Ahmedabad, Aug 23, 2010: In a freewheeling interview with BioSpectrum, Dr Stephen Cutler,Senior Vice President and Chief Operating Officer, Kendle, throws light on the company's APAC strategy and the crucial role the region will have to play in their overall global strategy

How favorable is the CRO market environment in India, especially for a global CRO like Kendle?

 India has a favorable environment  to conduct clinical trials, with a large number of previously untreated patients in a wide array of therapeutic areas and excellent regulatory processes for clinical trial approvals. Previously untreated patients are particularly attractive to both researchers and regulators alike because questions of drug interactions or interference from previous treatments are eliminated.  Additionally, there is a strong medical infrastructure in India, with approximately 14,000 hospitals, more than 160 medical schools and roughly 600,000 physicians. This provides a strong foundation for conducting clinical trials. 

India, to date, does not allow first-in-man studies. Has this been a hurdle for Kendle in terms of getting trials into India, especially when a sponsor wants to do studies beginning with phase I?
 
No.  As a large, global full-service CRO, Kendle has early stage facilities in other countries and is able to locate those portions of clinical development programs outside India. Our business in India focuses on the larger scale phase II-IV studies, and the support of global trials through knowledge-processing services. Our global footprint and expertise provide us the flexibility to place studies or portions of studies where they are most beneficial to our customers. 

Will Kendle expand in an organic or inorganic way in the Asia-Pacific region? Can you throw light on some of the ongoing investments here? 

In addition to India, Kendle currently operates in Singapore, Thailand, the Philippines, Malaysia and Australia, and maintains multiple facilities in China, all of which we expect to grow. We will be opportunistic in terms of acquisitions in these countries, but organic growth remains the most likely scenario. Moving forward, we will look at places like South Korea, Vietnam and Taiwan as we believe these countries have a strong potential for supporting clinical trials.  In terms of our functional services, India and China remain the countries of focus.  

How is Kendle tackling the rising competition in the CRO market especially in a high growth market like India?

We have been successful globally in developing early and late-stage full-service partnerships as well as functional service provider relationships in key areas like  clinical data management, medical writing, safety, biostatistics and more, all of which drive demand for services in India. A key factor contributing to our success in the Asia/Pacific region is the SEZ operations center in Gandhinagar, (Gujarat), India, which increases our functional service offerings in the region.  We will continue to expand our capacity and capabilities in the region to meet customer expectations.    

There is a sea of change happening in the life sciences industry which includes patent cliffs and a spree of mergers and acquisitions. How will that affect Kendle's business?

With continued pressure from patent cliffs, escalating regulatory concerns and the current financial markets, we believe customers will continue to make near- and mid-term moves on many fronts in order to adjust to the environment. Customers continue to right-size their global R&D workforces as well, a complex and time-consuming process that directly impacts the volume of work outsourced to CROs.  Although we believe this right sizing will ultimately lead to increased outsourcing, the process is slow and the near-term effect is a decrease in opportunities.  Mergers and acquisitions also have taken focus away from R&D, and slowed partnering and outsourcing decisions while business strategies are consolidated.  We believe strategic partnerships will play an important role moving forward, but these relationships will not be settled and producing predictable revenue streams for some time.

In the long term, we expect CROs to see stronger opportunities to partner with biopharmaceutical companies, driving increased innovation and efficiency.  By 2015, some analysts believe the CRO market will once again experience growth rates in excess of 8 percent, driven by outsourcing penetration rates of as much as 40 percent or more.  In the interim, we will continue to execute against our global growth plan, strengthening our global infrastructure for the delivery of cost-effective clinical trial solutions anywhere in the world.

The CRO industry as a whole faced tough times with a recession followed by drop in R&D investments, pricing pressures and high attrition rates. Do you see a recovery now?

We see signs of recovery but there is still volatility in the market.   Although there has been improvement in recent months we are not expecting a full recovery until well into 2011 or early 2012.  We expect to see incremental progress across the industry as a result of increased outsourcing but this progress is likely to be punctuated by dips in performance based on merger and acquisition activity and inter-customer partnering within our customer base.  Despite the ongoing fluctuations in the industry, we recognize the need to continue with our growth plan, expanding our global capacity and capabilities to better serve customers worldwide.