What are the business models of pharmaceutical R&D outsourcing organizations?

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 Pharmaceutical R&D outsourcing CRO refers to pharmaceutical companies using the purchase of new drug clinical or preclinical research and other services from a third party, and the contractor is responsible for the work tasks of drug development trials and declaration of registration within the scope of the contract, mainly serving the stage of new drug launch and before. 

The pressure of new drug R&D has led to the rise of new drug R&D outsourcing services and has also driven the global CRO industry to take off. Consistency evaluation of generic drugs, self-checking and verification of drug clinical trials, and acceleration of drug trials are driving the domestic CRO market to the 100 billion level.

The current high cost of pharmaceutical R&D, the reduced success rate of R&D, and massive patent expiration have prompted pharmaceutical companies to be more eager to improve the efficiency and speed of R&D, which has accelerated the development of the specialized division of labor, accelerated the increase of CRO penetration rate and accelerated the development of CRO industry. As a CRO company, Medicilon Biopharma is a comprehensive technical service platform in China that integrates compound synthesis, compound activity screening, structural biology, pharmacodynamic evaluation, pharmacogenetic evaluation, and toxicological evaluation in line with international standards.

CRO exists in four business models currently.

1, the traditional model: refers to the transaction between CRO enterprises and pharmaceutical companies for one-time marketing of the preliminary order contract model, That is, the "one hand to pay, one hand to deliver" model. Due to the lack of R&D strength and poor risk tolerance, most CRO companies adopt the traditional model in the early establishment stage. Under this business model, CRO companies take low risks and have low returns.

2, Innovative model: A model in which pharmaceutical companies pay CROs a proportional amount according to their progress. An innovative business model requires pharmaceutical companies and CRO companies to set "milestones jointly," After each "milestone," pharmaceutical companies will pay CRO companies a certain amount of service fees.

3, Results-oriented model: CRO companies can get an excess bonus if they complete the project, and the revenue will be reduced if the project is delayed. Under the result-oriented model, CRO and pharmaceutical companies share certain risks and benefits. Pharmaceutical companies will have more patent terms and increase revenue if the project is completed early. Cros will get more project revenue, and vice versa.

4, Risk-sharing model: The pharmaceutical companies will hand over the project to CRO enterprises, and the latter will be responsible for the design and implementation of the project. Under the risk-sharing model, CRO companies share the risks and benefits with pharmaceutical companies, and CRO companies take the initiative to take risks and share more returns. Under the new risk-sharing model, CROs can participate more deeply in new drug R&D projects, share the risks with pharmaceutical companies, and get more lucrative returns.

Currently, CROs in the domestic market is divided into three levels of the ladder. The strongest at the top are the domestic branches of large multinational CROs, with muscular R&D strength and financial strength, which can carry out international multi-center trials; followed by large local CROs, represented by Medicilon, WuXi AppTec, Tigermed, Boji, etc., which are familiar with the domestic market and can provide most preclinical and clinical trial They are familiar with the domestic market and can provide most of the preclinical and clinical trial services; the most significant number and the lowest barrier to entry are small and medium-sized local CROs, which are of mixed quality, many of which mainly provide low-technology-intensive work such as registration filing, with poor profitability and easy to fall into the disorderly competition, but CROs with the standardized operation will survive and grow in the fierce competition.

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