In March of this year, Josef von Rickenbach, chairman and chief executive officer of PAREXEL International was honored by the Massachusetts Biotechnology Council (MassBio) with the fifth Henri Termeer Innovative Leadership Award. We spoke about the award, the decades-long evolution — and perception — of CROs in the industry, the shift to digital processes and how his company has prepared for it, the benefits of strategic partnerships, and the Godot-like wait for biosimilars in the U.S. Mr. von Rickenbach will also participate in next issue’s CRO Overview, but he offers his “state of the industry” perspective here.

—GYR

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Contract Pharma: Congratulations on winning the Henri Termeer Innovative Leadership award from the Massachusetts Biotechnology Council!
Josef von Rickenbach: Thank you! I was pleased to receive this award from MassBio. Even though I accepted it personally, it’s really a testimony to the company we have built. That success has many parents.

As you noted, it’s an innovation award, and we’ve brought new thinking to drug development and the pharma/biopharma industry, whether that’s through investments in new technology, the systems and approaches that we’ve brought to the table, the automation of processes, and the way we’ve driven globalization over many decades. In combination, those were likely the factors that swayed the MassBio committee.

CP: I noticed that the previous winners of the award came from pharma and biopharma — EMD Serono, Cubist, Millennium and Vertex — not a CRO. What do you think that says about how these organizations view the future of drug development?
JVR: I think it signifies that they feel we — as a company and as an industry — have grown important in the biopharmaceutical development environment.

I recently read a quote about the adoption of new ideas: “A new idea in the beginning gets ridiculed, and then fought, and then everybody had it all along.” I think we’re now in that third stage. For a lot of the people who are now in drug development, working with CROs is totally normal, and they can’t imagine that we went through those first two stages.

CP: What was necessary to get through those early stages?
JVR: In some ways, we were making our own market. Of course, there was a confluence of trends that helped us get our message across. For one thing, there was increasing cost pressure on the industry. Prior to 1984’s passage of the Hatch-Waxman bill, there wasn’t really much competition (in the traditional sense) in the pharma space. Once that bill came into play and ushered in small molecule generics, things changed.

It’s not a coincidence that the founding of the major CROs matches almost entirely with that year. Once competition started to bite, people became more concerned with cost of development, productivity and so on. Over time, from our perspective, we contributed credibility and respect for work.

In the beginning, there was a lot of concern about CROs. Both domestically and overseas, we had an ambiguous legal status. In the U.S., CROs were not considered in regulations for a long time. In Japan, it was actually illegal (or, at least, you could interpret the statutes that way) to work as a CRO. But regulations adapted and we became embedded as a fact of life.

So it was a confluence of market trends among clients, regulatory flexibility, and also our ability to perform.

CP: Where is PAREXEL looking to grow?
JVR: We believe that our core business — clinical research outsourcing — still has significant legs. We’ll continue to vigorously pursue that opportunity.

Over the timeframe that we just talked about, there were two main trends playing out: outsourcing of clinical research, and a move from manual processes to digital processes.

That latter trend, digital enablement, is still playing out, and it may be a bit behind the first trend. That provides a growth opportunity for us, through our Perceptive Informatics subsidiary.

Also, most of the industry’s IP has migrated to small companies. As those small companies are increasingly taking their IP up through the development value chain, they need advice and resources to accomplish their goals. We’re very good partners with them. We do a lot of work with large pharma companies, but we set up a specific biopharm unit that works predominantly with these small companies.

I think the MassBio council members, who largely constitute that segment, really appreciate that resource.

CP: How does that manual-to-digital transition inform PAREXEL’s acquisition of Liquent late last year?
JVR: Liquent was a very good fit for us. They have a system that guides regulatory experts in the filing of documents with various agencies around the world. The regulations are updated on a continuous basis. For an RA professional, this is a great tool. We used the system ourselves in the past, so we had significant familiarity with the company and the system, and saw how it could fit with our existing informatics products and offerings.

Liquent was a standalone company, and it can be difficult to cover the world and the various market segments from that position. So it helps them and it helps us.

CP: What are your growth regions?
JVR: We still see emerging markets as areas of opportunity, notably Asia. China remains a big opportunity for us and the whole industry. At the end of the day, we go where our clients want us to go. Asia may not be growing as rapidly as it was a few years ago, but these economies are still growing rapidly relative to developed markets. It creates opportunities both inter-regionally, and globally.

There is not a pharma/biopharma company with products on the market that is not trying to establish a foothold in Asia. We can certainly help with that.

Also, domestically in Japan, the penetration of outsourcing is not nearly as high as it is in the west. In some ways, that’s a market in which we can develop.

CP: Where do you see biosimilars going? From our past conversations, I know PAREXEL historically saw them as a significant market driver, but we’re still in a holding pattern in the U.S., waiting for someone to move forward and file.
JVR: I think that’s just it. Conceptually, it’s a big opportunity for everybody, not least the healthcare system, as it would help with costs. At the same time, there’s still an ambiguous regulatory situation. As a result, a number of companies have started to move into more of a wait-and-see mode, rather than moving forward aggressively and ambitiously, as they planned to do two or three years ago.

I think some companies were surprised with the current interpretation of the regulations, in terms of how expensive it will be to get to market with a biosimilar. I really expected that more progress would have been made by now.

CP: How are preferred provider CRO relationships working out, now that we’re a few years into them?
JVR: These partnerships are proving to be a better approach to pharma’s development problems than the previous, transactional system. A number of CROs are trying to position themselves to be more attractive as potential partners.

The old system was somewhat wasteful. It had a lot of empty runs, so to speak. Five or six companies would bid on a
project, and one would get the work while the others fell by the wayside. Every time you bid, it involved a significant effort and expense. Eventually, that expense has to be rolled over.

Certainly, there was a learning curve to working so closely with a client. We’ve specifically built governance models and metrics allowing us to capture what we learn and apply those lessons later in the partnership. It’s an environment of continuous improvement. That’s an important part of a successful partnership, and not just a preferred provider arrangement.

CP: Can you give us your state-of-the-industry perspective?
JVR: I think the biopharma industry has a bit of a bounce in its collective step. The number of drug approvals in 2012 was helpful. Many were from small companies and were clinically high-priority products. Is this a new trend or benchmark? Who knows? One year doesn’t make a trend, but it was well received and couldn’t have come at a better time. If we see another year or two near this level, we might see a re-acceleration of investment in R&D, which would be great.

The fortunes of the CRO industry are tied very closely to the biopharma industry. With that in mind, I believe that we have been successful because we offer good, economical solutions to our clients. We expect the broad outsourcing trend to continue, with growth in Asia and other non-U.S. areas.

If you look at the CRO industry, a major privately held competitor is planning to go public again, so they’ve weathered their private equity period reasonably well. You hear mixed stories of other private companies, but I expect that some CROs are going to re-emerge as publicly held, leading players.

CP: Do you think we’ll see any more major consolidation among CROs?
JVR: It’s difficult to call. We haven’t been particularly acquisitive in terms of buying other CROs similar to ourselves. We feel we have scale, scope and reach. I believe that life has changed for many of the smaller and medium-sized CROs. I wouldn’t be surprised if we see some more consolidation over time, although I think the bulk of those moves have already occurred. 

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Biographical Note
As chairman and chief executive officer of PAREXEL, Josef von Rickenbach has taken PAREXEL from its pioneering beginnings as one of the first CROs in the early 1980s to its place as one of the top three public biopharma services providers. He led PAREXEL through its IPO, multiple public offerings, and more than 35 mergers and acquisitions during the company’s 30-year history, expanding its portfolio in order to meet changing client needs and market demand. Mr. von Rickenbach is the 2013 chairman of the Association of Clinical Research Organizations (ACRO) and is one of the original members of the ACRO Board of Directors.