Country Report: China - Pharmaceutical Executive


Country Report: China
The Long March Marches Onward

Pharmaceutical Executive


Ultimately, the platitude of people as number one asset is rampant in China. As some insiders put it, the talent war is a cliché as big as a house, but one that remains the most pressing issue for companies of all size. Headhunting abounds, resulting in a subgenre of employee known as the "job-hopper" – a person who will change jobs up to once per year for salary increases as little as 300RMB (USD 48) per month – although most increases result in total packages increase by 20-30%, and contribute to rapid wage inflation that has touched every segment of the Chinese economy.

Found In Translation: Ancient Wisdom from the Middle Country, vol. 1
Though any elementary economics textbook would suggest an easy fix for a shortage – pay more – many managers, such as Jonathan Zhu, general manager of Celgene China, have found a way around this expensive alternative. "Our statistics for turnover rate in the last 12 months are very, very low," Zhu says bluntly. However, his HR strategy is somewhat counterintuitive: "My philosophy is that I'm not necessarily recruiting "the best" – simply because it's so hard to define. One must take into account all the human qualities, inclusive of competence and knowledge, personality and experience. It's very difficult to define. I'm going to recruit the appropriate talent and labor, which fit in very well for the long-term – people who speak a common language and share common values, and they will adopt the corporate values and compliance in turn. The result is a group that works together as an effective and productive team." This has seen a doubling of headcount, from 30 to 60, in the company's Shanghai office, in preparation for the China launch of Revlimid, a multiple myeloma drug, for mid-2013.


Jonathan Zhu, General Manager of Celgene China
Zhi Yang, managing partner, & founder of BioVeda China Fund, never intended to be a healthcare investor. But his remarkable story – from a restaurant worker in the Cultural Revolution, to being selected to earn his PhD at Harvard, and returning to China to start the first international investment fund focused on healthcare – is rivalled only by his history-making exit, which at the time was the largest acquisition in the Chinese pharmaceutical industry since 1949.

Zhi Yang, Managing Partner, & Founder of BioVeda China Fund
In 2011, he turned his $7.8 million stake in CITIC Pharma into an approximate $550 million exit in just five years. Yang, in a brief history of healthcare sector investment in China, says that when he started BVCF in 2005, "the talk was always about "low-hanging fruit." Later, many people began to notice that all the low-hanging fruit may be ripe and ready to serve, but ripe fruits are also the soonest to rot. When you hold low-hanging fruit in your hands, if market conditions are not right, you can find yourself holding handfuls of rotting fruit. On top of that, a lot of veteran Chinese investors now agree that the low-hanging fruit is gone. You have to look at the higher fruits which are less ripe, and find the ones that can quickly become the best fruits with the right nurturing. That means investment, like most things, is a game of differentiation and skill."

Yang describes the field of investing with a uniquely Chinese metaphor. "Sometimes I compare investing to a TV show about appraising ancient Chinese antiques. On the show, an antique is presented to two panels: a panel of regular people, and a panel of antique experts. First, the common panel must decide if the antique is real or fake, and if it's real, then which dynasty did it come from? These are hard questions! They look at obvious things like color and markings, feel whether they trust the antique's owner, or even crowd-source an opinion from the audience. In reality, they make their best guess. Most of the time they don't get it right – obviously!"

As an example, Yang offers another successful investment, where he began by buying out the stake of a local Private Equity fund, which had priced their investment at under $100 million. "In China, that's not a small number!" he says. "They were happy that they made good money on the deal. We were happy that we got an asset which was quickly becoming a $1 billion company."


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