The 2007 edition of the PharmSource–Pharmaceutical Technology Outsourcing Survey indicates that the contract services industry is going through a period of almost unprecedented growth.
Pharmaceutical company budgets for contract services are rising, and contractor revenues are growing at double-digit rates,
but the volume may be close to outstripping contractors' ability to deliver.
Respondents profile
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Among the pharmaceutical company respondents to this year's survey, 94% report an increase in spending on outsourced activity
for the year (see Figure 1). That's a big jump from 2006, when only 84% reported a spending increase. The increase in spending
is remarkably consistent across company size (see sidebar, "Respondents profile"), and rates of growth for spending on commercial
and development services also are about the same.
How do you expect your contract services spending to change from 2006 to 2007? (Figure 1)
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Survey results indicate that the growth in spending on outsourced activities reflects a fundamental move in favor of outsourcing
rather than conducting activities in-house. Among biopharmaceutical and pharmaceutical company respondents, 27% reported that
their spending on contract services is growing faster than their overall spending, up from just 18% of respondents in last
year's survey (see Figure 2). More than 20% of respondents report that half or more of the spending in their particular area
is outsourced, which is more than double the response from 2006 (see Figure 3). Here again, the results are consistent regardless
of company size or activity (commercial versus development).
How is your outsourcing spend growing relative to overall spending in your area? (Figure 2)
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Not surprisingly, the growth in spending is translating into a banner year for contract services providers. More than a quarter
of service providers expect revenues to jump by 20% or more this year; in 2006, only 17% of contractor respondents expected
such robust results (see Figure 4). Just as revealing is the fact that none of the service providers expect revenues to decrease
in 2007; 10% of respondents to last year's survey had expected their revenues to decline. The growth is coming from all customer
segments, with mid-size and generic biopharmaceutical and pharmaceutical companies showing particularly big jumps. Service
providers report that new contract signings are rising a bit more slowly than revenues, but they are still growing at a robust
rate.
New opportunities
What share of the total activity in your area is outsourced? (Figure 3)
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The growth in spending has created a more fluid contract services market that offers more opportunities for service providers.
In this year's survey, 57% of biopharmaceutical and pharmaceutical company respondents report that they are actively looking
for new service providers, either to increase their vendor base or to replace current providers; that value is up from 37%
in 2006 (see Figure 5). The number of respondents who are unwilling to look beyond their current provider base dropped by
two-thirds: only 5% of respondents say they use only current vendors.
