Pace of change in CRO industry increasing, says ISR

18-Apr-2016 - Last updated on 19-Apr-2016 at 13:00 GMT

There are several “moving parts” contributing to the CRO market. (Image: iStock)

More funding from capital investments and higher outsourcing levels are increasing the pace of change in the CRO industry, says ISR president.

“With above-average Wall Street returns, many CROs are looking to change their corporate structure,” Andrew Schafer, President of ISR, told Outsourcing-Pharma.com. “The pace of change in the CRO industry is increasing.”

According to Schafer and a recent report by ISR, with this change in pace, some companies may “test the public waters” or restructure ownership.

“From a fundamental standpoint, the industry is on solid footing,” he added. “Large and mid-size biopharmaceutical companies continue to streamline their internal processes and are looking to CROs to manage the ups and downs of their development pipelines.”

Additionally, 2016’s first quarter saw an increase in “already aggressive” levels of venture capital investments into small biotech companies, which was good for small and mid-size CROs that service this market sector.

“With the Dow Jones Industrial Average down around 10%, the vast majority of public CROs have added, some substantially, to their market capitalizations,” explained Schafer. Moving forward, ISR expects that the CRO market will increase at rates between around 6% and 8% annually through 2020.

This growth can be attributed to higher levels of outsourcing, and increased levels of funding for biotech products. ISR expects R&D to increase at around 5% annually for biologic products and to remain relatively flat for small molecule compounds for the same time period.

“We are seeing continued growth in the CRO sector and while some of that can be attributed to higher levels of outsourcing, we are seeing increased levels of funding for biotech products which is providing a very solid base of development projects moving forward,” added Schafer.

There are several “moving parts” contributing to the CRO market, explained Schafer, including biotech VC funding levels (both initial funding and follow-on), large pharma M&A activity, clinical trial technology trends (wearables, risk-based monitoring), CRO mergers/consolidation, and non-traditional entries into the CRO market.

Schafer explained that ISR be watching all of these factors “for signals as to which way the industry will move in the next few years.”