Leading the way with innovation

The logo of Bayer AG is seen at the entrance of the company's headquarters in Leverkusen, Germany. Bloomberg

Amid the global financial turmoil, the Bayer Group, a Fortune 500 and a leading company in the areas of healthcare, nutrition and hi-tech materials, may be among the few that still commits itself to expanding its research and development (R&D) activities in 2009, the company's executives said recently.

"The task now is to set the right course. Only through innovation can our company generate the growth that is essential to safeguard its sustained success," said Werner Wenning, chairman of the board of Management of Bayer AG, in an address during the Bayer's Perspective on Innovation 2008.

Bayer has long valued its R&D efforts. About a century ago, Bayer developed what is now a common pain killer, aspirin. Its corporate mission of "science for a better life" has long helped the company differentiate itself from its peers in many areas.

In 2008, Bayer's R&D budget was about 2.8 billion euros, which represents the largest volume of R&D budget in Germany in the chemical and pharmaceutical sector, and amounts to about 5 percent of the R&D spending by the German industry as a whole, Wenning said.

The company's attention to R&D comes from the business growth potential in nations such as China, which is also in urgent need of solutions for environmental protection. This provides Bayer, which enjoys advantages in the areas of health care, crop science and climate protection, with lots of business potential.

"Bayer can make a contribution to meeting all of these challenges," said Wolfgang Plischke, member of Bayer AG's Board of Management responsible for innovation, technology and environment.

China innovation

Annually, health care and crop science account for 70 percent of sales in Bayer group, and they both are far less exposed to cyclical fluctuations.

Currently, the Asia-Pacific region presents one of Bayer's most important future markets, and in 2007, it generated sales of 5.2 billion euros, about 16 percent of Bayer's total.

In China, where it had 6,500 employees in 2007, it has grown into the largest market in Asia and the third largest worldwide, and plays a significant role in the company's investment plans.

Take the drug Nexavar for example. Developed for treating kidney and liver cancer, it has been on the market for two years and is now sold in the market which has the world's largest number of liver cancer patients.

An oxygen-to-chlorine technology developed by Bayer can also reduce electricity consumption and CO2 emissions by 30 percent. The technology has been in use in one of Bayer China's facilities in Shanghai since October 2008, which has an annual capacity of 215,000 tons of chlorine.

Bayer has 23 companies in China, including Bayer CropScience, Bayer HealthCare and Bayer MaterialScience as well as a service company Bayer Technology and Engineering (Shanghai) Company Limited under Bayer Technology Services.

Ten of these companies have production facilities on stream. Local production now accounts for an increasing proportion of sales. Bayer's commitment to the China market is not only reflected through building more production facilities, and also shown by its expenditures tailored to the Chinese market.

In June 2002, Bayer reached an agreement on chemical expertise training with Shanghai Petrochemical Academy. Bayer established the "Bayer Training Plant" in the academy, which is a two-storey facility equipped with laboratories, a pipe assembly workshop and a pilot plant where students learn chemical processes.

In recent years, Bayer has strengthened its R&D efforts in China. In 2006, the Polymer Research & Development Center (PRDC) was set up with an investment of $16.4 million in Shanghai, primarily for the Asia-Pacific market.

Wenning said Bayer would strengthen its cooperation with the Chinese Academy of Science in research to strengthen academic communication in R&D.

As for the future, Bayer said the pharmaceutical development pipeline is well stocked with 50 projects currently in various phases of clinical testing. In addition, the company plans to bring 10 new crop protection active ingredients to the market by the end of 2012.

In this context, Wenning has called for comprehensive global patent protection. "The defense of intellectual property forms a necessary foundation for innovations. Global protection of intellectual property rights is essential for an inventor company like Bayer."

In 2007, Bayer made patent applications for 774 inventions. The company achieved about 40 percent of its sales with patented products and processes.

Tax reduction urged

Worldwide, Bayer has 11,800 researchers and developers, more than 60 percent of which work in Europe including 6,300 in Germany.

But, "it is particularly important that Germany's innovative capability will be enhanced", said Wenning who has called on the German government to provide substantial tax breaks for R&D expenditures.

Wenning also emphasized the importance of public education about innovation, saying that technologies cannot be developed unless they are sufficiently accepted by society and government officials should play a role in enhancing the awareness.

Editor's note: The IPR Special is sponsored by the State Intellectual Property Office and published by China Business Weekly. To contact the Intellectual Property Office, the IPR Special hotlines are 8610-64995422 or 8610-64995826, and the e-mail address is ipr@chinadaily.com.cn.

(China Daily 01/05/2009 page11)