Covance Taking China Growth Slowly

Following the collapse of its Joint Venture arrangement with WuXi PharmaTech (WX), Covance (CVD) will build its own China CRO facilities, but the company does not feel any great pressure to get the job done quickly. The reason? China’s current cost advantage will soon disappear, as wages for scientists in China approach those in the West, according to Joe Herring, CEO of Covance.

Covance does $1.5 billion worth of CRO business around the world. Apparently, it does not feel as though it is losing a great deal of contracts to its China-based competitors.

As the economic benefit diminishes, the huge push to shift work to China will also lose its urgency, Herring said. Nevertheless, Covance is seeking to find a suitable site for a preclinical facility. Current plans are to have the facility operational in 2011. Covance opened a preclinical site in Shanghai in late 2007, a 13,000 square feet facility located in the Zhangjiang High-Tech Park. The existing China lab is the fifth such lab for Covance worldwide.

Herring’s thoughts on Covance’s presence in China and the future of the China CRO industry were carried in an article appearing in Outsourcing-pharma.com.

Herring noted that without a China animal facility, the company had to pass on two big pharma contracts for animal work that will be performed in the second half of 2009. The contracts were worth $300,000 and $400,000.

Rather than making a huge investment in China, Covance will seek to grow along with the market in China.

Disclosure: none.