Contract Research Organization ( CRO ) Market Sector Overview
The top 10 CROs hold more than 50% of the market. This is expected to increase over the next few years in response to fluctuating R&D productivity, competition among the key CRO customer entities and expiring patents. By 2022, the worldwide CRO market is estimated to be worth $45 billion.
CRO Mergers and Acquisitions Leading To Consolidation In the Sector
A series of smaller scale acquisitions have been in play in the CRO sector during 2019 following a string of large scale deals that took place between 2015 and 2018. CROs of all sizes are seeking to bolt on other companies, not necessarily competitors, to diversify the types of services and healthcare industry sectors they can provide services in. Charles River bought MPI for $800 million in 2018. LabCorp. announced in July, 2017 it was acquiring Chiltern for approximately $1.2 billion. Parexel was acquired by Pamplona Capital Management (a private equity / financial investment company) in mid-2017; the deal was valued at approximately $5 billion.
In early May, '16 IMS Health extended an offer to acquire Quintiles for $9.2 billion. The new combined entity is comprised of 50,000 employees with exceptional healthcare data capabilities in commercial and clinical applications -plus enormous clinical research resources for pharma, device and other healthcare industry stakeholders. WuXi, China's largest CRO, went private in a $3.3 billion dollar deal in 2015.
CRO Capabilities and Services
An array of services is provided by contract research organizations. They vary on the size and scope of the CRO and typical industry sectors they service and where they may want to build or reduce their business focus and laboratory asset resources towards. CROs work in these and other areas of clinical and product research & development:
- Bio-analytical services and testing
- Cell and genetic chemistry
- Clinical research and study design consulting and management
- Competitive product analysis, bioequivalency testing
- Consumer, patient, medical professional complaint testing and evaluation
- Drug discovery and formulation modelling solutions
- Drug recall batch analysis and assistance
- Manufacturing quality control ( production startup, maintenance, complaint response or recall )
- Molecular imaging and radiochemistry
- Post-launch additional indication expansion studies
- Post-launch product surveillance and quality control evaluation
- Product development compiling and analysis of historical data
- Routine primary laboratory services
- Statistical data analysis and data management
CRO Business Trends And Demands Of Pharmaceutical And Medical Device Manufacturers Plus Regulators
- To reduce research & development costs, drug companies have outsourced greater portions of these functions to CROs to avoid inherent fixed costs of maintaining facilities and ongoing costs of compensating full time staff.
- The FDA is seeking deeper, more intricate data sets to base their approvals on, CROs have increased their clinical and analytical management resources to conduct more advanced, more introspective trials with better reporting.
- As pharmaceuticals become more complex (self-injectable therapies, biotech drugs, biosimilars, advanced oral agents) and medical devices more intricate, manufacturers are required to have more stringent production control processes in place, along with total quality assurance monitoring and advanced reporting, to meet approval standards.
- More companies are utilizing CROs in post-approval monitoring surveillance roles to satisfy FDA requirements, upping their game in ongoing quality control throughout the product lifecycle including variations in reported side effects, product quality and other measurable outcomes
- Pharma manufacturers are seeking the maximum number of indications for their molecules which enables them to get wider clearance for use by payers which generates more revenue; ongoing research drives these initiatives.
- As brand drugs go generic, brand manufacturers seek ways to develop variations of an existing brand formulation to develop a new product which will qualify for new patent exclusivity and provide a pathway for the older drug formulation's patients to be retained through migrating them to the new therapy
- Generic drug producers are continually expanding their portfolios of products and rely on their own as well as contract research organization laboratories to develop bonafide copies of brand formulations to market once their patents expire
- To bolster the foundation upon which to make clinical / promotional claims, drug companies are more closely scrutinizing data in earlier stages of development for positive attributes which lend themselves to more marketing applications, CROs are responding to this with more revealing data sets.
- Increasingly, CROs are being actively engaged by pharma for actual trial design advice and other consultation as the CRO's have substantial experience derived from developing an array of molecules in different therapeutic classes and monitoring their quality levels.
- "Personalized" treatment paths of oncology demand unique clinical trial design and monitoring. The individualized approach to oncology treatment drives exploration and innovation; it has the potential to revolutionize treatment protocols and achieve positive outcomes.
Clinical and Commercial Challenges for Contract Research Organizations
Clinical research organizations have enormous business demands on their plates now and more to come. The FDA deploys Compliance Program Guidance Manuals (CPGM) to manage its field operatives on the inspectional and investigational activities regarding CROs and other research stakeholders. Their bioresearch monitoring activities, policies and regulations ensure the protection of research subjects and the integrity of data submitted to the agency in support of a drug approval application or other approval and licensing requests. This is in addition to municipal, State, Federal and other government agency oversight to reinforce all necessary measures required for accurate data and clinical research best practices for prescription drugs and other medical products.
To be competitive, CROs need to be able to deliver more advanced means of analysis and monitoring while keeping up with increased regulatory requirements and the changing, higher level requirements of clients and the industry. The growing sophistication of therapies needed to treat more challenging conditions requires a research infrastructure that allows for complex analysis to be conducted at an accelerated pace. If a product is approved, there is frequently additional needs for post-approval surveillance and added indication exploration. These are revenue opportunities for CROs but they require additional organizational resources to execute.
Professional Experience and Facility Assets
Startup and established companies working with CROs are seeking those which have direct experience in the types of products they are developing. Some of the reasons for this include advisement in setting up clinical trials, experience in managing the process efficiently and having familiarity with the data sets required. Having staff and facilities at the ready is another important consideration as once a company decides to advance its testing and require more specialized and /. or larger scale clinical research support, they do not want to have to wait for a CRO to staff up or acquire equipment to conduct the research exercises. Much of this drills down to time and cost efficiencies. CROs are not inexpensive to work with and speed to discovery means accelerated time to market to achieve commercial success faster.
The Clinical Laboratory Improvement Amendments (CLIA) of 1988 are United States federal regulatory standards which apply to all clinical laboratory testing performed on humans in the United States with the exceptions of clinical trials and basic research. Clinical Laboratory Improvement Amendments (CLIA) regulate laboratory testing and require clinical laboratories to be certificated by their state as well as the Center for Medicare and Medicaid Services (CMS) before they can begin analysis operations of human samples for diagnosis. CLIA regulations set quality standards for laboratory testing performed on specimens from humans (blood, body fluid, tissue) for diagnosis, assessment of health, prevention and treatment of disease.
As the CRO marketplace consolidates, each potential client account becomes more valuable as their impact on business is larger based on win or loss --plus there are less opportunities to win business in their category to fill a gap as a result of client loss. The products CROs utilize can be as mundane as a pipette or as advanced as clinical diagnostic and other analytical instruments costing millions of dollars. For this reason pharmaceutical manufacturers, biotech companies and other healthcare product firms and medical research companies seek the support of CROs to work with them versus investing their own funds into capital equipment assets.
For diagnostic and analytical equipment manufacturers, the selling cycles can be long ( easily 6+ months or even more than 1 year ) and require the services of leasing companies or other financial support to secure equipment sales. Depending on the company, testing involved and host country, some CRO services can be transacted offshore however the vetting process must be rigorous to assure time efficient CRO vendor support, regulatory compliance and clinical / statistical accuracy can be established and maintained throughout the relationship.
Pharmaceutical and other chemical companies ( chemistry products, solutions, reagents, bioagents, etc.) must be able to consistently comply with CRO standards which includes specific batch lots, lengthy production expiration dating and other requirements. Any gaps in supply or errors in product batch selection, dating, shipping can result in lab testing setbacks, clinical trial delays and other issues which the CRO may not be able to overcome based on their clients' budgets and timelines without incurring significantly greater costs.