On a global scale, the pharmaceutical industry is facing tremendous pressure to control costs, because all large pharmaceutical companies are currently reducing their internal capabilities in manufacturing, R&D, and marketing, and costs are mainly turned to outsourcing. CRO has become an indispensable part of every pharmaceutical company because they often rely heavily on outsourcing services to perform their basic tasks and increase their productivity. The growth of CRO revenue even exceeded R&D expenditure. This means that the penetration rate of CRO services has increased.
Broad business needs require a better market environment, from finding new service providers for outsourcing activities to finding candidates for specific investment opportunities. As a foundation, a strong and reliable market research process is necessary, which can reduce risk.
Pharmaceutical companies large and small are aware that they are in a dilemma: the cost of drug research and development is increasing gradually, and the output of research and development work is measured by the number of new drugs approved each year, which is still very low. In order to solve this problem, all major pharmaceutical companies have taken radical measures, including reorganizing internal R&D systems, changing R&D strategies and priorities, and increasingly looking for available external resources. All these initiatives have shown two results: the pursuit of more externalized resources and more advanced technologies. As part of the long process of drug discovery and development, pre-clinical development, including extensive in vitro pharmacological characterization and toxicology studies, is playing an increasingly important role in reducing the loss of clinical development and overall drug development costs. In order to achieve their goals, pharmaceutical companies are increasingly looking for new technologies that can explore toxicity as early as possible in the research and development stage, so as to eliminate undeveloped candidates in the early stage, shorten the verification test time, and seek and can complete these tasks. Organizational cooperation opportunities. Perhaps because of the strong desire of pharmaceutical companies, preclinical development has undergone tremendous changes in recent years. New technologies and R&D methods, the strategies and priorities of pharmaceutical companies, and even new outsourcing models are constantly evolving. For example, it has become a trend for IND to launch discovery research services. The new model combines comprehensive discovery research and preclinical development and is sought after by pharmaceutical companies.
CRO should build sufficient capacity to meet the growing demand for drug development and internal R&D services. An organization dedicated to conducting clinical trials at each specific stage will definitely produce a higher success rate.
The evolving business model has promoted better cooperation between pharmaceutical companies and CROs. Some companies have established a new business model called insourcing, which is a new type of pharmaceutical procurement. CROs perform on-site work on customer sites in an integrated manner. This new model has excellent performance and efficient cost and time.
With a large number of skilled human resources, lower costs, favorable regulatory environment and high-quality data, Asia is becoming the preferred destination for outsourcing drug discovery activities. In addition, local governments are working to develop the healthcare and pharmaceutical industries to ensure that they focus on high quality and compliance in advanced supervision and training programs. Japan is the world’s second-largest pharmaceutical market, providing a huge opportunity for chief risk officers in the Asia-Pacific region. The pharmaceutical market in China and India is one of the fastest growing markets in the world and is considered the preferred location for drug discovery outsourcing, mainly because of the technological capabilities developed over the years.
Early clinical trial services will make significant progress because it saves R&D costs in the early stages. Demand for functional services such as data management, logistics, translation, supervision and consulting is also growing strongly. The joint drug development model will be the future of the drug development industry, and CRO companies will work with pharmaceutical companies to develop drugs. With the advent of personalized medicine, the joint development of drugs and diagnostic markers will go hand in hand. This will force CROs to cooperate with pharmaceutical companies in the future.
The current focus strategy focuses on the concept of greater equals better, and the company is preparing to expand the scope of services it provides. In May 2019, WuXi AppTec announced the acquisition of Pharmapacce, a US clinical CRO company. Provide data analysis services for all stages of clinical trials, registration and application and post-marketing support. Quintiles, as the largest CRO company, has expanded its clinical scope and entered new business areas such as market sales through large and small mergers and acquisitions since its establishment. According to incomplete statistics, Quintiles has completed more than 50 mergers and acquisitions. The more familiar ones are: the acquisition of Novella and Encore in 2013 and 2014, respectively, to expand the company’s business in medical device CRO and electronic health record management. From this point of view, no matter what model is chosen to mine external expertise and resources, we can see what factors have prompted pharmaceutical companies to expand their participation in the work of external technology suppliers instead of performing tasks internally. The domestic preclinical CRO market accounts for about 43% of the overall CRO market, and the clinical research market share is 57%. The proportion of preclinical business is higher than that of overseas markets. Globally, the growth rate of preclinical outsourcing has surged, leading to capacity constraints. The company has made significant investments in expanding production capacity. One of the leading growth areas in the preclinical outsourcing market is preclinical toxicology. Early preclinical outsourcing was mainly carried out in-house by pharmaceutical companies, but it has been observed that sponsors have become more open to the idea of outsourcing to CROs to reduce the price burden. Although this area is likely to be driven by sales growth, the market has stabilized due to pricing issues.
In order to further improve R&D productivity, it is expected that all pharmaceutical companies will still change their R&D strategies in the future, including outsourcing strategies, especially in discovery research and preclinical development. On the positive side, the entire industry is currently focusing on proof-of-concept research, the development of biomarkers and the inclusion of early R&D, and the development of biologic drugs including biosimilars. It is expected that research in these areas will lead to a strong demand for preclinical development services in the foreseeable future. From a negative point of view, the current main focus of major pharmaceutical companies is still later development. Their R&D budget for pre-clinical research has not increased as in other stages, except that the entire R&D budget is expected to remain tight in the industry in the next few years. In addition, because some institutional knowledge in preclinical research is still required, pharmaceutical companies may still want to keep some preclinical development work in-house. In general, although the demand for preclinical development of outsourcing services may still fluctuate, all the above conditions together determine that this market may still experience positive growth in the near future.
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