The major concerns of pharma companies today are the increasing cost of research and development, the need to launch a novel product in the market and issues of IPR in this knowledge driven economy. Merely achieving steady sales alone cannot help a pharma company to retain its top position. What required is a growth rate in excess of 10 per cent, which equates to 4 block-busters annually, each having a sales of about 1 billion a year; and to deliver innovative products.

Biotechnology's breakthroughs, novel platform technologies, understanding of genomics, proteomics, metabolomics etc are the key drivers for such innovations. The lines between biotechnology & pharma are inextricably intertwined. Many factors contribute to the productivity of R&D in a pharma company. However the evolution of biotechnology and pharma, relationship is a major one. The knowledge paradigms in biology will enable, delivering on the promise of tomorrow's medicine, a remarkable challenge, a challenge that will not be defined or limited by international boundaries.

Biotechnology has changed the practice of medicine and drug discovery in a profound way; and for the better. Literally millions of patients are now helped by the therapies, discovered, developed and manufactured with biotechnology knowhow. The innovations coming out of the industry will continue to transform medical practice in the future as new breakthroughs emerge.

Outsourcing opportunities:

In the undisputed scenario of high cost and less than 10 per cent success rate of new chemical entities reaching market, pharma companies are restructuring their R&D processes to optimize selection of compounds and information flow across the discovery and development interface. A growing trend in R&D is outsourcing. Outsourcing enables companies to reduce overall costs, cover gaps in capacity and improve their skill base. It also allows them to concentrate on in-house efforts on R&D processes more critical to their objectives.

Increasing costs can be reduced by 2 options:

1. Outsourcing
2. Collaboration

Collaborations enable
-- Sharing of risk and costs.
-- Access to new technologies and expertise.
-- Work divided and delegated reduces time required for task comparison.

A particular area for collaborations has been between pharma and biotechnology. The specialty of biotechnology encourages discovery.

In pharma / biotech outsourcing opportunities, three broad categories can be described.

1. Solution Providers: The highest value category. To address a block of a business process in a company that can be carried out without daily interaction with drug companies and to provide complete solution as a package. Multiple clients can be handled as long as potential conflicts are avoided. Most preferred by drug companies as their scientists can focus on more high value tasks.

2. Service Providers: This could include a range of services from screening of NCE against targets, its final efficacy to clinical studies, analytical testing. Paper work for dealing with regulatory agencies, portfolio management, marketing research, regulatory compliance etc., Most small and medium and some large firms do not have these capabilities in house and prefer to hire service providers on an- as needed basis. Business can be a continuous process. It is a dynamic space.

3. Product providers: Should have a good product portfolio including requirement of both pharma & biotech needs, concomitant R&D investment to meet market demands. Prices of product provided at the time of development versus supply may drastically fall impacting on overall health of the organization providing product. The product may also be highly rewarding hence an element of risk is associated.

Outsourcing is not a new concept to pharmaceutical companies. However, its use has increased dramatically, of late. It is estimated that in 2004 nearly 42 per cent of the drug development expense was outsourced. Some estimates currently list about 1200 organizations involved in biotechnology in house clinical research, site management organizations (SMO) and clinical research academic and medical centers. To date the term CRO and outsourcing is generally synonymous to organizations that carry out preclinical and clinical evaluation of a new drug candidate.

Today however, the connotation encompasses services provided to identify an NCE as a lead molecule. This area of work covers identification of novel targets, the binding of NCE to the said target, ascertaining its functional capability, enlisting its metabolic profile, the complete in vitro ADMET, safety and genotoxicity. In this complete gamut of activities the first three are fairly unique and NCE driven, whereas the latter tests involve a more routine analysis for all molecules to pass the funnel of screening. The advent of rDNA technology, genomics, proteomics, metabolomics and all other enabling technologies deriving from molecular biology have today changed the way new drug discovery is carried out at these initial stages. Thus, an area driven by molecular biology expertise has emerged as an outsourcing opportunity in new drug discovery research.

The pharmaceutical outsourcing is expected to rise to over $ 60 billion by 2005 and this is reported as a 40 per cent rise (E & Y 2004)

Outsourcing activities could be broadly categorized into:
-- CRO in discovery research: Engaged in screening of NCE and identifying lead molecules carrying out invitro ADMET.
-- CRO offering preclinical safety/ toxicology evaluation of lead molecules.
-- CRO offering clinical evaluation of drug candidate (Ph. I, II & III studies)
-- CMO that offer contract-manufacturing capabilities.

The economic rationale for outsourcing throughout the R&D value chain is to reduce time to market and increase return on investment. It further enables the company to focus on its core competence while outsourcing external expertise.

-- The author is director and chief scientific officer, Magene Life Sciences, Hyderabad.