A tour of the exhibit hall at this year's AAPS Annual Meeting showed that the integrated services model is the "next big thing" in CMC and early-development services. One of the biggest proponents is Aptuit, whose model calls for integrated API and dosage-form development and manufacturing capabilities tied together with a sophisticated project-management system. Aptuit recently announced two major acquisitions to fill out its service offerings: the API manufacturing operations of EaglePicher Pharmaceutical Services, based in Lenexa, Kansas, and SSCI, a provider of solid-state analytical-chemistry services. Aptuit already had preclinical, formulation, CTM manufacturing, and packaging services as a result of its acquisitions last year of Quintiles' (Research Triangle Park, NC) nonclinical operations and clinical packager Almedica. Almac Group (Craigavon, UK) and Azopharma (Miami, FL) are other examples of CROs offering an integrated services package.

Back from the brink

The emergence of sourcing options in the low-cost countries of Asia has provided a learning experience for both buyers and sellers of contract services. Nowhere has this learning process been more evident than in the discovery services arena. A year ago, North American and European providers of discovery services were under tremendous pressure as major pharmaceutical companies seemed intent on pushing down everyone's prices to Asian levels. A year later, Western discovery CROs are more optimistic. While the flow of discovery, chemistry, and biology projects to Asia continues to grow, Western CROs are learning to compete more effectively.

"It seems like cost was a major driver," says Mike Trova, senior vice-president of discovery services for Albany Molecular Research, Inc. (AMRI, Albany, NY). "I think the pendulum is swinging back to a middle ground now where it doesn't have to be one or the other." Pharmaceutical clients are growing more comfortable placing projects in locations that best match the project's requirements, he notes.

"We have had to react to the developing Asian CROs," says David Phillips, senior vice-president of sales and marketing for UK-based BioFocus DPI (Saffron Walden, UK), a subsidiary of Galapagos NV (Mechelen, Belgium). "Not by competing head-to-head, but rather by trying to position our unique selling points to be more competitive."

Phillips says BioFocus DPI has become more targeted in its business development efforts. "We are much more selective about the type of work we pitch for," says Phillips. "We'll tell a pharmaceutical company, 'This may not be the right project for us.' We try to help them position projects with us more effectively."

Going global has become an important strategy for the larger discovery CROs. BioFocus expanded beyond Europe by acquiring the remnants of Discovery Partners International (San Diego, CA), a US-based discovery company, and initiated collaborative arrangements for chemistry services with two Indian companies.

AMRI recently opened its second facility in India, focused on early-stage drug discovery research, including custom chemical synthesis and medicinal chemistry. The company opened a facility in Singapore in 2005. "Diversification and globalization of our business are key," says Trova. "We can offer differing expertise and a variety of cost models around the world, and it allows us to expand our customer base."

Projects that require speed frequently stay in the United States. "Timing is everything, especially for small companies," says Deborah Minor, whose company, Drug Discovery Alliances (Bath, NC), represents approximately 40 small- to mid-sized CROs and CMOs in the United States. "Communication is another factor. If you want information about your API real-time, that's not always easy to get with the time differences."

Western CROs also may find that developments in the Asian markets may close some of the cost gap. The supply of key resources, including staff, energy, and water, is often unreliable, and their costs seem to be escalating. Phillips from BioFocus DPI notes that Indian salaries have risen, so the comparative advantage has narrowed there. Trova at AMRI sees some price pressures already beginning to surface in China, with escalating salaries and the cost of doing business there. That could lead to other countries becoming bases for discovery work.

"Big Pharma began exploring options around the world years ago," Trova says. "I would suggest that there will be developing markets in other parts of the world."