Ramifications from the worldwide economic crisis continued to seep into the world of China biotech last week. Most notably, Charles River Labs (NYSE: CRL) noted that more and more of its contract research clients are postponing scheduled studies into next year (see story). Other clients, aware of their own tight budgets and increased capacity in the CRO industry worldwide, are aggressively seeking price reductions. The trend caused no more than a slowdown in growth in Charles River’s Q3. But for Q4, the effect will be more profound, according to company predictions. In fact, Charles River reduced its guidance for the entire year because of the delays. The trend is most pronounced in Europe, so its effect on China’s CRO industry remains a matter for speculation. Charles River said that its new China facility, opened October 15, will gradually progress to full use of its capacity over the course of 2009, implying that China will not suffer greatly from the slowdown. It could be argued that, if cost is really an increasing matter of concern, the China CRO industry would benefit, as more work is shifted to the most cost-effective sites in the world. Nevertheless, the notion that the worldwide CRO industry suddenly finds itself with excess capacity is a cause for concern.

A second example of fallout from the economic crisis hit 3SBio Inc. (NSDQ: SSRX). The company announced a $2.7 million writedown of a $3 million investment in Lehman Brothers short-term notes (see story). 3SBio released the news as part of its preliminary Q3 unaudited results, which showed decent growth on the revenue side – they climbed 22% to $10.0 million. However, the writedown devoured almost all of the company’s net income, which dropped to $0.3 million or $0.01 per ADS. The company assured investors that the remainder of its commercial paper holdings was not in any jeopardy
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Patent law remains a concern to China biotech. China is rewriting its patent law and related administrative procedures, and the government has floated three different proposals for the new regulations, inviting comment from interested parties to each one.