Clinical Market: Outsourcing Landscape Survey

Today about 50% of Phase 1 to Phase 4 clinical activities are outsourced by pharma companies to CROs. The market of clinical CROs – save for discovery, central laboratory, preclinical, post-approval and commercialization services – is currently valued at $25 billion, with its CAGR growth rate estimated to be 7% until 2020.

The greatest share – 80% – of the clinical CRO market is held by Europe and North America, with their clinical trial R&D expenditures reaching a total of up to 83%. The greatest share of their expenses is spent on Phase 2–4 clinical trials, with the early stage ones making just 12% of the total amount.

The other players of this market – Asia Pacific and Latin America – hold the modest shares of 13% and 4% respectively.

According to clinical revenue data from 2015 – 2016, over 60% of the total clinical CRO market share is held by 20 CR organizations, with the remaining share being fragmented between niche organizations.

Among CROs – each of which is either a regional or a global player – there is a steady trend of acquisitions, mergers, and collaborations. These processes are aimed at maintaining unique positions in the market and remaining competitive, expanding the scope of operations and services in terms of geographic reach, enhanced therapeutic area expertise, full-service capability along with increased functional capability, as well as technology.

Major drivers of the market

The most powerful driver of the clinical CRO market is the outsourcing of large molecule development, rare disease specialty treatment, as well as personalized therapy and devices. This segment has demonstrated a steady growth from 35% in 2013 to 45% in 2017. This growth is largely attributed to the reliable single-use technology becoming more available.

The second powerful driver of the market is the emerging markets of China, Brazil, and Russia. The ever-increasing number of trials creates demand for regional CROs packed with strong regulatory knowledge. Due to low-cost labor, the market witnesses large pharma increasing their outsourcing to the emerging market of India of such clinical services as data management, pharmacovigilance, biostatistics and a few others. This trend is to increase further the revenues in the Asia-Pacific region.

Outsourcing penetration of clinical CRO market

Researchers at Credit Suisse predict the clinical outsourcing penetration to reach up to 50% by the year 2020 from the current 45%.

The rising cost of R&D together with profit pressures brought to the growing sponsors’ reliance on CROs, which has reached over 60% in a two-year period. CROs therapeutic and scientific expertise allows sponsors to achieve their goals in R&D process innovation, globalization of clinical trials, and greater efficiency in conducting those clinical trials.

As to future plans, 23% of pharma respondents to the Credit Suisse survey stated they are planning to incorporate strategic partners, while 34% of them choose to stick to their current outsourcing strategy.

The incorporation of strategic partners has a focus on supplier consolidation. In this respect, 34% of pharmaceutical companies are interested in engaging large CROs with well-established supply chains rather than niche or midsize specialists for signing an exclusive partnership with. Large CROs are also more preferable for providing:

  • clinical support services (like biostatistics, data management, etc.)
  • late stage (Phase 2 and higher) clinical trial services.

Whereas for the category of early phase trials, largely preferred are niche specialists with their access to specialized patient populations.

Thus, as of 2016–2017:

  • 50% of outsourcing on the clinical trial market goes to the collaboration of large CROs with niche specialists
  • 34% – to large CROs only
  • 16% ­­– to niche specialists.

Early phase engagement patterns between pharma and CRO

For early phase clinical trials, multinational pharma companies outsource on average to 25–30 CROs, with 33% of them being operating globally, and 67%  – locally.

Their engagement by functions looks like follows:

  • Study, medical writing and data management – 39%
  • Clinical monitoring – 21%
  • Lab services and ECG – 15%
  • Staffing /investigators – 12%
  • CPU unit – 12%

To achieve cost savings through consolidating supplier and spend, for early phase studies pharmas engage with global CROs that they are already engaged with for their late-stage studies.

Overall, to provide the best fit for their clinical research needs, Pharma companies tend to partner with the relevant CRO capable of providing for the needs of innovation, full-service, and good access or enhanced geographic reach to specialized patients.

So, the answer to the question “Is consolidation possible within the entire clinical research and development services?” is YES. It is obvious judging by the experience of the industry’s major players – larger CROs consolidating with niche specialists and other large CROs through acquisition or mergers on the one hand, and forming partnerships with pharma on the other.