Contract research organisations: labs for hire
Monday, 19 August, 2002
As Australia's burgeoning young biotech hopefuls push toward clinical trials of their fledgling products, contract research organisations are hoping for a rush of new business. The skills they have for hire are designed to move products through the development pipeline, particularly that section involving clinical trials. The problem is, CROs are terra incognita for a typical young start-up and there are few formal channels yet established that make it easy to find the right one.
The contract research organisation landscape in Australia is dominated by two groups of larger companies - one multinational, the other locally owned - plus a swarm of locally-owned niche players with one to six employees.
Of the multinational CROs with an Australian presence, the Big Five are generally seen as Quintiles, Covance, PPD Development, Parexel International and Kendle Australia. Other multinational subsidiaries here include PRA, which recently acquired another multinational, CroMedica, and Icon Clinical Research. Some run to staff counts of 100 and most, but not all, have the resources to support the entire drug development pipeline, from strategic planning, toxicology and pre-clinical studies through clinical trial management and monitoring, to health outcomes. All these are specialised skills which few young biotechs will have inhouse and even large pharmas find more cost-effective to outsource.
The majority of multinational CRO affiliates in Australia generate the bulk of their business through global pharma projects farmed out by their head offices, according to Kendle Australia managing director George Mihaly. They rely on the top pharmas' preference for a one-stop shop approach to global trials which they can satisfy by outsourcing projects to CROs with multi-country outlets. Kendle, by contrast, has made a serious effort to supplement its business by tapping into the emerging demand from Australian biotechs for contract research. It has set up a division specifically to handle biotechs making the transition from proof-of-concept in the lab to proof-of-concept in the clinical trial.
About 40 per cent of its business now derives from biotechs, primarily domestic and that doesn't include CSL whose size slots it into the pharma category as far as Kendle is concerned. Although Kendle is equipped to supply across-the-board services, the lion's share of its work -- perhaps 50 per cent -- deals with managing clinical trials. Totally different issues surface when it comes to providing outsourced trial management services to biotechs compared with pharmas, Mihaly says. "Pharma companies have a lot of internal experience in drug development, they have large capital bases and infrastructure and they can withstand bad outcomes [in a particular trial]." "By contrast, biotechs have few resources, limited background experience, very limited cash reserves and a restricted capacity to withstand negative outcomes. "If they are going to outsource, it has to be with a CRO partner that understands these differences."
Ideally, a CRO should pass on some of its knowledge to its biotech customer as the relationship grows in strength, he says. "The issue nearest and dearest to me is how to build a relationship so the biotech can capture [the outsourcer's] expertise. Otherwise the client could lose both control of the project and the opportunity to learn about the product it is developing. Mihaly believes demand for CRO services from local biotechs is ready to take a significant upward jump.
That view is shared by PRA managing director Sue Devenish-Meares who says she is looking for a "dramatic increase" after two years of steady progress by domestic biotechs. PRA has about 24 staff in Australia and concentrates on clinical development services, including regulatory services. Devenish-Meares says companies using CROs should look for one whose size they are comfortable with. "Some smaller companies are concerned that if they work with a very large CRO, they aren't given the appropriate level of attention."
She also warns biotechs not to adopt "the common view that if you have outsourced a service, you don't have to manage it." In fact, companies using outsourced expertise need to allocate up to 10 to 20 per cent of one staff member for each project to ensure their expectations for the outcome will be met, she says.
"They should always remember they need to have somebody who is internally managing the whole business, has an overview of what is going on and is taking responsibility for it." They also need to put a lot of upfront work into knowing the ultimate outcome they want from their product, Devenish-Meares says. If they haven't, they run the risk of contracting outsourcers without knowing precisely what they want - a scenario that can end in tears on both sides.
There has been some consolidation lately between international CROs, such as PRA's own acquisition of CroMedica in June. However Devenish-Meares does not expect significant consolidation to continue with the Australian scene.
The second, but smaller group on the CRO landscape are comfortably-sized domestic companies. There are only two or three of which the largest and oldest is probably Datapharm Australia, which boasts a staff of more than 30. The 15-year-old company once relied almost exclusively on big pharmas but is now interested in the opportunities it sees as small start-up biotechs advance in greater numbers toward clinical trials. Datapharm's managing director Dr Helen Allars, says startups often have limited expertise in the area of clinical research that Datapharm can supply most economically.
She notes biotechs who are confident about the sort of clinical trials they want to run can benefit from outsourcing services which ensure the trails are run in accordance with the appropriate international standards. But a considerable number are not exactly sure where they want to go with their product, and for this group, the greater benefit is from provision of pre-trial strategic planning services, she says.
Datapharm is also involved in clinical data management, a field that requires data to be entered in concordance with international formats such as the International Conference of Harmonisations (ICH) standard. "You can't just whack it in a spreadsheet... it has to meet global rules and regulations," Allars says.
Not confining itself to Australia, Datapharm is setting up global associations, including links with hospitals and companies in China and in the US, where it has contract staff running a study for a large non-biotech Australian client. It has also joined the Axis HCN network of small CROs spread across Europe, Scandinavia and Russia.
The final layer in the Australian CRO sector is made up of dozens of small consultancies, many of them founded by former pharmaceutical company employees, which focus on niche or specialty areas. While they can't deploy the resources to cover the whole drug development spectrum, their lower overheads allow them to be competitive in price.
That is a positive feature for biotech start-ups seeking to conserve cash as they pursue proof-of-principle for their product via early stage clinical trials. "Cost-effectiveness is a major factor, particularly with start-up companies," agrees Prof Tony Webber, founder of Brisbane-based Clinical Network Services.
The smaller CROs can offer tailored services which many biotechs customers find more attractive than the more impersonal environment of larger organisations, he says. "They like to know they are dealing with a dedicated project team that doesn't change every time they pick up the phone."
Formerly dean of science at Queensland University of Technology, Webber launched Clinical Network Services four years ago to provide specialist skills in early stage clinical trials. He offers clinical development planning expertise and early phase trial management and monitoring services.
In addition to emerging Australian biotechs, Webber aims for customers among US biotechs attracted by Australia's cost structure for trials and studies which typically is less than half the US price tag. So far, Webber has brought in four US companies, including a Philadelphia-based biotech start-up for which he has just completed a Phase II study and is enrolling patients now in a follow-up study.
The business it drums up from US clients is allowing the company to slowly expand while it waits for more Australian biotechs to develop their products to the clinical trials stage. Webber's three-person company punches above its weight because it is plugged into a domestic network of small independent CROs as well as being affiliated with US company Applied Logic Associates and Harrison Clinical Research in Europe.
Some small CROs deal with pre-clinical work, notably contract research lab ICP Firefly which specialises in toxicology studies for small startup companies with novel compounds. Formed in 1995, it is based in Sydney and has six full-time and two part-time staff.
In the past few years, it has shifted its focus from routine regulatory work toward biotech startups, said spokesman Edmund Ho. "Our strength is our ability to offer companies tailor-made toxicology testing for new compounds with unique modes of action."
Its overall aim is to be in a position to provide support for Australian biotechnology companies who wish to commercialise their products. ICP Firefly's message to clients is that its services are a lower-cost, easier-to-manage alternative to the offerings of international CROs.
But ICP Firefly founder and managing director Dr Isabelle Meyer-Carrive says it requires ongoing efforts to assure Australian biotechs of her company's preclinical testing expertise. "A lot of people still go overseas because they believe there is no experience here. They feel more confident going overseas but if they do and the project fails, the consequences, including costs, can be much greater [than if they had used Australian services of equal quality]."
Like many of Australia's CRO's, Firefly's business is just ticking over while it waits for an anticipated biotech boost, she says. "We don't have a high life but we think we will grow gradually with market expectations."
Getting into business
Some biotechs who made use of CRO services while developing their own drug candidates have learned from the experience and now play in the CRO space themselves. An example is Progen Industries, one of the few Australian biotechs with a drug in Phase II clinical trials in the US under the guise of an IND with the US FDA. Progen still uses outside CROs for specialised applications but has developed in-house expertise in clinical trials management and is utilising the experience it has gained in regulatory processes for Investigative New Drug (IND) applications.
It is making use of that expertise to manage a Phase I clinical trial for US biotech Lipid Sciences. The trial, conducted at Brisbane's Wesley Hospital, involves human plasma samples processed by Progen's contract drug manufacturing arm for Lipid Sciences under a $500,000 agreement.
Progen vice-resident for business development Dr Peter Devine said the company developed its own IND expertise because of the difficulty in finding domestic CROs with an intimate knowledge of the IND process. "We still use some local CROs ourselves for specific applications and these are affiliated with US offices. In our experience, we had difficulty finding a local CRO with a good understanding of the US IND process. It was for this reason we developed our own expertise in the area."
Taking advantage of CROs
According to Dr Karen Woolley, "relatively few Australian biotechs have reached the clinical trial stage of drug development - the longest and most expensive stage of development - and therefore have little experience with contract research organisations." CEO of ProScribe Medical Communications, a consultancy specialising in medical writing and clinical research, Woolley says that before taking advantage of outsourcing services offered by CROs, "Australian biotechs first need to find out who the CROs are."
They need to acquaint themselves with the performance records and specialist skills of individual CROs. They must also distinguish between tasks that are suitable for outsourcing and those for which outsourcing can be disastrous, she says. Woolley for a number of years has been interested in clinical trial trends and usage patterns. She's in the midst of conducting the First Australian Clinical Trial Survey (FACTS) with support from professional association ARCS Australia and pharamaceutical lobby group Medicines Australia.
All Australian affiliates of the leading international pharmas are participating in the 100-question survey which Woolley believes is the most comprehensive to date in Australia. Its results, due out in November, should shed light on cost and time issues (including times required to win ethics committee approvals) related to clinical trials.
Woolley said she is concerned that Australia's young biotech community is reaching the clinical trial stage of their product development pipeline but lacks experience with CRO services in that area. The survey should produce information that will help solve that problem for biotechs poised to take their first compound into early phase trials, she said.
"Basically, it will help them answer questions like how long does it take to get approval, where should we do it, how much will it cost per patient, what are the time lines, what state should we do it in?"
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