FACE TO FACE INTERVIEW

NAME: Wu Xiaobing

POSITION: President and managing directo

rCOMPANY: Wyeth China & Hong Kong

EDUCATION: Xinjiang University, China (B.A.); Konstanz University, Germany (M.A. & Ph.D.)

IN HIS POCKET: Blackberry, Nokia mobile phone, wallet, ID card

On September 16, CCTV broadcast the news that 1,300 babies had been hospitalized and three dead from melamine-contaminated infant formula sold by dairy firm Sanlu and twenty-one other local Chinese companies – at the time of going to press, four babies had died and more than 6,000 hospitalized.

As the news broke out, Wu Xiaobing of Wyeth, China’s market leader in infant dairy produce, became very difficult to track down, as he set up emergency staff meetings and response plans to address the issue.

Although he had to postpone the interview twice, Wu finally managed to sit down with CIB to discuss the recent scandal, troubles with research and development (R&D), and how Wyeth is taking on the Chinese pharmaceutical market.

Founded by John and Frank Wyeth during the American Civil War, Wyeth is an American pharmaceutical company whose product line includes such over-the-counter medicines as Centrum, Advil, and Robitusson, as well as pharmaceuticals like Effexor and Prevnar. With annual sales of USD 22.4 billion in 2007, and R&D spending of USD 3.3 billion in 2007, Wyeth is the 11th-largest pharmaceutical company in the world, with products sold in more than 145 countries.

What’s your view on the melamine-contaminated infant formula scandal?

It’s sad. The poor babies. We just had an emergency staff meeting to discuss the issue. Twenty-two local Chinese companies have been banned. This is a crisis for the whole industry.

Will the scandal have an immediate beneficial effect on your product, which is already close to being the market leader in China?

I think we’ll see many more users switching to our brand. We just [decided] during the meeting that we will not raise our prices [like some other multinationals are doing]. We’ll show our commitment through this difficult time. I believe public confidence will return as long as the Chinese government enforces the regulations and standards.

Local companies need to increase public confidence as well. Wyeth’s products go through a very tight quality control [process]. At each step, the product is checked and approved. There is no local sourcing – our milk power is imported from Australia and New Zealand.

Is it priced higher than the local brands?

We are offering a premium product, so yes, we have premium pricing.

Many experts suggest that the Chinese pharmaceutical industry needs consolidation. What do you think?

I absolutely agree. [Before regulations were tightened] there were too many manufacturers, probably 6,000 in China. You don’t need 6,000. Since the government tightening, we probably have 3,000 now. 3,000 is still too many. We really don’t need more than 1,000 – 1,000 big, good, and high-quality manufacturers, who are efficient.

What problems do multinational pharmaceutical companies face in China that are different from other countries?

Pharmaceuticals is a sensitive industry. I hope that the Chinese government and the SFDA can improve the regulation process and speed up the registration approval process. This is my biggest project – to improve the environment here so that R&D and clinical trials can move to China. There is a huge opportunity for China to upgrade its industry, to get expertise, to develop the software. And any red tape or inefficiency in this regard will slow down innovation, not just for the multinationals, but also for the local companies. Approval for early clinical trials in China can take nine months to a year. In other places, approval takes just a few weeks, two-t0-three months at most. Most multinationals can’t wait nine months and that means China is losing an opportunity. I really hope that the Chinese government will focus on safety and efficacy, and eliminate unnecessary hurdles.

Do you see progress in the future in this regard?

Yes, slow progress, but progress nonetheless.

Before you moved to Wyeth, you worked for Bayer. Can you tell us about your history and how you got involved in the pharmaceutical industry?

I was among the first batch of Chinese students to benefit from Deng Xiaoping’s “open-door policy.” I went to Germany to study in 1981 and received my Ph.D. there. I then started working for Bayer while doing my research and then moved with Bayer Healthcare to China in 1996. I worked for Bayer for 13 years before moving to Wyeth in 2004.

What sort of vision do you have for Wyeth?

We want to be one of the top 10 pharmaceutical companies in China. Right now, we are very close to being number one in nutritional products, and are currently the top nutritional supplement provider in infant formula.

What sort of progress have you made in your four years at Wyeth?

Four years ago, we didn’t even rank in the top 100 pharmaceutical companies in China, but now we’re one of the top 40. In 2004, our earnings in China were USD 84 million. This year, our revenue is five, six times that figure.

What have been the biggest challenges?

There have been many challenges. But we have a great senior management team here who oversee 20 branches, and 2,000 employees at our four divisions – manufacturing, R&D, OTC (over the counter), and pharmaceuticals.

Which of these four divisions has shown the fastest growth?

There’s growth everywhere. [The company has] seen double-digit growth every year for the past four years. There’s a big growth in OTC, in anti-depressants, antibiotics, and in infant-formula.

Are anti-depressants popular in China?

They are becoming very popular as society becomes more competitive and people feel the stress.

How are they prescribed? Psychiatry hasn’t really taken off here in China.

They are sold by hospitals and often prescribed by doctors, in addition to psychiatrists.

Where is your manufacturing based in China?

Our nutritional product manufacturing is done in Shanghai, and our pharmaceutical and OTC products are manufactured in Suzhou. We’ve just announced the building of a USD 300 million facility in Suzhou, to open in 2010-2011, which will be our single biggest manufacturing site in all of China.

Many pharmaceutical companies are moving their R&D to China. Has that been the case for Wyeth?

Yes, we moved our R&D operations for Asia-Pacific from Australia to Shanghai in 2005.

At present, what is your most successful product, and what products do you have in the pipeline?

Last year, we introduced an infant formula that improves eye (lutein) development. This has been very successful. Next year, we’re introducing a new antibiotic that is very powerful and has a broad spectrum of usage. China has one-third of the world’s antibiotic market, so this is very big.

Next month we are also launching a vaccine for infants to protect them from pneumococcal – this is a very big event. It’s a unique product that protects two-year olds from pneumonia and meningitis.

Is it a new vaccine? What does it cost to launch such a product?

The vaccine is five to six years old and I really can’t say how much it costs to launch the product. Launching a product means that we invite the China Media Association, China Prevention Association, China Soong Chingling Foundation, and others to communicate to them how important this vaccine is, and the urgency of its distribution. We want to generate passion for our products and quickly get them listed in hospitals.

What differences do you see between the European/American market vs. the Chinese market.

I don’t see a very big difference. The only major factor in China is that traditional Chinese medicine (TCM) has 40% of the market share. This is unheard of anywhere else. So although China is ranked seventh in terms of its Western pharmaceutical consumption, if you add the TCM spending, China could easily rank in third or fourth position.

Some companies are trying to locate the active ingredients in TCM and repackage them. Does Wyeth do that?

No we don’t. But TCM is really strong on preventative medicine, and in China there’s a lot of passion for preventative medicines such as vitamins and nutritional products. We’ve seen a huge growth in our vitamin products such as Centrum because people trust our brand and our international reputation.

How do you compete with the other multinationals? How do your revenues compare?

Many multinationals are doing very well, but we’re very happy with where we are. Wyeth’s revenues are increasing very quickly. We’re not top in revenues, but we entered the market a little later than the others.

How about employee retention? It’s been very difficult for many industries, but the pharmaceutical industry seems to be particularly affected.

There is a talent war in China. A McKinsey report stated that China will need 50,000 high-end industry leaders with multinational experience, but currently there are only 5,000. That means demand is 10 times the supply. What we offer at Wyeth is an adequate salary, with a focus on team building. This is what cultivates people’s loyalty.

Our salary is competitive, but they can easily find a better salary elsewhere. People stay because at Wyeth they get a sense of achievement and belonging. One manager told me that if his team disbanded he [would] leave; but for now, [he’s] staying for the team. At Wyeth, we stress respect, cooperation, and support for others. A good sense of humor also helps. Overall, our management team has been extremely stable during my four years here.