Contract research companies benefit as pharmaceutical firms expand their outsourcing
By Hepeng Jia/Beijing, China
The global financial crisis has brought mixed fortunes to China’s burgeoning CRO (contract research organisation) industry, creating more business opportunities for major players while putting pressure on smaller firms in a harsh economic environment with shrinking capital resources.
On 17 March, Beijing-based CRO BioDuro and AstraZeneca announced a major deal to expand their research collaboration to optimise discovery research for respiratory and inflammation indications. Thirteen days later, BioDuro entered into another strategic partnership with Roche to support discovery phase research efforts at Roche’s global research sites.
BioDuro isn’t the only firm apparently riding high above the economic turmoil. On 25 March, Shanghai-based Wuxi PharmaTech, the largest CRO in China, announced that the US-listed company realised an 87 per cent year-on-year revenue growth in 2008 to US$261.8 million.
’Facing financial crisis, big pharmas have quickened their process to reduce costs, outsourcing more research to CROs,’ says Zhang Ling, communication director of BioDuro.
Lu Shoufu, chief executive of Shanghai-based CRO and new drug firm AQBioPharma, agrees. ’Even though [big pharma’s] overall research budget has reduced, the market for low-cost CROs in China and India is growing with accelerated outsourcing,’ Lu told Chemistry World. But he warns cutbacks and more cautious venture capitalists could dampen the expansion of local CROs through lack of financial support.
Another challenge lies in the fact that with increasing job cuts by leading pharmas and even CROs in the West, more pharmaceutical experts will come to China to work in contract research organisations, making competition more fierce, Lu says.
Ren Keyong, general manager of Beijing-based consulting firm Accelovance, says there are more than 200 CROs in Beijing alone and the severe competition has led to significant price cuts by clients.
BioDuro’s deals with AstraZeneca and Roche have been branded as providing integrated services, meaning BioDuro will not only be assigned certain stages of research - typical to most CRO deals - but the whole process of drug discovery, from pharmaceutical synthesis, biological tests and toxicological research to pharmacokinetic and animal tests. Wuxi PharmaTech also bills itself as an integrated solution provider for the whole drug discovery cycle.
’Only by extending their research areas can CROs make a living,’ Lu says.
But that could mean risks. If only carrying out contract research at a certain stage, a CRO can have a low but safe return. But when a CRO is involved in the whole discovery cycle, the process becomes much riskier. ’If we fail to reach the target this time, we will lose our next client,’ cautions He Yun, BioDuro’s vice-president for research.