PHARMAcr.JPGIn recent years, the global pharmaceutical industry has sought to shift more contract research to low-cost China. But China's contract research organisation (CRO) sector is fragmented and immature.

That puts Chinese CROs at a competitive disadvantage when compared to CROs in better-established markets like India.

Recognising the problem, two Chinese CROs, United PharmaTech and Sundia MediTech, have agreed to merge . Consultants say this is likely to become a growing a trend in China's young CRO sector as players seek to gain scale and so provide the “one stop shop” solution that western pharma firms require.

Under the terms of the merger, the two Shanghai-based companies will become subsidiaries of Sundia Investment Group, the British Virgin Islands based holding company which currently owns Sundia MediTech.

Earlier, the two companies reached an agreement with a third player, HD Biosciences, to form a CRO “service alliance” dedicated to providing a complete CRO service to pharmaceutical and bio-pharmaceutical companies worldwide.

There are currently no plans for HD Biosciences to join its two former partners as one, but the new company will maintain all ties with HD Biosciences and all agreements made between HD Biosciences and the two merger partners will remain the same.

The three companies were all founded in the last five years in Shanghai by veterans of US pharma companies to provide drug discovery and development CRO services in different stages and fields. Seeing the rapidly developing global CRO industry, the founders left their positions in the US and went to China, which is seen as fertile territory for CROs. Xiongwei Shi, CEO of United PharmaTech, said:

The current CRO industry in China is unique. Pharmaceutical companies in developed countries desperately need new drugs, but cannot afford the prohibitive cost of research in their home countries.Their best option is to outsource R&D work.”

More on the growing trend to outsource pharma R&D to China in this story. Boston Consulting Group analyses the trend in this story.

Elsewhere on the CRO front:

  • Charles River Labs, a big US-based CRO, has set up a JV with Shanghai BioExplorer. Charles River, which will be the majority owner, will build a 50,000 sq ft preclinical services facility in Shanghai which is scheduled to open in mid-2008. BioExplorer was founded in 2002 and currently operates a 15,000 sq ft facility in Zhangjiang Hi-Tech Park in Shanghai. ChinaBio Today describes Kewen Jin, BioExplorer's CEO and co-founder, as the quintessential “sea turtle” — western-educated Chinese entrepreneurs who decide to China. More on sea turtles here.

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