Chinese Biopharm Investment Moves Rapidly Up the Value Chain - Japanese and Western biotechnology companies are moving beyond joint ventures to take majority ownership in Chinese companies. - BioPharm


Chinese Biopharm Investment Moves Rapidly Up the Value Chain
Japanese and Western biotechnology companies are moving beyond joint ventures to take majority ownership in Chinese companies.

BioPharm International
Volume 19, Issue 9

While the representative office's role is to provide technical support to the distributor, the staff at the office is able to visit directly with customers, which offers insights not available when a third party handles all customer contact. In fact, Qiagen soon discovered there were market needs not fulfilled with the company's current product line.

"This is why we acquired the first company," Potgeger says. TianWei focuses on the research community in China, and its product line is more in tune with the methods used by Chinese researchers.

The second company, PG Biotech, focuses on the diagnostics market, with assay products designed for the avian flu virus and Hepatitis B.

Both acquisitions achieved two objectives. The first was to expand the sales channel for Qiagen products, and the second was to acquire capabilities that were a better current fit for the Chinese market. Without expanding its presence in China, Qiagen would not have gained the knowledge it needed to make the strategic decisions it made in 2005.


The experience of becoming a China-based company is not for the weak or those lacking in subtlety. Navigating the Chinese business culture, as Qiagen's Potgeger described in an interview, is not about understanding variations in business principles, as US and European executives contend with in their dealings with one another.

"In Asia," Potgeger says, "you have different principles."

Potgeger emphasizes that many types of business relationships exist in China. Many Chinese have lived and worked abroad and understand how to deal with Western business people. The cultural gulf is much wider among those who have not worked abroad. Knowing who you are dealing with is therefore a critical first step in building relationships.

Westerners entering China must do their homework. They need to find the right people to help them understand simple protocols and the intricacies of local businesses.

It is also important to avoid applying Western standards on everything that is done in China. When Qiagen was reviewing the website of one of its acquisition companies, it found the site was not professional, according to Western standards. There were too many flashing lights, and too much nonbusiness material, such as photos from a recent company outing. Potgeger says his company's first impulse was to shut the site down. Then he learned that the website's style was common among Chinese companies.

Potgeger also advised bringing your own translator, even if you know one will be there from the other side of the negotiating table.

"He or she should not just be a translator, but should be familiar with your business," Potgeger says."

Understanding how to protect one's assets or intellectual property is also critical to working in China.

Even as China's entrance into the World Trade Organization has raised its awareness of the importance of IP protection as table stakes for doing business globally, the issue remains high on the list of concerns about doing business in China.

Kedl, the consultant who helps companies acclimate to China, says the best results come from those who have the strongest personal relationships. This is often developed over countless dinners where little or no business is discussed.

"What will protect you is not relying on regulation and enforcement," Kedl says. "That is still a long way off in China. What you rely on is relationships."

Kedl tells the story of a client that was being blatantly infringed by a competitor, and a team of lawyers was unable to get the matter resolved. Later, a junior local manager was able to discuss the matter with a local official, with whom there was a close personal relationship, and the infringer was soon shut down by the local authorities.

"Two guys at a very low level who had a relationship were able to do this, while the high-power lawyers were not," he says.

Savoie has found that by making sure that all parties to a contract agree to abide by US law, which is much more robust in protecting intellectual property rights, GNI has encountered few problems.

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