SHANGHAI – Merck KGaA, of Darmstadt, Germany, has reiterated its commitment to China, forging ahead with its €80 million (US$107.3 million) manufacturing plant, expected to be Merck's second largest globally and its first such pharmaceutical investment in China.

The facility will be dedicated to low-cost drugs for China's Essential Drug List (EDL), and three drugs will be the mainstay of production: Glucophage (metformin), Concor (bisoprolol) and Euthyrox (levothyroxine sodium), for the treatment of diabetes, cardiovascular diseases and thyroid disorders, respectively.

Merck is keen to be seen as supporting the Chinese government's priorities to provide quality medicines to its population in a cost-effective manner, as well as supporting China's efforts to deliver homegrown innovation in the form of novel biopharmaceuticals.

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

In the current climate of China's health care reform, with corruption probes and indictments of senior executives at Glaxosmithkline plc, it is no surprise that Merck is looking to stay on the right side of the government's agenda.

Its news comes hot on the heels of GSK's announcement that sales in its China operations are down 25 percent, as the company continues to be mired in an investigation into allegedly illegal sales practices, including accusations that it fraudulently funneled some $500 million to doctors and health officials. (See BioWorld Today, July 23, 2013, Aug. 12, 2013, and Oct. 25, 2013.)

During the latest GSK earnings call, CEO Andrew Witty emphasized China sales are stabilizing. "We remain committed to China as a business for us both in our consumer and pharma vaccine business," he said. "Obviously, we want to work with the authorities to resolve the issues that we've got there."

With GSK as the cautionary tale to avoid, Merck is taking a decidedly different tack. It has pointed out its plant will be the first big pharma greenfield investment totally dedicated to supplying the EDL, "reflecting the company's commitment to improving the lives of Chinese patients, in line with government priorities," the company said.

On Kley's return to Germany, he told local media (confirmed by the Merck press office in Beijing) that the company plans to maintain its double-digit annual growth and double its 2013 China revenues of €500 million to €1.3 billion by 2018.

Groundbreaking for the plant, located in the Nantong Economical Technological Development Area (NETDA) in the Greater Shanghai region, is slated for August. The plant is scheduled to come online in 2017.

The facility is designed for bulk manufacture and packaging of the three EDL drugs, and will have a maximum capacity of 9 billion tablets annually with an expected 2.4 billion tablets in the first phase of production. Drugs will be manufactured for domestic markets as well as export, said a company spokesperson.

While the EDL has been gradually expanded to include more drugs over the years, those that do get listed are constantly under the threat of price cuts. The once coveted opportunity of being listed on the EDL for the allure of volume business has become considerably undermined by diminished margins.

That might help to explain Merck's investments into developing innovative biopharmaceuticals that pack more market punch, is considerably greater than its manufacturing facility.

OTHER INVESTMENTS PROGRESSING WELL

Last fall, Merck announced two deals with up-and-coming biotech Beigene Co. Ltd., of Beijing, worth a potential combined $500 million for two locally discovered cancer candidates: preclinical poly ADP-ribose polymerase (PARP) inhibitor Beigene-290 and a second-generation BRAF inhibitor called BGB-283. (See BioWorld Today, Nov. 14, 2013, and Nov. 27, 2013.)

The deal represented what is considered only the second time a local company has licensed out a locally discovered potentially first-in-class treatment.

Both programs appear to be progressing well. In May, Beigene received a $5 million milestone payment for BGB-283 from Merck. Earlier in July, the first patient was enrolled in the phase I study for BGB-290 in Australia.

One of Merck's four global R&D hubs also is located in Beijing. That hub takes a stratified approach with a focus on biomarkers and drug genomics. When it was announced in 2011, the investment of $1.5 billion for R&D over five years was considered one of the biggest investments to date.

In 2011, Merck opened its Biopharmaceutical Technical and Training Centre in Zhangjiang Hi-Tech Park, Shanghai, to support biopharmaceutical customers in China for upstream and downstream processes. While the company has no biologics manufacturing facility of its own in China, the center helps its customers meet Chinese and global regulations with courses specifically designed GMP training and aseptic process manufacturing.