Biotechnology Round Table March 2012
Contract-research organizations in North Carolina have expanded beyond traditional parameters to meet customers’ needs and emerging trends.
What is the role of a contract-research organization in the biopharmaceutical industry?
Stafford: To partner with the biopharmaceutical industry to provide services throughout a product’s life cycle.
Muir: Duke has all the services of the traditional CRO plus faculty who can partner and work with sponsors to develop programs.
Zimmerman: At Pozen, we have our own services in-house, but we have to enlist the help of the CROs in our universities and area. We look for faculty, statistical and clinical expertise.
Warrington: There are about 390 CROs in North America. North Carolina carries a quarter of available resources in this industry. We’re critically important.
Stewart: In addition to the actual number of organizations, two of the world’s three largest are based here.
Oortgiesen: At Cato Research, we like to partner with biotech companies, which offer a lot of expertise. But there are certain areas where we can help. We offer traditional services, such as clinical management and monitoring, but we also do a lot of regulatory-affairs consulting, such as representing companies at the Federal Drug Administration. We also facilitate FDA meetings and assist with strategies for drug development, including in manufacturing and crafting a nonclinical development plan.
Stafford: At Quintiles our marketing slogan is the four C’s: clinical, commercial, consulting and capital. We partner with pharmaceutical and biopharmaceutical companies beyond the clinical arena, and that includes regulations.
Ribeill: I’m different because I work in the pre-clinical area. We go from concept to clinical, so I’m only two C’s instead of four. We provide companies with the expertise, the consultancy and the tools needed to bring technology to the clinical organizations that are going to take a compound into phase one and so on. There has been a change in the industry over the last five or six years. The pharmas are starting to outsource the clinical side. They were facing problems and cutting costs, so they decided to go downstream.
Moore: CROs help pharmas and biotechs find sites to conduct trials. Those relationships work very well.
Why are there so many CROs in North Carolina compared with other states?
Stafford: Quintiles founder Dennis Gillings and Pharmaceutical Product Development CEO Fred Eshelman came out of UNC Chapel Hill. We have Duke University and large companies here as well, such as GlaxoSmithKline, Burroughs Wellcome and their spinoffs. With students coming from N.C. State University, Durham Technical Community College and North Carolina Central University, there is a lot of competition in this area.
Muir: We have these amazing research institutions and investment that took place in RTP decades ago. Along with the explosion in molecular discoveries, everything came to fruition at the right time. It soon became clear that there would need to be expertise, and some very inspirational people brought ideas forward.
Stewart: There’s not any barrier to entering the field. If you have a very qualified individual who has a relationship with a customer, they can leave Quintiles or PPD, start their own CRO and focus on a specific therapeutic area.
Warrington: There is a little company in Wilmington called Inclinix that’s solely focused on patient recruitment. It was started by someone who lost their job.
Ribeill: There are more spinoffs coming from larger companies. You can find money here. You can find people who are really looking for new ideas or to start a business. You can find people to build a company around, and there are a lot of businesses you can work with to start your own.
Oortgiesen: You also have institutions like the Biotech Center and Council for Entrepreneurial Development that are very good at bringing people together.
What does your client base look like, and what do you do for them? Also, whom do you hire?
Oortgiesen: In the U.S., most of our clients are small to midsize biotechs and pharmaceuticals. Our bigger clients are normally outside the U.S., including in Japan, Korea and Europe, and are interested in moving their products here. We help them with regulatory and FDA interactions and then move them into the clinical aspect.
Stewart: A lot of people don’t think of animal health when they think of big pharma, biotech and med-device. It’s a fourth leg of that stool that, especially in this area, is growing quickly. We have been and will be hiring in that field.
Zimmerman: From small CROs to large CROs, we hire all kinds. It just depends on the program. I think we’re especially spoiled in this state because we use the expertise at Duke and some outsourcing from other CROs, including Quintiles and PPD. There’s a lot of talent in this area to choose from.
How does a client find you?
Stafford: We have sales organizations that establish relationships with buyers in a business sector, mainly biopharma. We have a marketing group that focuses on advertising. We’re using a lot of social media, including Facebook and Twitter, to let people know where we are and what conferences we’re participating in.
Oortgiesen: And it’s very competitive. Since the recession, a lot of CROs have cut corners or slashed budgets. This area has one of the highest densities of CROs, but competition comes internationally, as well. A different approach we’ve taken is to use our Cato Bioventures arm. There are a lot of bioventure conferences and meetings we can attend.
Muir: At Duke, it’s very much the expertise of the faculty that leads to client relationships. There have been times when people come to us looking for advice because they don’t know about all of the CRO services. That leads to a relationship.
Moore: Area schools offer programs that recruit high school and college students. CROs get a lot of exposure from recruiting.
Do CROs break down into certain types or have certain specialties?
Stafford: There are CROs that only do device work. There are CROs that only do oncology trials. The larger CROs tend to do a little bit of everything but concentrate on one area.
Does a CRO manage the risk involved in a client’s business? If so, how?
Oortgiesen: We mitigate risk in advising how to set up protocol and how to approach the FDA. At a CRO, you work on all kinds of projects and with all different products. We see products do poorly and products do well. You learn a lot. Working for a small biotech, you don’t get as much experience.
Muir: I see it very similarly. I have an opportunity to participate, but I don’t work for them. Sometimes, we’re the honest advice, the voice in the room that’s different from everything else that you might be hearing but that you need to hear. I think our data-management strategies mitigate risk and improve accuracy. Because at the end, if the data is not sound and reliable and the FDA complains, the study is lost.
Zimmerman: We’ve noticed that some CROs set up contracts differently. Some share some of the risk while others don’t, and that will be stated in the contract. A lot depends on the CRO and its desires. Typically, we are approached with their idea of risk sharing, which is a relatively new concept.
Stafford: We approach it a couple of different ways. Years ago, it was more about time and materials in terms of the contract resources they were paying for. Now, they’re paying for deliverables. They’re paying for outputs and the risk we take on a contract basis. We take on a project for a fixed cost, understanding that we don’t exactly know what it’s going to take to deliver. You’re putting capital into the product, the success of that product and the return.
Warrington: The economy has given the buyer a lot more opportunity to negotiate the contract. We’ve seen a lot of interest in doing milestone payments based on performance. It’s a good way for smaller organizations to get a leg in with a potential client, whereas there might not be as much flexibility with Quintiles to do that kind of negotiating.
What do you think the impact of CROs has been on the biotech industry in North Carolina?
Stewart: I think the proximity to larger CROs allows early-stage biotech companies to be very efficient with the capital they have. Early on, it’s very difficult for them to raise money. And when they have it, they have to be as efficient as possible with it. Having this quantity of expertise in such close proximity really allows them to do the most they can with that cash.
Zimmerman: I think they’ve had a tremendous impact. They started from the industry’s needs, the intellectual capital that’s in North Carolina and really smart people spinning off to do their own specialties.
In light of PPD’s recent acquisition, will more occur? What about mergers?
Ribeill: We’ll see some acquisitions and mergers, companies disappearing and others being created. It’s a consequence of success. Private equity eyes these companies because there is money to be made.
Oortgiesen: Cato is expanding internationally, and the way that we are doing that is by forming partnerships with CROs in other locations.
Stafford: Quintiles has made three acquisitions since October. We’re looking to bring in expertise that we don’t have and to continue to grow.
Stewart: In talking with my clients, big pharmaceutical companies are cutting their internal resources and outsourcing more. As they do that, they’re noticing the deals they’re bidding on are bigger, so they need more expertise in new services. I don’t think they’ll just buy the same things to get bigger. I think that they’ll expand their offerings.
What’s in store for CROs?
Oortgiesen: I think they will grow around the world. As Quintiles has done already, we have to look into drugs globally. Also, if the health-care system is going to be totally electronic, there may be a lot of efficiences put into place and more monitoring done at the lower level. That may change the industry, too.
Muir: Clinical research is even better than it was 20 or 30 years ago. It’s done well and more efficiently, and the quality is better. But the ultimate goal is to improve patient care. That dissemination beyond the clinical research is where — at least from where a medical practitioner is concerned — we could do a lot better.
Stafford: CROs have evolved from being consulting companies to becoming a commodity. They are going to be more knowledge-based. Part of that is offering more data analytics, taking the data that we have and the data that’s coming from hospitals and patient care to help us design better studies. The key is going to be getting products to market faster and for less.
Stewart: A challenge is getting to the market quicker — and for less — while the FDA increases requirements and regulations.
Stafford: It did approve 30 products in 2011 versus 21 in 2010, which was a nice improvement to see.
Warrington: This industry is still showing strong double-digit growth. Other industries in this economy would pray for the growth that CROs have had. There’s no question this is a viable, healthy component of this state that we need to continue to nurture. I don’t see that changing. I see it getting better. All I wish and hope for is that North Carolina benefits from it, and I’m not even a politician.