Could cheap CRO rates threaten to destabilise biotech?

Back in the early 1990s, the arrival of high throughput synthesis and screening raised several questions in drug development organisations. How big will the increasing demand be? And how variable would it be? The answer to managing these uncertainties was to create a flexible, external supply chain. At around the same time, a sector of small biotech companies began to emerge, which began to supply drug candidates to fill big pharma pipelines. While it’s interesting to think about what came first, it’s now evolved into a mutually dependant ecosystem. But how robust is this ecosystem?

Today, partly due to the growth of contract research organisations (CROs), a significant proportion of big pharma pipelines derive from small biotech companies – an estimated two-thirds of all new drugs produced in 2022, according to a report by the CRO IQVIA Most of these charge for their drug discovery work using full time equivalent (FTE) rates – the charge for one person working 100% on a project for a year, pro-rated for the actual time used. This type of costing model means that the CRO will get paid irrespective of whether it ultimately succeeds.