Icon seeks longer partnerships to avoid three-year deal probs

21-Mar-2012 - Last updated on 21-Mar-2012 at 14:38 GMT

Icon wants longer contracts with partners after finding three-year deals can be “a little problematic”, its president said.

Pursuit of longer-term deals is based on the experiences of Icon and other CROs (contract research organisations) involved in big clinical outsourcing deals. Many of the deals run for three years but CROs have found it takes half that time for the relationship to settle down and drive solid sales.

“Three year deals can be a little problematic”, Steve Cutler, group president, clinical research services at Icon, told Outsourcing-Pharma. Cutler wants five to ten-year deals which fit better with the time taken to run late phase trials and, in theory, allow CROs to take a more forward thinking approach.

Mark Goldberg, chief operating officer at Parexel, also said he would prefer longer deals. Both CROs have upcoming chances to push for longer-term contracts. In June 2013 the three-year deal with one of the clients shared by both CROs, Bristol-Myers Squibb, is due to expire.

Having longer-term deals should give Icon stability as it enters a period Cutler said “will be critical in defining our industry”. As well as trying to extend deals, Cutler wants Icon to be “more assertive” in pushing outsourcing penetration up towards 60 per cent from its current level of around 40 per cent.

Sponsors are also looking to gain an edge in renegotiations though. In July David Windley, equity analyst at Jefferies & Company, said sponsors will try to “extract a fresh pound of flesh” in pricing renegotiations. Windley also said three-year deals are “borderline unreasonable”.

Threat and opportunity

The possibility for more or less favourable deal terms is one reason Cutler said contract renewals are a “threat and opportunity” for Icon. The other reason is the possibility of winning new deals, or losing a contract all together.

Biopharma firms have had “good, bad, and indifferent experiences” with their partners, Cutler said, and will adjust their outsourcing strategies based on what they have learnt about models and CROs.

“We’re seeing some sponsors look to add one or two CRO partners”, Cutler said. Others are looking at making more significant changes to their outsourcing strategies, Cutler said, but major changes could disrupt research programmes.

Windley said the risk of trial disruption means sponsors are unlikely to make big changes “unless the incumbent really falters” but this “certainly can, and is happening”. In these cases other CROs are poised to snatch business.