Drug Discovery Outsourcing Market Analysis Report By Workflow (Lead Identification & Candidate Optimization, Preclinical Development), By Therapeutic Area, By Drug Type, And Segment Forecasts, 2018 - 2025

Industry Insights

The global drug discovery outsourcing market size was estimated at USD 2.19 billion in 2016. Drug discovery is a long, costly, and arduous process that requires dedicated manpower, financial resources, and infrastructure. The pharmaceutical industry has witnessed radical changes in the past two decades, in terms of a shift toward biologics, patent expiration, and unprecedented downsizing of internal discovery of big pharmaceuticals. All of this has accelerated the adoption of outsourcing activities.

Breaking down the different steps of drug discovery such as hit confirmation, lead generation, lead optimization, and high-speed screening allows players to specialize in their core services. An estimated 75.0% to 80.0% of R&D spending in the biopharmaceutical industry can be outsourced, creating opportunities for contract research organizations (CROs). High demand for novel drug candidates drives R&D in the pharmaceutical industry, which in turn, is expected to boost market growth.

Increase in number of potential targets over the past years is much faster than the rise in information related to these targets. This has added to the challenges faced by drug discoverers. It is projected that over the next few years almost one-half of drug discovery practices will be outsourced, thereby accelerating revenue growth. 

Innovation and technological advancements have dynamically changed drug discovery research. Combination of chemistry-based and target-based technologies identification of novel compounds demand technical expertise. These include molecular and behavioral pharmacology, ultra-high-throughput screening (ultra-HTS), molecular biology, and medicinal, combinatorial, and analytical chemistry.

Key biopharmaceutical companies have been observed collaborating with academia and CROs for drug discovery. Cost cutting, chasing innovation, gaining access to specialized knowledge and technology, and increasing speed and agility are some of the significant factors encouraging pharma companies to expand their involvement in outsourcing. This, in return, is expected to increase competition among key players.

For instance, AstraZeneca established multiple outsourcing partnerships with Cancer Research UK (CRUK) Cambridge Institute, Medical Research Council Laboratory of Molecular Biology (MRC LMB), University of Texas MD Anderson Cancer Center, and Academic Drug Discovery Consortium (ADDC) in 2013-14. Other prominent partnerships include Bristol-Myers Squibb with Allied Minds, GlaxoSmithKline with the University of Leicester, and Actelion with Enamine.

Workflow Insights

The iterative process of lead identification, also known as hit-to-lead, is a significant stage in early drug discovery. It has historically proven to have improved efficiencies and economies of scale for drug developers. Introduction of advanced in silico techniques to improve lead identification process, such as Computer-Aided Drug Discovery (CADD) and structure-based drug designs, support segment growth.

Advances in High Throughput Screening (HTS) technology, which enables screening of rare metabolically active tumor cells, microchip-synthesized genes, and toxicology of environmental chemicals and drugs, benefits the growth of the segment.

Need for resources with combinational knowledge of metabolism, analytical chemistry, and computer software, along with high cost associated with integration of latest computation technology, is enabling higher outsourcing of lead identification. As a result, lead identification and candidate optimization accounted for the largest share in terms of revenue in 2016.

The other associated services segment, which includes data mining, is anticipated to witness rapid growth in the coming years. This is owing to increased adoption of outsourcing services and high investments in drug discovery R&D.

Therapeutic Area Insights

Respiratory systems accounted for largest share in the drug discovery outsourcing market in 2016. Higher adoption of drug discovery outsourcing, coupled with well-established product portfolio resulting from outsourcing, is responsible for the segment’s high revenue. High incidence of respiratory disorders such as lung cancer, bronchitis, tuberculosis, chronic obstructive pulmonary diseases (COPD), and asthma, coupled with increasing cases of drug resistance, has also influenced segment growth. 

The oncology and anti-infective segments are both projected to witness strong growth over the course of the forecast period. Increased focus on identification of novel targets to support cancer treatment contributes to lucrative growth of the oncology segment.

Antimicrobial resistance is projected to become a global crisis with its high rate of emergence and spread resulting in high economic burden. Companies have increased R&D in anti-infective drugs, having identified the future need. This is poised to benefit segment growth.

Drug Type Insights

Small molecules pharmaceuticals accounted for the highest number of New Drug Application (NDA) approvals in 2014 and contributed a substantial number of new molecular entities. Furthermore, small molecules represent about two-third of drugs in the pipeline. Increased significance and highly effective components add up to the potential of small molecules in pharmaceutical portfolio. Owing to this, small molecules held the largest share in the overall market.

Furthermore, advantages of small molecules over larger ones have increased investments in the field, especially in cancer research. Ongoing studies to investigate and develop novel therapeutics for various indications is expected to further influence segment growth.

Regional Insights

North America dominated the market in 2016 owing to higher adoption of technological advancements, presence of well-established research infrastructure, presence of key players, and higher investments in drug discovery R&D. With outsourcing no longer being solely about cost reduction, rising need for efficiency, quality, and innovation are expected to contribute to market growth.

Government initiatives in emerging Asia Pacific (APAC) countries to forge alliances with U.S. pharmaceutical companies are anticipated to foster regional market growth. In addition, regulatory changes as well as emerging and promising startups have been attracting API and drug development outsourcing to countries such as China and India.

For instance, China launched the Market Authorization Holder (MAH) pilot program, following which, investments from venture capital increased in the nation’s biotech and pharmaceutical sector. Initiatives for economic progress and high investments to raise infrastructure to support R&D further contributes to growth in the APAC market.

Drug Discovery Outsourcing Market Share Insights

Some of the major players are Albany Molecular Research Inc.; EVOTEC;Laboratory Corporation of America Holdings; GenScript; Pharmaceutical Product Development, LLC; Charles River;WuXi AppTec; Merck & Co., Inc.; Thermo Fisher Scientific Inc.; Dalton Pharma Services; Oncodesign; Jubilant Biosys; DiscoverX Corporation; and QIAGEN. International partnerships are a key strategy witnessed among players. For instance, CROs in U.K. are increasingly collaborating with players in the Swiss pharmaceutical sector. Events like the UK Trade & Investment (UKTI) further encourage alliances among players.

In addition, in a fragmented industry like pharmaceutical, agility becomes vital in the fast-moving drug discovery sector and this can be provided by quality service offerings along with a broad portfolio of capabilities. Thus, partnerships with Contract Development and Manufacturing Organizations (CDMOs) are preferred over Contract Manufacturing Organizations (CMOs).

Report Scope

Segments Covered in the Report

This report forecasts revenue growth at global, regional, and country levels and provides an analysis on latest industry trends and opportunities in each of the sub-segments from 2013 to 2025. For the purpose of this report, Grand View Research has segmented the global drug discovery outsourcing market report on the basis of workflow, therapeutic area, drug type, and region:

• Workflow Outlook (Revenue, USD Million, 2013 - 2025)

  • Target Identification & Screening

  • Target Validation & Functional Informatics

  • Lead Identification & Candidate Optimization

  • Preclinical Development

  • Other Associated Workflow

• Therapeutic Area Outlook (Revenue, USD Million, 2013 - 2025)

  • Respiratory System

  • Pain and Anesthesia

  • Oncology

  • Ophthalmology

  • Hematology

  • Cardiovascular

  • Endocrine

  • Gastrointestinal

  • Immunomodulation

  • Anti-Infective

  • Central Nervous System

  • Dermatology

  • Genitourinary System

• Drug Type Outlook (Revenue, USD Million, 2013 - 2025)

  • Small Molecules

  • Large Molecules (Biopharmaceuticals)

• Regional Outlook (Revenue, USD Million, 2013 - 2025)

  • North America

    • U.S.

    • Canada

  • Europe

    • Germany

    • U.K.

  • Asia Pacific

    • Japan

    • China

  • Latin America

    • Brazil

  • Middle East and Africa (MEA)

    • South Africa