Drug Discovery Outsourcing – COVID-19 has Mixed Effect

Drug discovery is a high-cost, risky business because only a fraction of the therapeutic targets selected for study will actually yield products that achieve regulatory approval by the U.S. Food & Drug Administration (FDA) or other global regulatory agencies. The average drug can take 10+ years to progress from the discovery phase to the clinic, with only one compound out of 10,000 evolving into a viable product. The increasing demand for outsourcing has spawned a proliferation of companies offering contract drug discovery services. Contractors competing in this sector range from small regional companies with a limited geographic reach to medium and large CROs with a large global footprint. As more pharmaceutical companies from emerging countries become major players in the pharmaceutical industry, and multinational pharmaceutical companies expand into emerging countries, the global demand for drug discovery services will continue to expand, although it will be affected by the 2020 corona virus pandemic, lockdown and expected recession.

According to Kalorama Information’s latest report, the market for outsourced drug discovery services has been robust. This is expected to change dramatically in 2020, with ongoing recovery through the five-year forecast period of this report. The global market is estimated at $31.6 billion in 2019 up 15.8% from $27.3 billion in 2018,

The net impact of the corona virus and lockdown will be to inhibit global drug discovery outsourcing while creating opportunities for the development of corona-related vaccines and therapies.

As of May 2020, economic analysts around the world broadly predict an economic recession resulting from the dramatic slowdown in business activities during the corona virus lockdown. The full impact of the global corona virus contagion is not yet understood. In fact, even as a clearer picture emerges in the coming months, the economic ramifications are unlikely to be fully grasped until 2021 or beyond.

As the lockdown requirements are designed to prevent the spread of the corona virus in large groups of individuals who have direct physical contact with each other, manufacturing operations of many companies have been suspended. The pharmaceutical and biotechnology industries, however, are considered life sustaining and therefore medicines and vaccines continue to be produced. As of early May 2020, no significant shortages have been reported.

This could change, however, if the lockdown requirements become more stringent; while the current trend appears to be easing of lockdown restrictions, a significant subsequent wave of infection could reverse this. Furthermore, the industry remains subject to market forces, economic cycles and consumer demand. Although low cost generic medications will probably maintain their sales levels, branded medicines are likely to suffer.