Sigma-Aldrich has become the latest firm in the BCW Index to acquire a Chinese company as the firm, like many of its multi-platform peers, positions itself for growth in the emerging China market.
Company officials also said this week that Sigma is set to open a new production plant in India this quarter.
Sigma is one of several BCW Index companies that has acquired a Chinese company or has made efforts to expand in the rapidly growing research tools market there. Many of the firms have greatly expanded their operations over the past couple of years in China and India by either acquiring companies or opening sales and service offices and demonstration centers.
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. 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 hundreds of millions of dollars on scientific research and biotechnology this year alone.
The acquisition of Beijing Superior will increase the number of Sigma employees in China almost 10-fold to 87.
This week, Sigma became the latest research-tool vendor to expand its operations in the 1.3-billion-person country by acquiring Beijing Superior Chemicals and Instruments and establishing a trading company in Shanghai, as well as adding on to its current offices there.
The acquisition of Beijing Superior Sigma's main distributor in China with locations in Shanghai, Beijing, and Guangzhou will increase the number of Sigma employees in China almost 10-fold to 87. Since 75 percent of Beijing Superior's $22 million in annual revenues result from Sigma products, the acquisition will not immediately impact Sigma's sales in China. Sigma did not disclose how much it paid for the company.
The acquisition and expansion should benefit Sigma's fine chemicals and research products' businesses, said company Treasurer Kirk Richter. He told BioCommerce Week that the biotech and fine chemicals markets offer the strongest growth potential in China, and they also "pull through products from our research essentials and research specialties unit."
The operations in China are solely sales and service, and they will not include any production work, Richter said. He added that Sigma will only sell its own products in China, consistent with its strategy worldwide.
Sigma also announced that it has established a Wholly Foreign Owned Enterprise, called Sigma-Aldrich (Shanghai) Trading Company, expanded its administrative offices in that city, and opened a leased transit warehouse in Shanghai.
"We've enjoyed spectacular growth since opening our representative office in Shanghai in 2002," said Eric Green, Sigma's vice president of international sales and operations, in a company statement. "Our ability to now provide sales, marketing, and distribution capabilities locally holds great promise for continuing that rapid growth for years to come."
The firm also has offices in Japan, South Korea, Singapore, Malaysia, and India, where the company is currently building a production plant "that will come on line this quarter," Richter said.
Expansion Through Acquisitions
Sigma is the latest among its BCW Index peers to expand its operations in China, whose pharmaceutical market, which today surpasses $20 billion, will continue to experience double-digit growth rates into 2010, according to a report from the Gold Triangle Organization. Like Sigma, Qiagen and Invitrogen have gone the acquisition route to gain a foothold in the country.
In September, Qiagen acquired Chinese molecular diagnostics company Shenzhen PG Biotech for $14.5 million in cash. The deal provided Qiagen with more than 10 assays approved by the Chinese State Food and Drug Administration, a 120-person staff 20 of whom focus on assay development, and an established sales channel and regulatory expertise in the Chinese market.
That acquisition is expected to strengthen Qiagen's molecular diagnostics business, and will give the firm a "strong manufacturing base" in the emerging Asia market, CEO Peer Schatz said at the UBS Global Life Sciences Conference in New York in late September (see BioCommerce Week 9/29/2005).
In December 2004, Invitrogen bought Shanghai-based Bio Asia, a 5-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, CEO Greg Lucier said Invitrogen would invest $20 million in China over the "next few years," including building a manufacturing facility in Shanghai.
Invitrogen 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.
Opening Facilities, Staffing Up in Asia
Many of the other firms in the BCW Index have undertaken efforts to expand in Asia, and particularly in China, by opening new facilities and hiring sales staff to sell directly to customers there.
Most recently, Waters said that it would cut 70 employees from its staff as part of a restructuring and resource reallocation plan begun last month that will help support the firm's growth in Asia (see BioCommerce Week 3/8/2006). Waters has been building up its business in the Asian market, where it said it expects to generate double-digit growth in 2006. In addition, it has ramped up production of its Acquity UPLC instruments and has moved some manufacturing of its Alliance systems to Singapore.
Meanwhile, PerkinElmer opened a new technology center in Shanghai in late February, with a goal of consolidating its three facilities in the city and bringing together its sales, service, customer care, and technology-support functions. PerkinElmer said the center would serve as the firm's regional headquarters for greater China.
Molecular Devices, which currently has an office in Shanghai, is planning to open new facilities in Beijing and Bangalore, India, soon, with Brazil to follow, CEO Joe Keegan told BioCommerce Week in an interview last month (see BioCommerce Week 3/22/2006). The primary focus of the expansion will be in its sales and service operations, which currently employ about 200 of the firm's roughly 550 staffers globally. Keegan did not disclose how many employees the firm intends to add during the global expansion.
Beckman Coulter, which collected more than $100 million in sales revenue in China last year, established its own trading company in the country, called Beckman Coulter Commercial Enterprise. Beckman President and CEO Scott Garrett said the enterprise status provides the firm with "broader capabilities [that are] expected to accelerate instrument placements and market penetration." (see BioCommerce Week 2/22/2006).
Thermo Electron opened a manufacturing facility in Shanghai in early 2005, and followed that with the opening of a demonstration center in the same city later in the year. Overall, Thermo added more than 300 employees in China and India in 2005, and said Asia will be its top growth region for sales last year.
In May 2005, Agilent established 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. Agilent employs roughly 1,500 employees in China.
Edward Winnick ([email protected])