Merck Plans R&D Center in China

Merck & Co. will spend $1.5 billion on R&D in China over the next five years, with a big chunk of the cash going to build a facility in Beijing that will become the U.S. company’s R&D headquarters for Asia.

By 2014, Merck expects to complete the construction of R&D facilities in Beijing’s Wangjing Park with more than 500,000 sq ft of space. By then, Merck will have 600 people in Beijing working in drug discovery, translational research, clinical development, regulatory affairs, and management of outsourced research programs. The company expects to further expand its Beijing R&D facilities after 2014.

At a press conference in Beijing, Ruiping Dong, a Merck senior vice president in charge of R&D in emerging markets, said one of the goals of the new R&D center is to facilitate the approval of Merck products by Chinese regulators. Peter Kim, president of Merck Research Laboratories, added that Beijing was selected over Shanghai partly because it is the Chinese government’s decision center.

Merck has been conducting R&D in China for years. In 2005, it established a lab in Beijing that now employs 300 scientists who manage clinical data. Moreover, Merck is one of the major customers of China’s numerous contract research organizations, or CROs.

Because of its reliance on CROs, Merck’s R&D presence in China so far has been mostly “virtual,” notes Greg Scott, CEO of ChinaBio, a company that advises investors about China’s biotech sector. “Perhaps they have felt some pressure [from the Chinese government] to set up a brick-and-mortar R&D lab,” he says.

It is quite likely that Merck was offered attractive terms by Wangjing Park, an emerging research cluster that actively promotes itself to potential investors, Scott adds. “Shanghai’s Zhangjiang Hi-Tech Park is the most established location in China, but it is less aggressive in its promotion,” he says.

A few companies have already selected Beijing to conduct pharmaceutical R&D. Novo Nordisk set up an R&D center in the Chinese capital about 10 years ago. More recently, the oncology start-up BeiGene chose Beijing as its headquarters. Several of China’s top universities and government research institutes are in Beijing.