Post Credit Crunch Opportunities


Applied Clinical Trials

Applied Clinical TrialsApplied Clinical Trials-09-01-2009
Volume 0
Issue 0

The once recession-proof industry must now seek out opportunities to defend itself from potential downfalls.

Pharmaceutical R&D expenditure has traditionally been immune from the vagaries of economic cycles and spending cuts. This time it is not so. There was a slowdown in expenditure growth to just 1% fourth quarter 2008—markedly different from the historic 10% growth rate. Since the last biotechnology IPO in early 2008, the window has been firmly closed and will remain so for the foreseeable future. The absence of exit opportunities limits available cash and investor appetites, contributing to the cancellation and reprioritization of R&D projects.

Nermeen Varawalla, MD, PhD, MBA

Restructuring and consolidation among large pharmaceutical companies has also resulted in project delays and cancellations, as well as internal facility closures and layoffs. There remains a commitment to fund ongoing late-stage clinical trials, however, preclinical and Phase I projects have been cutback.

Industry consequences

The reduced demand for clinical trial services will probably halve CRO industry growth in 2009. Beyond which the outlook is promising, given that outsourcing is widely recognized to deliver cost effective and expert services. Also headcount reductions will increase reliance on CROs.

Scarcity of cash and the failure of burgeoning budgets in past years to deliver the expected numbers of approved molecules are forcing pharmaceutical companies to rethink their R&D model.

Price controls and generic competition have made innovation even more critical. Codevelopment deals between large pharmaceutical and biotech companies and product development partnerships supported by governments and/or nonprofit organizations are some of the ways in which the industry is attempting to do so.

Emerging countries have demonstrated their ability to deliver data with speed and cost effectiveness. This is truer for Phase II-III trials. Also, pharma companies have been off-shoring their data management and pharmacovigilance services to vendors in India, with satisfactory outcomes.

Global front

The challenging economic climate will, however, make sponsors risk averse, unable to accept the risk of their clinical data being unable to meet their regulatory objectives. There also remains a possibility that the U.S. economic downturn may cause protectionism with dissuasion of the FDA from accepting foreign clinical data.

In this resource constrained environment, emerging countries like India have a unique opportunity to help transform the way clinical trials are executed. International sponsors are more willing than ever before to utilize its sites, motivated investigator pool, and cost effective workforce to develop innovative medicines at affordable prices. Further, governments of emerging countries are increasingly committed to attracting international trials, recognizing the ensuing benefits.

But to successfully embrace this opportunity, stakeholders including emerging country regulators, medical institutions, sponsors, and CROs must strengthen their capabilities, improve infrastructure, and up-skill their workforce. Also, they must strive to develop higher end services to move up the value chain beyond cost savings. If they can, there could be real progress toward their aspirations to develop affordable drugs to address the medical needs of their populations.

It is uncertain whether emerging countries will be able to grasp this chance. If they do, the benefits will be substantial for their economies and global health care.

Nermeen Varawalla, MD, PhD, MBA President and Chief Executive Officer ECCRO

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