Quintiles filed an initial public offering (IPO) – which is expected to generate $600m (€450m) – last week, confirming months of rumours that the ‘world’s largest contract research organisation (CRO) planned to join the public markets.
Like all S-1 filings, Quintiles used the document to highlight its strengths – detailing a 10 per cent hike in service revenue to $3.7bn in 2012 and claiming involvement in the development of 50 of the world's top biopharma drugs - and this information has already been reiterated all over the internet.
What is of more interest, however, is the CRO's take on the future shape of the market. And it is largely positive.
R&D spending
Quintiles predicts that R&D spending will increase from the $135bn mark in 2012 to around $139bn by 2015, citing the drug industry’s need to replenish pipelines after patent loss and improving financial markets among the key drivers.
The US CRO also suggests that higher regulatory approval rates in key markets - the US Food and Drug Administration approved 39 NMEs in 2012 which is up on both 2010 and 2011 – will encourage R&D spending and benefit the CRO industry.
“We believe that further R&D spending, combined with the continued need for cost efficiency across the healthcare landscape, will create new opportunities for biopharmaceutical services companies, particularly those with a global reach, to help biopharmaceutical companies with their pre- and post-launch product development and commercialization needs.”
Short-term trends
So far, so standard the forecast, but Quintiles’ IPO goes beyond these oft quoted and widely held opinions and comes up with some figures covering the next few years.
“We estimate that clinical development spending outsourced to CROs in Phases I-IV in 2011 was approximately $16bn and will grow to approximately $22bn by 2015. We expect outsourced clinical development to CROs to grow 5%-8% annually during this period.”
Of this, Quintiles expects 2 per cent to come from increase drug industry R&D spending with the remainder coming from increased outsourcing penetration, which the CRO expects to grow significantly.
Long-term trends
For the longer term Quintiles predicts the need to improve late Phase research productivity coupled with the growing complexity of development – particularly the emergence of personalized medicine and companion diagnostics - will be the key market drivers.
“Based on the current and expected composition of the global drug development pipeline, we believe that spending on Phase II-IV clinical trials will increase at a faster rate than spending on preclinical research and early stage clinical trials.
“We believe that this increased spending and the demand for global patient recruitment will favour the limited number of biopharmaceutical services companies that have both the capabilities to administer large, complex global clinical trials and relationships with thought-leading investigators and trial sites around the world.”
Quintiles also suggests that the need to develop drugs locally to access emerging markets will also shape drug industry spending and therefore favour larger CROs with global reach.
“Understanding the epidimeological and physiological differences in different ethnic populations and being able to conduct trials locally in certain geographies will be important to pharmaceutical product growth strategies, both for multinational and local/regional biopharmaceutical companies.”