China's growing appeal to the global CRO industry

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I had a chance to speak with Charles River Laboratories' Chris Perkin recently about the CRO's burgeoning presence in China.

Perkin, who established Charles River's preclinical ops in China, was distinctly bullish on the country as the coming place in the industry for animal research. One big reason: Local authorities were quick to accommodate the company's need for doing things like importing rat models that meet Western standards.

"China had no regulations to import rats," Perkin--who's leaving the company next month to run Canada's Algorithme Pharma Holdings--told me by way of an example. "But when you work with the local authorities, they'll change the regulations to meet your needs."

It's that kind of gung-ho approach by the Chinese that laid the foundation for this morning's announcement that the Boston CRO is buying WuXi PharmaTech for $1.6 billion. WuXi has been building the kind of animal research facilities that Charles River specializes in, and the CRO gains a whole new set of customers and a much bigger presence in China right at that animal research/first-in-man stage that is the company's sweet spot.

But the news also holds distinct and important lessons for the industry. When I attended the Partnerships in Clinical Trials meeting in Orlando two weeks ago, one distinct and underlying theme at the meeting was the rise of China in the field of drug development. Groups like Charles River which can go to the country and build facilities that are on par with the best of the West can tap a less expensive talent pool of scientists, far less expensive animal models for many research programs, and a group of regulators that is anxious to foster the industry.

These days, when quality can be matched with even marginally lower costs, and the regulatory environment emphasizes efficiency, you have a prescription for success. In China, that is translating to an annual growth rate of 30 percent for the CRO business while the rest of the industry is plodding along at a relatively modest 10 percent.

Having a state security apparatus that exercises rigid control over its population, ready to stamp out any sign of unrest with a heavy hand, is a polar opposite to Europe and the U.S., where animal rights activists are literally driving some animal research labs underground. That point may not make the press releases about the growth of China's CRO industry, but it's an important part of China's growing appeal to drug developers.

Mixing top industry standards with that kind of regulatory and cost environment is making China the drug development center of the future. - John Carroll (twitter | email)

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