Profit from big pharma's outsourcing drive

Developing drugs is expensive and time-consuming. But by farming out research and testing to smaller specialists, big firms can relieve the pain and cost of bringing a drug to market. Eoin Gleeson investigates pharmaceutical support services, and picks the best bet in the sector.

Developing drugs is a tough business. It starts with a simple target a cell or protein implicated in a disease. Chemists spend months bombarding it with molecules in the lab, searching for a single promising chemical. If they find it, the chemical is usually far too costly for mass production. An age follows, as the chemical is doused with catalysts and reagents to find a way to make it cheaply. It then has to pass a battery of efficacy and safety trials before it reaches the drug authorities, who can bring a decade of work to an abrupt end in rejection only one in 5,000 putative drugs eventually succeed. No wonder the pace of drug discovery is slowing by the year.

But help is at hand. By farming out the tasks of research and testing drugs to specialists, big pharmaceutical firms have found a way to relieve the pain and expense of bringing a drug to market.

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Eoin came to MoneyWeek in 2006 having graduated with a MLitt in economics from Trinity College, Dublin. He taught economic history for two years at Trinity, while researching a thesis on how herd behaviour destroys financial markets.