Pharmaceutical companies used to control every step of a drug’s route to market, from preliminary research to sales and distribution. Today, however, there is a growing recognition that outsourcing can help bring drugs to market faster and more effectively. As a result, certain key stages in the development process are being undertaken by independent specialists. Known as contract research organisations, these companies perform clinical trials, work on drug development and analyse the resultant data. The market is already worth around $30 billion and it is growing rapidly.​

HEALTHCARE

 

HEALTHCARE

Delivering 

the drugs

In recent years, the pharmaceutical industry has undergone a series of radical changes. Previously, major pharmaceutical companies such as AstraZeneca, Pfizer and Novartis jealously guarded every aspect of the delivery process for the next blockbuster drug. From pre-clinical tests to clinical trials and from manufacturing to distribution – Big Pharma did it all. Only a small handful of contract research organisations (CROs) existed. These were firms to which certain parts of the drug development process could be outsourced. But they were few in number and their use was not widespread. 

Then the scales tipped 

The shift can be attributed largely to cost. In 2000, pharmaceutical companies spent an average of $800 million bringing a drug to market. Today, that same process can cost up to $2.5 billion. 

At the same time, the opportunity for pharma companies to recoup their expenses and generate value is limited – patents last for around 24 years and the first eight of those years are often spent simply making the drug in question. Once the patent ends, generic companies can begin to make the same drug at a vastly reduced cost because they have not had the expense of developing it. 

Not only are financial pressures rising, but the ability to find new blockbusters has been falling too. “The success rate from phase I to launching the drug has been going down over time,” says Jamie Wyatt, head of healthcare at Bridgepoint. 

With the industry squeezed on cost, pressurised on patents and facing concerns about future growth, both pharma companies and biotech groups are keen to shorten the clinical trials process and make it more effective. The less time that is spent on trials, the more time a drug can be sold under patent. And the more effective the process becomes, the greater the chance that there is a product to sell at the end of it.​

Specialised skill-sets

Quotient Clinical, a former Bridgepoint portfolio company that was successfully exited last year, also provides highly specialised CRO services. Unlike its peers, the group both develops and trials drugs. “The industry is new to research and development outsourcing but unless the service sector starts changing, it’s going to deliver the same results as pharma and look at the malaise that caused,” says Peter Scholes, Quotient’s chief scientific officer. 

“Our model means we can get new drug molecules into humans faster because we can test products soon after manufacturing them. We don’t need to get bogged down generating excessive stability data to verify a product’s shelf life. We can just test it,” he adds.

Moreover, drug development is done in real time just before trials begin. “That means that during a clinical study, as clinical data emerges, we can use that knowledge to change the products we make and dose,” explains Scholes. 

In normal circumstances, the phase 1 or “dose escalation” stage, takes place several weeks or months after development because one company takes charge of developing a drug and another tests different doses on patients. This makes it almost impossible to adjust drug formulae as the dosing progresses. Quotient’s approach – known as “translational pharmaceutics” – delivers increased precision during the dosing phase, reducing waste and speeding up the entire testing process.

Time critical 

Synexus is another CRO with a unique skill-set. Unlike many competitors, the group owns and operates 28 permanent research centres in Europe, South Africa and the US, typically in urban locations. This allows it to recruit clinical trial patients very quickly – a highly attractive proposition for pharmaceutical firms, where time management is absolutely critical. Earlier this year, the UK-based company was snapped up by US multinational Pharmaceutical Product Development (PPD) for £178 million. 

But CROs are not the only businesses focused on shortening the clinical trial process. Tech firms play an integral role as well, providing essential software to CROs so they can assess and deliver results faster and more effectively. In essence, as Big Pharma is developing a reliance on CROs, CROs desperately need companies that can provide them with the requisite technological know-how. 

As Wyatt explains: “We’ve looked at how clinical trial data is captured and brought through, ultimately to the regulator, and there were a lot of old-world practices. Basically, a lot of paper was being used, which can be both unwieldy and time- consuming. Bringing in professional disciplines and data devices is really speeding up analytics.” 

Bridgepoint-backed IT specialist Phlexglobal is a classic example of the breed. The company uses state-of-the-art technology to provide software and services that support crucial administrative and operational aspects of the clinical trial process.

“Some CRO-related IT businesses have been growing at a rate of 20% plus. Clearly, this is very attractive, because the clinical trials market is enormous and if CROs suddenly adopt a technology solution, that can be very material,” says Wyatt.

The age curse

At a practical level, all these changes are contributing towards the transformation of healthcare for the consumer, which is particularly useful as global demographics change. Research from Joseph Chamie, former head demographer at the United Nations, revealed that by 2030, 56 countries will have more people aged 65 and over than children under 15. 

While children and young adults are susceptible to disease, there is no denying that the elderly are the biggest users of medical drugs. That suggests there is an ongoing and increasing need for sophisticated drugs to combat age-related illness. A more efficient clinical- trials process can play a central role in bringing these medicines to market more quickly and at an affordable price. 

There is a growing vogue for personalised medicine too, that is, medication tailored to the individual. CROs are expected to be heavily involved in this development as well. 

“The more we move to personalised medicines, the more effective they will be at an individual level. But the potential for losing economies of scale in areas such as manufacturing is large and will increase cost pressures for pharma firms,” says Wyatt. 

Clearly, making 100 variants of a single drug is complex and costly. However, CROs can help to reduce associated costs, driving growth in the personalised medicines market and opening up better healthcare to more people. 

Across the industry, the growth of the CRO sector has been remarkable, not least because Big Pharma spent so many decades taking charge of the entire drug development process. The shift in attitude confers multiple benefits, speeding up drug trials, cutting costs and delivering treatments faster and more cheaply to the end consumer. 

And the trend is expected to continue and accelerate. Over the next few years, forecasters predict that CROs will play an increasing role in the pharmaceutical space, accelerating medical breakthroughs and encouraging positive developments across the healthcare sector 

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Outsourcing solution

This drive for efficiency lies behind a growing trend across the industry to outsource parts of the clinical trial process to CROs. 

The shift makes sound financial sense. CROs carry out trials for a wide range of clients, whereas pharmaceutical and biotech firms perform such tests on a smaller, less frequent scale. As a result, CRO fees are invariably cheaper than in-house costs. But there are further advantages too.

“A lot of CROs have specialisms in certain areas, so they can add value back to the pharma companies – they can say ‘We’ve seen this before and it’s generally a warning sign’ or ‘Here’s an opportunity’. This helps combat that growing drug-trial failure rate,” says Wyatt. 

Figures show just how much the CRO industry is benefiting from drug developers’ interest in outsourcing. According to a report by investment bank Harris Williams & Co., the global CRO market is expected to grow from $27 billion in 2014 to $32.7 billion by 2017, an increase of more than 20 per cent. 

The sector is also becoming more diverse. Companies such as Quintiles, PPD and Covance are large multinationals in their own right, with a sizeable share of the market. Quintiles, for example, was valued at around $9 billion when it recently merged with IMS Health. At the other end of the spectrum, a growing number of boutique firms have specific niches or specialisms.

Sarah Cannon Research Institute is one example of this breed: with a few sites in the US and one in the UK, it specialises in cancer drugs and has a particular focus on phase I and phase II trials. 

“In terms of early drug development, we recruit around 1,000 patients a year, which is probably the largest network globally for phase I,” says Dr Hendrik-Tobias Arkenau, medical director at the Sarah Cannon Research Institute UK. According to Arkenau: “You need specialist teams to carry out and manage early drug development because trials are not just about making sure a drug is safe any more, they’re about looking for biomarkers that predict a response to a treatment or not. 

So it’s getting very complex – you can’t just open two or three chairs in a hospital unit and say you are doing early drug development.”​

Some CRO-related IT businesses have been growing at a rate of 20 per cent plus. Clearly, this is very attractive, because the clinical trials market is enormous and if CROs suddenly adopt a technology solution, that can be very material”​

In 2000, pharmaceutical companies spent an average of $800 million bringing a drug to market. Today, that same process can cost up to $2.5 billion”​

A more efficient clinical trials process can play a central role in bringing these medicines to market more quickly and at an affordable price”​

A more efficient clinical trials process can play a central role in bringing these medicines to market more quickly and at an affordable price”​​

In 2000, pharmaceutical companies spent an average of $800 million bringing a drug to market. Today, that same process can cost up to $2.5 billion”​​

Specialised skill-sets

Quotient Clinical, a former Bridgepoint portfolio company that was successfully exited last year, also provides highly specialised CRO services. Unlike its peers, the group both develops and trials drugs. “The industry is new to research and development outsourcing but unless the service sector starts changing, it’s going to deliver the same results as pharma and look at the malaise that caused,” says Peter Scholes, Quotient’s chief scientific officer. 

“Our model means we can get new drug molecules into humans faster because we can test products soon after manufacturing them. We don’t need to get bogged down generating excessive stability data to verify a product’s shelf life. We can just test it,” he adds.

Moreover, drug development is done in real time just before trials begin. “That means that during a clinical study, as clinical data emerges, we can use that knowledge to change the products we make and dose,” explains Scholes. 

In normal circumstances, the phase 1 or “dose escalation” stage, takes place several weeks or months after development because one company takes charge of developing a drug and another tests different doses on patients. This makes it almost impossible to adjust drug formulae as the dosing progresses. Quotient’s approach – known as “translational pharmaceutics” – delivers increased precision during the dosing phase, reducing waste and speeding up the entire testing process.

Time critical

Synexus is another CRO with a unique skill-set. Unlike many competitors, the group owns and operates 28 permanent research centres in Europe, South Africa and the US, typically in urban locations. This allows it to recruit clinical trial patients very quickly – a highly attractive proposition for pharmaceutical firms, where time management is absolutely critical. Earlier this year, the UK-based company was snapped up by US multinational Pharmaceutical Product Development (PPD) for £178 million. 

But CROs are not the only businesses focused on shortening the clinical trial process. Tech firms play an integral role as well, providing essential software to CROs so they can assess and deliver results faster and more effectively. In essence, as Big Pharma is developing a reliance on CROs, CROs desperately need companies that can provide them with the requisite technological know-how. 

As Wyatt explains: “We’ve looked at how clinical trial data is captured and brought through, ultimately to the regulator, and there were a lot of old-world practices. Basically, a lot of paper was being used, which can be both unwieldy and time- consuming. Bringing in professional disciplines and data devices is really speeding up analytics.” 

Bridgepoint-backed IT specialist Phlexglobal is a classic example of the breed. The company uses state-of-the-art technology to provide software and services that support crucial administrative and operational aspects of the clinical trial process.

“Some CRO-related IT businesses have been growing at a rate of 20% plus. Clearly, this is very attractive, because the clinical trials market is enormous and if CROs suddenly adopt a technology solution, that can be very material,” says Wyatt.

The age curse

At a practical level, all these changes are contributing towards the transformation of healthcare for the consumer, which is particularly useful as global demographics change. Research from Joseph Chamie, former head demographer at the United Nations, revealed that by 2030, 56 countries will have more people aged 65 and over than children under 15. 

While children and young adults are susceptible to disease, there is no denying that the elderly are the biggest users of medical drugs. That suggests there is an ongoing and increasing need for sophisticated drugs to combat age-related illness. A more efficient clinical- trials process can play a central role in bringing these medicines to market more quickly and at an affordable price. 

There is a growing vogue for personalised medicine too, that is, medication tailored to the individual. CROs are expected to be heavily involved in this development as well. 

“The more we move to personalised medicines, the more effective they will be at an individual level. But the potential for losing economies of scale in areas such as manufacturing is large and will increase cost pressures for pharma firms,” says Wyatt. 

Clearly, making 100 variants of a single drug is complex and costly. However, CROs can help to reduce associated costs, driving growth in the personalised medicines market and opening up better healthcare to more people. 

Across the industry, the growth of the CRO sector has been remarkable, not least because Big Pharma spent so many decades taking charge of the entire drug development process. The shift in attitude confers multiple benefits, speeding up drug trials, cutting costs and delivering treatments faster and more cheaply to the end consumer. 

And the trend is expected to continue and accelerate. Over the next few years, forecasters predict that CROs will play an increasing role in the pharmaceutical space, accelerating medical breakthroughs and encouraging positive developments across the healthcare sector 

Back to articles

Some CRO-related IT businesses have been growing at a rate of 20 per cent plus. Clearly, this is very attractive, because the clinical trials market is enormous and if CROs suddenly adopt a technology solution, that can be very material”​​

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Bridgepoint  |  The Point  |  November 2016  |  Issue 30