Outsourcing Industry is "Best Ever"

Interphex2007, New York, NY  (Apr. 24, 2007)-Summarizing the current state of the outsourcing industry, Jim Miller, president of PharmSource Information Services (www.pharmsource.com) said “It’s the best it’s ever been and seems to be getting better.” Miller’s presentation “The State of the Outsourcing Industry” today at Interphex focused on the reasons for this positive outlook, including the growth of the industry, the key drivers for this growth, and trends in the near future.

The outlook was based on the 2006 results of various public contract research and manufacturing organizations (CROs and CMOs) as well as pharmaceutical sponsor companies.

Leading this performance is the double-digit growth by CROs in clinical and preclinical services. “Even active pharmaceutical ingredient (API) and intermediate ingredient manufacturers, who were in such bad shape just two or three years ago, are showing very strong results now and double-digit growth,” says Miller.

Miller pointed out that the only side that “didn’t look quite robust” was in dose- manufacturing and formulation services. However, Miller pointed out “this isn’t a true indicator of how the industry is going,” primarily because of the domination of the area by Cardinal Health (Dublin, OH, www.cardinalhealth.com) and Patheon (Mississauga, ON, Canada, www.patheon.com).

As one representation of the status of the industry, Miller presented the large increase in the number pipeline products for both small- and large-molecules of Lonza (Basel, Switzerland, www.lonza.com). Although the focus has been on the biologics, there are still a lot more small-molecule projects in the pipeline.

“The level of contracting is very high” says Miller, pointing to the large number of candidates in Phase II trials, continued increases in investigational new drug filings, and the growth in backlogs, which is reported every quarter by public CROs. The steady increase in backlogs can be attributed to larger and longer Phase III studies, more Phase IV studies, and the fact that companies are planning studies sooner and are working with CROs longer.

At the top of the list of trends to watch in the near and future was the investment of biopharmaceuticals by venture capital firms. “The phenomenon clearly in venture capital is that there is a lot of money out there to be invested, and venture capital continues to be a good share of all the money that is there to be invested,” said Miller. “In the last several years, biopharma has received about 18% of the pot that has been available to invest from venture capital. It has been a much more dependable source of funding.”

Other trends Miller focused on included: the restructuring of Patheon to restore profitability; the role of private equity investors; the likely consolidation of the industry (driven by mergers and acquisitions, better market shares, and preferred provider initiatives); the decline of the value of the US dollar in comparison with the strong euro; and the impact markets in Asia will have in biopharmaceuticals as well as CMOs in India seeking larger opportunities to invest in Western assets.