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Half of Drug Discovery Work to Be Outsourced in 2016

By PR Newswire | May 16, 2016

The market for drug discovery tasks that outsourced by pharmaceutical companies to contract research organizations (CROs) and others is estimated to reach $21 billion in 2016, according to Kalorama Information. 

The healthcare market research firm says that is up 19 percent from $17.6 billion in 2015. That’s no surprise, as drug discovery is a high-cost, risky business because only a fraction of the therapeutic targets selected for study will actually yield products that achieve regulatory approval by the Food & Drug Administration (FDA). The average drug can take 10+ years to progress from the discovery phase to the clinic, with only one compound out of 10,000 evolving into a viable product. The finding was made in Kalorama Information’s report, Outsourcing in Drug Discovery, 7th Edition.

“Over the next 4-5 years, it is predicted that almost half of the drug discovery research will be contracted to CROs,” author Anne Anscomb said in the report. “Thus, outsourcing drug discovery remains an important strategic imperative for pharmaceutical and biotechnology companies.” 

Traditionally, R&D has been largely immune to cost cutting but that has changed in recent years. After decades of rising R&D spending, pharmaceuticals reduced the rate of increase in their R&D spending.  The rate of new drug development has stagnated despite large annual allocations. Moreover, profit margins have decreased because the brands that do make it to market lack the market size/revenue of their predecessors, which portend the end of the blockbuster era. Current trends in the pharmaceutical industry are creating new opportunities as well as challenges for companies as they strive to continue generating above-average shareholder returns. Opportunities can be seen in technological advances that are leading to an improved understanding of the causes of diseases, enabling companies to develop new drugs for previously untreated conditions. Challenges also abound.

“Contractors competing in this sector range from small regional companies with a limited geographic reach to medium and large CROs with a large global footprint,” Anscomb said. “As more pharmaceutical companies from emerging countries become major players in the pharmaceutical industry, and multinational pharmaceutical companies expand into emerging countries, the global demand for drug discovery services will continue to expand this rapidly evolving market.”

The global economic downturn affected the drug discovery outsourcing market to varying degrees. Some outsource contractors reported cancelled projects, while others saw their revenue increase as a result of new, multi-year collaborations. Despite the difficult global economy, the outsourcing drug discovery market is expected to record robust compounded annual growth rates.

The report, Outsourcing in Drug Discovery, contains detailed segment market size and forecasts for specific outsourced activities such as lead optimization, high throughput screening services and biology services. Large CROs are profiled in the report, and markets for geographic regions are defined. To view the report on Kalorama Information, click here.

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