Viewpoint Cite This: ACS Med. Chem. Lett. XXXX, XXX, XXX−XXX
Drug Discovery: Collaborations between Contract Research Organizations and the Pharmaceutical Industry Victoria A. Steadman Selcia, Fyfield Business & Research Park, Fyfield Road, Ongar, Essex CM5 0GS, United Kingdom ABSTRACT: Collaborations between the pharmaceutical industry and contract research organizations continue to represent an attractive alternative to internal drug discovery within a single organization. This Viewpoint covers many of the business models and strategies that are employed in industry-contract research organization collaborations.
KEYWORDS: Outsourcing, collaboration, CRO, contract research organization
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working with multiple different suppliers. Flexibility with resourcing within the CRO can also be built into agreements such that if the project’s needs vary such that more chemistry is required and less biology or vice versa, then scientist numbers can be adapted across the disciplines accordingly. For small and virtual companies, integrated providers offer compound handling and storage, meaning the company receives the biological data as the deliverable rather than the physical compounds, reducing requirements for their own scientists and laboratories. Typically clients can access their data generated at the CRO in real time via informatics solutions proving secure access to that customer’s data. Business models for outsourcing of research and development typically take one of the following options. The straightforward Fee-For-Service task-based model is useful where a task, for example, running an assay on a set number of compounds or synthesizing a reference or tool compound, can be carried out to a preagreed fee. The Full Time Equivalent (FTE) model where a company pays for a scientist’s time and materials can be beneficial for both the outsourcing company and the CRO due to the added benefit of continuous work flow and reduced contractual burden. The FTE model also offers flexibility of approach to readily change the work plan when required. In both these models all intellectual property (IP) is owned by the customer, including where CROs innovate on behalf of their customer. Newer models are emerging where the initial innovation comes from the CROs, who establish early chemistry/biology entry points into a disease and then approach potentially interested companies to collaborate with them on integrated drug discovery projects that they themselves have identified.
he pharmaceutical industry is facing ever increasing pressure not to just fill the pipeline but to deliver value to the payers as well as their shareholders. Over the past decade, one of the ways that companies have sought to reduce costs during the research and development (R&D) phase is through externalization of research to Contract Research Organizations (CROs). Outsourcing research that would have previously been carried out in-house allows capital efficiency by moving fixed costs into variable cost, and also capital elasticity, with the ability to adjust spending by portfolio needs and data. Outsourcing can also be used to address capacity shortfall, an internal expertise or capability gap and allows companies to focus on their core expertise while externalizing other activities.1 Indeed, the outsourcing trend for drug discovery as a whole is predicted to continue to grow over the next decade by 5−10% per year, and the drug discovery chemistry market is predicted to grow to $17.7 Bn by 2025.2 Strategies toward outsourcing vary between organizations.3 Some companies prefer to use a wide variety of different suppliers, seeking the best specialists for the different components of the drug discovery process. Others prefer to work with providers of integrated drug discovery, where a multidisciplinary project team’s drug discovery experience is brought to bear on a project from within a single CRO.4 There are multiple advantages of working with an integrated drug discovery provider.5 Contractually, these “One Stop Shops” typically operate under a single Master Services Agreement (MSA) with work orders governing the research to be carried out, thereby keeping to a minimum the contractual burden on the company. Additionally, a project manager within the CRO will manage the CRO’s multidisciplinary operations, therefore reducing the project management required at the outsourcing company, compared to © XXXX American Chemical Society
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DOI: 10.1021/acsmedchemlett.8b00236 ACS Med. Chem. Lett. XXXX, XXX, XXX−XXX
ACS Medicinal Chemistry Letters
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chemistry design is carried out under an agreement where all IP is assigned to the client, where scientists within the CRO are named inventors on the client’s patents. Success factors: The most challenging aspect of outsourcing has been noted to be communication and cultural issues, followed by vendor qualification and selection, and documentation.1 A CRO that puts good communication and high visibility in all aspects of its services has a good opportunity to build trust and long lasting partnerships with clients. Building trust takes time and having gone through the challenge of vendor selection, often a company will want to test the waters with a new supplier with a small project in a single discipline to begin with before launching into an integrated multidisciplinary project, assuming all goes well with the trial period. As mentioned above, some companies choose to partner with smaller specialist CROs for certain activities, for example, 14C radiolabeling, safety screening, or ADME services. However, just as pharma engages in mergers and acquisition activities, the CRO environment is also subject to mergers and acquisitions, with consolidation happening more and more often. According to Bloomberg, M&A spending in the CRO industry reached $24 billion in 2016. These acquisitions assist the CROs to evolve from commodity service providers to key strategic partners who offer integrated solutions from the start to the finish of the drug discovery process. Recent examples (2017/ 2018) of acquisitions and investments are Eurofins’ acquisition of Selcia, Villapharma, and DiscoverX and Charles River’s acquisition of KWS Biotest. However, while the consolidation of CROs offers the opportunity for companies to work in a more integrated fashion with fewer CROs, it does reduce the choice of options for the client. As well as M&A, CROs look to expand their offerings by making strategic alliances to other service providers who offer a service that they cannot provide themselves. Such an alliance avoids the expense in investing in new technology, personnel, or facilities. Typically, work is then subcontracted between the CROs, so from the client’s perspective they are still dealing with a single project manager. The type of client that drug discovery CROs work with is now broader than just pharma and biotech. Academics with an interest in drug discovery can work with CROs to raise the value of their projects to potential future pharma partners. Indeed, alliances are being formed between Universities and CROs, for example, Evotec and Oxford University’s “Academic Bridge” initiative. Another sector with a strong interest in drug discovery is the charity sector, with strong pressure from their funders to fund not just academic research but also translational research, drug discovery, and clinical research to bring forward new treatments for the charities’ specific therapeutic indication. While some charities have invested in physical drug discovery facilities, virtual models utilizing CROs has also become a common strategy, where tapping into the deep expertise of an integrated provider offers the most convenient way forward. Research institutes and virtual biotechs (venture capital or grant funded) are additional organizations that can benefit from interacting with CROs. The contract research environment is currently flourishing. Given the external pressures on Pharma to reduce cost, this looks unlikely to change in the near term. Consolidation within CROs is an ever-increasing trend, as well as the use of CROs by companies as more than just a “pairs of hands” but instead as trusted collaborators and as a source of new projects and ideas, which can only enhance the potential for innovative new drugs for patients.
The type of business model for these collaborations depends upon the stage and type of project but can include milestone and royalty payments to the CRO as well as payments for FTE research and also potentially jointly owned IP. Some service providers themselves have their own internal drug discovery activities, with a view to a future licensing deal with a Pharma company. In direct contrast, others make a point of being a pure service provider without their own internal entry point or drug discovery programs. Some companies chose to collaborate via a risk-sharing business model whereby no or lower FTE revenues are accepted by the CRO in return for joint IP, higher milestones, and royalties downstream. Strategic alliances and partnerships are becoming more common, where CROs are chosen to be preferred providers for a company and long-term collaboration agreements are put in place, often with highly competitive pricing, which benefits the company, but giving the benefit of visibility of incoming work to the CRO. Insourcing of CRO researchers onto company sites is an increasing trend, especially where a large company has unused laboratory space but does not want to add to headcount. In these cases, the CRO provides scientists to work at the company’s site as part of an integrated project team. This gives high visibility for the company into the CRO’s work, enabling efficient management while maintaining the capital efficiency and potentially a lower FTE rate if the CRO is not taking on the building overheads. Another way for a company to have high visibility into a CRO is to have an embedded scientist within the CRO. With a rigorous firewall set up to restrict visibility into other clients’ projects, this gives the company the ability to manage their CRO team from the CRO site. One thing is clear, business models of collaboration between companies and CROs are continuing to evolve to accommodate both the clients and CROs changing needs and the increasing trend toward contract innovation, not just contract research. When considering the strategy for outsourcing of medicinal chemistry, the first thing for the client to consider is whether the sponsor wishes the project to be both client sponsored and client led or client sponsored and CRO led. Typically, in the former approach, a medicinal chemist within the client’s organization will carry out the design of the compounds to be synthesized, and the CRO will then design and plan the synthetic route and deliver the compounds or, within an integrated drug discovery project, the biological data associated with the compounds, depending on the requirements of the client. This approach of outsourcing synthetic chemistry but keeping the design internally is a common tactic employed by pharma and biotech alike. However, client sponsored and CRO led programs are becoming more common. In these programs, the CRO leads the medicinal chemistry design as well as the synthesis. In this case, the role of a medicinal chemist within the client or a consultant employed by the client (who will typically be running multiple such projects) is to both support and challenge the decisions being made within the CRO and provide strategic oversight and direction to the project. In particular, this is a popular model for small and virtual biotechs as they can tap into the often considerable drug design expertise within the CROs, much of which has been gained within the big pharma environment, due to the large influx of trained medicinal chemists into CROs resulting from headcount reductions and site closures within big pharma. Under a Fee-For-Service FTE business model, this type of medicinal B
DOI: 10.1021/acsmedchemlett.8b00236 ACS Med. Chem. Lett. XXXX, XXX, XXX−XXX
ACS Medicinal Chemistry Letters
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AUTHOR INFORMATION
ORCID
Victoria A. Steadman: 0000-0003-1583-0202 Notes
Views expressed in this Viewpoint are those of the author and not necessarily the views of the ACS. The author declares the following competing financial interest(s): The author is employed by Selcia Ltd., a Eurofins company.
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REFERENCES
(1) Contract Pharma 2016 Outsourcing Survey. https://www. contractpharma.com/contents/view_outsourcing-survey/2016-05-05/ 2016-annual-outsourcing-survey. (2) Vision Gain − Drug Discovery Outsourcing Market Forecast 2015−2025. https://www.visiongain.com/Report/1416/DrugDiscovery-Outsourcing-Market-Forecast-2015-2025. (3) Montana, J.; Hop, C. E. A. BioPharma and CDOs collaborating in early drug discovery. Drug Discovery World, 2015. http://www.ddwonline.com/business/p303677-biopharma-and-cros-collaborating-inearly-drug-discoverysummer-15.html. (4) Levy, H. Commercial Biotechnology 2013, 19, 49−54. (5) Clark, D. Drug Discovery Today 2011, 16 (3), 147.
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DOI: 10.1021/acsmedchemlett.8b00236 ACS Med. Chem. Lett. XXXX, XXX, XXX−XXX
