Finding the right partner for the job - whether from the sponsor side or the contractor side - generally presents a challenge. As a sponsor, it takes a substantial amount of time and money to identify and then vet prospective CROs and CMOs. As a CRO or CMO, it can be hard to know which companies to single out for direct business development efforts within this highly competitive market.
For the past 18 months, Nice Insight has been tracking outsourcing behaviors in the drug development industry. Our purpose has been to capture the most significant trends in the market and generate new insights that may expedite the development and launch of new medicines into the global pharmaceutical market at a lower cost and faster pace. Every three months, Nice Insight engages in primary research with pharmaceutical and biotechnology industry executives to benchmark the current best practices in outsourcing relationships and assess the outsourcing landscape for a wide range of projects and services over the previous quarter.
The focus of the research is company specific, so sponsors may begin new relationships or expand current ones with the knowledge of their peers’ recent experiences. However, for contract service providers, many broader industry trends - such as which services are in demand and where sponsors intend to spend their budgets - may be garnered from the data and used for business development.
TRENDS IN OUTSOURCING ACTIVITY BY PHASE
PHASE 1– Primary research data from Nice Insight’s most recent Pharmaceutical and Biotechnology Outsourcing survey reveal that 50% of the 2,404 respondents across Big Pharma and Biotech, Emerging Biotech, Specialty Pharma, and Emerging Pharma plan to engage partners during Phase 1. On the upper end of the scale, 57% of Big Pharma respondents indicated that they would engage partners during this phase. This was followed by more even numbers across Biotech (50%), Emerging Biotech (51%) and Specialty Pharma (52%). Emerging Pharma (39%) demonstrated the lowest planned frequency of engaging partners in Phase 1.
PHASE 2 – Overall, there was a slight increase in the percentage of sponsors who indicated they would be engaging an outsourcing partner during Phase 2, up from 39% in Q1 to 42% in Q2. Big Pharma was again the largest contributor in this group, with 50%. planning to engage contract providers during this phase. Only 28% of Emerging Pharma sponsors indicated they would engage partners during Phase 2, which was the lowest frequency. This trend is in line with prior data, with the number reflecting only 21% in Q1.
PHASE 3 – Approximately one-third (35%) of respondents plan to engage outsourcing partners during Phase 3, which is up two percentage points from what was indicated in first quarter results. Big Pharma respondents were again the most likely to engage partners in this phase, with 44% indicating plans to do so. The Emerging Pharma segment was least likely to engage partners during Phase 3, with only 20% of this sponsor group indicating an intent to do so.
POST LAUNCH – Less than one-third of respondents are planning to engage outsourcing partners for Phase 4 studies. Big Pharma and Specialty Pharma sponsors showed the highest tendency towards engaging partners for Phase 4 studies with 41% of Big Pharma respondents indicating this intent, and 38% of Specialty Pharma sponsors doing so. Emerging Biotech is the least likely to engage Phase 4 partners, with only 17% indicating interest in Q1 and 14% in Q2 (suggesting a downward trend).
TRENDS IN ANALYTICAL TESTING
Within our research, we categorize analytical testing as a contract service involving the research, development, validation and execution of GCP, GLP and cGMP analytical methods. These analyses support pharmaceutical product development from early development to manufacture.
As one of the more transactional services outsourced to contract providers, the total estimated spend allocated by respondents planning to outsource analytical spending increased from $515M to $533M, coinciding with an 8% increase in those who will outsource this service in 2012, from 32% to 40%.
For Biotech respondents who indicated their company would outsource analytical testing in 2012, planned spending increased by $18M, accounting for an 11% increase from 33.82% to 44.48%. For Emerging Biotech, there was no change in the percentage of respondents who intend to outsource analytical testing in 2012 from Q1 to Q2 (32%). A consequent $2M decrease in projected spending amongst this group was not especially significant.
For Big Pharma respondents, there was an 8% increase in those planning to outsource analytical testing. Spending was projected to increase from $138 to $158M.
BEYOND STRATEGIC FOCUS
Over the last two quarters, data has supported a continuing industry focus on strategic partnerships. However, it is apparent that with many pharmaceutical innovators keen to keep novel drugs within their development capabilities in order to retain intellectual property, the objective of a truly balanced outsourcing relationship accentuated by shared risk and common objectives is still somewhat scarce. The most successful providers to date have been those capable of adding value to the innovator beyond scientific expertise by proactively assisting with the allocation and streamlining processes of internal and external development resources.
Survey Methodology: The Nice Insight Pharmaceutical and Biotechnology Survey is deployed to outsourcing-facing pharmaceutical and biotechnology executives on a quarterly basis/four times per year [Q1 2012 sample size 3523]. The survey is comprised of 750+ questions and randomly presents ~30 questions to each respondent in order to collect baseline information with respect to customer awareness and customer perceptions on 300 companies that service the drug development cycle. Over 1200 marketing communications, including branding, websites, print advertisements, corporate literature and trade show booths are reviewed by our panel of respondents. Five levels of awareness from “I’ve never heard of them” to “I’ve worked with them” factor into the overall customer awareness score. The customer perception score is based on six drivers in outsourcing: Quality, Innovation, Regulatory Track Record, Affordability, Productivity and Reliability; which are ranked by our respondents to determine the weighting applied to the overall score.