China has been hailed as a location for low-cost, high-quality preclinical services but has suffered setbacks over the past 12 months. Covance still operates a toxicology site in China but both MPI Research and Charles River Laboratories (CRL) exited preclinical sites in 2010.
Client reaction to the CRL decision was “disappointingly quiet”, said CEO James Foster in a conference call with investors. There was a lot of interest in the China site, said Foster, but a combination of few locally-discovered compounds and low-costs in the West made it unviable.
These factors mean establishment of a preclinical services market in China is “going to take a lot longer than we all expected”, said Foster, with chemistry remaining the primary strength in the region.
Despite this CRL retains an interest in performing other types of work in China. CRL continues to look for small acquisitions to strengthen its discovery services, said Foster, and, if the conditions were right, this could see it invest in China, or any other location.
However, the scarcity of suitable acquisition targets means CRL is focused on strengthening its existing discovery sites through investments in staff and technologies. In particular, CRL wants to expand into more therapeutic areas.
“Major seismic moves”
CRL has “exquisite relationships with very large pharma”, said Foster, and through talks with these clients knows “there is a fair amount of potential work available”. Consequently, CRL, and its peers, are bidding on large packages of work.
Some contracts are for “work that was historically only been done internally”, said Foster. “Major seismic moves”, like the restructuring at Pfizer, will accelerate this process, said Foster, and lead to outsourcing of work traditionally performed in-house.
Following the recent cuts there has been “a very apparent, immediate, commensurate” increase in dialogue and interest in services, such as toxicology, from Pfizer. Foster said it seems Pfizer is going to be “more aggressive” in its outsourcing.
Clinical – preclinical shift
CRL also expects to benefit from adjustments to how big pharma research and development (R&D) budgets are spent. Although total R&D spend will remain flat, with some increasing and others cutting, some clients are shifting the focus of investments from clinical to preclinical work.
Pharma is also focused on trying to “kill” development of compounds earlier in development, said Foster, to ensure budgets are spent on only the most promising candidates. Clients will focus investments into these molecules and CRL expects to benefit from fast-tracking of preclinical.