This idea is underpinned by Herring’s belief that there will be “large equilibrium in labour rates”, which would reduce the appeal of operating in China.
Despite this Covance is still pursuing its expansion into China, following the temporary blip resulting from the collapse of the deal with WuXi.
In the second half of 2009 Herring predicts that multi-nationals will start to want to conduct work in animal models in China but is unconcerned by Covance’s likely inability to fulfill these needs.
This is in part due to the sums of money involved, with Herring referring to two leading pharmaceutical companies that were both seeking to take out $300,000 to $400,000 preclinical contracts in China late next year.
Owing to the scale of these contracts Herring said Covance will not be making a “massive investment” in China and will look to grow as the market grows.
The intention now is to have the preclinical site operational around 2011, which would add to Covance’s current capacity in China.
While admitting that “it would be great if [Covance] had a facility online” by late 2009, Herring remained confident that if Covance has preclinical space in China by 2011 the company “will do fine” in the nation.
Land is yet to be purchased for the preclinical facility, which Covance claims will be a match for the standards in its US and European sites.