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Derek Lowe The 2002 Model

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Derek Lowe, an Arkansan by birth, got his BA from Hendrix College and his PhD in organic chemistry from Duke before spending time in Germany on a Humboldt Fellowship on his post-doc. He's worked for several major pharmaceutical companies since 1989 on drug discovery projects against schizophrenia, Alzheimer's, diabetes, osteoporosis and other diseases. To contact Derek email him directly: Twitter: Dereklowe

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April 21, 2005

The Globalization of Med-Chem

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Posted by Derek

Over the last ten or fifteen years, there seems to have been a real boom in contract synthesis companies. These are small outfits, many of them, anyway, that will make intermediates for you. Send 'em your synthetic route, how much final compound you need, and when you need it by, and they'll send you back a quote. (I also write a column for the trade magazine Contract Pharma, which covers this and the other outsourcing possibilities of the industry.)

This comes in handy when you want to keep your own people busy making new analogs, not diverted to making batches of competitor or reference compounds. And the price you pay for these is often a good deal compared to the price you'd pay to make it in house. (For one thing, the outsourcing company probably doesn't pay its people as much.)

That trend has been reaching its logical conclusion recently, with the entry of suppliers from India and China. Man, are these guys cheap. In many cases, they can underbid pretty much anyone here in the US, and they often do very good work (after all, there's plenty of well-trained scientific labor coming from both of those countries.)

It's gotten to the point that I don't see how the standard make-your-compounds-sir? contract houses are going to stay in business over here. Many of them have already been branching out, looking for some unusual type of chemistry to specialize in (nasty halogenations, high-pressure reactions) or getting into FDA-quality manufacturing for clinical trials, which is something that the Indian and Chinese companies can't yet provide - I think. Others are offering to do medicinal chemistry on an outsourcing basis: Let us develop your lead series! Structure-activity relationships while-u-wait!

Naturally, my nightmare is that that part of the business takes off and becomes a big moneymaker for the US firms. . .at which point it migrates to China and to India. I'm not sure that this is going to happen, or how long it would take, but I can't completely rule it out, either. An awful lot of other technical heavy lifting has migrated over there already, and I'm having trouble coming up with arguments about how we're immune. Perhaps it would do us all good, here in the US-based Big Pharma labs, to find some useful med-chem skills that would be harder to outsource. . .

Comments (10) + TrackBacks (0) | Category: Business and Markets | Drug Development


1. notNpharma on April 22, 2005 12:47 AM writes...

The "outsourcing" scenario for med chem is awfully hard to ignore. Of course, there's the "nuclear option" for outsourcing, which would be for Pfizer/GSK/Novartis, etc. to just up and buy shops like Dr. Reddy's and others - that would only delay the inevitable. Some say that big pharma cos will soon turn into huge development and marketing powerhouses with little in-house discovery stuff done. I think it's too early to say that, but the trend is somewhat worrisome.

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2. PacRim Jim on April 22, 2005 1:52 PM writes...

China plus India graduate something on the order of an order of magnitude more engineers than the U.S. That, coupled with the Internet and their respect for education, is bound to make them formidable competitors. Personally, when I'm 70 and potentially fatal diseases threaten, I won't care who developed a treatement/cure. It would be unfortunate, however, to live in an impoverished America. Perhaps poverty will be salubrious, however, and result in increased respect for education.

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3. patentobserver on April 22, 2005 2:23 PM writes...

The rate of outsourcing to China is artifically accelerated by that government's policy of fixing their currency exchange rate to the dollar. Sooner or later that "win-win" scenario will change. Asian labor is not intrinsically cheaper, and it only appears plentiful at the moment. On the other hand, I would begin to worry however when US students begin choosing Asian universities as the postdoc destinations of choice, much as Europeans choose the US today.

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4. Lexo on April 27, 2005 5:36 PM writes...

Asia is accumulating capital fast, and FDA-grade chem is around the corner there. It is already a reality in Central Europe, where the peg-to-Euro raises the perceived costs - but once the Euro starts drifting down back to a $1 level, they'll be there, with techs who don't expect to make $45K out of the gate (and in some places in the USA, even that seems puny to raise a family on).
But it's destiny. And, when viewed from outside the G7 cocoon, it's even a positive phenomenon.

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5. simon on April 27, 2005 10:03 PM writes...

The pharma industry is well on its way to being outsourced ... everyone knows that scientists are a cost ... the lower the better ...

The real value is in management ... every body knows that it is the executives who create value by the excellent decisions they make ...

The question is what value can current scientist capture beyond their wages ...

The system will reduce costs but I do not think we will drmatically acclerate development of new drugs ... the rate limits are NOT set by discovery but clinical trial ...

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6. Reuben on April 29, 2005 2:30 AM writes...

The real reason drug discovery is expensive in the west are the outrageous overheads incurred in big pharma by their operating management and marketing sharks. (hey dont tell me you are paying your synthetic and medicinal chemists a million bucks a year!)So you guys underpay your scientists and overpay the magmt. scums. Along come Asian firms, which operate on a reality based financial scale and guess what? Your mgmt. bosses are busy buying a product for what they construe as cost effective. Outsourcing the entire process of DD is a reality and points to US pharma's merely becoming expensive marketing firms. Oh, by the way, wait till India and China start their full service DD firms, you can kiss the top 30 bloated, uncreative, stagnant pharma goodbye!

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7. Tom Bartlett on May 2, 2005 4:22 PM writes...

I've used overseas contract labs. The quality is ABYSMAL. You get what you pay for. Still, the off-shoring trend is worrisome. I think long-term, we have to get more kids into science; keep our universities best-in-the-world, and make it easy for the best-and-the brightest of foreign grad students to stay here. Remember, Einstein was an immigrant. And Von Braun.

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8. The Novice Chemist on May 2, 2005 9:48 PM writes...

Hi, Tom Bartlett: could you describe (leaving out proprietary details, of course) what you mean by abysmal quality? Just curious as to what's the standard, etc. How does it compare to a domestic contract lab facility?

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9. Tom Bartlett on May 3, 2005 11:12 AM writes...

Just call me a long-time Med Chemist.

We tried a few contract labs, and we found turnaround time to be very slow, and level of expertise of the chemists doing the work to be very low. Also, the pricing structure was not as good as it looked on paper-- manpower may have been cheap, but they took so long it was no bargain.

I speculate that GOOD Chinese/Indian Chemists come over here to the US and STAY. At least right now they do.

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10. Derek Lowe on May 3, 2005 1:13 PM writes...

My experience with these outfits hasn't been as bad - the material was fine, as was the delivery date. For a time-sensitive job, we'd probably source a US supplier, though.

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