Biologics Development Continues To Rise At Traditional Pharma Companies — What Does It Mean For Outsourcing?

Chemical Information Services, May 2014

Over the past two years, research results from Nice Insight’s annual Pharmaceutical and Biotechnology Outsourcing survey indicate a rise in the percentage of respondents who work at traditional pharmaceutical companies that are engaged in the development of biologic based therapeutic drugs.

Perhaps surprisingly, the largest increase comes from respondents who work for emerging pharmaceutical companies, up 14 percentage points over last year (34%, 2013 to 48%, 2014); followed by specialty pharmaceutical companies with a 13pp increase (52%, 2013 to 65%, 2014); and Big Pharma with an increase of 6pp (76%, 2013 to 82%, 2014). 

These changes coincide with an increase in the percentage of one’s outsourcing budget spent on biologics as compared to small molecule therapeutics—up a substantial 11 percentage points among Specialty Pharma respondents, 6pp in the Emerging Pharma group, and a modest 2pp among Big Pharma respondents. This makes sense considering biologics have traditionally been more expensive to develop than small molecule therapeutics, but as the patents for existing biologics continue to expire—an expected market value of $54B will go off patent in the next five years—the push for reducing costs in biologic development will become more crucial.  So, while both outsourcing expenditure and the percentage of expenditure going towards biologics development have both risen over last year, it should not necessarily be interpreted as rising costs, rather, it is more likely a reallocation of internal versus external spend on biologics development. 

lsl_charts_0214.jpg
 
A key shift Nice Insight research as highlighted over the past few years is a change in the ideology of outsourcing. A practice that started off as purely client-vendor relationship, centered around commoditized activities has evolved into more of a partnership, where CROs and CMOs are engaged in part because of access to external knowledge, not just the ability to complete tasks. As a matter of fact, when asked to consider a dozen different quantifiable traits, 74% of survey respondents whose business is involved in the development of biologics stated “technical expertise” was very important, second only to having a “track record of success,” 75% when selecting an outsourcing partner. Meaning, access to knowledge and experience are not only essential qualities, they drive CMO engagement when it comes to biologics. That being the case, it makes sense that businesses that are involved in the development of biologics are considerably more interested in forming strategic partnerships*, defined as a long-term, win-win commitment between two organizations, than those whose focus is strictly small molecule (56% vs. 24%).

A key shift Nice Insight research as highlighted over the past few years is a change in the ideology of outsourcing.

Interestingly, respondents whose business is involved in the development of biologic based therapeutics are also significantly more likely to consider CROs and/or CMOs in emerging markets such as Brazil, China or India (78%) than businesses that are strictly small molecule (50%). In addition, this group is more likely to already be working with emerging market providers than their counterparts (53% vs. 32%). Among respondents who outsource to emerging markets, almost two-thirds of the work is sent overseas.  The practice of outsourcing complex biologics projects that contain intellectual property further represents the shift in outsourcing beliefs, which was bolstered by improved patent laws in developing countries along with the strong education systems and access to an expanding pool of available patients to participate in clinical trials. 

*In the Nice Insight annual survey, a "strategic partnership" is defined as a "long-term, win-win commitment between two organizations for the purpose of achieving specific business objectives by maximizing the effectiveness of each participant's resources."

 

Nice Insight

Nice Insight, established in 2010, is the research division of That’s Nice, A Science Agency, providing data and analysis from proprietary annual surveys, custom primary qualitative and quantitative research as well as extensive secondary research. Current annual surveys include The Nice Insight Contract Development & Manufacturing (CDMO/CMO), Survey The Nice Insight Contract Research - Preclinical and Clinical (CRO) Survey, The Nice Insight Pharmaceutical Equipment Survey, and The Nice Insight Pharmaceutical Excipients Survey.