Consolidation wave likely to continue among European CROs
pharmafile | October 27, 2009 | News story | Research and Development |Â Â crosÂ
Another report concluding that the most successful contract research organisations (CROs) will be those that can offer a broad range of services and a global presence is likely to spur continued consolidation in the sector.
The research, conducted by Frost & Sullivan, also predicted that the European CRO market will almost double between now and 2015, from $7.1 billion last year to $13.5 billion.
"Due to the rapid consolidation of the pharmaceuticals and biotech industry, European CROs are forced to compete for a smaller pool of customers," said Frost & Sullivan analyst Ranjith Gopinathan.
"Moreover, R&D portfolio reviews of merged or acquired pharmaceutical entities are leading to the cancellation of some non-core projects," he told Pharmafocus.
Increasing numbers of outsourced projects are being put on hold, according to Gopinathan. The rate of contract cancellations in the CRO sector is currently quite high in the region of 15%-20%, while preferred provider agreements are also being terminated.
There is a corresponding rise in merger and acquisition activity in the CRO industry, and economies of scale and global capabilities are now a prerequisite in the clinical outsourcing space.
Global CROs are revamping their services and business models, and increasing their focus on geographic expansion, while multinational CROs are penetrating the European markets by acquisitions.
"The New Jersey-based CRO, Covance, for instance, is looking for acquisitions, and thereby positioning itself for growth when the economy recovers," said Gopinathan. For example, the company recently expanded its clinical pharmacology capabilities through the acquisition of Swiss Pharma Contract.
"Such diversification of service portfolios reduces the impact of contract cancellations," he noted, adding that this could also help CRO companies to strike better deals with large pharma companies.
Meanwhile, large European CROs such as Ireland-based ICON plc are expanding the scope of their operations through vertical integration, aiming to leverage their existing functions.
"The European CRO industry will continue to evolve towards a full-service model, with companies offering services all the way from the earliest stages of development through clinical trials and post-approval research," said Gopinathan.
The CRO story in Europe is not all about the pursuit of scale, however.
With big pharma displaying a healthy appetite for biological drugs as the future source of innovation, small CROs are re-defining their business model, according to Gopinathan.
The French CRO CIT, for instance, recently announced that it would be offering tissue cross-reactivity (TCR) services, a technology that allows its clients to screen monoclonal antibody-based therapies for binding to tissues other than the desired target.
Others, such as France's Biovays, are starting to offer biomarker discovery and development services to help drugmakers in compound selection, dose optimisation, efficacy and safety monitoring.
Meanwhile, medium-sized European CROs such as UK-based Melbourn Scientific are venturing into the preclinical segment to offer earlier-stage services, such as initial screening programmes and capabilities in preclinical and early clinical trials.
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