The virtual model works for biotech, Big Pharma

The virtual model of drug development features a core management group that coordinates R&D activities, which are largely outsourced to other parties. The benefits include less overhead and faster clinical progress. But when the idea first surfaced in the 1990s, venture capital funding was plentiful and biotech wasn't under as much pressure to keep its operations lean and mean.

Funding has become less readily available in the last few years. Biotechs that were once encouraged to build fully-integrated companies are now doing what they can to keep costs down and make their dollars last as long as possible. That's led to wider adoption of the virtual model. And biotechs aren't facing those development pressures alone; Big Pharma is trying to get a handle on the ever-rising cost of developing new drugs. That's led companies like Eli Lilly to take a closer look at biotech's stripped-down model as a tool to cut their research budgets.

Lilly founded its Chorus division in 2002. The group, which includes 22 employees, moved deprioritized compounds from the preclinical through proof-of-concept trials. Of the 19 compounds the group has handled in the last five years, Seeking Alpha notes that nine of them have reached the proof-of-concept stage. Chorus has moved these drugs through development 1.5 years faster than industry average at just 10 percent of the cost. For Big Pharma and small biotechs alike, keeping fixed costs down while quickly moving potential drugs through development is one of the biggest challenges. And according to Seeking Alpha, that means the virtual model is here to stay. 

- check out the Seeking Alpha story