The Rise of CRO Outsourcing in Early Drug Discovery

After the blockbuster days of the 1990s, biotech stepped up to fill big pharma’s innovation gap and fuel growth for the industry as a whole. But rising R&D costs soon turned up the pressure to run smart and lean.

By the 2010s, many companies began outsourcing their compound synthesis. They could focus their money and talent on core design competencies in medicinal chemistry, while passing off the legwork to CROs who could create compounds faster and cheaper. It was a win-win. But, in recent years, even with this synthesis-outsourcing model well established, pressures have continued to mount for a variety of factors.

R&D costs are growing

R&D spending is nearly ten-times more than it was in the 1980s. It can take as much as 12-18 years and $1-3 billion dollars to bring a new drug to market.[2,3]

Funding options are waning

As valuations fell post-COVID, potential partners and investors became increasingly trepidatious; mergers and acquisitions slowed; easy funding and fast-tracked IPOs were replaced with growing demand to differentiate, meet strict development milestones, and offer laterstage assets.[1,4]

Layoffs are lingering

The layoffs of 2022 spilled over into 2023.[5] Many companies have reduced headcount, dropped programs, and refocused efforts, which has forced their teams to trudge along with dwindling funding and staff.

CRO 2.0:

Optimizing Outsourcing

As the pressure to do more with less grows, biotechs are looking beyond synthesis and questioning what CRO 2.0 might look like.

Could CROs help expand capacity, scale, and pipelines?

What other early-discovery tasks can be outsourced?

Could specialty providers fill talent and technology gaps?

What role will CROs play as the use of AI-and in silicobased virtual screening grows?

What are the hidden costs of CRO outsourcing?

These are essential questions to ponder given how strongly biotechs are betting on CRO outsourcing. By some estimates, biotechs now outsource anywhere from two-thirds to 100% of their R&D activities. For big pharma, that figure is around 45 percent.[6]

Outsourcing is so strong that the global contract research market is expected to reach approximately $163.48 billion by 2029, representing a compounded annual growth rate of around 12% [7]. Reliance on CROs is especially strong among companies working in small molecule drug discovery.[8]

Biotechs now outsource anywhere from two-thirds to 100% of their R&D activities.

In particular, the outsourcing of early discovery initiatives, pre-clinical studies, and drug development efforts are growing at a faster pace than all other segments, including clinical trials and laboratory services.[7]

How can the CRO relationship be optimized, not just task-bytask, but as a whole?

Despite growing reliance on CROs in early R&D, exploration of how to optimize the biotech-CRO relationship has largely focused on clinical phase projects, where clients say they are looking for CROs to help integrate point solutions, offer end-toend strategic advice, and provide reliable and credible program management.[9] But the success of early discovery outsourcing can also be threatened by multiple factors, such as inefficient data exchange, quality concerns, communication difficulties, and project management challenges. These factors also warrant exploration.