Pipeline Gap Fuels Growing Outsourcing

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Pipeline Gap Fuels Growing Outsourcing

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Between the $2.6 Billion Cost for a New Drug, $117 Billion of Drug Products with Patent Expirations, and the Thousands of Pharmaceutical Industry Layoffs, the Only Way to Fill the Gap is Outsourcing.

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 Food & Drug administration (FDA). 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.

Traditional in-house drug discovery activities are rapidly being
outsourced by a challenged pharmaceutical industry looking to
stretch R&D dollars. Almost half of discovery could be outsourced
in the next few years, according to Kalorama Information’s report.
Through outsourcing portions of their drug discovery programs, many pharmaceutical and biotechnology companies have found an effective cost-cutting strategy that can also improve the hit-to- lead conversion and early identification of unsuccessful compounds. In view of the fact that outsourcing can accelerate the drug discovery process, the business of contract drug discovery has evolved from providing low-end research services to more value-added high-end research.

Drug discovery Outsourcing revenues are up 17% – Based on Information from Kalorama Information’s OUTSOURCING IN DRUG DISCOVERY Report

Drug discovery in pharmaceutical research typically combines target-based and chemistry-based technologies to enable the discovery of new compounds. Drug discovery requires technical expertise in the areas of molecular biology, ultra-high throughput screening, molecular and behavioral pharmacology, and combinatorial, medicinal and analytical chemistry. The process can be organized into four stages: target identification, target validation, high speed screening, and lead optimization.

The Pharmaceutical Research and Manufacturers of America (PhRMA) estimates that on average the industry must spend $2.6 billion in research and development to bring a product to market. To speed the process and cut costs, it is necessary to improve target identification and validation, and to be able to predict or determine absorption, distribution, metabolism, excretion and toxicity (ADME/Tox) profiles earlier during discovery process. To achieve these goals, drug research has turned to new areas in science to develop better in vitro, in vivo, and in silico methods and models.


Major Trends That Have Led To An Increase In Demand For Contract Services In Drug Discovery Include:

• Development Of New Technologies That Continued To Increase The Number Of Targets And Accelerate The Identification Of Active Compounds;

• Pressure To Develop New Lead Compounds Due To The Near-Term Loss Of Patent Protection For Many Drug Products;

• Increased Pressure To Reduce The Time Spent In Drug Discovery And To Bring Drugs To Market Sooner;

• Increased Focus On Converting Fixed Costs To Variable Costs And Streamlining Operations By Contracting For Research And Development Services;

• Heightened Regulatory Environment And Increased Complexity That Made The Internal Management Of Complicated Discovery Projects More Difficult And Costly; And

• Biotechnology And Emerging Pharmaceutical Companies, In Many Cases, Lacking The Required In-House Drug Discovery And Development Expertise.

Another major trend that continues to gain momemtum is choosing outsourcing partners in Asia and Eastern Europe. It is not only large pharmaceutical and biopharmaceutical companies that are moving their outsourcing offshore, but smaller biopharmaceutical companies are following this trend as well. Small biopharmaceutical firms, such as virtual companies, that lack the infrastructure to carry out

complex chemistry, biology, and lead optimization services are chosing outsourcing partners in India or china, thus expanding the rapidly evolving global drug discovery outsourcing market.

Bottlenecks Where Outsourcers Can Assist

A critical bottleneck in the drug discovery process is the hit-to-candidate stage. Scientists interviewed for this report generally agree that the number of potential targets has increased sharply over the last decade, but information about those targets, i.e., sufficient understanding of gene and protein function–especially in the context of biological pathways–has not increased at the same rate. To break the bottleneck, anti-targets need to be eliminated earlier, freeing up researchers to concentrate their time and attention on potential targets of interest.

Another bottleneck is the characterization of absorption, distribution, metabolism and excretion (ADME) properties of new molecular entities (NMEs) in the pipeline. With the number of identified drug targets increasing, candidate compounds with significant ADME and toxicity profiles need to be determined earlier in the process of drug discovery and development. Failure to determine ADME characteristics and physiochemical properties can cause a compound to fail during later drug development stages or in clinical trials.

Advances in genomics, combinatorial chemistry and high through-put screening have all contributed to an explosion of new biological targets and new drug leads. However, most pharmaceutical and biopharmaceutical companies do not have the expertise or in-house programs to fully utilize these novel technologies. Thus, in order to keep pace with technological developments and evaluate the usefulness of potential drug compounds more efficiently, companies are turning to outsourcing to increase the efficiency and reduce the overall cost of the drug discovery process.

Beyond Just Outsourcing for Costs

2017 saw a continuation of a trend that Kalorama has tracked since 2002 – outsourcing not just for price but for expertise as well. Most of the arguments for drug discovery outsourcing have focused on the cost-saving benefits. However, today companies are looking at benefits and opportunities beyond cost savings. Companies are outsourcing to gain strategic benefits such as access to innovative technology, faster response time to support and benchmark internal programs, and on-going process improvements.

The pharmaceutical industry has a long history of outsourcing non-core functions. However, over the past two decades, this pattern changed as companies began routinely outsourcing a number of core functions, such as clinical trial management and manufacturing. Although drug discovery is one of the more recent core functions to be outsourced, increasingly portions of the drug discovery process are being outsourced today.

Drug discovery has become increasing complex since the 1990s as a result of advances in molecular biology and the emergence of nextgeneration biological therapies. These advances plus the

emergence of new technologies have made it unsustainable for companies to undertake all drug discovery functions in-house. Therefore, the industry chooses to outsource core drug discovery functions more frequently. To quote a senior scientist from Bristol Myers Squibb: “Outsourcing has become so paramount in a pharmaceutical’s infrastructure and drug discovery strategy that it can no longer be considered an option.”

As outsourcing has proven to be a useful tool for pharmaceutical companies to manage their core functions, it has provided a valuable way to make time and cost savings as well as provide financial and operational flexibility. However, issues over loss of control, intellectual property and confidentiality remain a concern for some companies, contributing to their reluctance to outsource more of their core drug discovery functions.

Each company has different needs, and these needs change over time, which underscores the necessity for an outsourcing strategy to be dynamic, allowing for the ability to make adjustments to suit a changing landscape.

Outsourcing can play a key role in shortening the drug discovery process by enabling pharmaceutical companies to hand off selected tasks, thereby freeing up resources to devote more time to other strategic activities. Global outsourcing can also give a company access to technology and talent not available in-house. However, it is imperative that pharmaceutical companies develop a detailed plan for outsourcing. Deciding what, when, and where to outsource is a multifaceted undertaking.