CRO market blooms; BRIC regions remain untapped
By Mia Burns
Research and consulting firm GlobalData has released a new report indicating that Quintiles largely fuelled the growth in the contract research organization sector. Quintiles independently contributed about $397 million to the $1.2 billion market increase. Quintiles’ revenue grew by 12.1 percent year-on-year to $3.7 billion in 2012, demonstrating considerably larger growth than its closest rival, Covance, which grew at 4 percent year-to-year to $2 billion. In addition, Quintiles was effective at turning its order backlog into revenue, and winning new business contracts in emerging markets in Europe and Asia.
GlobalData analysts say that the total combined peer group revenue from contract research organizations increased by 10.2 percent year-to-year, from $12.4 billion in 2011 to $13.6 billion in 2012, driven mainly by greater demand for outsourced clinical services as drug companies look to contractors as a strategy to off-set the high cost of bringing new therapies.
“In the past, the pharmaceutical industry has been slow to put in place robust business process outsourcing strategies when compared to other sectors of the global economy,” says Adam Dion, GlobalData’s analyst covering healthcare industry dynamics. Dion also told R&D Pharma Business Connect that examples of other sectors include information services; technology, banking, and telecom. “These sectors are far more progressive when it comes to outsourcing and were early adopters,” he says.
“While the reasons for this are many, the primary motive boils down to competitive positioning and maintaining control over corporate functions,” Dion says. “While there is nothing wrong with this, the biopharmaceutical industry is now facing significant headwinds and as a result, is taking another look at outsourcing. The blockbuster era is over. Uncertainty remains around reimbursement, and regulatory policies, and generic competition is eroding corporate profits. Meanwhile, the current R&D paradigm is inefficient, duplicative, expensive and in the long run untenable. GlobalData believes the surging growth rate in the contract research organization market is indicative of the industry beginning to respond to these industry pressures and change the way it approaches clinical research. Drug makers are intensely focusing on generating more value and productivity out of every dollar spent on R&D. The challenge of accelerating pharmaceutical product development while controlling costs creates a difficult balancing act for senior management. Through the use of strategic outsourcing with third-party vendors, drug makers can maximize their internal resources, while at the same time enter into risk-sharing agreements with contract research organizations to generate significant cost saving and accelerate time-to-market.”
According to GlobalData, Brazil, Russia, India, and China, which is also known as BRIC and other emerging regions saw a flood of investment and business activity from contract research organizations in 2012. Combined peer group revenue in the BRIC regions increased 14.6 percent above 2011 levels to $394 million in 2012. GlobalData expects this trend to continue into the near term, with contract research organizations looking to increase their share in these lucrative markets.
The report provides an overview of the key drivers and trends shaping the global contract research organizations market; including biologics manufacturing, emerging markets, and eClinical technologies.
“We estimate that through 2015, more than $20 billion in annual biologic product sales will be lost as a result of expiring patent protection,” Dion told R&D Pharma Business Connect. “This will create tremendous opportunities for follow-on biologics, biosimilars and interchangeables. However developing a sustainable biosimilars program is not an easy endeavor. Biosimilars production is faced with many challenges, particularly in the United States, as there is no clearly set regulatory pathway. More arduous, is the gamble of trying to replicate the complex manufacturing processes of how biosimilars are made. Copying a biologic drug is more difficult, because manufacturers can never precisely replicate the ‘original’ environment, nor the living system (host) originally used. As a result, one company’s drug will be inherently different than another’s. As a result, pharmaceutical companies are searching for contract research organizations that have demonstrated experience in avoiding the manufacturing pitfalls that have been known to derail biologics and biosimilars development.”
Dion says that two companies covered in the report are WuXi and Catalent. “Both companies are responding to higher-than-expected demand from pharma companies for biologics development by financially investing to expand their manufacturing capacity,” he told R&D Pharma Business Connect. “WuXi has put forward $60 million of capital into building its first current good manufacturing practice fill-finish facility in WuXi, the first of its kind in China to meet good manufacturing practice standards of the United States, and the European Union. WuXi also recently acquired Abgent, and has struck three deals with biologics developers in the aim of establishing one of the leading mAb technology platforms in China. Meanwhile, last April, Catalent officially opened its new, state-of-the-art bio-manufacturing center of excellence in Madison, Wis. The new facility quadrupled Catalent’s biologics manufacturing capacity and all of the equipment at the site is scalable to meet the needs of any customer, even requirements for Phase III studies if necessary.”
Regarding emerging markets, Dion says, “The globalization of clinical trials has led many contract research organizations and other service providers to expand their strategic investments in emerging markets. The emerging markets in Asia, Central and South America and in Eastern Europe have become attractive regions for pharmaceutical outsourcing due to easy access to large pools of treatment naïve patients, low labor and manufacturing costs, and highly skilled medical workforces. With better recruitment and retention rates, strong investigator networks and populations in need of novel treatments, conducting studies in emerging markets is a strategic necessity for pharmaceutical companies looking for a competitive advantage. However, not all emerging markets can be treated in the same fashion. The variability in regional regulatory guidelines, product approval pathways, and differences in cultural norms pose as challenges to successful market entry. Most contract research organizations are growing their footprint in China, while others take a different approach – deciding to acquire the capabilities of domestic companies or launch subsidiaries to handle the additional workload. For instance, PPD (BioDuro), and Quintiles (Kun Tuo) established subsidiaries in China to strengthen their ability to provide biopharmaceutical clients in Asia with a comprehensive range of capabilities, from drug discovery services to regulatory submissions preparation. Contract research organizations with the ability to deliver tailored solutions that translate to cost –and time-saving efficiencies to clients without compromising patient safety and data quality will be able to yield higher returns from emerging markets.”
As clinical trials are becoming more complex, they require a larger number of patients and the ability to globally manage multiple trial sites. GlobalData believes that service providers that offer clients best-in-class solutions that permit the integration of multiple workflows and allow for finding process bottlenecks faster will have a significant competitive advantage, and are more likely to become preferred vendors of choice for biopharmaceutical companies.
“In recent years, there has been an increase in the number of software applications and informatics tools for managing the clinical trials process, but these independent systems are not necessarily compatible with each other,” Dion says. “This forces sponsors and investigators to enter the same data multiple times across many different applications disrupting optimal workflow, resulting in an unintended loss of productivity. However, significant progress is now being made by contract research organizations to offer fully integrated eClinical solutions that simplify the clinical trial process. Biopharmaceutical companies can adopt these informatics tools in two ways – one is through the contract research organizations’ own in-house platform (MyTrials, Parexel); the other is through partnering with information technology vendors like Oracle, Medidata, and Cerner and other application providers who offer integrated software stacks for conducting clinical trials. Parexel’s MyTrials platform is built on Software-as-a-Service (SaaS) infrastructure and is scalable to handle single or multiple studies, and facilitates collaboration across the entire study community. MyTrials has a single and secure repository for all of the necessary study information and has a full suite of data analytic tools to provide researchers a view of the progress of clinical trial programs, enabling more effective decision making, regardless of the size, scope or the number of clinical trials. Clinical program managers can view the status of trials at all levels in any specific region in near real-time. Other team members, such as pharmacovigilance scientists, can easily use the tool to focus on safety-specific data, while site start-up specialists can use the solution to monitor patient enrollment to optimize the patient recruitment process.”
Posted: September 2013