Firm sees more pharma partnerships and outsourcing as inevitable

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Drug developers will be forced to form more partnerships and outsource development functions in order to speed the pace of new drug development, according to new research from Tufts Center for the Study of Drug Development.

The report found that partnerships and more streamlining will help drug development in the long term, rather than having companies handle the costly process largely on their own.
The research, developed by Tufts CSDD, an operations management consulting firm, found that:

  • Globally positioned operations correlate with higher sales per product, annual number of approvals, and levels of operating efficiency, as measured by higher average 10-year EBITDA (Earnings Before Interest, Tax, Depreciation, and Amortization) margins.
  • Operations with more diverse product portfolios, such as more therapeutic areas of focus, correlate with higher levels of operating efficiency and commercial and innovation effectiveness.
  • Organizations with centralized decision-making structures correlate with higher levels of innovation efficiency.
  • Organizations with more integrated business units correlate with higher levels of revenue growth.

“Moving forward, no company -- big, medium, or small pharma, or biotech -- will develop new drugs entirely alone,” said Kenneth I. Kaitin, Tufts CSDD director, who co-chaired the panel. “Increasingly, R &D productivity gains will depend on developers focusing on what they contribute best to the drug development value chain and partnering with organizations that provide capabilities that are too expensive to develop or maintain internally, or are outside of the company's core competencies.”

“While traditional responses to boost R &D productivity, such as full or partial vertical integration strategies, still carry validity, they are not the wave of the future, since they tend to divert attention away from what a company does best," he added.

The panelists concluded that to speed the pace of new drug development, pharmaceutical and biopharmaceutical companies will not only partner with each other, but will also form strong alliances with organizations outside the drug development industry, such as overnight shipping companies.