Strategic Analysis of Drug Discovery Outsourcing Markets in Europe

SUMMARY

Soaring Drug Development Costs Fuel Outsourcing

Over the years, the cost of developing new drugs has increased considerably and despite the strenuous efforts of companies, it is estimated that only 15 per cent of new drugs being developed are likely to reach the market. A majority of these research and development (R&D) expense occur at the clinical trial stage, and owing to the growing complexity of these trials, this proportion of R&D expenditure is continuing to rise. Faced with spiralling costs and diminishing margins, pharmaceutical and biotechnology companies are increasingly outsourcing their business processes as a way to develop innovative ideas, maximise the use of existing resources, and cut expenses.

This Frost & Sullivan research service analyses the European markets for drug discovery outsourcing. It critically examines the competitive structure in the drug discovery outsourcing market and provides an in-depth look at current infrastructure and ongoing implementation initiatives. It further examines the business potential of the total market in Europe, taking into account the market dynamics and drivers in each region.

Greater Emphasis on Expertise and Capabilities of CROs

Companies wanting to generate new breakthroughs have traditionally formed alliances with biotechnology firms, university research centres, contract research organisations (CROs) and other third parties. While cost efficiency is a major influence on outsourcing decisions, pharmaceutical and biotechnology firms are placing greater emphasis on the expertise and capabilities of CROs. Firms recognise that saving a small amount of money on fees could ultimately cost the firm more in project delays. This is particularly true for CROs that focus on preclinical studies involving expensive initial capital outlays for equipment and facilities.

The merger of smaller biotechnology organisations with large pharmaceutical companies represents a challenge for CROs as this slows down general decision making and delays clinical trials. Although, in some instances, pharmaceutical and biotechnology companies have refocused their R&D strategies following a lengthy merger period, this has resulted in CROs having to revise and restructure their business strategies and finances to make their R&D efforts more efficient. "An important challenge that pharmaceutical and biotechnology companies face is the recruitment of volunteers for clinical trials," says the analyst of this research. "At a time when the public is popping more pills and dietary supplements, health regulation protocols are becoming more complex, requiring clean and medication-free volunteers."

Need for Better Process Efficiency May Drive Future Growth

Apart from complementing the in-house level of expertise and experience, outsourcing also provides greater access to R&D resources, therapeutic expertise and brings about the alignment of diagnostic testing for safer and more effective therapies. With the need for improved business processes that allow radical improvements in efficiency, cost and speed, pharmaceutical and biotechnology companies are increasingly embracing outsourcing. Processes that are most frequently outsourced include parts of IT, finance/accounting services, clinical trial data management, drug manufacturing, logistics and human resources.

Given the proprietary knowledge and the high quality work involved, companies are likely to associate themselves with vendors with an established track record. "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," says the analyst. "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."

TABLE OF CONTENTS

• 1. Strategic Analysis of Drug Discovery Outsourcing Markets in Europe
  • 1. Research Scope and Methodology
    • 1. Research Scope and Methodology
    • 2. Research Methodology
    • 3. Project Scope
    • 4. Forecast Revenues
  • 2. Introduction and Background
    • 1. Key Definitions and Abbreviations
    • 2. Exchange Rates
    • 3. Background
    • 4. Overview
    • 5. Outsourcing Expenditure
    • 6. Reasons for Outsourcing
    • 7. Contract Research Organisations (CROs)
    • 8. Drug Development Times
    • 9. Offshore Outsourcing Country Matrix
  • 3. Market Dynamics
    • 1. Market and Technology Trends
    • 2. Key Industry Challenges
    • 3. Key Market Drivers
    • 4. Key Market Restraints
    • 5. Industry Lifecycle
  • 4. Total Market Forecasts
    • 1. Assumptions
    • 2. Key Market Engineering Measurements
    • 3. EU Drug Discovery Outsourcing Market Revenue Forecasts
    • 4. Top Five Rank Positions
    • 5. Geographical Market for Europe
    • 6. Company Profiles
  • 5. Strategic Analysis and Recommendations
    • 1. Major Challenges and Strategies
    • 3. Potential Threats
    • 4. Expectations for the Future
  • 6. Frost & Sullivan Awards
    • 1. Introduction
    • 2. Competitive Strategy Leadership Award
    • 3. Market Strategy Leadership Award
  • 7. Industry Participants
    • 1. Industry Participants
  • 8. Decision Support Databases
    • 1. Decision Support Databases