Preclinical recovery: moves by private CROs may indicate tox recovery

A light at the end of the preclinical tunnel?

The higher demand for preclinical toxicity testing reported by public CROs last year may also be being seen by private firms if recent investments are any indication.

When the economic downturn that began in 2008 it hit contract research organisations (CROs) hard with – arguably – those providing preclinical development services suffering the most as cautious development sponsors shelved early phase R&D investment plans.

The slowdown was accompanied by falling revenues and wide ranging capacity cutbacks at most of the major services providers – Charles River Labs (CRL) and Covance being just two of the most notable examples.

In 2013, however, the tide started to turn. Both CRL and Covance showed modest gains in the first three quarters of the year – the former saw revenue growth of around 5% and the latter reported growth of its early development business for the first time in two years.

In October, CRL CEO James Foster told investors that demand from large and mid-tier biopharmaceutical clients – coupled with growing market share – had been key drivers for the gains the CRO had made. It also invested to build its presence in Asia, again citing recovering demand.

At the time ISI analyst Ross Muken said CRL’s preclinical services [PCS] business “benefitted from strategic relationships with global biopharma customers and market share gains, more study starts, and more specialty services.”

A month or so before that Covance reported that it had seen an uptick in its toxicity testing services business – driven in part by maturing strategic relationships – was proving to be a key driver for the firm.

Private gains?

But was the recovery seen by CRL and Covance specific to those firms and the result of established strategic partnerships or an indication of a more generalized recovery?

To be honest the jury is still out, but there is some evidence of hope, particularly among private preclinical CROs many have which have invested to add capacity, which is not something they have done since the economic downturn began.

In December Agilux and Harlan both said they would increase animal housing capacity citing a surge in demand. Similarly, Crown Bioscience partnered with Chinese academics to set up a research centre also citing increased demand.