Summary
A major supplier of clinical development services has just been awarded all of Astra Zeneca's clinical pharmacology work. Such work was traditionally performed internally but is now one of many stages of development being outsourced. This follows similar trends in research, where pharma companies are forging external relationships. We question where the pharma industry is headed and how much of its core business will remain in-house.
Analysis
Quintiles, the pharmaceutical development company, has just announced two major new pieces of business. The first is a multi-product deal with Eisai which involves clinical development of 6 products in Eisai's pipeline. The second will see Quintiles take on all of Astra Zeneca's clinical pharmacology work.
The article also notes that the deals are similar to business wins by the CROs Icon and Covance with Eli Lilly.
This very significant outsourcing of what traditionally was a pharma company's core competency raises interesting questions about the shape and structure of pharma companies in the very near future. How much of their development work can be awarded to outside suppliers, like Quintiles? Is it necessary for pharma to have extensive teams in Development (the D in R&D) i.e. fixed costs, when they can pay as they go (variable costs) to competent suppliers?
Taking this further one might also speculate about pharma companies' future in discovery (the R in R&D). In recent years we have seen them discover and develop successful and effective treatments for many, if not most, common conditions. In other words, there are enough drugs to cover needs. (Paying for them is a different discussion.) And so now as companies look for smaller, more specialized diseases and conditions to treat they are turning to outside alliances and relationships with smaller, specialized biotech companies and academic centers where such expertise and focused research is underway. What does this mean for their internal teams working on discovery? How many experts can a company employ, and can it cover all bases in order to be sure to hit its target?
Recent layoffs across pharma include those working in R&D, and mega mergers are not known for adding headcount. Where pharma is headed we don't know for sure, but it certainly seems that more and more companies will focus on marketing and selling, and look increasingly to outside partners for research and clinical development.
