09.01.2009

On the crest of the middle tier Chiltern has strengthened its global footprint through acquisitions, collaboration and geographical expansion. And in parallel with the rest of the outsourcing sector, the company is also bene ting from pharma’s current drive for cost-containment, CEO Glenn Kerkhof tells Caroline Richards

Q. In the past year, Chiltern has opened new offices in Portugal, Russia and Argentina. What are the benefits of having a presence in these countries?  

Chiltern now has 23 of ces in 14 countries, with employees in over 23 countries. We are continually reviewing our portfolio of geographical operations and thinking about how we can better serve our sponsors with them. By extending our reach in a controlled and sustainable way we can access new investigators, study participants and potential markets on behalf of sponsors, as well as providing them with individual staff members should they choose that option.
Russia is an important and emerging pharmaceutical market. And for us Argentina represents a gateway to all of Latin America — now that we have established operations in the region we expect to see a lot of growth in coming years. The Portugal office was established after having operated in that country successfully for some years with eldbased staff.
We were also excited to announce in June 2008 our collaboration with a large Asian CRO, EPS International, giving us experienced and effective access to several markets in Asia. Our Indian operations are growing strongly and we may well see further of ces established on the Indian subcontinent too.

Q. Do you think expanding in emerging economies, such as China and India, is important to a CRO in today’s competitive global market?  

Yes. Chiltern’s Indian operations, based in Mumbai, have quickly become an important axis for the company. Not only is there a large supply of investigators and study participants, but there is also tremendous expertise available.
We recognise the clear importance of the Chinese market, but have not established direct operations there yet. Instead we have opted, as I’ve just mentioned, to access the long experience and solid track record of EPS International in that country.
It’s worth noting that India and China have yet to make a major mark on the global clinical research landscape; there are fewer than 1,000 trials ongoing in these countries out of 62,000 being performed globally. Nevertheless, having recognised the huge potential of both regions, our strategy is to expand operations in each country in line with market growth.

Q. What motivated Chiltern to purchase the Scottish Phase I clinical trials unit Drug Development Solutions (DSS)?  

At a strategic level we wanted to expand and strengthen our Phase I offering. With the DDS purchase we can now offer complementary services from Dundee, Scotland and our 30-bed unit in Slough, just outside London. The units now share the same leadership and operate in an entirely integrated way.
In particular, we were attracted to the 42-bed Dundee unit because it is one of the few Phase I units in the UK located at a large teaching hospital. This was a strong draw for us in light of UK regulator the MHRA’s requirements for GCP accreditation for rst-in-man trials, which indicated that more pharma and biotech trials will need to be hospital-based. We also felt the return to a more predictable and ef cient regulatory environment once again made the UK an attractive place to conduct Phase I studies. And recent falls in the value of the pound against the US dollar certainly reinforce that view.
The Dundee unit comes with an expert, dedicated and stable workforce and a reputation for doing quality work that has been built since it was established in 1982. It has niche expertise in phototoxicity studies in humans, which few units can perform, so that also attracted us to the business. We are very pleased to have been able to build our Early Phase brand in this way.

Q. Do you intend to make any further acquisitions?  

We do not see ourselves as a highly acquisitive company. We are attracted to pursuing organic growth as much as possible, but will consider acquisition where this strategy cannot allow us the access our sponsors require to geography, scale, expertise or technology. Where we do make an acquisition we place great emphasis on successful integration and building a single ‘Chiltern’ identity.

Q. Do you welcome the MHRA’s Phase I accreditation scheme which came into effect recently?  

Yes and no. It is important that the accreditation system establishes a “gold standard” for Phase I within the UK, applicable to all sectors of clinical research (NHS, charities and industry) alike. However, in order to further improve the UK’s position of  rst-in-man studies from a global perspective, the regulatory review process for investigational products manufactured outside the EU needs to be more commercially realistic. The industry has addressed this issue with the MHRA.

Q. Do you think any improvements are needed in the regulatory infrastructure governing the world’s major markets?  

We believe the European and US regulatory environments are suf cient to provide a safe and ethical forum for the development of investigational medicinal products. However, variations between national territories call for experienced handling of the pan-European regulatory arena in order to ensure that assessment time, multiple standards of care and cultural evaluation of protocols meet clients’ expectations.
The US FDA has strengthened its position regarding post-marketing commitments by sponsor companies. We believe there is a need for the EMEA and the European Community also to critically evaluate and provide formalised guidance in this area. Our clients are proactive and are really pressing forward with commitments. But the legislators in Europe are less equipped to deal with that on a pan-European basis at present.

Q. How is Chiltern’s client work broken down by therapy area and clinical phase?  

We work across a wide range of therapeutic areas, our largest being oncology, which makes up about 20% of what we do. Respiratory, CNS and cardiovascular trials make up around 15% each and infectious diseases around 10%. We also have a strong presence in ophthalmology, although that is a relatively small area of research. To support these efforts we have established ve specialist therapeutic area teams, with a sixth, devoted to cardiovascular, in preparation. The teams look at study feasibility to ensure superior country and site selection, develop training templates for use by our project teams and develop deeper relationships with our clients and sites aligned to a particular therapeutic area.
The Early Phase business presently brings in around 5% of our revenues, Global Clinical Development around 48%, Biometrics 14%, Resourcing Solutions 24% and Late Phase around 5%. The remainder is regulatory affairs work.
We always keep sponsor requirements for study expertise under review and respond as required; paediatric expertise, for example, is a developing area. Building further areas of therapeutic strength remains a priority for us.

Q. Why would a company choose to outsource its clinical research to you?  

We have a good geographic network, strong expertise, highly controlled process, modern systems, well trained people and a hands on, ‘can-do’ attitude. We are continually thinking about what we can do better and have a variety of different models available which would suit all clients’ needs. There is a real sense of enthusiasm in the company as we continue to develop. I think sponsors recognise and appreciate these features and reward us with their trust.

Q. Do you have any long-standing strategic client partnerships at the moment?  

We have a number of successful and collaborative long-term relationships, but it’s really been over the past two years that we have seen more partnerships of the sort you refer to. While a lot of outsourcing continues to be done on a tactical basis, we have entered into several strategic outsourcing partnerships and are seeing these relationships move in two different directions.
One direction is partnering where we run all or part of a pipeline of trials. These trials may be managed and staffed exclusively by Chiltern staff or may be a hybrid approach where we manage aspects of the trial and provide staff to pharma af liates, via our Resourcing Solutions group, to support projects.
The other form of partnering that we’ve seen is functional service provider outsourcing (or FSP) partnering, ie, Chiltern running and staf ng internal departments or supporting a service within sponsor companies. For us, this has taken the form of running a European pharmacovigilance team for a large pharma player, running a global EDC implementation team for two large pharma companies or wholesale staf ng of clinical development departments.
Clearly many companies in the pharma sector are facing R&D cost pressures and drug development challenges, driving the current trend for outsourcing and cost-containment. It’s also clear that the CRO sector, in supporting its pharma clients, is bene ting from that and we’ve been a player in this space.

Q. What were Chiltern’s main successes of 2008?  

Our major successes have been the acquisition and integration of CTMS in North America, which has transformed Chiltern into a more global CRO. The US now delivers around 30% of our revenue base, helping us a great deal from a strategic perspective. Another major success of 2008 has been our EDC platform partnerships with both ClinPhone [now Parexel] and Medidata. More than 70% of our studies are now going into an EDC platform; we see this as a tremendous success.
Other highlights have been the integration of DDS to strengthen our Early Phase brand and I think what we’ve seen overall is validation of the globalisation and the focus of Chiltern in servicing our clients’ needs. We’ve seen signi cant revenue growth of around 25% and a very signi cant increase in sales, so we have con dence in our model moving forward.

Q. What are your longer-term ambitions for the company?  

Although we’re not seeking to be the largest CRO in the world, we’d like to stay at the top of the middle tier and continue to grow in a sustainable and successful manner. And we will do that through a combination of organic growth and acquisition, but in the longer term we are really intent on continuing to build stronger client relationships and making Chiltern a successful and great place to work for our people.

Q. How has the credit crunch affected your business and the CRO sector in general?  

There has been considerable discussion recently about the impact of the tightening of the capital markets on biotech VC funding, pharma pipelines and ultimately on outsourcing to the pharmaceutical services sector. In short, we have not seen any impact to date either in terms of cancellations or a slowdown in new business volumes.
The CRO sector appears to be growing at a steady rate and has bene ted from costcontainment initiatives and the drive to outsource from within the pharma sector. I would expect this to increase over the next few years. However, I don’t believe any sector is bullet-proof in tough times and we will certainly watch how this plays out with great interest.
With respect to consolidation, there has been a drive to globalise CRO services with a focus on expanding our therapeutic expertise, our global reach and the quality of our service. Additionally, with further consolidation within the pharma and biotech sector this will inevitably lead to consolidation within the CRO sector. We intend to be a player in this space and will, of course, consider all strategic alternatives necessary to improve our position in this busy arena.

.                                                                                                    Caroline Richards is a reporter for Scrip

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