Pipeline growth & price rises encouraging signs for CROs

Close to half of respondents, from biopharm of all sizes, expect the number of active development projects at their firm to increase in 2011. Cuts to biopharm budgets raised fears that pipeline growth, and work for contract research organisations (CRO), will stall, but the survey suggests otherwise.

John Kreger, equity analyst at William Blair, said: “Budget cuts may be more geared toward reducing infrastructure and internal resources rather than decreasing the number of projects in the research and development pipeline​.” US-based investment firm William Blair commissioned the survey.

Mid-sized biopharm companies were most optimistic about pipeline growth. An increase in funded projects is expected by 63 per cent of mid-sized companies, with close to one-quarter of these firms predicting more than 10 per cent growth in their pipelines.

Increasingly positive mid-sized biopharm partly offset the more pessimistic outlook of their larger and smaller peers. About two-fifths of respondents from each sector expect year-on-year pipeline growth, a decline compared to the survey William Blair commissioned earlier in the year.

Biotech clients going, going…​

Optimism at small biopharm companies may have been dented by tumbling financial markets. Since July financial markets have fallen sharply and this could have a detrimental impact on biotech funds.

“We view biotechnology funding as the biggest risk to this favourable outlook, with funding up year-over-year in each of the last three quarters but down sequentially in the third quarter​”, Kreger said.

In the third quarter venture funds across all industries raised $1.72bn (€1.26bn), less than any period since 2003, according to data from the National Venture Capital Association​ (NVCA) and Thomson Reuters. Food and Drug Administration (FDA) hurdles are reportedly deterring biotech investment​.

Positive pricing​

The survey provided further evidence that some biopharm companies are paying more for services. Close to half of respondents said outsourcing prices have increased over the past year. The finding adds support to the RW Baird survey Outsourcing-Pharma​ reported on last month​.

“We are encouraged that, consistent with recent channel checks and commentary from key industry players, our survey data suggests the pricing environment is stable to slightly increasing​”, Kreger said.

Unlike the RW Baird survey, which singled out rises at large pharma, the William Blair results showed consistent price increases across all company sizes. The outliers were more mid-sized biopharm reporting up to five per cent increases and small firms saying costs rose more than 10 per cent.