Merck KGaA starts work on what will be its second-largest plant

Merck Serono CEO Belén Garijo

Merck KGaA emphasized the importance of China as a market when it announced last year it would build a new plant there, a facility that would be its largest outside of Europe. The German drugmaker made that point again last month when it announced it was getting ready to start construction on the facility. And this week, just in case anyone had missed it, the drugmaker said construction had begun on the plant which will make meds on China's essential drug list.

"We have steadfastly aligned our focus and strategy with the Chinese government's efforts to increase patient access to quality care throughout the country," Merck Serono CEO Belén Garijo said in a statement. "Today, we are focused on localizing production to better cater to the demands of Chinese doctors and patients. At the same time, we are localizing research and development to further build a differentiated portfolio of medicines in China, aimed at serving patient needs for general as well as specialized care. We are also creating alliances and partnerships with local partners in every part of our operations."

The €80 million ($107.67 million) plant it is building in Nantong in the Shanghai region 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.

The drugmaker also said the company will emphasize standards in both construction and operation of the new plant. "We firmly believe that complying with the highest quality, environment, health and safety standards is a natural commitment to the communities where we operate, as well as a prerequisite to ensuring the availability of high-quality medicines for patients," said E. Allan Gabor, CEO of Merck Serono China.

China is a huge and rapidly growing market, albeit one that can prove tricky for Western companies. Many other drugmakers are building production operations there. Johnson & Johnson ($JNJ) is investing between $200 million and $300 million in a new 267,000-square-meter facility in Xi'an, the capital of the Shaanxi province. That facility is slated to become Janssen's supply-chain hub, not just for China but other Asian markets. Other companies are building in Singapore, which many consider a safer bet. AbbVie ($ABBV) said earlier this year it would build a $320 million plant in that city-state.

- here's the announcement