With increasing interest rates and tightening access to money, we are all experiencing an increased pressure from shareholders to focus on profitability and reducing expenses on our P&L wherever possible. As pharmaceutical and biotech companies, we must tread carefully when cutting expenses as we cannot slow down discovery and development efforts which are the life blood for any company. A major opportunity to reduce these costs and to improve capital efficiency is to partner with a contract research services company and to outsource components of the discovery and development process. In the life sciences space, companies have varied philosophical and business viewpoints on outsourcing research as there are both advantages and disadvantages to doing this.
Advantages: Reducing Discovery and Development Costs
The most significant advantage of outsourcing components of a company’s discovery and development process is that it greatly reduces the cost to execute these individual research projects. Contract research organization’s (CROs) and smaller contract research service companies tend to specialize on a few pieces of the drug discovery and development process for which they are experts and highly efficient. 250 years ago Adam Smith wrote in The Wealth of Nations about the role of specialization in basic economics and how entities can become more efficient by focusing on what they are best at. In the case of pharmaceutical companies, and even large multi-national pharmaceutical companies, efficiently managing all activities can be challenging and thus outsourcing these activities provides the opportunity to reduce cost.
For these companies, outsourcing means that they can move a lot of their research expenses from fixed costs to variable costs which they can increase and decrease dynamically. This ability to dynamically change these expenses is critical in reducing costs and also increasing productivity as companies tend not to have steady-state research programs but instead programs that dramatically change in resource needs over time. Further, for small pharmaceutical companies, outsourcing means that they do not need to invest in expensive capital equipment and infrastructure that will only be utilized a small portion of the time.
The most significant advantage of outsourcing components of a company’s discovery and development process is that it greatly reduces the cost to execute these individual research projects.
Disadvantages: Challenges With Communication and Fluidity
While there are significant financial benefits from outsourcing, anyone who has worked with a CRO will of course comment on the challenges with communication in working with CRO’s as well as the challenges associated with timelines and flexibility. While from the outside this can appear to be a lack of communication or challenges in meeting timelines, more often it is based on the fundamental differences between internal and external research. In internal research, a pharmaceutical company can easily delay a project, change a project’s focus or change details about an experimental plan up to the moment the plan is executed. However, in outsourced research the work of a lab needs to be choreographed weeks-to-months in advance to ensure that resources are efficiently allocated and to deliver the cost savings that pharmaceutical and biotech companies are seeking compared to internal research. If a client wishes to change even a small parameter within a project, it can affect a dozen other projects with other clients as well as delay the client’s study. It is for this reason that working with CRO’s reduces scientific flexibility compared to internal research which is one of the main disadvantages in working with CRO’s.
Working With Visikol
At Visikol, we specialize in advanced imaging as well as advanced cell culture services and work to provide our clients with services that accelerate their drug discovery and development efforts. As a result of our specialization in these two domains, we are able to provide these advanced services to our clients at an affordable price with rapid turn-around times. Comparatively, developing internal advanced imaging and advanced cell culture services would be incredibly expensive and time-consuming for pharmaceutical companies. In addition to our ability to reduce research costs for our clients, we also work hard to have a strong line of communication with all of our clients throughout project execution. Reach out today to discuss your project with our team.