Speciality Chemicals, July 2016
The pharmaceutical industry is experiencing healthy growth as the global economic recovery continues and demand for advanced medicines expands, particularly in emerging markets. That growth has provided cash for investment in innovation, which has led to very robust pipelines and high FDA approval rates.
Heightened R&D activity is anticipated for some time to come, with many sponsor companies turning to contract research organisations (CROs) due to limited capacity and/or to access specialised capabilities. As a result, the CRO market is estimated to be growing at a compound annual growth rate (CAGR) of 9.83% .
Toxicology testing, in particular, is outsourced by many pharmaceutical companies due to the need for specialised expertise. Both sponsor firms and CROs offering tox testing are, however, currently grappling with the adoption of alternatives to animal testing, and, for some tests (notably genetoxcitiy testing), capacity issues.
Upward Spending Trend
According to the nearly 600 outsourcing-facing pharmaceutical and biotechnology executives that participated in the new 2016 Nice Insight Contract Research - Preclinical & Clinical Survey (CRO), the level of R&D outsourcing by pharmaceutical and biopharmaceutical companies will expand significantly in 2016 .
Respondents indicated that their companies dramatically increased year-over-year spending on outsourcing from 2015 to 2016 - the fourth year in a row of significant increases. In fact, the increase has been dramatic ever since 2013, when 47% spent $10-50 million/year; in 2015, this number increased to 62%.
Most notably, while the percentage of respondents whose companies spent more than $50 million/year on outsourcing remained fairly stable at 23 to 24% from 2012-2014, that number more than doubled to 56% for CROs in 2016. Meanwhile, the percentages of respondents whose companies spent <$10 million and $10-50 million on outsourcing to CROs both decreased from 2015 to 2016.
Survey respondents also anticipate that their companies will increase spending levels over the next five years. Specifically, 71% expect their companies to increase expenditures on contract research services. 21% expect their level of outsourcing to remain the same, while just 6% predict a decrease in spending. In addition, 64% of respondents to the CRO survey expect to increase the number of service partners they hire going forward, with 33% anticipating the number will remain the same and only 1% expecting it to decrease.
Partnerships are Important
Key drivers for the increase in spending on contract research services include expanding R&D portfolios and a shift in company strategies towards a larger proportion of outsourced relationships in their supply chains. This is due to the need to address patent life issues, the need for novel delivery forms and other specialised capabilities, as well as a desire to increase decentralisation for greater flexibility. Respondents also indicated that they are increasing their level of outsourcing based on earlier positive experiences.
The reason most often cited for outsourcing is the desire to improve quality. Other important drivers include the desire to increase efficiency, reduce costs, and time to market, improve processes and gain access to specialised expertise. Participants in the 2016 Nice Insight CRO Outsourcing survey are also looking to gain a competitive advantage by outsourcing to CROs.
Although spending on contract research services is on the rise, not all service providers will benefit. Sponsor companies have become increasingly selective about which CROs they are willing to work with. Service providers that are only capable of serving as tactical suppliers are losing favour, while outsourcing partners that are positioned to participate in preferred or strategic supplier relationships will capture most of the expanding business; 69% of survey respondents seek ‘preferred suppliers’ or ‘strategic partners’, while the preference for tactical suppliers dropped from 35% to 31%.
CROs that are chosen offer a combination of high-quality, superior, flexible customer service and novel, proprietary technologies designed to address key customer needs, all at a competitive price - and often through creative contractual agreements.
Spotlight on Toxicology Services
Toxicology services are used by 45% of respondents to the 2016 Nice Insight clinical services survey. They are sought at all phases of drug development - most frequently for Phase I and III projects (both at 55%), but also fairly often for pre-clinical (including discovery) and Phase II (52% and 53%, respectively).
Two key challenges for the toxicity testing segment of the CRO market are the pressure to switch to non-animal test methods and capacity shortages for certain types of testing, particularly genetic toxicity testing.
The use of animals for toxicity testing is recognised to present significant issues. In addition to the ethical concerns associated with animal testing, animals studies are quite costly and more importantly, animal models often do not serve as good predictors of responses in humans. Evidence for the latter can be found in the number of drug candidates that are advanced to the pre-clinical testing phase based on the results of animal studies, only to be found to have toxicity issues or suffer from dose-dependent toxicity .
There is a push to ‘reduce, refine or replace’ in vivo studies with alternatives that at minimum require fewer animals, lessen or eliminate pain or distress and/or use less highly developed species, but preferably are non-animal based - in silico computer models or in vitro cell-based systems .
In the pharmaceutical industry, however, although there is high awareness of the need for alternative test methods, there is reluctance to adopt new technologies due to concerns about the risk of losing historical data and having difficulty obtaining regulatory approval. There are also some in vivo tests for which no in vitro alternatives have yet been developed that exhibit acceptable predictability, such as for complex toxicological endpoints.
However, most CROs do offer at least some types of alternative test methods. Markets and Markets estimates the overall global in vitro (cellular, biochemical and ex vivo methods and in silico models) toxicology testing market to be growing at a CAGR of 13.5% and predicts it will reach just over $17 billion by 2018 .
The fairly high growth rate is attributed to advances in technology, government support and a wider acceptance of alternatives. At the same time, the reluctance of regulatory authorities to consider alternate methods for proving safety and efficacy is a limiting factor. In the pharma sector, the pressures to reduce drug attrition rates, lower development costs and accelerate commercialisation are key drivers for the adoption of in vitro methods at earlier development stages.
Shortage of Genetox Testing Capacity
Demands for genetic toxicity testing are on the increase largely due to the upcoming 2018 deadline for the registration of small-volume substances as required by the REACH regulation and the need for additional testing for previously registered substances.
There is particular concern about capacity for complex genetoxicity studies, such as the extended one-generation reproductive toxicity study (EOGRTS) and higher-tier ecotoxicity testing, as there are a limited number of CROs capable of performing them. A report produced for the European Chemicals Agency (ECHA) by Risk & Policy Analysts says global lab capacity is “significantly greater” than it was in 2012, but capacity concerns continue . There is even more limited capacity for speciality assays, such as the Comet Assay and TGR/Big Blue Assay.
- TechNavio, Global CRO Market 2015-2019, 8 January 2015. http://www.prnewswire.com/news-releases/global-cro-market-2015-2019-300018141.html
- The 2016 Nice Insight Contract Research – Preclinical & Clinical Survey, January 2016. niceinsight.com
- Chemical Watch Global Service Providers Guide 2015. https://chemicalwatch.com/downloads/ServiceProvidersGuide2015.pdf
- Markets and Markets, In-Vitro Toxicology Testing Market by Industry, Technology, Applications & Method - Global Forecast to 2018, April 2014. http://www.marketsandmarkets.com/Market-Reports/in-vitro-toxicology-testing-market-209577065.html?gclid=CJb6yL3O8cwCFQJZhgod5esNVg
- Chemical Watch, Global Service Providers Guide 2016. https://chemicalwatch.com/guide/viewer/