Biotech Firms in Europe Turn to Outsourcing

Although facing financial strain from lengthy drug discovery times and the soaring costs of drug development, biotechnology companies in Europe are increasingly turning to outsourcing, a market forecast to expand from U.S.$3.2 billion in 2004 to $5.1 billion by 2011, according to a new analysis from Frost & Sullivan (Palo Alto, CA, USA; www.frost.com), an international consulting firm.

The financial strain has been worsened by complex trial requirements and high drug-failure rates, with only 15% of the new drugs entering development expected to reach the market. To control rising costs and generate new breakthroughs, companies are seeking to outsource their drug delivery processes.

"Outsourcing may be one strategy to adopt, which allows companies to control and utilize their R&D expenditure more effectively,” said Dr. Amarpreet Dhima, a research analyst at Frost & Sullivan. "Also, despite cost efficiency being a contributing factor to encourage outsourcing, the impact of genomics and proteomics in therapeutics has also resulted in an increasing awareness of the benefits of outsourcing.”

As a result, pharmaceutical companies are more eager to form alliances with biotechnology companies, university centers, contract research organizations, specialized niche vendors, and other service providers. Such partnerships are facilitating the drug-discovery process. Consequently, the scope of outsourcing has expanded, with the trend to outsource processes such as finance/accounting, clinical trial data management, drug manufacturing, information technology, and human resources.

Outsourcing companies should ensure that they retain control over their business processes and proprietary knowledge. "At the same time, companies must become more comfortable about sharing some control over non-core processes, with the risk of errors and delays, with their ability to safeguard proprietary knowledge, and with the impact of outsourcing on regulatory compliance,” said Dr. Dhiman.

Thus, firms are likely to select outsourcing partners with an established track record, which possess capabilities to meet varied scientific and operational requirements. Also, companies seeking to combat high costs can benefit by selecting an outsourcing partner from countries with lower wages, such as India and China. By 2010, more than 40% of R&D is projected to be outsourced to more specialized firms.



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