The research, by David Windley at Jefferies & Co, makes worrying reading for early-phase services firms which had, as recently as May, started to see demand pick up after the slump that began with the global economic downturn in 2008.
“A couple of recent calls in early development reinforce a slow, choppy progression. Order volumes may have paused around mid-year,” said Windley, adding that “large pharma is deferring expensive work in multiple areas of early development until proof of concept is achieved.”
This chimes with comments made by US contract research organisation (CRO) Charles River Laboratories (CRL) earlier this summer when it said that it had seen a greater proportion of shorter-term studies in its sales mix.
Covance too said it had experienced a number of ‘false starts’ in the recovery of its toxicology services business.
Another reason for the change in toxicology order volumes is that some pharmaceutical sponsors have been slow to receive supplies of candidate compounds which, Windley suggested, may be due to an increased reliance on Asian chemistry and manufacturing providers.
Pricing, possibly as a result of the stop start nature of the market, has remained stable since May. Windley said that: “Competition has waned somewhat. Through labs continue the occasional deep discounting of studies, those are rare.”
Strategic toxicology deals
Another observation Windley makes, based on a number of recent conference calls, is that Big Pharma cost cutting and a desire for supplier stability is making it increasingly likely that early-phase focused ‘strategic deals’ are in the offing for Big CROs.
“To repeat the positive commentary that came from our recent CRL meeting…some large pharma clients have shut down capacity and moved to outsource more work,” he explained, adding that the CRO’s management believes it is on the cusp of signing big deals.
“A current trend in business flows is the desire to bundle more work – in vivo safety with bioanalytical and other lab (work).”
This idea also fits with CRL’s decision, announced yesterday, to combine its drug discovery research models and preclinical toxicology services businesses into two region units.