This year, when China and other 'emerging' markets were welcomed into the main body of the JP Morgan 29th Annual Healthcare Conference, it confirmed that these countries were now major players in the global life sciences industry. For the first time in its history, the conference had a one-day track for China with 15 Chinese companies presenting, and another day for India and South East Asia with 14 companies presenting.
This new order in world pharma extends beyond the traditional confines of the industry. Samsung recently set up Samsung Biologics, comprising 300 top scientists and a high-tech facility, to apply its expertise in high quality manufacturing to the pharmaceuticals business. To do this, “We hired seasoned executives from the United States who know about bio-manufacturing, technology transfer and validation and quality control,” senior vice president and director Dr Kyusung Lee told Genetic Engineering and Biotechnology News.
Effective talent management strategies are going to be critical as emerging healthcare markets and pharmaceutical businesses grow. For emerging pharma, they offer the means to meet the challenges around business processes, compliance and how best to set up the business to prosper in the highly-regulated European and US markets. For established pharma, they are the key to unlocking the opportunities in some 25 countries with very different cultures and complex, ever-changing rules governing pharmaceuticals and healthcare.
The development of 'emerging pharma' can be traced back to 'large pharma' shifting its cost base into countries such as China, India, Vietnam and Indonesia, where manufacturing was cheaper. Evolution follows a well-travelled path. Manufacturing develops expertise in working to required quality standards and regulations. Over time, companies obtain US Food and Drug Administration (FDA) or European Medicines Agency approval and then they start to develop their own patented medicines, funding R&D within the International Conference on Harmonisation (ICH) and Gene eXpression Technologies (GXT) Programme regulatory frameworks. Samsung's Biologics business seems to align with this model.
The larger pharma companies in emerging countries share a common desire to establish a strong domestic presence before moving into Europe and then on to the US. They fall into three main groups:
China is the home of formerly state-owned businesses which have acquired enormous expertise by producing drug copies. Today they are major players, investing in new drugs and buying in to the market. A measure of China's importance is the fact that even in recession it has continued to attract investment from private equity and venture capital investors; in 2010, some $30.4bn (13 per cent of the global figure) was raised. Pharma is now one of the most vibrant sectors for China.
Examples of small 'family' businesses which have evolved into integrated pharmaceutical companies include DexaMedica of Indonesia and India's Biocon. Family-owned enterprises may have started as distributors, buying products and branding them for their home market. They tend to be incredibly dynamic and have an advantage over established players in their proven ability to innovate, operate at low cost and make good margins in demanding markets.
The last group is the generics companies that are taking the next step on the evolutionary path to being global players. These include: Dr Reddy's with revenues in excess of $1bn, Sarbanes-Oxley (SOX) certification and its own drug discovery programme; Ranbaxy, India's largest pharmaceutical company (now part of Daiichi Sankyo) and China's Hisun which has 40 products approved by the FDA.
Those seeking to move into the 'developed' Western markets in Europe and the US need a range of business skills and capabilities. Key requirements include boardroom leadership, to configure the organisation so that the right systems and processes are in place to enable transition into the heavily regulated global marketplace, and middle management to reinforce capability in key areas such as manufacturing, regulatory affairs and clinical trials.
Chairmen and/or non-executive directors are in demand to help establish the governance required in the US and Europe. This tends to be relevant to family businesses where there is a need to formalise decision-making. The board at Biocon, for example, includes Dr Neville Bain, business leader and chairman of the UK Institute of Directors.
In middle management, it is no surprise to find strong demand for regulatory affairs professionals who can put together dossiers and structures that are compliant with international commercial arbitration (ICA) harmonisation. Other important areas are: quality control professionals for manufacturing; scientists who can help introduce best laboratory practice and medics who can set up and run studies to international standards and sort out problems when investigator medics stray from industry best practice.
Established pharma has made considerable investment in Asia but now finds it is having trouble adapting to the market. There are some 25 different countries to address and complex rules that change by the day. Governments are tough when it comes to bargaining but keen to do business with Western pharma. Market access is incredibly valuable and with it comes great demand for 'creative relationship builders' who can get a drug adopted and reimbursed.
But who are these people and where can they be found? In the emerging countries there is little indigenous talent because life science is still young there. There are those who have gone away to study and work in the West, known as 'sea turtles' by the Chinese, and who return to take up positions in their own countries. They have a linguistic and cultural advantage but they will be used to Western pay and conditions and may find it difficult to reintegrate, particularly when it comes to returning to China.
Then there are the 'Pioneering Westerners', although in this case there are a huge number of well-qualified people who want the experience of working in the East but tend to be looking for a badge on their CVs to progress their careers. More likely to help an organisation realise its ambitions is someone who has 'gone native' or joined a local company because he or she truly demonstrates a commitment to stay, integrate and, ultimately, succeed.
Business skills are only one part of the equation when a company in the East is looking to break into the West, or a company in the West is looking to penetrate the healthcare markets of the East. To realise true value in this marketplace an executive needs to have the 'x-factor'. The x-factor is a powerful amalgam of business skills and cultural plurality which allows effortless movement between two worlds with very different business and civil cultures.
Typically, in the East people work for a boss and trust that their intention will help the staff along: 'do well and the rest will follow'. In the West, business is more target and process driven and if these are delivered, a career will go well. In the West, alongside the business targets, workers have to master the 'how' and 'why' of doing business. In Asia business is very much about modesty, teamwork, time, trust and a degree of ambiguity which sits uncomfortably with the typical Western psyche.
Taking someone from the East and putting him or her into a company from the West tends to be easier, but clan-based cultures make it difficult to wean key people away. The big question is whether they can adapt to all the different aspects of compliance. Experience suggests that the best thing is to professionalise local people. This was a key motivator for supporting the creation of the Pan-Asian Clinical Research Association (PACRA) to support training and education for clinical research professionals in Asia.
Sometimes people who do not fit the standard mould are needed; people who can make things happen in areas where the organisation has little insight or influence. This requires the sourcing of the 'honourable maverick'; someone who can be difficult to manage in the conventional sense but who can be trusted to do the right thing if sent off to 'distant lands'. This rare breed has the optimum mix of assertiveness, knowledge and entrepreneurial spirit.
Whether it is an established pharma looking to optimise investment in the East, or emerging pharma looking to go West, talent plays an important part in value generation. The x-factor that everyone is looking for is great business acumen allied to an ability to bridge the cultural divide and work equally effectively in both worlds. Immediate requirements may be met through getting the best out of the sea turtles, pioneering Westerners and honourable mavericks. Longer term, the future rests with the next generation that will grow up in a more diverse and multicultural industry.
Nick Stephens is CEO of RSA