I simply have to note that — at least for the near term (the next seven to ten years) — Merck’s investment spend in China will likely exceed its return (in domestic Chinese net profits on its sales revenue), but the higher-end health care consumption market emerging there is simply so large, that Merck cannot afford not to make these investments. So it has plunked down $1.5 billion, to build an R&D complex there.
From Merck’s press release of this morning, a bit:
. . . .Merck. . . known as MSD outside the United States and Canada, today announced the establishment of an Asia Research & Development (R&D) headquarters for innovative drug discovery and development located in Beijing, China. The new facility is part of a $1.5 billion commitment the company has made to invest in R&D in China over the next five years. . . .
Located in Wangjing Park, one of Beijing’s rapidly expanding science and technology parks, the facility will consist of 47,000 square meters of office and laboratory space. The first phase of construction, scheduled to be completed by 2014, will provide capacity for approximately 600 employees working in the areas of drug discovery, translational research, clinical development, regulatory affairs and external scientific research programs. . . .
That’s about $300 million per year for the next five years. To be clear, I am not being critical — this is a smart Whitehouse Station strategy, primarily because it is likely the only way to really establish a sustainable selling effort in China: one must invest in China — put down planted roots — to grow in China, given that the state still owns (and/or largely influences) all of the significant health care expenditures made there.