Outsourcing clinical trials: growth continues

May 1, 2009
Sylvia M Findlay

Sylvia Findlay is Pharmaceuticals and Biotechnology Industry Analyst at Frost & Sullivan.

Pharmaceutical Technology Europe

Pharmaceutical Technology Europe, Pharmaceutical Technology Europe-05-01-2009, Volume 21, Issue 5

The CRO market is experiencing two-tiered growth: firstly from pharmaceutical companies seeking to lower fixed costs by outsourcing clinical research to CROs; and secondly, from biotechnology and specialty pharmaceutical companies that lack the infrastructure to conduct trials.

Mounting costs have forced pharmaceutical companies to move clinical trials away from the traditional playing fields of Europe and the US, in favour of conducting R&D activities offshore. The likely beneficiaries from this increased outsourcing are expected to be Asian countries such as India and China, with other countries such as South Africa, and those in Latin America and Central and Eastern Europe also expected to garner more interest.

Clinical trial delays: nailing the issue

Analysis has shown that most clinical trials currently do not meet their deadlines and approximately 85% experience delays; 95% of these must contend with delays of more than a month.1 The primary reason is difficulties in patient recruitment. Phases II and III trials require patient recruitment on a global scale, which complicates the situation and poses a serious challenge to clinical trial co-ordinators.

Why are CROs so attractive?

Though rising costs are a crucial factor, pharmaceutical companies look for unique expertise and capabilities when choosing a CRO. Technical know-how, capacities, compliance and the ability to complete clinical trials within the stipulated time are also primary factors that companies examine before making a decision (Figure 1).

Figure 1: Key attributes to a CRO (World), 2008.1

CROs have started to take centre stage in the drug development process. In fact, the drug development business model has been modified considerably to include CRO services, spearheaded by increasing drug development costs and the expanding global scale of clinical trials. Reliance on CROs has also increased considerably, primarily because of their services rendered towards conducting large, global and highly complex clinical trials.

Different factors are driving growth in different segments of the CRO market. Increasing R&D spending and toxicology services have fuelled the growth of preclinical services, while small pharmaceutical and biotech companies that lack the infrastructure to conduct Phase I trials have driven Phase I outsourcing.

Post-marketing studies have seen an increase in recent years, owing to the importance given by the medical community to the long-term safety aspects of drugs. As such, there has been an increased demand for Phase III and Phase IV clinical trials outsourcing, which is now considered a prime growth factor sector in the CRO industry. The need for therapeutic expansion, global reach and market consolidation amongst CROs has also driven the Phase III and Phase IV clinical trials outsourcing market — postmarketing clinical research involving global expansion, life cycle management, reimbursement and indication expansion has fuelled the demand for these late stage development trials. In addition to CRO services, functional services such as data management, laboratory facilities, logistics and translation services are also gaining significant importance (Figure 2).2

Figure 2: Revenue share percentage by phase (world), 2008.2

CRO market: the stats

Pharmaceutical and biotech companies have increased R&D spending on CRO services significantly during the last 5 years. Expenditure on CRO services accounted for 12.9% of total global R&D expenditure in 2003 and reached 17.2% in 2008, indicating the rising demand for CRO services in drug development. The major spend in CRO services comes from pharmaceutical companies, with biotechs only accounting for 30%.3

Another observation regarding the clinical trials outsourcing arena is that North America dominates the R&D spending share compared with other geographic regions; Frost & Sullivan estimates that North America holds up to 49% market share, followed by Western Europe with 37%. Asia Pacific is gaining significant interest because of the globalization activities in R&D and now holds approximately 13.5% market share. The share from the rest of the world is only 0.5% (Figure 3).3

Figure 3: R&D spending share by geographic region (world), 2008.3

In addition, North America leads the way in the volume of clinical trials conducted, but emerging markets such as India, China and Central and Eastern Europe are expected to witness considerable growth by 2012 because of their low cost advantages and the ease with which they can recruit a heterogeneous patient population for clinical trials.

Overall, the number of clinical trials being conducted has grown significantly in the last 5–7 years. In 2000, 40000 trials were conducted while 62000 trials were conducted in 2007. Of these, more than 5000 were in oncology, more than 3000 in central nervous system and more than 2000 in infectious diseases.3

Future of the CRO industry

Because of increased R&D spending from specialty pharma, and the lack of infrastructure from small pharma and biotech companies, Frost & Sullivan predicts that R&D expenditure for CRO services will continue to grow. CRO services are estimated to witness growth of 14–16% by 2010 and at least 60% of FDA-regulated clinical trials are estimated to be conducted offshore by 2012.1 Consolidation amongst CROs is also a major trend to look out for in the next couple of years and is an indicator of the rising demand for large, globalized clinical trials.

Sylvia Findlay is Pharmaceuticals & Biotechnology Industry Analyst at Frost & Sullivan (India).

References

1. Contract Research Organization (CRO) Markets in Europe. Frost & Sullivan, August 2006.

2. US Contract Research Outsourcing Markets. Frost & Sullivan, September 2008.

3. Global CRO Spending Trends. Frost & Sullivan, June 2007.