WuXi PharmaTech of China competing on price for more contract R&D

In our recent global issue of STINSON’s Acclerate newsletter, we listed 8 companies to watch in health, science, and technology.  At the top of the list is WuXi PharmaTech, a Chinese drug-research company that provides scientists-for-hire to conduct research and development (R&D).

Last week while I was in China, one of Wuxi’s executives said the company hopes to become a global player in the next five to 10 years.

Edward Hu, chief operating officer of WuXi PharmaTech, stated, "The majority of our clients are big international firms, with Pfizer and Merck ranking as the top two. As business expands, we want to win more clients, big or small, and get more orders from current customers."

The Shanghai-based company said it will do so by expanding into biotech, safety evaluation and manufacturing, thereby providing an array of outsourcing services that are cheaper yet of equal quality to their foreign counterparts.

From 2005 to 2008, the firm's revenue grew by over 100% annually as a growing number of international firms outsourced their pharmaceutical R&D business to developing nations like China, where the talent pool is abundant and labor costs are comparatively lower.

"In 2006, the R&D cost of a new drug for an American pharmaceutical company was $1.5 billion, five to 10 times the cost of a similar drug developed in China or India. It is estimated in 2009, US pharmaceuticals firms outsourced 41% of their R&D business, valued at $24 billion worldwide," added Zheng Yufen, senior manager for healthcare at the investment banking division of Zero2IPO.

Click here to read more in the Wednesday 2/24 edition of the China Daily newspaper.