Animal Testing Gets Bigger and Badder

As campaigners corner vivisection labs into an increasingly uncomfortable position, a process of consolidation is sweeping the industry. New research reveals that larger firms are buying up independent labs, facilitating cost-cutting trends in the slumping pharmaceuticals industry. For animal rights campaigners, the results are a double-edged sword. By Max Gastone

Charles River Laboratories is best known in the UK as the parent company of Shamrock Farm, a holding centre for primates closed down after a vigorous campaign several years ago. Earlier this month, it was announced that Charles River had paid £1.5 billion to purchase Inveresk, a contract research laboratory with bases in Scotland and Canada. This is just the latest stage in a process of consolidation across the animal testing industry, which has over the last decade seen four companies take over smaller competitors. The big four are now Quintiles Transnational (aka. Sequani), Harlan (aka. InterFauna), Covance, and Charles River Laboratories, all which have American headquarters. This leaves only a few smaller independent contract research laboratories specializing in animal testing in Europe, the main ones including Huntingdon Life Sciences, Notox and TNO Bibra. A few of the larger pharmaceutical companies also play a role, such as AstraZeneca's provision of genetically altered animals.

A "contract research organisation" [CRO] is a company that provides a researching facility so
other companies can outsource the work to them. Although the generic term is applicable to most industries, it is the chemical and pharmaceutical industries where such research organisations are most prominent. Furthermore, as the chemical companies have to test their products for toxicity etc. to satisfy similar regulations as the pharmaceutical industry, the reality is that these days most CROs market their services across the chemical, agrochemical, biotech and pharmaceutical industries, depending on the range of individual services needed. For example, the annual reports of Huntingdon Life Sciences, principally known for serving the pharmaceutical industry, show that agro-chemical clients account for one fifth of its business.

The industry in which these CROs operate is based on the current model of testing chemicals and drugs for safety, which divides into four phases. Phase I is called "pre-clinical" and currently refers to animal testing for all intense procedures. Phases II to IV are collectively known as "clinical" and concern testing the products on humans. The passage between Phase I and Phase II is known as "pharmaco-vigilance". Among the big four firms, Quinitles and Covance are pure CROs, focusing on the actual testing in all phases. Harlan and Charles River, on the other hand, are more concerned with supplying the animals and associated foodstuffs/equipment to the testers. Smaller companies such as Huntingdon and Notox focus almost exclusively on animal testing; their involvement in clinical (human) trials is done through outsourcing. Companies such as Unilabs of Switzerland focus on clinical trials only, with a network of companies across Europe.

What is changing now is the ambitions of the large companies, as exemplified by the case of Charles River. Over the last few years, it has been purchasing smaller labs such as BioLabs in Ireland as it moves into pre-clincal testing instead of just supplying laboratories. The purchase of Inversek indicates that it does not intend to stop there, but to dominate the entire market.

For a long time Covance has been the market leader globally in animal and clinical testing, growing organically as well as through acquisition, with Quintiles not far behind. Charles River has now become the third big player. Though not as big as the other two from the clinical trials perspective, it does have the advantage of a strong position delivered by its role in supplies, including animals. All the large companies are reporting double figure growth in 2003 over 2002, with Covance's net revenue in 2003 amounting to $940 million. Harlan does not have the same presence in the clinical market or in actual animal testing, but it's position as leading supplier to the pre-clinical industry means that it is hard to separate out. As Harlan is still a privately owned company, details on its financial status and position in the industry are scarce, but we can expect to see it too expanding in the future.

The Pharmaceutical Connection
Outsourcing of testing is one of the few growth areas in the healthcare field. Currently the entire pharmaceutical and chemical industries are looking stagnant, in particular the former. Pharmaceuticals' profits and share price depend on a steadily flowing pipeline of new drugs, and these are currently not very forthcoming. A pharmaceutical's share price depends to a great extent on the projected success of future drugs, hence the importance of "blockbuster" products. In order to keep up the illusion that they have a healthy pipeline, pharmaceuticals regularly purchase smaller biotechs in order to acquire their products and intellectual property.

The problem is that the golden eggs the biotechs were supposed to be laying are few and far between, leading to a lot of concern in that industry as well. Statistics on the flow of new drugs are not readily available due to the commercial sensitivity of these details. However, industry groups regularly mention the problem as part of their lobbying against increased regulation, with the world's largest regulatory body, the US Federal Drug Agency, has highlighted this trend as a significant problem in 2004. Cash flows are being questioned by financiers who have learnt that years of positive press releases claiming breakthroughs doesn't mean they will transfer into successful products in the market place. There is also increasing questioning of how much these "breakthroughs" are really what they claim to be. For example, studies have shown that many of the new drugs being brought into the market do not actually differ significantly from the ones they are supposed to replace.
All this is putting pressure on the pharmaceutical industry to reduce costs. Testing is very expensive and can take years, eating up a huge percentage of the research and development budget. In particular, keeping animals with all the attendant regulations and security is very costly. This means that CRO's, who can provide specialized outsourcing in this area and thus reduce costs for the pharmaceuticals, are in a position to benefit - especially companies such as Covance, who provide an all-round service from pre-clinical testing to Phase IV. The icing on the cake for the CROs is the increasing push for genetics based research, something that will further increase the number of animals being tested.
As with many industries dominated by a few large companies, it is a case of rapidly expand or get squeezed out. Smaller independent CROs, whether specializing in clinical or pre-clinical trials, will find it harder to operate or end up getting bought out by the bigger ones.

Implications for Campaigners
This process of consolidation has two contradictory implications for campaigners. On the one hand, it means that there are increasingly fewer sites to campaign against and these are becoming stronger and harder to pressure financially. On the other hand, the smaller companies, especially family owned firms (e.g. Bantam and Kingman or Newchurch Guinea Pigs), will find it harder to compete on economies of scale; this loss in profit will mean they have less financial muscle to resist a concerted campaign. Hence, the consequence for campaigners is a double-edged sword. The smaller independent animal testers and suppliers will be weaker, but the big players will become much stronger. The successful campaign that led to the closure of Charles River-owned Shamrock Farm may be seen as a counter-example. However, this was a relatively small site, disjoint from the rest of the company, and not in the same league as multiple-acre sites such as Huntingdon Life Sciences in Cambridge or Covance's site in Leeds.

Despite these projected difficulties, it remains the case that the UK vivisection industry as a whole is under serious strain. Campaigns such as Stop Huntingdon Animal Cruelty (SHAC), and Speak Campaign's victory over a proposed Cambridge laboratory and current pressure on Oxford University's proposed lab, have all sent shockwaves through the industry. Internal information provided to campaigners indicates the UK is seen as one of the most hostile countries in which to carry out animal research, either directly or through outsourcing. For example, Novartis has ceased to expand its research in the UK and is in the process of moving it to the US instead. A Japanese consortium has decided to withhold one billion pounds in research funds earmarked for the UK. British scientists, the lifeblood of the CRO industry, are questioning whether it is worth going into fields of research involving animal research.

The battle for the future of vivisection continues to rage between the animal rights movement and a government with strong vested interest in supporting the pharmaceutical industry. This has yet to be played out, but the outcome will have significant implications for the CRO industry and those focusing on it.

Recommended Links:
Stop Huntingdon Life Sciences: http://www.shac.net
SPEAK Campaigns: http://www.speakcampaigns.org.uk
Covance campaign http://www.covancecampaign.com
FDA analysis of slowdown in the pharmaceuticals industry:
http://www.fda.gov/oc/initiatives/criticalpath/whitepaper.html