Merck & Co seeks Chinese alliances to increase growth

Updated: 2011-08-18 08:13

By Daryl Loo (China Daily)

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Merck & Co seeks Chinese alliances to increase growth

BEIJING - The pharmaceutical giant Merck & Co is ditching the strategy of increasing sales employees in China and turning to local partners and education to reach doctors as the US company seeks growth in the world's third-biggest drugs market.

"The conventional thinking was that a linear increase of the sales force will generate a linear increase of revenue. I don't believe in this model," said Michel Vounatsos, the head of Merck's China operations, in an interview on Tuesday.

"We are very happy with the number of sales representatives we have now."

Merck, the second-largest US drugmaker, has been trimming jobs in developed markets and expanding in emerging ones, where increasing incomes are bolstering consumer spending on medical treatments.

The company reduced its sales force in developed markets by 32 percent in 2010, while hiring workers in China, Brazil and Russia, Chief Executive Officer Kenneth Frazier said in January.

Merck has 5,000 employees in China, of which 3,500 are in sales. One thousand of those salespeople were added after 2009, with a large part coming from its acquisition of Schering-Plough Corp that year, said Vounatsos, who previously headed Whitehouse Station, New Jersey-based Merck's unit in France.

"The prime focus of the physician is how to best treat patients, so they're very eager to be continuously educated on innovations and novel techniques and new regulations. And we have a role to play," Vounatsos said in an interview on board a high-speed train from Nanjing to Shanghai.

More than 185,000 Chinese doctors have signed up on Merck's healthcare education website Univadis since its China debut in July 2010, giving them access to medical journals such as The Lancet, Vounatsos said.

The drugmaker also sponsors the training of doctors and nurses at community clinics in China and has donated more than 5,000 copies of the Chinese version of the Merck Manual medical reference book.

"It translates into appreciation and a good image for the company," Vounatsos said. Merck's senior management is supportive of the strategy, even if it may not immediately generate return on the investments, he said.

"China is a long-term dossier and opportunity, so we don't assess in the short term. We measure our progress beyond the five-year period and refresh our strategy as it evolves," Vounatsos said.

The target is to grow "at least at or above the market growth rate" in China, he said.

China's pharmaceutical market will probably grow 19 to 22 percent annually over the next five years and will probably be valued at $115 billion by 2015, according to the US research company IMS Health Inc.

Merck generated sales of $206 million in China in the second quarter, a 30 percent increase from a year earlier, said Adam Schechter, the company's president of Global Human Health, on a July 29 earnings call.

Merck is also looking to improve its access to the Chinese market by teaming up with local companies such as Sinopharm Group Co, the country's biggest drug distributor.

The company on July 21 signed a deal with Nanjing-based Simcere Pharmaceutical Group for a venture that will improve access to patients and boost sales of blood pressure treatments and cholesterol-lowering medication.

Bloomberg News

(China Daily 08/18/2011 page17)