The pressures placed on pharmaceutical and biotechnology firms are causing companies to outsource their drug discovery processes as contract research organisations (CROs) expand to offer services such as finance/accounting, logistics and human resources and IT.
Soaring costs of drug development and lengthy drug discovery times are well-established problems in the pharmaceutical industry, with only 15 per cent of new drugs entering development expected to reach the market.
As a result, pharma companies are forming alliances with biotechnology firms, university research centres, contract research organisations (CROs), specialised niche vendors and general service providers, which have increasingly extended its offerings to serve the unmet need.
For example, CROs provide expert geographic coverage enabling companies to allow researchers of different locations to simultaneously view and discuss data, improving testing and turn-around times, and ultimately enhancing data quality.
"Outsourcing may be one strategy to adopt, which allows companies to control and utilise their R&D expenditure more effectively," said Frost & Sullivan's (F&S) research analyst Dr Amarpreet Dhiman.
"Also, despite cost efficiency being a contributing factor to encourage outsourcing, the impact of genomics and proteomics in therapeutics has also resulted in an increasing awareness of the benefits of outsourcing."
F&S' latest report details the intensifying financial strain of drug development, which has been currently estimated at approximately $800 million per drug. Such is the outsourcing trend, figures have predicted the European drug discovery outsourcing market to expand from $3.2 billion (€2.7 billion) in 2004 to $5.1 billion by 2011.
The report identifies the reluctance of some companies interested in outsourcing to lose overall control of their business processes and proprietary knowledge.
Firms are likely to select outsourcing partners with an established track record, which possess capabilities to meet varied scientific and operational requirements. Also, companies seeking to combat high costs can benefit greatly by selecting an outsourcing partner from lower-wage countries such as India and China.
"At the same time, companies must become more comfortable about sharing some control over non-core processes, with the risk of errors and delays, with their ability to safeguard proprietary knowledge, and with the impact of outsourcing on regulatory compliance," said Dr Dhiman.
"It is important that the various risks are identified, understood and measured, so that companies can successfully pool their disciplines to their development partners," he added.
The report predicted that by 2010, more than 40 per cent of R&D is projected to be outsourced to more specialised firms in order to efficiently maintain a strong and vitalpipeline for new blockbuster drugs.
As the European drug discovery outsourcing market expands, firms, which are able to reach out to focussed, research-orientated speciality companies that complement their traditional processes, are poised to emerge as leaders.
Frost and Sullivan's report: "European Drug Discovery Outsourcing Market (B562-55)," is available now.