KGaA emphasized that the drugs the facility will manufacture are on China's Essential Drug List, claiming it would be the first international company to build a new facility dedicated to large-scale production of drugs on the list "that satisfy public healthcare needs and must be made available at all times."

Of course other drugmakers see China, with its rapidly growing middle class and its expanding access to healthcare, as a prime, if tricky, market. At about the same time that Merck KGaA first announced its intent last fall, Johnson & Johnson ($JNJ) also said it would build a new facility in Xi'an, the capital of the Shaanxi province. The 267,000-square-meter plant will cost between $200 million and $300 million. The company said construction will kick off this year and that it will replace a Xi'an-based Janssen Pharmaceuticals facility built in a joint venture by J&J and a Chinese partner in 1985. The new plant is slated to become Janssen's supply-chain hub, not just for China but other Asian markets.

- here's the announcement (PDF)