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By Lauren Adams, CFA | 11-05-2010 05:13 PM

Going Global to Ease Drug Trial Process

Contract research organization Parexel is exploiting its global footprint to rapidly enroll patients in drug studies.

Lauren Migliore: Contract research organization, Parexel is a leading provider of outsourced research and development services to pharmaceutical and biotechnology companies. We're pleased to welcome the firm's CFO, Jim Winschel to speak with us today about the competitive dynamics in the drug development industry. Thanks for joining us, Jim.

Jim Winschel: Sure, Lauren. Good to be here.

Migliore: Well, let's start off with an overview of the industry. Can you talk about some of the advantages that CROs offer over traditional in-house development?

Winschel: Sure. Well, over the last several years, what we've seen is that productivity of the pharmaceutical companies themselves have decreased. Spending has substantially increased over that period of time, and the number of approved drugs coming out at the other end has diminished.

What we find is that the CROs have become over the last 10 or 15 years very process-oriented in their effective organizations and experts really in running clinical trials. We give these pharma companies a great efficiency of being able to run the trials on that basis.

Now, when you think about it, if you're running a trial and the drug fails for some reasons, maybe for reasons of efficacy or for drug safety, the pharma company would then have to cancel that trial.

Well, if they are trying to manage their own personnel and their cost, they have to be very nimble to try to replace the work that that particular group was doing with additional work. Whereas in the CROs, since we are doing work for all of the top pharmaceutical companies, all of the top biotechnology companies and hundreds of other companies around the world, we have a lot more flexibility to move the resources around and address the various needs.

Parexel has been following a strategy to be a global company over the last 20 years, and this is really paying off for us right now, because the real important reason for being a global company is access to patients.

If you are trying to run an oncology study, here in the U.S. for example, it's going to take you longer to enroll patients it's going to be much more expensive. But if you are willing to run that trial in Eastern Europe or Asia Pacific or South America or South Africa, you have huge advantage there in terms of being able to rapidly enroll patients in your study. Now, in the Far East there are huge markets for the drugs, when they do get approved and the fact that you've run the trials there, can real be beneficial to you.

Migliore: Kind of going off that thought, the clinical outsourcing industry is still very fragmented with hundreds of providers offering a range of different drug development services. So, what advantages as you were saying do global CROs like Parexel have over their smaller competitors?

Winschel: So, the smaller competitors have a real struggle when they try to bid on a global trial because the way they do it is to partner up with maybe somebody in Europe, somebody else in Asia, maybe somebody else in South America and the pharma companies really dislike this approach.

So, the fact that they can come to us as sort of one-stop-shop, we have responsibility for running the trial for all of the resources. If there is a problem they know exactly who to come to. In the other model, as things start to go wrong, fingers get pointed in a variety of different directions. So, I think it's very beneficial from that standpoint.

I think a large number of the sort of mid-sized CROs right now are really struggling, almost desperate in some ways to try to stay afloat. I wouldn't be surprised if we saw a number of the mid-sized companies merge together to try to be a bigger force as we go forward.

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