Fifty per cent of drug discovery work to be outsourced over next 4–5 years, report says

Published: 17-May-2016

The market is expected to be worth US$21bn in 2016, forecasts Kalorama Information


The market for drug discovery tasks outsourced by pharmaceutical companies to contract research organisations (CROs) and others is expected to reach US$21bn this year, according to Kalorama Information, up 19% from $17.6bn in 2015.

The healthcare market research firm says this is 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. It is well-known that the average drug can take more than 10 years to progress from discovery to clinic, with only one compound out of 10,000 evolving into a viable product.

'Over the next 4–5 years, it is predicted that almost half of drug discovery research will be contracted to CROs,' author Anne Anscomb said in the report, Outsourcing in Drug Discovery, 7th Edition.

R&D in the pharma sector has traditionally been largely immune to cost cutting, but that has changed in recent years. After decades of rising R&D spending, pharmaceutical firms have reduced their budgets allocated to this and new drug development has stagnated. Moreover, profit margins have decreased because the brands that do make it to market lack the market size/revenue of their predecessors, which seems to predict the end of the blockbuster era, the report says.

Over the next 4–5 years, it is predicted that almost half of drug discovery research will be contracted to CROs

Current trends in the pharmaceutical industry are creating new opportunities 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. But there are still many challenges ahead.

'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 has affected the drug discovery outsourcing market to varying degrees. Some 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 going forward is expected to record robust compounded annual growth rates.

You may also like