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.

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.