Given the proprietary knowledge and the high quality work involved in R&D, the author of the report, Amarpreet Dhiman, believes that many pharma companies are still likely to associate themselves with European vendors with an established track record, despite the higher costs compared to Asia.
"By 2010, more than 40 per cent of R&D is predicted to be outsourced to specialised firms to efficiently maintain a strong and vital pipeline for new blockbuster drugs," said Dhiman.
"Those firms that are able to reach out to small, more focussed, research-orientated and specialised companies, which complement their traditional processes are expected to emerge as strong industry participants," said the analyst.
Over the years, the cost of developing new drugs has been soaring, particularly in R&D expenditure, with the majority of these expenses occurring at the clinical trial stage, often due to the growing complexity of trials.
Faced with spiralling costs and diminishing margins, drug companies are increasingly outsourcing their business processes as a way to develop innovative ideas, maximise the use of existing resources, and cut expenses.
However, while cost efficiency is a major influence on outsourcing decisions, pharma and biotech firms are starting to place a greater emphasis on the expertise and capabilities of CROs and rely on them more heavily as partners rather than merely providers.
Firms are recognising that saving a small amount of money on fees could ultimately cost more in project delays, said the report titled "Strategic Analysis of Drug Discovery Outsourcing Markets in Europe."
This is particularly true for CROs that focus on pre-clinical studies involving expensive initial capital outlays for equipment and facilities.
This may serve as Europe's defence in the face of the slowly advancing Asian invasion.