Contract research organizations (CROs) and contract manufacturing organizations (CMOs) play an important role for small and emerging pharmaceutical companies. These companies typically require CROs and CMOs to fill a larger portion of their drug-development and manufacturing needs than larger pharmaceutical companies. Driven by these greater outsourcing needs, small and emerging pharmaceutical companies also represent a significant client base for CROs and CMOs.
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Industry players point to a generally healthy outsourcing market when working with emerging and smaller players. "Since most emerging pharmaceutical companies are focused on product development rather than facilities, they are forced to outsource much of their work when the GMP process comes into play," explains Jeff C. Basham, vice-president of marketing and sales with Metrics (Greenville, NC), a drug-development and contract manufacturer. "Most funding sources for emerging pharmaceutical companies are forgoing the facility build and requiring proof of concept and milestones in development to continue funding. This requirement by funding sources bodes well for this market to continue to be robust for outsourcing suppliers."
Big Pharma versus emerging pharma
CROs and CMOs point to the different needs of small and emerging pharmaceutical companies compared with larger pharmaceutical companies. "The outsourcing rationale for emerging pharmaceutical companies, as opposed to that for large pharmaceutical companies, exists on polar opposite ends of the outsourcing needs continuum," says Randall H. Guthrie, vice-president of Xcelience (Tampa, FL). Xcelience is a CRO specializing in preformulation, formulation development, analytical services, and clinical supplies manufacturing. "The drivers for large pharma most often relate to either the need to access technology or to manage capacity overflow. They may need to access a unique technology or piece of equipment that they do not have available in house or they may seek an outsourcing provider that can lessen the burden for their own in-house capabilities. In the latter scenario, the majority of outsourced services operate under a simplistic model: most of the science has already been developed and fine-tuned in house," he says. "The relationship in most cases begins as a simple fee-for-service model and may potentially build from there based on performance, quality, and responsiveness. In the former scenario, the need to access technology usually requires a high level of scientific collaboration; the relationship begins as a scientifically orchestrated feasibility study to apply the technology to the needs of large pharma and can build from there. Regardless of which scenario, outsourcing from large pharma typically involves many decision-making layers, and they are extremely sophisticated buyers, requiring input from procurement, purchasing, quality assurance, scientific teams and in some cases, the legal department."
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Virtual or emerging pharmaceutical companies represent the other side of the outsourcing continuum. "Faced with the backdrop of burn rates and funding, emerging pharmaceutical companies' outsourcing needs focus on speed to a specific endpoint," says Guthrie. That endpoint could be filing of an investigational new drug (IND) application, acquiring early pharmacokinetic results from an initial first-in-human study or achieving a milestone under a licensing deal. "Whatever the case may be, they typically either do not have in-house capabilities or have limited in-house capabilities at their company," says Guthrie. "They are looking for a relationship built on trust, flexibility, commitment, and speed. Quality and regulatory understanding are of course givens. Because these virtual or emerging companies may have only one or two candidates, the contract organization has to adapt to a 'hurry-up-and-wait' relationship. The wait could be for early preclinical or toxicology data or simply additional funding. It is not uncommon for a contract organization to have dealings with only one to two people and getting a project launched could be as quick as one week from initial inquiry."