Aim of the Paper The aim of our study is to better understand the role of Contract Research Organizations in the innovation system of the biopharmaceutical field. Background Literature Since the seminal works of Coase (1937) and Williamson (2010), Hierarchy and Market have been conceptualized as the two basic opposite alternatives to organize economic transactions. Many structural factors play a role in the choice of one of the two (and between intermediate options) governance modes of economic transactions. Of course changes in these structural factors may pushing towards the change of the dominant model in a specific industry. Among the others, change in risk/rewards structure (Knight, 1921) arising from new technology development may force incumbents to re-engineering the organization of their R&D process in favor of a more decentralized system. That move can be seen as an entrepreneurial opportunity for some specific kind on new entrepreneurial venture. Life Science Industry is a very interesting field to analyse such dynamics: companies evolved from a vertically integrated to a network organization, with a gradual opening up to collaborations with external partners. Strategic alliances allowed biopharmaceutical firms to gain access to innovative technology platforms and to share the risks related to a new medicinal product. The high costs of R&D phases, the low success rates for candidate drugs, the reduced proprietary drug portfolio, together with the strict regulation on safety and efficacy for drug approval, represented the main drivers of industry to the open innovation challenge. The Contract Research Organization (CRO) industry supports the pharmaceutical and biotechnology companies with high profile outsourced services in the development of a product for diagnostic or therapeutic purposes. CROs provide companies with the opportunity to rapidly and efficiently explore the innovative findings of life science research by reduced transaction costs, an accelerated time to market and a global development. A growing market demand is recorded of CROs, that can cooperate with companies in order to create greater value and improve the competitiveness on the market. Methodology The landscape of Italian CROs mirrors the evolution of the contract research organization at the international level, with the presence of multinational CROs, able to follow the full process of product development, as well as many local CROs, which are mainly specialized in few or niche services. In this study we investigated the business models adopted by the CROs in Italy, by using the database of CROs registered for clinical trials in the recent report of the Italian Medicines Agency. This representative sample was analysed by the email submission to each CRO of ten questions survey, related to the general characteristics of the individual CRO, the activities and the resources, the clients/partners and perspectives of the CRO. Based on the survey results, a first profiling of Italian CROs could be traced, implemented by qualitative and quantitative data analysis. Results and Implications The study results were very interesting and allowed us to draw the role of CROs in Italy by the strategies adopted in the new open biopharmaceutical system. The CROs resulted to cover many important market segments in the value chain of the drug development process, with a wide range of services in outsourcing or partnering from the applied research in the early phase of development to the marketing consulting, together with the management of a digital platform: flexibility, know-how and entrepreneurial abilities were the main features of the CRO. It was interesting to find out through our analysis that CROs over time developed different business models to meet the needs of all stakeholders, while keeping constant a core value: to ensure an efficient support, in terms of tactics and strategy, to the biopharmaceutical industry. The innovative value has been preserved by CRO thanks to the implementation of resources, skills, clients/partners, technology infrastructure, as well as the operational and financial aspects of the specialized services. In the reference market, the CRO revealed as a key resource for the biopharmaceutical industry.

Structural change in Industry as entrepreneurial opportunity: the rise of CRO in Life Science

PARENTE, Roberto;
2014

Abstract

Aim of the Paper The aim of our study is to better understand the role of Contract Research Organizations in the innovation system of the biopharmaceutical field. Background Literature Since the seminal works of Coase (1937) and Williamson (2010), Hierarchy and Market have been conceptualized as the two basic opposite alternatives to organize economic transactions. Many structural factors play a role in the choice of one of the two (and between intermediate options) governance modes of economic transactions. Of course changes in these structural factors may pushing towards the change of the dominant model in a specific industry. Among the others, change in risk/rewards structure (Knight, 1921) arising from new technology development may force incumbents to re-engineering the organization of their R&D process in favor of a more decentralized system. That move can be seen as an entrepreneurial opportunity for some specific kind on new entrepreneurial venture. Life Science Industry is a very interesting field to analyse such dynamics: companies evolved from a vertically integrated to a network organization, with a gradual opening up to collaborations with external partners. Strategic alliances allowed biopharmaceutical firms to gain access to innovative technology platforms and to share the risks related to a new medicinal product. The high costs of R&D phases, the low success rates for candidate drugs, the reduced proprietary drug portfolio, together with the strict regulation on safety and efficacy for drug approval, represented the main drivers of industry to the open innovation challenge. The Contract Research Organization (CRO) industry supports the pharmaceutical and biotechnology companies with high profile outsourced services in the development of a product for diagnostic or therapeutic purposes. CROs provide companies with the opportunity to rapidly and efficiently explore the innovative findings of life science research by reduced transaction costs, an accelerated time to market and a global development. A growing market demand is recorded of CROs, that can cooperate with companies in order to create greater value and improve the competitiveness on the market. Methodology The landscape of Italian CROs mirrors the evolution of the contract research organization at the international level, with the presence of multinational CROs, able to follow the full process of product development, as well as many local CROs, which are mainly specialized in few or niche services. In this study we investigated the business models adopted by the CROs in Italy, by using the database of CROs registered for clinical trials in the recent report of the Italian Medicines Agency. This representative sample was analysed by the email submission to each CRO of ten questions survey, related to the general characteristics of the individual CRO, the activities and the resources, the clients/partners and perspectives of the CRO. Based on the survey results, a first profiling of Italian CROs could be traced, implemented by qualitative and quantitative data analysis. Results and Implications The study results were very interesting and allowed us to draw the role of CROs in Italy by the strategies adopted in the new open biopharmaceutical system. The CROs resulted to cover many important market segments in the value chain of the drug development process, with a wide range of services in outsourcing or partnering from the applied research in the early phase of development to the marketing consulting, together with the management of a digital platform: flexibility, know-how and entrepreneurial abilities were the main features of the CRO. It was interesting to find out through our analysis that CROs over time developed different business models to meet the needs of all stakeholders, while keeping constant a core value: to ensure an efficient support, in terms of tactics and strategy, to the biopharmaceutical industry. The innovative value has been preserved by CRO thanks to the implementation of resources, skills, clients/partners, technology infrastructure, as well as the operational and financial aspects of the specialized services. In the reference market, the CRO revealed as a key resource for the biopharmaceutical industry.
978-1-900454-57-5
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Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/11386/4501058
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