Issue Date: September 24, 2012
Conference: Research Managers See Pitfalls, Opportunities For Integrated Service Firms
Companies selling comprehensive research services to the drug industry face a steep challenge in tying elements of discovery, development, and manufacturing into a coherent offering. That was the conclusion of a panel at the Pharma ChemOutsourcing conference in Long Branch, N.J., earlier this month that discussed the rise of one-stop-shop contract research organizations (CROs).
“We are seeing a bit of consolidation” among research service providers, said Michael Maciocio, director of global external supply at Pfizer. “Larger Western vendors are acquiring emerging-market suppliers to integrate into a fit-for-purpose, low-cost alternative.” But integration has proven a challenge for these firms, he added. Maciocio also noted that inflation and rising wages in China and India have diminished Asia’s competitive advantage.
A key concern for firms contracting for research services is service integration and process compatibility, said Thomas Ekrich, chemical product R&D adviser at Eli Lilly & Co. “Lilly has made a lot of investment in flow and continuous processing,” Ekrich said, “and we are looking for companies that can provide that.”
Lilly evaluates suppliers on the basis of technology qualification and cost-competitiveness, Ekrich explained. “We seem to be managing the difference between East and West okay, given time for shipping.”
Ekrich’s observation prompted Julianne A. Hunt, director of research operations at Merck & Co. and moderator of the panel, to suggest that shipping may be an underrated risk consideration in dealing with CROs. “Is it the elephant in the room?” she asked. In drug discovery, Hunt said, pharmaceutical companies require rapid turnaround times. “We are investing a lot in terms of trying to redo how we think about moving materials.”
Geoff Evans, vice president of business development at Alphora Research, a Canadian pharmaceutical services firm and the only CRO representative on the panel, argued that the cost advantages of contracting with Asian research firms have dissipated. “When we started in 2003, we were asked if we worried about China. Since then, if anything, concerns have abated,” he said. “The regulatory playing field has leveled.”
Nor does Alphora, which specializes in pharmaceutical chemical development and analytics, feel threatened by the increased competition from CROs with services covering long stretches of the drug discovery/development continuum. “The one-stop-shop model can be an endless pursuit of filling gaps that never get filled,” Evans said, adding that those gaps create opportunities for specialist research service firms.
Panelist Jeff Saunders, vice president of small-molecule drug design at Ember Therapeutics, an emerging pharmaceutical company, agreed that connecting the dots proves difficult for one-stop-shop CROs. “Having all the different functions and integrating them in a strategic way happens rarely and slowly,” he said. “Having what it takes for teams to work without silos and develop a culture is a rare thing in the CRO world.”
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