Friday, June 22, 2007

Pharma Outsourcing R&D To Free Up Marketing Dollars


Pharma Companies are outsourcing more R&D to free up cash for marketing, according to a new study from Cutting Edge Information.

"Uniting R&D and Marketing for Integrated Early-Stage Market Preparation" is Cutting Edge Information's latest study. The report reveals that pharmaceutical companies are looking to the biotech sector to outsource development of new drugs. In doing so, the company can free up resources to market drugs currently in their pipelines.

"I think there are two things driving this," says Elio Evangelista, research team leader at the North Carolina-based business intelligence firm. "The first is more spending and more overall focus on marketing. With fewer blockbuster products available in companies' portfolios, those brand teams are finding newer and more innovative ways to market their products."

One of those methods is to work more closely with R&D to develop more competitive labels, Evangelista says. The more a company can accomplish in clinical testing during launch, the more competitive it can be on the market. So R&D begins to play a much larger role in product lifecycle management.

"The second factor driving this increased communication is, in part, the external pressure for companies to reinvest their profits in more R&D," Evangelista tells Marketing Daily. "In doing so, R&D teams need to work with marketing teams more closely to begin developing products that the market will accept. It's no use spending hundreds of millions of dollars developing a drug that will never reach the market. Therefore, working more closely with marketing teams to develop viable products will go a long way to reducing the costs of health care."

The report includes strategies and tactics from 15 top pharma companies including Pfizer, Novartis, Merck, and Sanofi-Aventis.

One profiled company is in favor of shrinking business unit departments and creating small internal teams to handle deals with small biotechs to outsource most of the early-stage pre-clinical work. The idea is based on the biotech industry's capability to develop innovative products more quickly than slow-moving, large pharmaceutical companies.

The company invests almost as much in early-stage research as it would for an in-house compound, but it outsources the work to smaller, faster-moving biotechs, which assume some of the risk that the company would otherwise retain.