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Outsourcing Toxicology

Having published a new report on the outsourcing of toxicology and animal pharmacology, Graham Hughes, Editor of EPC, discusses the findings relating to the size and structure of this complex market

Toxicology is the study of the dynamic interaction of chemicals with living systems. It is also a backbone to the science of numerous industries and regulatory agencies – from those involved with the development and regulation of food additives to those involved with the use and remediation of hazardous chemicals. The report deals principally with the use of toxicology and its closely allied topic of animal pharmacology, especially in pharmaceuticals (1).

The toxicity testing of chemicals and pharmaceuticals has been outsourced since government regulations required testing. In general, chemical companies did not have the internal resources or the expertise to conduct these studies themselves, and so outsourced to universities as well as governmental and independent laboratories. The pharmaceutical industry was slower to outsource toxicology and in the latter part of the 20th century most, if not all, companies maintained large internal toxicology departments. With the increasing quality and professionalism of the CROs, an increasing number of companies have outsourced substantial parts of their requirements, and in some cases have closed internal departments or spun them off as independent companies. This trend continues today.

The market place is currently dominated by 20 to 30 large players with revenues of $20 million to over $500 million. Twenty of these companies are listed in Table 1. Companies have outsourced their preclinical needs for longer than any of their other activities in pharmaceutical development and we expect this outsourcing trend to continue. Although the market is now dominated by the requirements of the pharmaceutical and biotechnology industries, there are significant outsourcing needs from the veterinary, cosmetic and toiletries, food, agrochemical and chemical industries.

 Table 1: Top 20 companies in the global preclinical and toxicology market
 Advinus (India)       Laboratory of Pharmacology and Toxicology  (Germany)  
 Accelera (Italy)  Maccine (Singapore)
 Aptuit (US)  MPI (US)
 Charles River (Edinburgh)  NOTOX (Netherlands)
 CIT (France)  Quotient BioResearch (UK)
 Covance (US)  Ricerca (US)
 Harlan (US) (including SafePharm (UK) and RCC (Switzerland))  Sequani (UK)
 LSR (Huntingdon)  TNO (Netherlands)
 ITR (Canada)  WIL (US)

 LAB Research (including ScanTox (Denmark)
 and TRC (Hungary))

 WuXi (China)

However, it is estimated that the pharmaceutical and biotechnology industries currently amount to 70 to 80 per cent of the market. Some CROs of course, concentrate their marketing on one sector and may have a percentage of their business involved in another sector. Since companies do not publish their breakdown of figures, it is not possible to give an accurate breakdown of the business.

Over 200 CROs offer services in the areas of toxicology and animal pharmacology. The regional breakdowns are shown in Table 2 and country breakdowns are shown in Figure 1.

 Table 2: Regional breakdowns of CROs offering
 toxicology and animal pharmacology services
 North America            65

 Rest of the World      84

  • Eastern Europe 15
  • Latin America    17
  • Asia                   52
 Western Europe        86

The growth in the number of European companies has virtually stopped (see Figure 2). This is not to say that new CROs are not being formed, but the rate of formation seems equal to the rate of disappearance. This is usually because the companies are acquired by one of the major players. The situation is mirrored in the US, where there has been significant merger and acquisition activity over recent years (2).

In general, CROs are privately owned and this is also true of preclinical CROs. Of the leading 20, only Charles River, Covance, LAB, LSR and WuXi are publicly quoted. The remaining companies are privately owned with the exception of TNO, which is a governmentally owned institution. In fact, there are a number of similar not-for-profit companies in the US, such as SRI, Battelle, Southern Research Institute, Research Triangle Institute, Western Research Institute and Midwest Research Institute, which have substantial departments devoted to preclinical projects. Many of these projects are for US government agencies such as the FDA, Occupational Safety and Health Administration (OSHA) and Environmental Protection Agency (EPA). The remaining 200 or so CROs are all private and often guard their revenue figures jealously. In fact, demographic data from preclinical and toxicology companies are often difficult to obtain, not least because the companies fear publicity owing to the activities of animal rights activists.

A similar group of institutes exists in Europe including organisations such as INSERM France, Karolinska Institutet in Sweden, Fraunhofer Institut in Germany, as well as many small special institutes such as the UK’s Institute of Food Research. The European Institutes tend to be less commercially-orientated than their US not-for-profit counterparts.

All of the above means that the estimation of the total market size in the preclinical and toxicology market is a formidable task, and one that is likely to be prone to error.

From annual reports, employee figures and other data, it is estimated that the total revenue from the aforementioned companies is about $2.8 billion. In the clinical area, and the CRO area as a whole, it has been previously noted that the leading 20 companies represent about 65 per cent of the total market. With the volume of independent, relatively large not-for-profit institutes, especially in the US, this figure for the leading 20 companies would sit nearer 60 per cent. Thus an approximate estimate of the total market is $4.7 billion.

Going forward, the most significant non-pharmaceutical industry is likely to be the chemical industry. This is due to the REACH legislation that has been enacted recently by the EU. REACH is a European Community Regulation on chemicals and their safe use (EC 1907/2006) that came into force on 1st June 2007. It deals with the registration, evaluation, authorisation and restriction of chemical substances.

The aim of REACH is to improve the protection of human health and the environment through the better and earlier identification of the intrinsic properties of chemical substances. At the same time, innovative capability and competitiveness of the EU chemicals industry should be enhanced. The benefits of the REACH system will come gradually, as more substances are phased into REACH and as the regulation’s provisions are extended incrementally over the next 11 years. Companies can find explanations of REACH on the ECHA website, in particular in the guidance documents, and can contact national help desks.

The Royal Society of Chemistry has recently reported as follows (3):

“The number of substances pre-registered for the EU’s REACH chemicals legislation hugely exceeded expectations, with 2.7 million pre-registrations for more than 140,000 substances logged by the 2008 deadline, instead of the predicted 180,000 registrations for 29,000 substances.

Those original estimates were based on chemical production data for 1991 to 1994, and suggested a probable cost of around €1.6 billion (£1.4 billion) and use of around 2.6 million animals. However, changes to the final legislation (such as including reaction intermediates) and the significant increase in the number of EU member states since 1994 mean these figures could be some way off the mark.”

Thus the REACH legislation is predicted to add at least $14 billion in costs over the next 10 years, or $1.4 billion per year. This would increase the market by some 30 per cent.

Other noticeable trends include the increasing outsourcing of the more routine aspects of toxicology by the pharmaceutical industry – notably to developing countries, such as China and India. We also expect a slow development of non-animal testing methods, although the full implementation of a preclinical pharmaceutical dossier without in vivo animal testing looks far off. Thus the toxicology and animal pharmacology market is strong, even in these difficult economic times, and I confidently expect it to show strong growth in the next few years.

References

  1. Hughes RG and Barrett R, Toxicology and Pharmacology: Outsourcing, History, Process and Regulation; Technical, Political and Economic Challenges, published by BioPharm Knowledge Publications
  2. For more details of M&A transactions over recent years, see Hughes RG, Annual Reports on the Global CRO Industry 2005-2009, published by BioPharm Knowledge Publications
  3. www.rsc.org/chemistryworld/News/2009/August/27080901.asp

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Graham Hughes is a leading expert in the field of outsourcing in pharmaceutical development. He was the founder and Scientific Director of Technomark Consulting Services in 1987. Graham is Editor of European Pharmaceutical Contractor and International Clinical Trials. He is a frequent speaker and chairman at national and international conferences on outsourcing and drug development. He has also run numerous workshops on the selection and management of CROs. He has recently been Chairman of Auxetica, a UK-based medical device company, and is President of Aginko AG, a Swiss CRO specialising in musculo-skeletal medicine. He is currently a Director of Oxford Cardiac Pharmacology Ltd and Vice President of Technomark Life Sciences, which is based in the US.
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