A sense of relative calm seems to have overtaken the bio/pharmaceutical contract services industry in 2013. Bio/pharmaceutical
companies say that their spending on contract services is still growing, but at a pace in line with the growth in their overall
budgets. Service providers state that 2013 has been a good year, but it is not exceeding their expectations the way 2012 did.
Visage/Getty Images; Dan Ward
Those are the impressions gained from analyzing the results of this year’s PharmSource Pharmaceutical Technology Outsourcing Survey, administered during June and July 2013. PharmSource and Pharmaceutical Technology have been conducting the survey for more than 10 years.
Modest spending growth
Figure 1: How will your contract services spending change this year?
(All figures are courtesy of the author.)
Responses from professionals at bio/pharmaceutical companies indicate that spending on contract services is up in 2013, but
at a more modest rate than last year (see Figure 1). Just 30% of buy-side respondents indicated that spending this year will increase by 10% or more; in 2011 and 2012, 43%
expected spending growth of 10% or more. Further, the number of respondents indicating that spending year-over-year will remain
flat jumped from 27% in 2011 and 2012 to 37% in 2013.
The modest spending growth appears to reflect the overall growth in R&D spending. Approximately 40% of bio/pharma company
respondents indicated that contract services spending is growing at the same pace as total R&D spending while those answering
that services spend is growing faster or slower than total R&D spend are evenly split. These results are consistent with past
Contract service providers appear to have come into 2013 with high expectations and while most haven’t been disappointed,
those high expectations have left little room for upside surprises. Among sell-side respondents, 22% said they expect their
volume of business in 2013 to be “very good” or “extremely good,” which is down sharply from the 39% in 2012 (see Figure 2). Further, 15% said business in 2013 was “not very good;” only 5% were so pessimistic in 2012.
Figure 2: What will business be like for your company this year?
Those subdued assessments of business conditions may reflect expectations more than actual performance. Only 28% of sell-siders
view business in 2013 as “better than expected” while in the 2012 survey 49% were pleasantly surprised. Clearly, many service
providers went into 2013 expecting strong performance while their expectations going into 2012 were more tentative.