Silicon Valley Targets CRO Industry For Market Disruption

By Louis Garguilo, Chief Editor, Outsourced Pharma

The techies in Silicon Valley are at it again. This time it’s the contract research industry targeted for disruption.

The disruption is of the inefficient way researchers throughout the industry search and contract for drug discovery services. The means is a new application of an existing solution, as is often the case with technology, and for that matter, science. In fact, this time the technologists are in with the scientists. Together they’re challenging both the drug discovery industry, from researchers at Big Pharma to those in academic settings, and the inefficiencies of Internet search, including the likes of Google.

Pharma, biotechs, CROs and academic labs have started signing up for the Science Exchange. “We now look at the Science Exchange as the best way of finding new outsourcing opportunities with collaborators and CROs,” says James Lillie, VP In Vitro Biology, Genzyme. “We’re shifting more of our efforts for new outsourcing contracts there.”

Will other research sponsors and CROs lose out on new opportunities if they don’t, too?

It’s Not Your Parents’ Portal, Or CRO Market

Web-based portals and “exchanges” connecting buyers and sellers is old hat, both in specific industries and broad consumer application. Think NASDAQ, Amazon, eBay. But the tools of our modern age seem to stop at the water’s edge – the search function – for drug research and discovery services. And that search process has proven inefficient: Researchers say they dislike the cumbersome way of searching for a CRO or academic lab each time they need to outsource a new assay or have an experiment run by experts. Employers – pharma, bio, academia – appreciate even less the resultant negotiations and contracting, project-related document generation, and PO processing that needs to happen before any work can get done.

Necessity was the mother of invention, and Silicon Valley the land of funding. Based on her idea to make it easier to conduct quality science for individual researchers, their organizations, and service-providers, Science Exchange has already raised north of $10 million from angel and other investors. Iorns established the company in May of 2011, with two co-founders, Dan Knox and Ryan Abbott, who supplied the software and hardware engineering knowhow.

The company gained near immediate notoriety by taking on a key role in the Reproducibility Initiative, a program for lab validation of reproducible research from important experiments found in the science literature. Lillie of Genzyme says, “We initially started working with Elizabeth because of the publicity around the Reproducibility Initiative’s attempts to replicate experiment in important areas such as oncology research. All companies look to published literature for new ideas, and she provided a better way to try and reproduce some experiments for Genzyme.”

Today, Science Exchange says it “exceeds the research capacity of Covance and Charles River Labs combined, making it the largest platform for preclinical outsourcing services in the world.”

The aforementioned Charles River, Harvard Medical School, Sigma Life Science, and WuXi are examples of organizations already providing services through the exchange. Iorns says the list on the pharma and biotech side is as impressive … and growing. Currently, transactional volume is about 70 percent scientists from industry (pharma/bio), and 30 percent researchers for academia and various government entities (including the NIH). Sounds like a good mix of potential customers for most any CRO.

According to Austin Jelcick, product manager at Cyagen Biosciences, a biotech specializing in murine model generation, DNA vector construction and viral packaging services, a key to the early popularity of Science Exchange is also the facilitation of contracts and regulatory requirements.

“We joined recently and already brought in just under $100,000 in revenue, a good start for a smaller company,” says Jelcick. “But more important to the entire outsourcing industry, the Science Exchange platform streamlines regulatory and bureaucratic items, such as product licensures, MTAs [material transfer agreements], IP and confidentiality agreements. After signing up with Science Exchange that entire chunk of time is cut out for both service provider and researcher. Projects start quicker and deliverables get out faster.”

Additionally, according to Iorns, some pharma and service providers utilize the Science Exchange as a clearinghouse for contracts. “We serve as a payment processor for both sides. For the CROs, this is preferable to having individual researchers contacting them, trying to get them set up as an accepted or preferred vendor, and then agreeing to terms and conditions. For pharma, we’re an easy way to process POs. If CROs want to work with these pharma companies, they need to be set up in Science Exchange.”

An Offer CROs Can Refuse?

We’ll dig deeper into specifics in a second article, but what appears immediately evident is this platform “to order experiments from the world's best labs” is both favorable to the outsourcing industry, and also a bit frightening.

Favorable is the facilitation of search, contact and contract for research services, from both the scientific and business sides of the industry. “Science Exchange brings the best practices that have been applied in nearly all other technology marketplaces,” says Iorns, speaking with me from her headquarters in Palo Alto. “We’ve solved the logistical challenges of managing and outsourcing to service providers.”

The fear stems from what might become an imperative more than an option. I asked Lillie of Genzyme whether he would start to exclude CROs or potential collaborators not in the Science Exchange?

“It wouldn’t go that far,” he replies, “but when I talk to a CRO about a contract, or a collaborator about an MTA, I recommend we consider the advantages of doing that through the Science Exchange. It isn’t a requirement, but it has the potential to make everyone’s life easier.” He adds, “If we can identify a new quality provider via Science Exchange, instead of signing them up ourselves, then that’s my preference.”

And Jelcick of Cyagen has this to say from the CRO side: “Our competitors wouldn’t necessarily be at a disadvantage one way or the other, because if it makes sense to them, they can always be a part of the exchange.”

Why wouldn’t it “make sense” to either side of the equation? What might an exchange, where the costs associated for many of the services are openly listed, do for pricing and CRO profitability? How does Science Exchange make its money? Is the exchange scalable, and viable for larger outsourcing programs, for example medicinal chemistry projects and FTE models? What about document and network security, from hackers or even firewall mishaps? We’ll tackle all of this – including returning to some thoughts on Google – when we continue our discussion with CEO Iorns in a following article.