August 2010

Outsourcing to Emerging Global Markets


Outsourcing to emerging global markets like China, India and Brazil is rapidly becoming popular in the biotechnology and pharmaceutical industry. Here, Richard Soll talks about the past, present and future of research and development outsourcing.


World-ScienceOutsourcing, which just a decade ago played a very small role in the biotechnology and pharmaceutical industry, steadily is becoming an integral part of the operation of such companies. And, among the numerous outsourcing destinations, contract research organizations in emerging global markets like China, India and Brazil rapidly are becoming the primary targets.

It’s an ascent that Richard Soll knows intimately. In 2001, Soll, then head of chemistry at a small company named 3D Pharmaceuticals, was unsuccessfully looking for an industrial partner to help build a combinatorial screening library. Then, with a bit of luck, he stumbled on a nascent CRO in China called WuXi (pronounced woo-she) PharmaTec that was willing to develop his library on a fee basis. Soll became Wuxi’s first customer.

Ten years later, that same company, now known as WuXi AppTec, brings in more than $250 million in yearly earnings while providing a full array of contract services to more than 500 clients worldwide, ranging from tiny startup companies to biotech behemoths, as well as private research institutes, nonprofits and even universities.

And Soll, who remained close to WuXi AppTec over the years, now oversees this process, having joined the company in 2008 to head their integrated services division. As someone who has been on the forefront of this growin relationship between pharmaceutical companies and CROs, ASBMB Today decided to ask Soll about the past, present and future of research and development outsourcing.

ASBMB: Is the practice of outsourcing aspects of drug development to CROs a relatively recent development in the business?
Soll: Well, companies have been outsourcing for a while, but primarily in areas referred to as “noncore services.” For core research areas like discovery biology, though, outsourcing services on a “cash and carry” basis was indeed fairly nonexistent 10 years ago; most large companies had the infrastructure to handle everything themselves. And, if you were a smaller company, that meant finding someone to assist you; the few places interested in working with you wanted a collaborative agreement, which included a large amount of money upfront.

ASBMB: What spurred the seemingly sudden change this past decade?
Soll: As in many cases, economics proved to be a deciding factor; the theme for any industry is how to get the most bang for your buck. It’s become a priority for the pharmaceutical industry, because they’re facing some serious challenges, notably the stagnant drug development process that ends up approving only 20-25 new drugs a year.

WuXi AppTec provides a full array of contract services to more than 500 clients worldwide.

So, the industry is trying to retool itself, following an era of mergers and acquisitions, to bring down costs and get more drugs to market. And, in the short term, outsourcing the early stages of drug development, including screening and validation, to foreign CROs can be a cost-effective option; some of the logic includes, “If I can put more drugs into the pipeline for the same cost, and the failure rate doesn’t change, then I get more drugs out.”

ASBMB: You also noted that universities are significant clients of CROs, including WuXi AppTec; it seems surprising that they would follow this path.
Soll: Many people overlook the fact that universities are major innovation and economic engines as well centers of learning; think of all the businesses that are spun out of university discoveries. So, just like any biotech in these times, universities have to be creative with their dollars too, and that means looking at how to maximize the effectiveness of their graduate student and postdoc workforce and maximize the potential returns from university spinoffs.

ASBMB: Why China?
Soll: Given my own history, I’m likely a little biased, but China, specifically among the emerging markets, has the right combination of both a huge number of scientists in the workforce and a high quality of science that has been on a rapid rise these past few years. You just have to pick up any scientific journal, and you can see the growing number of articles published from Chinese labs. And, even in many Chinese CROs, you find staff that is eager, bright and driven. So, I personally think, in terms of scientific output, you are going to see China pull away from these other emerging countries over the next decade.

ASBMB: What are the main concerns in setting up a deal with a CRO? And, specifically in the case of China, are there cultural or political issues to worry about?
Soll: The biggest risk for any outsourcing venture is that you pay, and you don’t get the deliverables. So, that’s why it’s imperative that arrangements with CROs shouldn’t be purely based on economics; consider quality and other variables as well.

In terms of China and the government, one big concern is the regulatory environment for drug development in China, which is different than in the U.S. and needs to be handled accordingly. The issue of intellectual property is a relatively new concept in China, so IP strategy is an important consideration.

ASBMB: Now that it’s an established practice, how do you see outsourcing progressing over the next decade?
Soll: Going forward, outsourcing will continue be a significant part of almost any R&D organization. Now, where the outsourcing pendulum will ultimately settle in the long term is an intriguing question, but it definitely is getting closer to the positive end right now.

However, I think outsourcing just reflects a bigger issue, namely the globalization of science. And, what you’re seeing is more and more of these big companies setting up R&D institutes in emerging markets. It’s not a new trend, but it really has accelerated over the past five years; right now, almost every major pharmaceutical firm has a research center in China, India or both.

ASBMB: What advantage would that offer as opposed to simply contracting?
Soll: When the executives in the pharmaceutical industry look at the growth of these emerging markets, they see not only a new scientific workforce, but also potential new clients. By establishing a foothold in these markets, they can take on new initiatives by companies to identify regional therapeutics in addition to making it easier to sell their existing products.

Nick Zagorski ( is a science writer at ASBMB.

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