10 Years On: CRO Perspectives

By Gil Y. Roth

Contract Research Organizations have followed different paths and models over the past decade. We asked several of the major CROs about the biggest changes and trends they’ve seen in their part of the business. Here’s what they had to say. —GYR

---

The past decade represents an incredible era of change and maturation for the CRO industry. A series of events — including the continued evolution of the CRO industry, biotechnology industry growth, and increased financial pressures on the biopharmaceutical industry — has fueled the biggest trend in drug development outsourcing: Strategic Partnering. This movement from highly transactional relationships to trust-based, innovative partnerships is fueling significant growth for the CRO industry and creating value for the biopharma industry in terms of reducing cycle-times, reducing cost, expanding global reach, etc. All designed essentially to help improve R&D productivity.

This trend began in early 2000 with well-funded biotech companies equipped with novel technologies and limited internal development capabilities, which made working with CROs a natural fit. Biotech’s growth spurred increased demand for CROs and helped fill gaps created by sporadic, overflow capacity pharmaceutical R&D outsourcing activity. As a result, large CROs improved their quality and delivery while making significant investments in scientific staff, instrumentation, information technology and state-of-the art facilities.

By 2005, strategic partnerships between CROs and large biopharma companies emerged as market pressures and economic conditions forced sponsors to critically evaluate their fixed cost structure and the productivity of their R&D organizations. Those partnerships were enhanced through investments and expansions that afforded full-service CROs best-in-class scale, global reach, scientific expertise and quality. As biopharmaceutical companies assessed their core and non-core competencies, they increasingly realized the benefits of leveraging external drug development resources and began to secure long-term, strategic agreements with CRO partners.

The recent economic crisis, compounded with patent expirations and rising R&D costs, have increased the sense of urgency for innovative outsourcing solutions. The 2008 strategic alliance between Covance and Eli Lilly & Co. culminated from a 20-year, trust-based relationship, allowing Lilly to make its fixed cost infrastructure more flexible via the transfer of an underutilized preclinical facility and approximately 270 employees to Covance. A similar partnership in 2009 resulted in the transfer of Merck’s Gene Expression Laboratory and the scientific and technical staff to Covance as part of an effort to reduce fixed costs and assure Merck’s access to these genomic analysis services.

The shift from transactional relationships to strategic partnering is not only the greatest trend of the last decade, but it will likely revolutionize the biopharmaceutical outsourcing industry as we know it for the next 10 years and beyond.

—John Watson, president, strategic partnering & integrated drug development, Covance

---

As clients have focused more on the cost effectiveness of drug development and made strategic choices about selecting their internal core competencies, the most significant change has been a collaborative evolution within the industry. This is transforming traditional pharma-CRO relationships to become long-term partners, versus simply individual product or service vendors. Essentially, drug companies are realizing that it is not necessary to reinvent the wheel for each new project. CROs have scientific expertise, therapeutic area experience and state-of-the-art infrastructure available for them to utilize and optimize their process efficiency.

—Stephanie Wells, corporate senior vice president, chief marketing officer, Charles River Laboratories

---

The biggest trend that we’ve seen relates to the regulatory agencies’ emphasis on the evaluation and monitoring of product safety. The determination that not enough attention is being given to ensure safety throughout a product’s lifecycle has had a global impact on development, with the biggest effect seen after product approval. This includes emphasis on more efficient post-marketing surveillance and the requirements for additional post-marketing studies.

At a time when our industry needs to decrease healthcare costs, we also need to respond to the new regulations and guidances. To do both requires a new and more efficient approach to monitoring the benefit/risk ratio of products, analyzing the information received and effectively communicating that information to the public.

—Suzanne Gagnon, M.D., FACP, chief medical officer, ICON Clinical Research

---

The biggest trend in the CRO sector has been the evolution of our relationships with our biopharmaceutical customers. Ten years ago, CROs were used primarily to fill gaps in R&D capacity. Contracts were executed in a very transactional manner — as an industry we did not yet have the capabilities to be a true global partner to our customers.

Today the depth and breadth of our relationships have grown significantly. CROs and our customers have entered a new generation of outsourcing focused around innovation and collaboration to drive efficiency and value across the drug development lifecycle. More than ever before, we provide the global capabilities, therapeutic expertise and experienced workforce to execute trials anywhere in the world. Global CROs now offer customers unprecedented geographic reach, with access to specialized patient populations across the globe. Today we account for approximately half of the research workforce involved in drug and medical product development.

In this next generation of CRO/pharma industry outsourcing, we expect true strategic relationships to become standard. These strategic relationships will rely on the ability of CROs to partner with their customers to create joint teams that can fully leverage the complementary expertise and operational efficiencies of both organizations. Relationship success will be built around the ability to anticipate needs, communicate effectively, drive innovation and ensure efficiency in delivery.

We believe the evolution of our relationships with our customers to this more strategic level will benefit all parties involved, most notably the patients who will receive the new life-saving and life-enhancing therapies in record time.

—Candace Kendle, Pharm.D., chairman and chief executive officer, Kendle

---

The outsourcing industry has seen a growing reliance on the expertise CROs bring to the drug discovery and development process in the past decade. As a result, the CRO industry experienced double-digit growth in recent years, although current recession headwinds have slowed the expansion over the past few quarters. Still, with the fundamental drug development paradigm changing, CROs are emerging with an increasingly important role in bringing new drugs to market safely and efficiently.

CRO/sponsor relationships are moving from tactical and transactional to more strategic partnerships, such as the recent asset transfers at Eli Lilly and Merck. MDS Pharma Services got in on this trend back in 2002 with the launch of our successful and long-standing relationship with Daiichi-Sankyo, to whom we have provided dedicated capacity and staff over the past seven years. The relationship was extended three more years recently following the completion of our 100th early stage clinical trial together. This trend from tactical to strategic relationships has accelerated in the past year and generated increased focus on core competencies, both within sponsor companies and among CROs. As a result, organizations have shed non-core assets to concentrate on what they do best. For our part, we are playing to our strengths in Early Stage by concentrating on the discovery through Phase IIa clinical proof-of-concept space.

We have observed an increasing level of complexity in the Phase I research process. A decade ago, Phase I research was primarily safety driven. Today, clients are seeking earlier information on efficacy, which is adding a new level of complexity to Phase I protocols. This new level of technical difficulty is blurring the line between Phase I and Phase IIa and is one of the reasons sponsors are turning to CROs.

—David Spaight, president, MDS Pharma Services

---

Perhaps the most significant trend in biopharma outsourcing over the past decade has been the evolution in the nature of the relationship and underpinning business model between sponsors and service providers. These relationships, historically transactional, have moved in a more strategic direction, involving new operating models, more information sharing, and the need for service providers to infuse greater innovation into study design and execution. At the same time, outsourcing has become more outcomes based, rewarding service providers for achievement of certain milestones and results.

Supporting the movement toward strategic partnering and outcomes-based outsourcing have been key advances in clinical research, including the globalization of development and technologies to facilitate trials. In this regard, PAREXEL in particular has invested in a vision to operate globally and provide leading eClinical technologies. Through the realization of this vision, not only have we been able to offer customers access to a wide array of geographies for complex, global clinical development programs but also the ability to reduce associated time and cost.

—Josef von Rickenbach, chairman and chief executive officer, PAREXEL International

---

There are two major factors:

1) Increasing cost and complexity of clinical trials and the changing relationships between biopharma companies and CROs

Drug development costs continue to rise because of changing regulatory and legislative environments and the necessity to speed drugs to market. There is a shift toward longer, more complex global trials as our clients work to fill their R&D pipelines in an increasingly competitive environment. The drug industry cannot afford to rebuild in-house clinical development departments and is seeking new approaches to drug development through alliances or strategic partnerships with CROs. Where clients previously looked to CROs to manage a specific aspect of a drug development program, CROs are now more closely involved in all aspects of strategic planning for clinical trial programs, such as protocol design, inclusion/exclusion criteria, site selection and patient enrollment strategies to ensure a drug gets through regulatory approval as quickly as possible. Companies are relying on the global and technical capabilities and operational expertise of a CRO to ensure they reach the right patients, collect and report the right data, and control development costs. Pharma has found that successful relationships, and ultimately successful clinical research, begin by having a trustful, reliable outsourcing partner.

2) Urgent need to expand clinical research beyond North America and Western Europe

Biopharma companies have an urgent need to find large groups of patients interested in participating in clinical studies, which has led to increased globalization of clinical trials. A recent white paper published by the Association of Clinical Research Organizations estimated it takes approximately 5.8 years to fully enroll all currently open Phase III cancer trials if only U.S. locations are used, as compared to 1.9 years using both U.S. and global trial sites.

There are large populations of people in emerging regions with diabetes, metabolic disorders, cancer and other diseases, and the ability to conduct high quality studies in these regions has greatly improved over the past decade. Asia Pacific, Central and Eastern Europe, and Latin America are fast-growing, emerging markets that offer large patient populations and well-educated, experienced investigators. While regulatory timelines are shortening in these regions, guidelines are often as strict, if not more so, than in developed regions. Because of strong training programs being put into place by biopharmaceutical companies, CROs and local governments, there is also stronger understanding and adherence to good clinical practices and ICH guidelines.

—Dr. Fred N. Eshelman, founder, executive chairman, PPD, Inc.