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Charles River Labs (NYSE: CRL) declared itself surprised at the low level of demand for its China CRO services. The company opened its lab in October 2008 and, almost immediately after, it was said to be looking for a second site. However, the amount of activity in its Shanghai facility has always been less than the company’s expectations, which were based on discussions with China biopharmas.

Despite the slow start, Charles River remains positive on China’s longer-term prospects, and it feels it must be in China now to take advantage of China’s future growth.

“We thought the facility would fill up rapidly, and we’d have to race to site a second lab,” said Foster, CEO of Charles River. “Spending on development of compounds has been less than what they told us ... We can’t test compounds that don’t exist,” he added.

Foster’s remarks were reported in a recent article in the Boston Business Journal (see article). The article was a partially negative exception in an otherwise optimistic review of Boston area life science firms that are expanding their activities in China.

Although Foster was somewhat sour on the uptake of his company’s CRO services in China, he said the company still plans to expand in China. And that expansion is taking place as the company closes existing facilities in the west. Last month, Charles River shuttered a pre-clinical facility in Shrewsbury, Massachusetts, laying off 300 workers. The closure was termed temporary; the company plans to reopen the facility if demand resumes.

Longer-term, Charles River is very positive on the outlook for life science in China. “[The Shanghai facility] is huge. It was built to support local biotechs, and funding has been tight. We have to get ahead of the Chinese market because when it takes off, it’s going to increase dramatically,” said Foster.

Meanwhile, another Boston area company, Parexel International (NSDQ: PRXL), a clinical stage CRO, has experienced a strong growth in demand for its services in China. The company has upped its headcount to 1,600 from 1,000 just two years ago, its business coming from multinational big pharmas. According to the company, the major advantage to doing trials in China is the large treatment-naive population that reduces the time to sign up patients.

“Patient recruitment is the leading cause of delays in clinical trials. It is much quicker to attract patients in China, because access to top-notch care is limited there. It’s also easier to find patients that aren’t currently on any therapy,” said Mark Goldberg, CEO of Parexel. That is one of the reasons that conducting a clinical trial in China reduces by 50% the cost of performing a trial there.

Thermo Fisher Scientific (NYSE: TMO), a maker of lab equipment, said it is building a second demo lab in China. This one will be in Beijing, home to many of the country’s leading universities and research institutions. Thermo’s first facility is in Shanghai, which Thermo characterizes the site of a wide array of global pharmaceutical companies.

Thermo Fisher also has a large environmental instrument division, which is flourishing in China. In the next five years, it expects to double its China business, which currently provides 4% of the company’s revenue. In fact, Thermo Fisher moved the headquarters and four senior executives of the division to China recently.

PerkinElmer (NYSE: PKI), another company that makes laboratory tools, is putting most of its China investments into the areas of diagnostics and genetic screening. The company derives 5% of its revenue from China and employs 1,200 people there. PerkinElmer also has considerable business outside of life sciences, including capital equipment and consumable goods.

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Source: Charles River Labs Disappointed by Weak Demand for China Lab