A report from Visiongain estimates that the global drug discovery outsourcing market reached $22.69bn (€20.17bn) in 2018 and forecasts a compound annual growth rate (CAGR) of 11.7% through 2028 – with the market reaching an estimated value of $68.61bn.
However, the financial services company Jefferies LLC estimates the total discovery market today is around $47bn.
“Most people agree that discovery is less penetrated by outsourcing than development, so less than 50% and probably something like 20-30%, so that would be $12bn, not $22bn,” David Windley, CFA, CPA, managing director, health care equity research, Jefferies LLC, told us. With a CAGR of 11.7%, this would put the outsourced drug discovery market at $36.28bn in 2028.
As market estimates vary, so does the view of growth drivers, though Craig Johnstone, chief operating officer of the German drug discovery and development company, Evotec, said the market is most notably being advanced by the need for innovation.
This growth is being driven by a variety of industry trends, most notably by the economic need for innovation, according to Craig Johnstone, chief operating officer or the German drug discovery and development company, Evotec.
Increasing drug complexity, stricter regulatory requirements, and more competition are all factors driving drug launch prices up – though return on investments are going down, explained Johnstone “You don’t need an MBA to know that’s a very dangerous mix in any industry,” he said.
With the margin for profitability declining, Johnstone told us there is a need for “much greater flexibility, agility, and ability to respond to different data and different environments, even socio-political conditions, whatever the changing events are.”
“The more nuanced the diseases are understood, or the segmented the patient group, or the more personalized and tailored the medicine, the smaller the volume of sales, which means the actual revenue for product is going down,” Johnstone added.
A constant search for innovation
To become more flexible and agile, drug discovery companies are innovating, enabling revenue to be achieved at a greater rate, said Sygnature Discovery’s Andy Lindstrom, who cited several innovations as promising.
Among these include proteolysis targeting chimeras (PROTACs), small molecules designed to hijack the cells’ protein destruction mechanism and redirect it to destroy a disease-causing protein, he explained. “Developments like these are bringing both investment interest and hope in terms of finding new and improved treatments for some of the world’s worst illnesses,” Lindstrom told us.
He added, “Innovations do not always have to be big industry shifts; we are constantly searching for and implementing innovations of any size that make drug discovery programs more efficient and effective, and this is having an impact.”
There are several examples of innovations in the industry that go unnoticed but gradually enhance the drug discovery journey and, in the end, improve the time and cost of getting new treatments to the market, said Lindstrom.
According to Johnstone, one of the major innovations in the industry, and for Evotec, has been induced pluripotent stem cells (iPSC). “One of the very attractive features of iPSC is that you can make them [stem cells] behave like any feature of the human body. You can induce them to behave like a certain type of healthy tissue or a disease tissue,” he explained.
Johnstone added that customers who were able to use a service like iPSC, which can be tailored to a niche or difficult to access disease, “didn’t have to build the house themselves, they just had to move in.”
Collaboration over transaction
The growth of the market, according to both Johnstone and Lindstrom, hasn’t been impacted by any increased interest in one specific service area, but customers have taken a different approach to the way in which they work with drug discovery companies.
“Their change hasn’t been gross in any particular function or capability. I think the change has been increasingly moving from what you might consider as translational business-like chemistry or biology or high throughput screening, and moving increasingly to knowledge transfer and companies working together,” said Johnstone.
He explained, “Instead of a partner saying they’d like to buy chemistry, they’d say we want to conduct the prosecution of an idea at the beginning, and the project involves biology for validation or drug metabolism to evaluate the compounds that are made or involve the other disciplines that involve the science on a weekly, or monthly, or quarterly basis.”
Lindstrom said the company has seen strong growth in single discipline project work as well as fully integrated programs from hit finding to preclinical development. “From our end, this is fueled by the co-location of our medical chemistry, in vitro biology and screening, computational chemistry, in vivo pharmacokinetics and pharmacodynamics, and absorption, distribution, metabolism, and excretion departments,” he added.
Global market
For Sygnature Discovery, it’s the biggest market is the US where it is currently seeing a “huge uplift in the number, size, duration, and complexity of the drug discovery projects” it is working with, said Lindstrom. According to the company, there is also growth in other countries with biotech hubs, including Israel and Singapore, as well as traditional ecosystems in Europe.
Johnstone told us, “It’s clear that the entire global market is made up of different needs, different drivers, and puts different emphasis on different problems. It’s a single market and its growing and it’s all driven by the same trains and teams, but some people can choose to prioritize different designations of the solution, so increasing outsourcing is a consequence which drives a bus.”