If the biotechnology industry were like the restaurant world, Richard Lin’s company would be a kitchen cook working in the shadow of a celebrity chef.

Explora BioLabs doesn’t get public credit for the new therapies that come out of its San Diego facilities, but the company’s services can be critical to the drug discovery process.

Since 2004, Explora has been conducting preclinical tests of new drug candidates in mice, rats and other animals.

“We’re at a critical juncture (for an experimental drug) to get out of the molecular research lab” and move into human testing, Lin said.

Explora and more than 100 similar businesses, called contract research organizations, have sprung up in San Diego County in recent years to do the heavy lifting of drug development — running labs, formulating and manufacturing experimental treatments, and managing clinical trials for biotechnology companies.

As investment funding has slowed to a trickle in a tough economy, many biotechs slashed their internal research and development operations and became “virtual,” operating with only a handful of their own employees.

“As they have downsized, their pipelines remain full of drug candidates,” said Kenneth Getz, a researcher at Tufts University Center for the Study of Drug Development in Boston. “They are increasingly turning to outside parties to provide services.”

The shift should lower the cost of drug development and move new therapies more quickly from the research lab to the pharmacy, he said.

“It’s a very exciting and profound change,” Getz said. “We’re moving away from the siloed, compartmentalized and insular approach that companies took to develop a (drug) candidate, and moving into an open research and development environment, where you can tap into expertise anywhere in the world.”

About 21 percent of drug research and development spending worldwide went to CROs in 2010, up from 16.7 percent in 2007, according to a June report on the industry by the consulting firm Frost and Sullivan.

In the United States, CRO revenue grew at an average annual rate of 9.75 percent over the last five years, rising from $8.5 billion in 2007 to $11.4 billion in 2010.

Annual U.S. revenue for CROs will nearly double by 2017 to $20.1 billion, Frost and Sullivan said.

Nearly 30,000 people currently work for CROs in the United States, Getz said.

All of that growth has created hundreds of jobs in the San Diego area for many of the scientists and lab workers who were pushed out of shrinking pharmaceutical and biotech companies during the recession, several industry observers said.

“It’s been a positive contributor to keeping ourselves afloat throughout the recession,” said Joe Panetta, chief executive of the San Diego industry group Biocom. “Our (biotech) employment base has remained stable.”

No one has compiled the number of people who work for CROs in San Diego County or even how many of the companies operate in the area.

“If I had to guess, I’d say it’s in the single-digit thousands,” Panetta said of the employment figure. He estimated that local CROs number above 150.

When Lin and a partner opened Explora’s doors, the company had two employees and occupied 1,500 square feet of space. Now, it employs 17 full-time workers and covers 33,000 square feet of office and lab space at three locations in the region.

“We are completely self funded,” Lin said. “We generated revenue immediately. So far, so good.”

Like many CROs in the region, Explora emerged from a local biotechnology company.

Lin, a biologist, had been running a preclinical laboratory for Ansata Therapeutics. When that company ran short of funding and started laying off workers, he negotiated a deal to lease his lab space from Ansata and launch the new business.

Like most CROs, Explora specializes in what its scientists do best, which is testing potential cancer and diabetes drugs on genetically engineered animals such as mice and rats.

The work requires a small animal research lab, known as a vivarium, which can cost several hundred thousand dollars to set up and about $200,000 annually to staff, Lin said.

Most biotechs can’t afford to build such facilities and, even if they could, they wouldn’t use them enough to justify the expense, Lin said.

“There’s no way I could set up a vivarium,” said Scott Struthers, president and chief scientific officer of Crinetics Pharmaceuticals, a San Diego endocrine-related disease and cancer drug developer that does business with Explora.

Some biotechs employ dozens of CROs over the course of developing a drug.

“There are a whole bunch of local service providers, vendors and collaborators to take care of specialty work,” Struthers said.

“There is a company down the street (from Crinetics) that does our DNA sequencing,” he said. “Another one makes a key reagent. Several groups have mass spectrometers. For high-end microscopes, we use the (University of California San Diego) cancer center, where we pay by the hour.

“It’s all about finding a way to do things in a very capital-efficient manner,” he said.

Drug developers looking for lower-priced services often end up overseas, where labor and overhead expenses are less costly.

However, doing business with a foreign CRO can be challenging, said Jay Lichter, a managing director of Avalon Ventures in La Jolla who runs two of the firm’s virtual biotechs, Afraxis and Sova Pharmaceuticals.

“When you go to Eastern Europe, China and India, language can be a major issue,” he said. “Time zones are also a huge issue.”

To avoid those problems, Lichter’s companies work with foreign CROs that also staff offices in the San Diego area.

“If they didn’t have a U.S. presence, they probably wouldn’t get our business,” he said.

For those reasons and others, CROs in San Diego County and other parts of the country should continue to thrive over the coming years as even more drug research and development work migrates out of pharmaceutical and biotech companies, said Getz with the Tufts University research center.

“The U.S. market is very strong,” he said. “Some of the largest and most successful global CROs are based here. It’s a very promising time for the sector.”

keith.darce@uniontrib.com; (619) 293-1020; Twitter @keithdarce; About Me; Follow us on Facebook or visit the U-T Biotech page