Biotechnology Companies Will Increase R&D Outsourcing and Shift It Overseas, Finds Booz & Company Study

As biopharmaceutical companies look to cut costs and improve speed-to-market, more of them plan to outsource R&D and clinical trials and shift this work overseas to places such as China and India.

San Francisco, CA, March 7, 2012 As biopharmaceutical companies look to cut costs and improve speed-to-market, more of them plan to outsource R&D and clinical trials and shift this work overseas to places such as China and India, finds a survey released today by global consulting firm Booz & Company.

This study confirms that outsourcing will become an increasingly important part of the competitive landscape and provides key insights into why and how the outsourcing process will radically evolve in the next two to three years. For example, many biopharmaceutical companies will begin outsourcing formerly core activities such as clinical trial monitoring and protocol development to contract research organizations (CROs). This shift will be driven by new service offerings in real-time data processing and virtual platforms that allow people around the world to securely access clinical data in real time. Outsourcing more of these critical activities along the entire R&D spectrum will transform the nature of outsourcing relationships.

“There is a sea change happening in the biopharmaceutical industry,” says Matthew Le Merle, a partner at Booz & Company. “Companies first started to outsource to CROs to get R&D done faster and cheaper. However, this study clearly signals that biotech executives are now looking for more — more value, more expertise, and more innovation. This means we will see outsourcing relationships evolve from transactional to strategic, which will require new capabilities on both sides.”

In mid-2011, Booz & Company partnered with BayBio to conduct a survey and interviews with 32 executives in biopharmaceutical companies. BayBio is Northern California’s bioscience association, representing more than 450 companies.

Key findings of the study, called Outsourcing in Life Sciences: A Survey of BayBio Members, include:

  • Most survey respondents (67 percent) predict strong growth in R&D outsourcing.
  • Currently, most outsourcing occurs in the United States (64 percent) and western Europe (15 percent), but respondents predict many clinical trials will shift overseas to China and India in the next two to three years.
  • Companies send trials overseas for three main reasons: as part of a regulatory approval strategy (36 percent), to cut costs (23 percent), and to gain access to patient samples (23 percent).
  • Companies are outsourcing for three main reasons: They lack certain internal capabilities (53 percent), they lack internal capacity (38 percent), and they need to cut costs (44 percent).
  • Growth in overseas outsourcing drives demand for such technology solutions as real-time data collaboration and globally accessible data storage.
  • When selecting an outsourcing vendor, the majority of respondents (61 percent) will seek a long-term strategic relationship rather than a looser transactional, fee-for-service arrangement.

“The survey results clearly show that outsourcing is here to stay,” says Charley Beever, a partner at Booz & Company. “The key question that biopharma companies must address is which capabilities to outsource and which to maintain in-house. Making strategic, coherent decisions about what work is outsourced and why, and how CRO relationships are structured and managed, will help companies build a winning business model that adds value, innovation, and competitive advantage.”

To see a full copy of the study, visit: http://www.strategyand.pwc.com/media/uploads/BoozCo-BayBio-Outsourcing-Life-Sciences.pdf

Contact Margaret Kashmir
Global Media & Communications
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