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When asked to describe Roche’s (OTCQX:RHHBY) strategy for China, Dr. Joe McCracken, Global Head of Business Development for the Swiss pharma, disarmingly answered, “We don’t have one.” But he didn’t mean Roche has no strategy for China. “China is part of our global strategy and everything China does is related to our global strategy,” he explained in an exclusive interview with ChinaBio Today in Shanghai.

That’s a different approach than most other multinational drug companies. Most have specific strategies in place for China that include rapidly expanding global R&D centers, business development teams and of course, manufacturing and sales, often focused on the needs of Asia and specifically China. Gone are the days of treating China as one more market for an existing portfolio of drugs that were originally aimed at the US and Europe.

While Roche is also expanding rapidly in China, it is not putting China in its own insulated box. Roche believes it can best address China as part of the nexus of global disease. “We want to focus on treating serious diseases, gaining a critical mass of understanding and critical insights that will guide our research and clinical development,” continued McCracken. “We want to develop first-in-class or very highly differentiated drugs, and we want to be able to predict who is going to respond to these drugs.”

In other words, the lack of a China-specific strategy does not diminish Roche’s interest in China. “China is absolutely critical to our global strategy,” McCracken continued. “It is a source of innovation. We have a dedicated partnering team in Shanghai. It is a key source of talent. And we have our own R&D team in Zhangjiang.”

In fact, Roche is significantly upping the financial commitment to its China infrastructure. It plans to make $100 million in additional investments in China over the next five years, including building a new R&D center in Shanghai’s Zhangjiang High-Tech Park where it already has 250 scientists, as well as expanding its manufacturing facilities there. Overall, the company wants to triple its China headcount by 2020 to support what is already Roche’s third largest market around the globe.

Despite the global strategy, Roche also pays attention to problems that are prevalent in China, even if they are not major diseases in the West. As an example, McCracken cited the company’s cancer drug, Herceptin, which was recently approved for gastric cancer. Gastric cancer is not a major concern in the US and Europe, he pointed out, but it is one of the most prevalent cancers in China and Asia. At Roche, the drug was developed for this indication as a global program, not an Asia specialty, even though most of Herceptin’s sales for gastric cancer will likely be in Japan and China.

A Pioneer in China

Among global big pharma, Roche has one of the longest commitments to China and continues to be an early adopter there. The company first came to China in 1921, selling its products in local pharmacies. Then Roche opened its first office in China in Shanghai in 1926. The commercial center was established in China’s then-brand-new Zhangjiang Hi-Tech Park in Shanghai in 1994, headed by William Keller, now an icon of China’s pharmaceutical industry. Roche was also one of the first to have an R&D center in China, beginning in 2004, and the global partnering group was established in 2008, both located in Zhangjiang.

Given its long history in China, Roche is in a unique position to witness the rapid pace of change there. McCracken believes the returnees or “sea turtles” are one of the major reasons China is now changing so rapidly. The sea turtles – along with the rapid urbanization of China – have helped to create a “mobile workforce” he explains. The mobile workforce is very different from Japan, where he was most recently based. “In Japan, students with the best grades go to the top schools, then join the top companies, and then stay there for 20 years and never leave,” he explained. “In China, people leave [the country], get a great education and great experience and then return. In China, they move from company to company. This is what is making the biggest change in China.”

ChinaBio’s research shows that there have been approximately 640,000 returnees since China began tracking them in 1978, when Deng Xiaoping launched China’s “opening up” policies. Even more significant, fully two-thirds of the returnees, over 430,000, have come back to China in just the last five years. As a result, the management teams of many of China’s entrepreneurial life science companies are comprised of returnees. Roche itself has many returnees heading up major efforts in China including their R&D and business development groups, where returnees far outnumber the expats.

Drugs + Diagnostics

Roche Diagnostics is the #1 in vitro diagnostic company in the world, and has, until recently, operated independently of Roche pharmaceuticals. That began to change in 2006, when the first drug/diagnostic combination was developed in collaboration between the two groups. Just four years later, in 2010, there were 170 drug/diagnostic collaborations in development, representing half of Roche’s drug pipeline. According to McCracken, Roche’s goal is to develop a new drug and its companion diagnostic in parallel and present the combination to the FDA at Phase III.

McCracken and the Merger

McCracken has many years of industry experience, having worked at Genentech for 20 years, the last ten of them as Head of Business Development. Then, because of Roche’s acquisition of Genentech, his life changed dramatically. For the better, he adds. At Genentech, McCracken always felt he was missing out on the international action, as Genentech was focused exclusively on the US. Now, he’s with one of the pioneers in global pharmaceuticals and one of the early entrants into China’s market.

McCracken believes the acquisition is “a much happier merger than any other I can think of.” While much of Genentech’s commercial and manufacturing operations have been absorbed into Roche, the research operations, now called Genentech Research & Early Development (gRED), are still independent and have not changed much, McCracken noted.

Genentech was well known for its highly unusual culture, replete with “Hoho” parties (including Chinese New Year) and extravagant annual corporate bashes that would have been the envy of any internet company during the dotcom bubble. This kind of culture doesn’t seem to be well suited to the more straight-laced approach of a Swiss company like Roche.

But McCracken indicated the merger has been a two-way street, changing both companies. As Genentech has reined in the parties, Roche has become more science-focused, a hallmark of Genentech whose CEOs were scientists first and executives second. And Roche has become more patient, a trait necessary for companies developing truly innovative drugs. At the forefront of the biologics revolution since 1976, Genentech has been a master at patience.

The merger had a big effect on McCracken personally as well. Before the merger, he was based in South San Francisco where he focused solely on the US for 20 years. Post-merger, he jumped at the chance to gain international experience. He moved to Japan for over a year where he was the head of business development for Asia. Under his wing were the business development groups in Shanghai and Tokyo, giving him a much deeper understanding of China along with Japan. He thought he might be in Japan for as long as five years, but after only a year, he was tapped to head the global business development group and moved to Nutley, NJ, Roche’s US headquarters. At that time, there were eight BD groups around the world with different reporting structures. These have now been rationalized and report to McCracken.

McCracken seems quite comfortable with his new global role, exuding confidence not only in himself and his team’s ability, but also in Roche’s global strategy for China, a strategy that expects China to play a prominent role in the company’s future.

Disclosure: Roche is a client of ChinaBio and a sponsor of ChinaBio conferences.

Source: Roche's Unique, Global Strategy For China