Outsourcing to top €5bn mark by 2007

Outsourcing drug discovery functions is a rapidly growing trend that has led to a nearly $2 billion (€1.7bn) industry worldwide, according to a new study released this week by Kalorama Information, and contract services in the field will continue to grow at a brisk pace representing revenues approaching $6 billion (€5,3bn) by 2007.

According to the study, contracting for services ranging from basic target identification through to chemistry, screening, and target identification is becoming a more acceptable practice in early-stage pharmaceutical research and development. With R&D spending out of house growing at more than three times the rate of in-house R&D spending.

"For both technology-driven biotechs that are in need of a revenue stream and big pharma companies in need of lower cost and lower risk candidates, partnering is becoming a necessity,"​ commented Steven Heffner, acquisitions editor for Kalorama Information. "And with the advent of so called personal medicine, there will be a need for a wider variety of drugs for smaller markets. Innovation will need to be outsourced to smaller companies."​

In addition to providing market size, growth forecasts, and competitive market share, the study also examined the nature of the deals being signed - from simple product purchases to equity involvement - from the perspective of the client and the supplier. Using a case-study type approach, the study​ looked at how various biotech suppliers have attracted and retained customers and what several big pharma companies look for in potential partners.