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JULY 2014 47 LIFESCIENCELEADER.COM Indeed, academia has become the third key element of many companies' R&D; efforts. BIOLOGIC DRUG DISCOVERY BECOMING NEW FOCUS Biologic drugs, especially novel antibod- ies, have become as important a class of therapeutics as traditional small molecule drugs. That's why they have been steadily gaining share in the pipelines of major pharma companies. This has caused many companies to create dual-track drug dis- covery programs for both small molecules and biologics. To do so often requires two separate R&D; systems, each focusing on one field. Methodologically, biologic drug dis- covery research is operated just like that for small molecules. Compound librar- ies of antibodies, proteins, and peptides are in high demand. Similarly, antibody fragments that are smaller in size, but still antibodies by nature, are also being employed in biologic drug discovery research. However, in this area, the most advanced technologies are developed by specialty biotech companies. To a large extent, major pharma and biopharma companies currently rely on these compa- nies for the new technologies or for filling their pipelines. EMERGING COUNTRIES PLAY INCREASINGLY IMPORTANT ROLES, ESPECIALLY FOR SMALL MOLECULE DRUG DISCOVERY Until now, the most desirable technology in drug discovery research has been com- pound libraries with diverse structures. A Jim Zhang is president of JZMed, Inc., a market re- search f rm specializing in pharmaceutical outsourcing. This article is partially based on the f rm's latest re- search report "The New Trends of Global Drug Discovery Outsourcing." fragment-based lead discovery platform or high throughput screening of thou- sands of compounds against the select- ed therapeutic targets has still been the main approach. However, this type of R&D; work, especially the construction of small molecule compound libraries, has now been considered to be approaching matu- rity. Few drug companies large or small are now willing to assemble a large, inter- nal team of synthetic organic chemists to do it. The majority has, instead, been outsourced, including to low-cost emerg- ing countries. In recent years, emerging countries, in particular China and India, have been the main places for global drug companies to look for focused compound libraries of small molecules that possess diverse structural features. On the other hand, a number of ser- vice companies in emerging countries are now also able to offer integrated drug discovery research services. Multinational drug companies are thus expanding their discovery research outsourcing scope in these countries while strengthening their current relationships with local partners. FUTURE GROWTH POTENTIALS According to our research, in the past few years, the global drug discovery out- sourcing market has been growing at a CAGR of about 10.5 percent. Its cur- rent market size is estimated at $13B, accounting for close to 10 percent of the current total global drug R&D; spending. Of the total market value, the small mol- ecule drug discovery outsourcing service market accounts for about 87 percent, reaching about $11.25B. Between 2009 Forecasted future growth trend of global drug discovery outsourcing market Figure1 Small Molecules (%) Biologics (%) and 2012, its CAGR was around 11 per- cent. The current biologic drug discovery outsourcing market is estimated at only about $1.75 B, accounting for about 13 percent of the current total global mar- ket. However, its CAGR from 2009 to 2012 was about 37 percent. The current average outsourcing pen- etration of small molecule drug discovery research among major companies is esti- mated at 40 percent. The current average outsourcing penetration of biologic drug discovery research is, however, only about 15 percent. The overall average drug dis- covery research outsourcing penetration is about 30 percent at present. Driven by the strong desire of all drug companies to improve efficiencies and productivity in their R&D; efforts, the global drug discovery outsourcing market is expected to grow at a decent pace in the foreseeable future. We forecast that the global drug discovery outsourcing market will likely experience a CAGR of about 11.5 percent between 2013 and 2018, and its market value will likely reach close to $25B by 2018. By then, the overall indus- try-wide average outsourcing penetra- tion of drug discovery research will likely reach close to 49 percent. In other words, nearly half of the global drug discovery research will be performed by third par- ties by 2018. Of the total global market, the small molecule drug discovery outsourcing will likely account for about 3/4, reach- ing close to $19B by 2018. Whereas the biologic drug discovery outsourc- ing will likely account for about 1/4, reaching more than $6B by 2018 (Figure 1). l 2012 13 87 $13B 2018 24 76 $25B 0 7 1 4 _ C o n t r a c t _ S o u r c i n g . i n d d 2 0714_Contract_Sourcing.indd 2 6 / 2 0 / 2 0 1 4 1 : 0 1 : 1 7 P M 6/20/2014 1:01:17 PM