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Life-Science Tool Leaders Increasingly See China as High-Growth Opportunity

LAS VEGAS — As several of the firms in the BioCommerce Week Index made their pitch to investors May 17-19 at the Banc of America Securities Health Care Conference, investment in the Chinese market was a common strategy for growth mentioned by many of the presenting executives.

There are two primary reasons why many industries, chief among them the life sciences industry, are targeting China as a way to boost top-line growth (see related Q&A for more on China). China, as part of its effort to become part of the World Trade Organization a few years ago, agreed to "liberalize the availability, and the scope of the right to trade" throughout its territories.

The second reason is China's expressed commitment to broadly support scientific efforts in the country. As part of this goal, the Chinese government is expected to spend $600 million on scientific research and biotechnology this year alone.

Many of the molecular biology tools firms tracked by BioCommerce Week — including Agilent, Invitrogen, Thermo Electron, and PerkinElmer [see BCW Index] — already have operations in China, while others are contemplating a move into the Communist country. Here is a sampling of how these tool firms are already expanding in or thinking about entering the Chinese market:

  • Agilent has been the most aggressive of the bunch, announcing recently the establishment of a training center in Shanghai with the intent of increasing the technical capabilities of the company's customer support teams (see BioCommerce Week 5/19/2005). The Shanghai Training Center is located adjacent to the manufacturing and R&D centers the company set up in that city three years ago.
  • Last December, Thermo Electron opened a 90,000-square-foot manufacturing facility in Shanghai that is slated to produce 10 products initially. Thermo also operates a manufacturing facility in JinQiao and has commercial locations in Beijing and Hong Kong as well as a newly opened office in Guangzhou.
  • PerkinElmer, which currently has sales operations in China, is looking to strengthen its marketing and R&D efforts in the Asia-Pacific region, executives from the firm said at the conference. CFO and Executive Vice President of Business Development Robert Friel told BioCommerce Week after PerkinElmer's presentation that the firm currently conducts R&D in Singapore. He noted that intellectual property issues are still a concern when it comes to deciding what kind of work to do in China.
  • At Invitrogen, CEO Greg Lucier said the firm's sales momentum in China has continued through the early part of the year. He had previously described the Asia-Pacific market as the "real gem of our business."

    In December, Invitrogen announced that it would buy Shanghai-based Bio Asia, a five-year-old reagent manufacturer and R&D services provider, for $8 million in cash (see BioCommerce Week 12/16/2004). At the time the acquisition was announced, Lucier said Invitrogen would invest $20 million in China over the "next few years," including building a manufacturing facility in Shanghai.

    In response to questions from BioCommerce Week at the conference, Lucier echoed earlier statements that the company would be careful about what it sells there — "nothing of high IP content." He said China is "a great place to sell, [but] not a great place to create."

    Invitrogen currently has more than 250 people selling products in China, according to Lucier. While the company will use its operations in China to manufacture some products, India will remain a base in the region for R&D.

  • Likewise, Sigma-Aldrich CFO Michael Hogan said the firm expects strong growth in the Indian and Chinese markets. However, the firm has opted to build an R&D facility in Bangalore, India — but not in China.
  • Beckman CEO Scott Garrett cited China's low-cost manufacturing potential, and said the country offered the firm a potential $1 billion in sales. He said Beckman was targeting 17 percent compounded annual growth there in the near-term, and further noted that all of Asia — except for Japan — offered the possibility of strong growth for the firm.
  • Waters CFO John Ornell said that while Western Europe remained a challenging selling environment for big-ticket instrument manufacturers, Eastern Europe, India, and China are all attractive emerging markets. He said the company believed it could grow revenue near-term at greater than 20 percent in those markets.
  • Stratagene, on the other hand, has high hopes for Japan. The company, one of the smaller players tracked by BioCommerce Week, opened an office in Tokyo two years ago and began direct-selling in Japan last month. CEO Joe Sorge said the firm is evaluating setting up operations in China, but "we're not there yet."

— Edward Winnick ([email protected])

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