Globalization of Contract Research Organizations: Hope for Pharma Pipelines?

The current “elephant in the room” in the biotechnology and pharmaceutical industry is the fact that drug pipelines are suffering severely, resulting in a 20% decrease in Investigational New Drug (IND) filings just in the last two years. This is a vicious cycle, as it results downsizing of early R & D, causing many pharmas to lose drug discovery capabilities. However, they can now outsource to their choice of more than 500 contract research organizations (CROs) with wide-ranging clinical and pre-clinical capabilities. Indeed, several CROs have been a direct result of pharma downsizing, as displaced researchers take their specialties and form small companies, often doing quite well. A recent study came out about CROs, indicating that business is booming, with a 12.6% compounded growth rate in the market through 2011, when it will be $29.4 billion. CROs also allow smaller biotech companies to perform drug discovery more easily, allowing them to utilize capabilities only when needed in the development of their candidates. In some cases, such as CHDI, Inc., in Los Angeles, biotech companies don’t have any internal capabilities at all, doing so-called “virtual” drug discovery.

An interesting trend that benefits both CROs and pharma companies is the globalization of CROs. For the CROs, much business can be found in markets such as China and India, where both clinical and pre-clinical research is growing rapidly. Pharma companies benefit from globalization since US full-time equivalent (FTE) rates are high, especially in the biotech hubs. The first “stage” of globalization was the utilization of CROs which were wholly based overseas. However, it was found that sometimes this outsourcing suffered due to the intensive communication and project management needs of drug discovery programs. Now, CROs are becoming more globalized in the sense that while FTE work may be done where the rates are lower, there are strong ties to US or European sites. BioBlocks, a pre-clinical CRO specializing in chemistry services for lead optimization, recently announced a significant expansion of their management team, with senior members at their sites in San Diego, California, and Hungary. BioBlocks keeps it close ties to US drug discovery advancements and has strong project management at both sites, facilitating communication and performing the chemistry with non-US FTE rates.

What will the globalization of CROs mean for drug pipelines? Hopefully, this “new generation” of CROs will mean more capital efficiency and success for IND’s. Perhaps the utilization of these new CROs by smaller biotechs and pharma alike will minimize financial risks and result in more novel, first in class therapeutics for indications that are currently underrepresented in the market.

–Mary Canady, Comprendia, LLC.

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4 Responses

  1. We are a full- service clinical research organization in India with experience in all phases of clinical trials and in all key areas of the drug development process. And I am fully agree with you. We have cost advantage over many developed countries and also for our trials we get human resource very fairly. Thanks for mentioning India’s name in your blog post

  2. Interesting piece…

    The importance of CROs having global reach while maintaining close links with pharma HQs has been great for the extablised players, who have gradually moved into Eastern Europe, India etc over the past 5-10 years. This hasn’t been lost on the new generation of local CROs springing up in these regions, which had their initial growth from subcontracting from global CROs but are now emerging from their own countries and merging with other small/medium CROs from other countries (including developed countries) in an attempt to take on the big players at their own game of “global reach, local touch”.

    The upshot of this will certainly be cost-containment for pharma, but the big question is how much of this will get reinvested into smarter drug discovery and earlier, more demanding go/no-go questions being asked of compounds, and more efficient scientific and operational models for how the clinical programme is conducted.

    The even bigger question is whether having a clinical research operation that is more efficient at weeding out compounds that don’t meet the (more exacting) modern standards for safety and efficacy will improve or actually damage the size of the pipeline. You’ve got to have good compounds going into testing to be able to withstand the attrition that a good clinical research operating is always going to deliver…

  3. […] Andrew Smith on August 19, 2008 Over on the Blogging Biotech blog, Mary Canady has written about the globalisation of the CRO sector and how this could work for the benefit of pharma and biotech pi…. She makes some interesting points, but a more efficient clinical research sector also has some […]

  4. All this CRO business is eventually going to make a U turn to the US. With rising cost in India and China eventaully the difference is not going to be great. With the new government in place and tax benefits taken away from companies that outsource the incentive to outsource will decrease the pay gaps

    Jose

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