The most important asset for drug companies is the data behind their products, from the discovery stage all the way to market. The laboratory information system (LIS) is the tool that manages this critical data, and CROs that invest in state-of-the-art systems will have an advantage.
While mergers and acquisitions in the industry have led to the closure of some drug company research laboratories and a corresponding slowdown in LIS purchases, there continue to be factors that will drive growth in the drug discovery marketplace for these systems. These include the need to optimize the drug discovery and development process and standardization efforts that will involve replacing many smaller LIS installations at large pharmaceutical companies. Investment in India and China and the increase in drug discovery outsourcing, especially for biopharmaceuticals, will also be critical in driving LIS growth.
Global pharmaceutical R&D spending is forecast to increase at a compound annual rate of 10% between 2002 and 2012 to reach about $130 billion by 2012. Much of this R&D - Kalorama Information estimates about 44% - will be outsourced, as the amount of development will outstrip the existing capacity left at most drug makers.
The outsourcing paradigm is not new in the industry, having been utilized on a small scale for decades. However, expanding outsourcing to include what were considered essential in-house functions marked the beginning of the use of outsourcing as a strategic imperative.
Since the late 1990's, pharmaceutical companies turned to outsourcing to meet investor expectations and combat cost squeezes in R&D divisions. Cost is still a major driver in outsourcing but according to Kalorama Information's latest research and interviews with industry experts, price is not the only factor; one of the strongest drivers for recent growth is the technical know-how that CMOs have acquired in order to gain a competitive edge. This is especially true of the manufacture of biologics. As the number of biologics produced increases, the demand for manufacturing capacity will follow, and drug makers will turn to outsourcers.
Biomanufacturing is the fastest growing segment of the world contract manufacturing sector, expanding at a compound annual rate of 12% between 2003 and 2007. Last year it represented a $3.7 billion market and it should nearly double in the next six years. Biopharmaceuticals are estimated to represent 13% of all prescription drug sales in the US today.
All this growth in biopharmaceuticals, which requires more complex R&D processes that produce more data, will create demand for more complex data management, and specialized CROs will need to make investments in sophisticated LIS.
Size and Growth of the Market
Kalorama Information values the market for LIS in drug discovery at $570 million in 2010, with $456 million going towards software purchases and the rest to hardware. The growth of LIS sales to drug discovery labs will continue around 3% to 4% annually, slightly lower than sales to clinical laboratories. Still, these systems will continue to be adopted by drug developers because they increasingly need to meet industry-specific requirements, including the need for companies to comply with various regulatory and manufacturing processes, such ascGMP, NAMAS (National Accreditation of Measuring and Sampling), Environmental Protection Agency (EPA), and of course, FDA regulations.
Functionality and Open Standards
Connectivity and increased data sharing are among the significant factors encouraging laboratories to examine their LIS policies. Some drug company labs are operating older legacy systems and other obsolete LIS that do not provide much flexibility and interconnectivity.
Many early users of LIS installed heavily customized systems that proved difficult to upgrade and integrate with other business functions. As mergers and acquisitions occurred, integrating different systems and instrumentation became necessary to ensure that laboratories made their data accessible throughout the merged enterprise. After several years, homegrown systems had become almost obsolete. These were replaced by more available, upgradeable and compliant vendor-supplied commercial off-the-shelf (COTS) LIS.
Meanwhile, greater use of the internet affected the way in which scientists managed and accessed data. The eventual growth of supporting technologies enabled LIS to grow in scope from single-user desktop tools to global, enterprise-wide critical business applications.
Electronic lab notebooks (ELNs), connected to an LIS, now enable lab personnel to perform calculations and review documentation and results in real time, using online information from connected instruments, reference databases and other Resources . Management can supervise the lab process, react to bottlenecks in workflow and ensure that regulatory requirements are met.
LIS products also integrate with an organization's broader network, and provide secure access to data throughout a global enterprise. Business today is global, with companies developing, manufacturing and marketing their products around the world. LIS must be available in all regions and in different languages. For LIS vendors to enjoy continued growth in this environment, the development of open standards is extremely important.
Products are being built on open standards that are designed to be quickly and easily implemented, purpose-specific and configured to meet companies' needs. By providing LIS for specific applications that are connectible to other technologies, vendors can provide a holistic view across the entire drug development life cycle, while still allowing fast implementation and adoption times for each solution. For drug discovery, an LIS must be flexible enough to handle changing environments, including the complexities of increasing sample throughput and managing clinical studies.
The reality for pharmaceutical labs is that generic LIS products typically satisfy only about one-third of their needs. Installations can take from 18 months to three years to complete. System requirements may change during this time, leading to a significant difference in what an LIS can deliver and what a laboratory truly needs. A recent development in the software-as-a-service (SaaS) arena helps in closing this gap.
The recent commercialization of Thermo Scientific's LIMS-on-Demand, which marks the transition of SaaS from a minor product offered by just a few vendors to a significant product offered by a major supplier, provides LIS functionality through the on-demand approach. There has been significant interest in SaaS solutions due to an increasing dissatisfaction with the costs, complexities, and length of time that it takes to realize value from an investment in an on-premise application.
SaaS solutions have been gaining acceptance in other markets for several years and have gradually been introduced in the LIS arena over the last two years. These on-demand solutions deliver a low total cost of ownership, putting the cost of LIS into a manageable range for any smaller laboratories, while simultaneously offering enterprise-level functionality.
Now a specialized software provider can target global markets. A company that made software for a specific lab application might once have had a hard time finding enough of a market for selling the application. But a hosted application can instantly reach the entire market, making specialization within a vertical market not only possible, but preferable. This in turn means SaaS providers have an opportunity to deliver products that meet specific market needs better than traditional applications.
Producers of LIS for both the clinical and drug company lab are finding the competition growing, as a number of smaller companies have been carving their own niches in this marketplace. For instance, Interface Engineering (Seoul, Korea) has been interfacing chemistry and computation, providing laboratory focused LIS and laboratory automation systems. Meanwhile, a privately held startup, Sciformatix (Saratoga, CA) provides small to medium scientific labs with advanced, user-tailorable scientific information management systems, including LIS.
Integrating various systems to derive maximum benefits is vital to end users. Toward this end, the major LIS vendors have adapted a strategy by which they could own all of the data from end to end and thus strengthen their offering. Mergers and acquisitions among smaller vendors are becoming increasingly common. To survive, small LIS vendors can either formally merge with larger competitors or enter into a partnership and integrate systems.
In March 2010, Abbott completed its $123 million acquisition of Starlims Technologies Ltd. The acquisition provides Abbott with products and expertise to build its long-term position in laboratory informatics. Starlims' web-based software applications help laboratories store, retrieve and analyze data and are designed for a wide variety of laboratory environments operating across several scientific, industrial and clinical disciplines. The company's software is used by more than 500 laboratories in over 40 countries, including Amgen, and the U.S. Centers for Disease Control and Prevention.
Companies with a long-term view are developing a new generation of LIS that will meet the evolving needs of drug companies and CMOs of the future, with functionalities that many of today's systems cannot provide. In other words, there is opportunity for vendors who are flexible and innovative.
Andrea Hiller is a marketing manager at Kalorama Information. She can be reached at email@example.comThisarticle derives from Kalorama Information's report Laboratory Information Systems (LIS / LIMS) Markets, which focuses on themarket for LIS for clinical health care labs and pharmaceuticaldrug discovery laboratories. The report is available at: http://www.kaloramainformation.com/redirect.asp?progid=81003&productid=2713876.