August 2010

Outsourcing to Emerging Global Markets

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
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.

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