"Investing in the Future of R&D: To Outsource or Not To Outsource?, that is the Question&qu
When it comes to pharmaceutical development of a drug, the research that goes into finding this new therapeutic agent can be very daunting. With so many unknowns it is very difficult to find not only the right drug but also the right disease population with which to treat. To really understand how much effort goes into the research of a new drug one has to start with a brief summary of basic drug discovery, at least the principles.
Note that this is very generalized maybe even an oversimplification but will work as far as this article is concerned. In pharma/biotech companies at the drug discovery level, compound libraries are screed for "hits" against a known and well characterized molecular target (e.g., a key kinase involved in a cancer cell signaling pathway, if inhibited or removed the cancer cell dies), once you have narrowed down your 6 million compound library down to a few hundred "hits" chemists start to peer over the structures to see if they have any known liabilities, patent issues (already protected by chemical class) or can be modified by SAR (classical medicinal chemistry in discovery – basically trial and error between the chemist and biologist to build a "drug" from a "candidate" – SAR = structure-activity relationship – change a –CH3 group to a –NH3 and you get a different function – good or bad the biologist determines it so). After many iterations and a lot of back and forth discussion at the team level you get down to a few dozen compounds at which time you are ready to run some in vitro (in cells) and in vivo (in animal) studies. You determine if the compound hits the target, how tightly (affinity), does it work on cells in vitro and does it work in vivo (PK/PD relationship) then run efficacy studies (disease models). Finally you get down to a single candidate and start to think about second generation agents. This final compound goes through several rounds of further testing for safety then a nomination document is raised (100+ page document) all about this drug, history and potential use.
Now there are a few of options an R&D organization has when trying to pump "innovation" into its discovery efforts to fill out its pipeline with potential new blockbuster drugs. One, you take the traditional route where by you invest in the infrastructure that is required to build a chemistry unit, biochemistry and preclinical biology expertise to synthesize and test drugs doing everything "in-house"; two, you take everything "out-of-house" to contract research organizations (CROs) and outsource your studies; three you do a mix of both; or four, you take drug discovery "to the street" and in-license drugs at various stages of their life cycle to be developed in-house but with reduced risk.
Each of these options has their pros and cons. For the in-house drug discovery efforts this is a long and expensive process which requires the recruitment of skilled scientists plus equipment and all the risk that comes with research like models and instructments not working, studies failing and many iterations of guess and test. If you completely outsource everything you barely need a work force, no equipment, basically just an office, but you do need tons of cash on hand as studies at CROs are 2-10x higher than they would to do in-house. Also at CROs you have less control over your studies, the results, model optimization and there is a lot more of trust that is required to work with various CROs, some do not even work-out or are fraudulent, so there is a lot of risk here as well. A mix of the two would be the best scenario where you have a small in-house operation that is supplemented by outsourced activities to fill in the gaps in knowledge and capabilities. Innovation can stay in-house with the researchers and scientists while complex, large studies can be done at a CRO where such models are standardized and do not require a lot of set up time. Taking discovery to the street requires the most cash on hand but you can mitigate a lot of risk here. Paying for a compound or series or an entire company at a mid-stage clinical trial phase like Phase IIB will remove a lot of the risk off the table of this drug failing. It can still fail, and many do, especially in Phase III but this will give you the best chance of finding a winner. However, this cannot be considered "innovative" and if your company seeks to become an innovator in drug discovery you need a hefty R&D plan, if possible, mixed with both in-sourced and out-sourced efforts.
So to answer the question – "To Outsource or Not to Outsource?", the answer may be a bit confusing, but is "Yes, both", the next question must ask how much and when, this will depend on the goals and objectives of the particular biotech or pharmaceutical company as different size companies will have different objectives from looking at an early exit strategy (biotech) to filling in a development pipeline in search of the new billion dollar blockbuster drug (big pharma). When a company first starts out, as in the case of a small biotech or one man operation, outsourcing can be as high as 100%, but as things progress towards a larger organization with a supportive infrastructure this percentage for outsourcing beings to shift more towards 40-60% allowing innovation to sneak in around the 50% mark, which is a good balance to asses both risk and financial commitment moving forward with an R&D plan for a new chemical or biological asset.
Note that this is very generalized maybe even an oversimplification but will work as far as this article is concerned. In pharma/biotech companies at the drug discovery level, compound libraries are screed for "hits" against a known and well characterized molecular target (e.g., a key kinase involved in a cancer cell signaling pathway, if inhibited or removed the cancer cell dies), once you have narrowed down your 6 million compound library down to a few hundred "hits" chemists start to peer over the structures to see if they have any known liabilities, patent issues (already protected by chemical class) or can be modified by SAR (classical medicinal chemistry in discovery – basically trial and error between the chemist and biologist to build a "drug" from a "candidate" – SAR = structure-activity relationship – change a –CH3 group to a –NH3 and you get a different function – good or bad the biologist determines it so). After many iterations and a lot of back and forth discussion at the team level you get down to a few dozen compounds at which time you are ready to run some in vitro (in cells) and in vivo (in animal) studies. You determine if the compound hits the target, how tightly (affinity), does it work on cells in vitro and does it work in vivo (PK/PD relationship) then run efficacy studies (disease models). Finally you get down to a single candidate and start to think about second generation agents. This final compound goes through several rounds of further testing for safety then a nomination document is raised (100+ page document) all about this drug, history and potential use.
Now there are a few of options an R&D organization has when trying to pump "innovation" into its discovery efforts to fill out its pipeline with potential new blockbuster drugs. One, you take the traditional route where by you invest in the infrastructure that is required to build a chemistry unit, biochemistry and preclinical biology expertise to synthesize and test drugs doing everything "in-house"; two, you take everything "out-of-house" to contract research organizations (CROs) and outsource your studies; three you do a mix of both; or four, you take drug discovery "to the street" and in-license drugs at various stages of their life cycle to be developed in-house but with reduced risk.
Each of these options has their pros and cons. For the in-house drug discovery efforts this is a long and expensive process which requires the recruitment of skilled scientists plus equipment and all the risk that comes with research like models and instructments not working, studies failing and many iterations of guess and test. If you completely outsource everything you barely need a work force, no equipment, basically just an office, but you do need tons of cash on hand as studies at CROs are 2-10x higher than they would to do in-house. Also at CROs you have less control over your studies, the results, model optimization and there is a lot more of trust that is required to work with various CROs, some do not even work-out or are fraudulent, so there is a lot of risk here as well. A mix of the two would be the best scenario where you have a small in-house operation that is supplemented by outsourced activities to fill in the gaps in knowledge and capabilities. Innovation can stay in-house with the researchers and scientists while complex, large studies can be done at a CRO where such models are standardized and do not require a lot of set up time. Taking discovery to the street requires the most cash on hand but you can mitigate a lot of risk here. Paying for a compound or series or an entire company at a mid-stage clinical trial phase like Phase IIB will remove a lot of the risk off the table of this drug failing. It can still fail, and many do, especially in Phase III but this will give you the best chance of finding a winner. However, this cannot be considered "innovative" and if your company seeks to become an innovator in drug discovery you need a hefty R&D plan, if possible, mixed with both in-sourced and out-sourced efforts.
So to answer the question – "To Outsource or Not to Outsource?", the answer may be a bit confusing, but is "Yes, both", the next question must ask how much and when, this will depend on the goals and objectives of the particular biotech or pharmaceutical company as different size companies will have different objectives from looking at an early exit strategy (biotech) to filling in a development pipeline in search of the new billion dollar blockbuster drug (big pharma). When a company first starts out, as in the case of a small biotech or one man operation, outsourcing can be as high as 100%, but as things progress towards a larger organization with a supportive infrastructure this percentage for outsourcing beings to shift more towards 40-60% allowing innovation to sneak in around the 50% mark, which is a good balance to asses both risk and financial commitment moving forward with an R&D plan for a new chemical or biological asset.