“Pharming out” R&D could be a risky move

Outsourcing usually provides a better service at a lower cost. But for pharmaceuticals companies, farming out their research function is a risky move.

According to a 2/22 column in the Financial Times, an outsourcing strategy leaves companies at the mercy of the secondary market as it assumes a ready supply of quality drugs is available from bio-tech companies. The output of these smaller research houses, though, is cyclical and the number of people who can finance them is limited. Few of the researchers among the 11,000 staff jettisoned by GSK and AstraZeneca this year are capable of launching their own companies.

What’s more, the FT writer adds, large pharmaceuticals companies will be loath to enter into a bidding war for the successful ones, especially when a looming patent cliff makes cash flow uncertain.

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