NEW FOCUS ON EARLY DEVELOPMENT
In recent years, the contract services industry has benefitted from an unprecedented growth in the product development pipeline.
Over the past five years, the number of candidates in Phase 1 has grown by 50% and the number of Phase 2 candidates has jumped
25%. This has created new business opportunities for contract services providers. In a recent survey conducted by PharmSource, BioPharm International, and its sister publication Pharmaceutical Technology, most contract service providers report that they are experiencing double-digit growth, which is expected to continue.
Early development services—including preclinical toxicology, clinical pharmacology, analytical chemistry, formulation development,
and the manufacture of clinical trial materials—have benefitted the most from this trend. Rather than looking ahead to commercialization,
young biopharmaceutical companies have focused on demonstrating as soon as possible that the safety and efficacy profile of
a drug candidate is attractive enough to justify late clinical development. That demonstration of safety and efficacy, referred
to as proof of concept (POC), is usually made after a small Phase 2 study.
Proof of concept has become a critical financial milestone for early stage companies. Products that successfully demonstrate
POC are prime candidates for in-licensing by major pharmaceutical companies and private investments or IPOs. Venture capitalists
have adjusted their financial models to target POC as their most likely strategy for realizing the return on their investment.
The demand for early development services from early stage companies has resurrected the integrated services model among service
providers. The integrated services model, also known as the "one-stop shop," offers the client a single source for services
it might otherwise have to contract from multiple vendors. Typical combinations include packaging preclinical and Phase 1
testing together, and combining formulation development, analytical services, clinical supplies manufacturing, and clinical
packaging into a single offering. The purported benefit to the client is faster progression to proof of concept and lower
costs of procuring and managing the services. CROs offering the "one-stop shop" model are looking to increase their share
of the market by combining a number of relatively small expenditures into a single large engagement.
From a minimal presence 20 years ago, the contract services industry has grown to where it offers a substantial base of suppliers
to meet all of a biopharmaceutical company's development and commercial requirements. The PharmSource Advantage contractor
database lists 100 contract parenteral manufacturers, 50 formulation development CROs, more than 175 contract analytical laboratories
and over 100 biomanufacturers.
While simple supply-and-demand has driven the industry's growth to date, we see new factors pushing the industry in the next
20 years. The main factor will be innovation in technologies and business models. Contractors have led the way in addressing
emerging industry needs like cold chain management, electronic data capture, and manufacturing process improvement. CMOs have
anticipated emerging market needs for technologies like prefilled syringes and high containment manufacturing. CMOs and CROs
are partnering with their clients to serve the expanding base of R&D and manufacturing activity in Asia, especially India,
China, and Singapore.
We expect to see the biopharmaceutical industry take advantage of the service supply base available to it. More outsourcing
will lead to new business models, including longer-term strategic relationships and risk-sharing arrangements that will enable
biopharmaceutical companies to become more virtual and increase the number of development products. In the future, we expect
the industry to be dominated by a small number of large, well-financed players.
Jim Miller is the president of PharmSource Information Services Inc., and the publisher of Bio/Pharmaceutical Outsourcing Report, 703.383.4903,