Biotechs go virtual

Outsourcing the early stages of R&D is a growing trend among young biotech firms in the UK, a new report reveals. Researchers at Cass Business School in London tracked 68 university and public service laboratory spin-outs as part of a larger Engineering and Physical Sciences Research Council (EPSRC) project on high-tech business organization. The study reveals that up to one-third of these firms have embraced an innovative 'virtual biotech' business model to help reduce the time taken to reach clinical trials and build up a pipeline of early stage products. According to Dzidziso Samuel Kamuriwo, the report's author, this business model has flourished among fledgling biotechs thanks to a combination of local policies that favor the industrialization of public science, multiple sources of funding and high-quality science conducted in public labs. The advantages of going 'virtual' include flexibility and few or no capital costs, which help slow cash burn (Nat. Biotechnol. 27, 886–888, 2009). Companies that adopt this virtual approach tend to outsource R&D to their founding institutions or to specialist service firms and are dependent on strong project management to succeed. The virtual model works best across several therapeutic areas, while the integrated model—keeping everything in house—thrives on fewer areas. In the long run, Kamuriwo points out, integrated companies are more likely to succeed, but after experiencing the short-term gains of the virtual approach, companies find it hard to change their organization model.


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Aldridge, S. Biotechs go virtual. Nat Biotechnol 28, 189 (2010).

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