Where you find opportunities to grow

* Can't find your brand, product, service? Join BPT Marketplace

R&D Outsourcing

Section: Biopharma Insights     View all sections


The Evolving Pharma R&D Outsourcing Industry: A Bird’s-eye View

   by Andrii Buvailo    2856
The Evolving Pharma R&D Outsourcing Industry: A Bird’s-eye View

Pharmaceutical companies are increasingly outsourcing their R&D activities, including early-stage research programs, to third party organizations -- academic institutions, biotech startups, and private contract research organizations (CROs) -- as a means to stay competitive, flexible, and profitable against all odds.   

Economically, there are factors such as increasing downward pressure on drug pricing by governments, an impending “patent cliff” threatening $198 billion worth of sales during 2019-2024), and downturns in income due to the increasing competition from generics and biosimilars. 

From the innovation's point of view, there is a boom in life sciences, stimulating the emergence of novel biological targets, therapeutic modalities, and even whole new areas of drug discovery -- adding opportunities, but also complexity and uncertainty to research programs. In fact, according to Deloitte’s report, return on late-stage pipelines dropped for the top 12 pharma companies from 10.1% in 2010 down to 3.7% in 2016.

Technologically, there is an unfolding “digital revolution”, bringing even further complexity and investment cost to the table -- in a form of artificial intelligence (AI), data mining and big data technologies, data-driven diagnostics, and digital health. 

Finally, the rise of the personalized medicine paradigm forces companies to rethink their research pipelines and “one-size-fits-all” product development programs, as well as reconsider their market strategies. 

Pharma R&D Outsourcing Is On The Rise

   by Andrii Buvailo    45727
Pharma R&D Outsourcing Is On The Rise

Pharmaceutical companies are increasingly outsourcing research activities to academic and private contract research organizations (CROs) as a strategy to stay competitive and flexible in a world of exponentially growing knowledge, increasingly sophisticated technologies and an unstable economic environment.  

The R&D tasks that firms choose to outsource include a wide spectrum of activities from basic research to late-stage development: genetic engineering, target validation, assay development, hit exploration and lead optimization (hit candidates-as-a-service), safety and efficacy tests in animal models, and clinical trials involving humans.

According to a report by Clearwater International (autumn 2019), the global CRO market will potentially rise to a $45 billion industry by 2022, as compared to an estimated $30 billion valuation (by Objective Capital Partners), exhibiting the current rate of market growth of around 10% CAGR with projected acceleration up to 12%. This is in line with Vantage’s alliance benchmarking study, revealing that over 80% of bio-pharma respondents reported increased alliance activity compared to previous periods. Getting ideas and expertise from external sources is a well-established practice in the pharmaceutical industry with about one-third of all drugs in the pipelines of the top ten pharmaceutical companies initially developed elsewhere, according to a 2014 WSJ article by Jonathan D. Rockoff.  

The Evolution Of Pharmaceutical R&D Model

   by Andrii Buvailo    3206
The Evolution Of Pharmaceutical R&D Model

There is a plethora of analytics reports, including ones by Deloitte, DKV Global, and Ernst and Young, all pointing out to a declining business performance of the pharmaceutical industry. They all convey a similar bottomline message: the decline is not due to a lack of innovation (the innovations are growing). And not because sales are falling or markets are shrinking (revenues are growing in general, and the markets are expanding with the expanding and ageing population). The key reason of the declining financial performance is the fact that research and development (R&D) costs are growing substantially faster over an average investment period, than the actual revenues over the same period. This kills operational profits, leading to a decline in the overall business gain. A direct consequence of that -- an increasingly stagnating industry, cutting sometimes promising R&D programs, jobs etc.  

There are two more relevant questions here: 

1) why R&D costs are growing faster than revenues, considering that technological progress is seemingly providing more and more optimal and powerful technologies to pharma companies at a constantly decreasing specific price (e.g. costs of computation, sequencing, screening and many other things are falling), and 

2) what to do about it to reverse the decline in pharma industry performance? 

How Big Pharma Adopts AI To Boost Drug Discovery

   by Andrii Buvailo    38381
How Big Pharma Adopts AI To Boost Drug Discovery

(Last updated 08.10.2018)

The type of artificial intelligence (AI) which scares some of the greatest minds, like Elon Musk and Stephen Hawking, is called “general artificial intelligence” -- the one which can “think” pretty much like humans do, and which can quickly evolve into a dangerous “superintelligence”. There is a notion that it might be invented in the nearest decades, but today we are definitely not there yet. The AI which is making headlines these days is a “narrow artificial intelligence”, a limited type of machine “intelligence” able to solve only a specific task or a group of tasks. It can’t go anywhere beyond specifics of the problem for which it is designed, so apparently, it will not hurt anyone in the nearest time. But already now it can provide meaningful practical results on those narrow tasks, like natural language processing, image recognition, controlling self-driving cars, and helping develop new drugs more efficiently. With the ability to find hidden and unintuitive patterns in vast amounts of data in ways that no human can do, AI represents a considerable promise to transform many industries, including pharma and biotech.