Recession hits some biopharmaceutical companies and CROs

Cutting Edge InformationSep 11 2009

Recession-driven slowdowns in drug development mean problems for some biopharmaceutical companies and, by extension, the contract research organizations (CROs) they employ to test prospective therapies.

For small drug developers trying to get a product to market, it's a vicious circle. Traditional sources of funding, such as venture capital and public markets, have dried up. The companies' diminishing levels of operating capital then stall the very development programs that appeal to investors -- and that promise revenue down the line.

Those problems then bleed over to CRO partners. Earlier this year, according to the Charlotte Business Journal, leading CRO PPD Inc. announced layoffs and a scaling back of plans to expand into a new North Carolina business park. Charles River Laboratories, another large CRO, made similar layoffs amid declining earnings. In both cases, a main culprit is project delays and cancellations.

Even large drug companies report efforts to manage costs in expensive areas such as clinical development. "Strategic Clinical Sourcing: Managing Costs and CROs," a new report from Cutting Edge Information, discusses how sourcing professionals carefully parse CRO proposals to better understand where their money is going.

The result is often a reevaluation of development strategies and a new drive to seek alternatives with the lowest possible costs. Trial planners carefully balance in-house and outsourced tasks to get the best return on investment.

"Well-executed clinical outsourcing helps drug developers get more for the money they are spending," said Jason Richardson, president of Cutting Edge Information. "The most successful sponsors build strategies that leverage the capabilities of CROs and other clinical vendors specifically for each molecule in development. Even though the life sciences sector has resilience in the recession, drug companies are searching for vendor relationships that enable them to tighten their belts."

Richardson expects teams to pay careful attention to CROs' costs. "In the big picture, clinical outsourcing will continue to grow. But times being what they are, now is an excellent time for project managers to fully vet details like the unit hour costs in their vendor contracts."

The report, "Strategic Clinical Sourcing: Managing Costs and CROs," (http://www.cuttingedgeinfo.com/clinical-outsourcing-strategy/) discusses the processes, investments, benefits, and pitfalls of trial outsourcing. It also examines unit costs and headcounts along with strategies for addressing common obstacles in CRO selection and management.