To begin down the outsourcing path, a business must identify its core competencies. “Core competencies” are skills and knowledge that are central to how a particular business operates and distinguishes itself from other businesses in its industry. Areas of a business that are not “core” have the potential to be outsourced. The ideal outsource partner will be an expert in your non-core competencies; in other words, your outsource partner’s core competencies will be in the areas of your non-core competencies. When the network of internal and external competencies are taken as a whole, your business should be using best practices in all areas.
In a January 5, 2010 article in the Wall Street Journal, Jonathan Rockoff, wrote about Eli Lilly & Co.’s expanded use of outsourcing to run tests on its drug candidates. Lilly has partnered with third-parties to develop a novel rheumatoid arthritis drug. In adopting this approach, Rockoff said that,
“By outsourcing human tests of such a potentially important drug, Lilly is among a crowd of pharmaceutical giants adopting out-of-the-box strategies to revive fallow research-and-development organizations. Lilly is counting on a network of outside contractors to help develop not only the arthritis remedy but several other drugs it hopes start hitting the shelves as early as 2013.”
At PhysioGenix, our core competencies are preclinical research in chronic diseases, in particular metabolic and neurological disorders, and the process and methodology for conducting such research. From an outsourcing perspective, we have seen trends similar to those identified by Rockoff. Large pharmaceutical and biotechnology companies have been seeking more extensive relationships, including risk and return sharing in the drug development process.
Outside of large biopharma, we have also seen a virtualization of the smaller early-stage biopharma companies. They are running very lean organization and outsourcing almost every aspect of their business with their core competency being project management. We believe that larger biopharma companies over time will come to more closely emulate the early-stage model; thereby, giving them access to the best practices in each competency and access to the best talent around the world. This will result in faster, less expensive drug development. My colleague Dr. Curry will talk about the expansion of this model in our blog post next week.
2010 promises to be a very interesting year for our industry with a continued acceleration of change in the drug development business model.
Tags: drug development, FIPNet, non-core competencies, Outsourcing
outsourcing is essential if you want to increase your profit margin and efficiency.~-