How High Interest Rates Are Impacting Clinical Trial Investment

The DPHARM 2024 conference recently convened a panel of industry leaders to discuss the alignment of innovations to address the significant challenges in clinical trials, particularly within a resource-constrained environment. The panel, moderated by Nick Slack, Chairman and CEO of The START Center, included representatives from major pharmaceutical companies, CROs, and investment firms. They provided a comprehensive overview of the current landscape, highlighting the economic influences, operational adjustments, regulatory challenges, digital transformation, site and patient dynamics, and clinical trial investment perspectives shaping the future of clinical trials.

Economic Influences on Clinical Trials

The panel discussion opened with an analysis of the macroeconomic factors impacting the pharmaceutical industry, particularly the clinical trials sector. Nick Slack presented data showing a clear correlation between interest rates and clinical trial activity. He explained that during periods of low interest rates, such as in 2021, the industry saw a surge in clinical trial initiations due to the availability of cheap capital, which encouraged pharmaceutical companies to invest heavily in research and development. However, as interest rates rose, the cost of borrowing increased, prompting a strategic shift in resource allocation within the industry. This economic shift has led to significant job cuts and operational changes, with companies like Bristol-Myers Squibb and Novartis announcing large-scale layoffs as part of broader austerity strategies. These measures aim to optimize operations and focus on high-priority projects that promise the most significant returns, reflecting a broader industry-wide reprioritization towards assets that deliver substantial value and growth for patient outcomes and investor returns.

Operational Adjustments and Innovations

Andy Lee from Merck & Co. shared insights into how his organization is adapting to economic pressures by enhancing operational efficiency. He described the current environment as chaotic and disruptive, influenced by external factors like geopolitical tensions and internal regulatory changes. Lee emphasized the importance of productivity, noting that Merck has been challenged to “bend the curve” by finding operational efficiencies. This involves a dual strategy of ceasing unproductive activities and embracing innovative, patient-centric approaches. Lee elaborated on Merck’s operational scale, highlighting that the company runs approximately 300 clinical trials annually, involving around 100,000 patients. Merck uses its tools and systems to manage this vast operation efficiently, allowing for greater control and predictability. He noted that 95% of their project milestones are delivered on time, emphasizing the importance of quality and efficiency in their processes. While no single innovation has drastically reduced cycle times by 30%, a series of small, incremental improvements can collectively lead to significant operational gains.

Peyton Howell, CEO of Parexel, added to the discussion by highlighting the diverse landscape of sponsors they work with, ranging from large pharmaceutical companies to smaller biotech firms. She noted that while the industry has faced challenges, particularly in the biotech sector, there is still growth in the pipeline. Howell emphasized the need for a more measured and disciplined approach to clinical trials, advocating for creative solutions that push traditional boundaries. She stressed that achieving efficiency requires doing things differently, such as exploring new sites and country mixes and being open to innovative methodologies. Howell pointed out that despite the challenges, the industry is seeing growth, with good work continuing to receive funding. However, she cautioned that there is a need for more accountability in delivering on time and with innovation, which is why the conference’s focus on innovation is so timely and relevant.

Regulatory Challenges and Clinical Trial Investment Needs

Bari Kowal from Regeneron Pharmaceuticals addressed the regulatory challenges that add layers of complexity to clinical trial operations. She pointed out that new regulations, such as those related to data privacy and medical device reporting, create significant churn in companies’ operations. Kowal emphasized the importance of engaging with regulators to influence the development of these regulations rather than being passively affected by them. By participating in regulatory discussions, companies can help shape policies more conducive to efficient clinical trial operations. Kowal also discussed the necessity of upfront clinical trial investment in technology and automation to drive transformative changes. She explained that while incremental improvements are valuable, they often do not lead to substantial changes in output. Instead, Regeneron focuses on transformative initiatives, such as streamlining data collection processes through EHR to EDC connections. This approach aims to reduce costs and speed up trial processes by improving data accuracy and reducing the administrative burden on clinical sites.

Kowal elaborated on the need for strategic clinical trial investment to adapt to the evolving regulatory landscape. She noted that while adding more resources may not always be feasible, investing in technology and process improvements can lead to significant long-term benefits. Regeneron is prioritizing clinical trial investment that have the potential to move the needle from an automation and technology perspective, focusing on initiatives that can bring about dramatic changes rather than just incremental improvements. Kowal highlighted that one of their primary focus areas is EHR to EDC integration, which can streamline data collection, improve organizational efficiency, and ultimately benefit both sites and patients. By investing in such transformative technologies, Regeneron aims to enhance the speed and cost-effectiveness of its clinical trials, positioning itself for success in a rapidly changing industry.

The Role of Digital Transformation

Shoibal Datta from Takeda provided a perspective on the role of digital transformation in clinical trials. He noted that the traditional clinical trial model is resource-intensive and prone to errors, making it ripe for disruption. Datta parallels the healthcare industry, transitioning from manual processes to more automated, technology-mediated practices. He suggested that similar changes are taking hold in the clinical trials sector, driven by the need for greater efficiency and accuracy. Datta emphasized that digital transformation requires financial clinical trial investment and a workforce equipped with the necessary skills to implement these changes. He highlighted the importance of building a team that can leverage digital tools effectively, ensuring that the transition to more automated processes is smooth and successful. This shift towards digital solutions is seen as a critical step in overcoming the limitations of traditional clinical trial models and achieving significant improvements in trial efficiency and outcomes.

Datta further explained that integrating digital technologies into clinical trials can lead to more streamlined and efficient processes. He pointed out that digital tools can help reduce the reliance on manual data entry and improve data accuracy, ultimately leading to faster and more reliable trial results. However, he cautioned that the success of digital transformation depends on the ability to adapt to new technologies and the willingness to invest in the necessary infrastructure and training. Datta stressed that while the initial clinical trial investment may be significant, the long-term benefits of digital transformation can be substantial, offering a competitive advantage in an increasingly complex and competitive industry. By embracing digital solutions, companies can improve their operational efficiency and enhance the quality and reliability of their clinical trials.

Site and Patient Dynamics

Jim Murphy, CEO of Greenphire, provided insights into clinical trial sites’ financial pressures. He explained that many sites operate with limited capital, often having only six months of operating funds available. This financial constraint is exacerbated by a significant portion of payments to sites being delayed beyond 90 days. Murphy noted that this situation creates a challenging environment for sites that face increased administrative burdens due to more complex trial logistics. Murphy highlighted that patient recruitment has become more complex over the years, with the average distance traveled by participants to reach a trial site increasing by 40% in the last six years. This trend places additional logistical and financial pressures on sites, as they must facilitate travel and other arrangements for participants. Murphy concluded that sites are experiencing a resource-constrained environment, with financial and operational bottlenecks that must be addressed to ensure the sustainability of clinical trial operations.

Murphy elaborated on the challenges sites face, noting that the increased complexity of clinical trials has led to a greater administrative burden on site staff. He explained that site coordinators are often responsible for managing logistics and ensuring that participants can attend trial visits, which can be time-consuming and resource-intensive. Murphy emphasized the importance of supporting sites with the tools and resources to manage these challenges effectively. He suggested that streamlining administrative processes and improving payment systems could help alleviate some of the financial pressures sites face, allowing them to focus more on patient care and trial execution. By addressing these bottlenecks, the industry can help ensure that sites remain viable and capable of supporting the growing demand for clinical trials.

Clinical Trial Investment Perspectives

Zachary Sigal from LLR Partners offered an investor’s viewpoint on the current market dynamics. He noted that companies increasingly seek technologies that drive operational efficiency and reduce the complexity of managing multiple technology relationships. Sigal observed a trend toward platform solutions that streamline processes and provide comprehensive support for clinical trial operations. Sigal explained that his firm is focused on identifying companies that can offer innovative solutions to the challenges faced by the industry. These companies are expected to address operational inefficiencies and deliver value to investors. He emphasized the importance of partnering with customers to develop new ways of conducting trials and leveraging technology to achieve better outcomes. This approach aligns with the broader industry trend of seeking integrated solutions that enhance efficiency and reduce costs.

Sigal further discussed the role of private equity in driving innovation within the clinical trials sector. He noted that investors increasingly seek opportunities to support companies that can offer scalable solutions to the industry’s most pressing challenges. Investing in companies that provide integrated platform solutions can help drive the adoption of new technologies and processes that improve trial efficiency and outcomes. Sigal highlighted that the focus on platforms reflects a growing recognition of the need for comprehensive solutions to address multiple aspects of clinical trial operations, from data management to patient engagement. By supporting companies that offer these solutions, investors can play a crucial role in advancing the industry’s ability to conduct efficient and effective clinical trials.

In conclusion, the DPHARM 2024 panel provided a comprehensive overview of the challenges and opportunities faced by the clinical trials industry. The discussion highlighted the need for strategic clinical trial investment, regulatory engagement, and digital transformation to drive innovation and efficiency. As the industry evolves, collaboration among stakeholders will be essential to overcoming resource constraints and significantly improving clinical trial operations. The insights shared at the conference highlight the importance of embracing new technologies and methodologies to ensure the future success of clinical trials.