Drug discovery is a lengthy, complex and expensive process. With rising costs of research and development, many pharmaceutical companies are outsourcing parts of their drug discovery pipeline to contract research organizations (CROs) to reduce costs and bring new therapies to market more quickly.
The High Costs of Drug Discovery
Developing a new drug from discovery to approval can take over 10 years and cost over $1 billion according to some estimates. Factors such as longer clinical trials, regulatory requirements and high failure rates have contributed to skyrocketing R&D costs over the past few decades. Many big pharma companies have struggled to keep up with these escalating costs leading to job cuts, site closures and mergers and acquisitions.
Outsourcing Non-core Functions
To reduce costs and focus internal resources on core activities, numerous large pharmaceutical firms have outsourced non-core functions related to drug discovery. Activities like medicinal chemistry, biology services, safety assessment and target validation are commonly outsourced to CROs with specialized expertise in these areas. By leveraging external capabilities, pharmaceutical companies can access specialized skills, technologies and infrastructure they otherwise cannot economically develop in-house.
Growth of CRO Industry
The rise in drug discovery outsourcing has fueled tremendous growth of the CRO industry. Global spend on CRO services is projected to grow to over $75 billion by 2027 according to market estimates. Large CRO players like Thermo Fischer Scientific, Charles River, WuXi AppTec and Evotec have benefited greatly from this trend. These CROs provide a wide range of discovery and development services allowing pharmaceutical clients to “mix-and-match” the services needed for their projects without investing heavily in internal resources.
Advantages of Outsourcing
There are several key advantages that drug discovery outsourcing provides:
Cost Savings: Outsourcing reduces fixed infrastructure and staffing costs for pharmaceutical companies. It allows variable costs that fluctuate with demand. CROs can offer services at lower costs by achieving economies of scale.
Access to technology/expertise: CROs invest heavily in latest technologies like high-throughput screening, structure-based drug design etc. They also employ specialized scientists and researchers that they are able to attract due to their scale. Pharma clients gain access to technologies and talent they could not afford otherwise.
Flexibility: Outsourcing provides flexibility to pharmaceutical companies to rapidly increase or decrease research activities based on portfolio needs. This allows them to focus on drug development rather than discovery. Additionally, CROs take on project risks freeing up internal resources.
Speed and efficiency: With optimized workflows and resources dedicated solely to drug discovery programs, CROs are able to rapidly move projects through the early discovery phases based on predefined milestones and timelines. This can accelerate candidate selection.
Challenges of Outsourcing
While drug discovery outsourcing provides advantages, it also poses certain challenges:
Loss of internal expertise: Over-reliance on outsourcing could cause pharmaceutical companies to lose in-house capabilities and expertise over time if critical scientist are not retained.
Security and IP issues: Transferring sensitive data and research materials to external partners increases risks of data breaches or loss of intellectual property. Strict confidentiality agreements are needed.
Co-ordination challenges: Managing large, complex outsourced projects spread across multiple CRO partners requires significant co-ordination. Success depends on clear communication and well-defined responsibilities.
Regulatory compliance: As drug discovery moves offshore, companies need processes to ensure all outsourced work complies with relevant quality and regulatory standards. Regulators are also increasing scrutiny of outsourced operations.
Pricing pressures on CROs: Commoditization of generic discovery services and industry consolidation has intensified pricing pressures on CROs. This could threaten service quality if not managed well.
The Road Ahead
Going forward, drug discovery outsourcing is expected to continue growing at double-digit rates annually. Pharmaceutical firms will increase outsourcing of early-stage research while keeping strategic activities in-house. CROs are expanding their end-to-end integrated services across the entire value chain from target ID to pre-clinical development. With more specialized expertise and capabilities, they will become even more important strategic partners to the pharma industry. As costs soar, outsourcing will remain critical for pharmaceutical companies to survive in the post-blockbuster era.
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