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Quintiles talks R&D spend and outsourcing trend in Second Public Offering

By Dan Stanton+

10-Mar-2014
Last updated on 10-Mar-2014 at 13:16 GMT

Nearly 40% of the $51bn spent on clinical development last year was outsourced according to Quintiles, which has predicted continued growth for the CRO industry in documents outlining its second public offering.

Ten months after it went public , the world’s largest contract research organisation (CRO) announced this morning that certain stockholders plan to sell 15 million shares in a second public offering.

According to a prospectus filed with the SEC , Quintiles will not receive any proceeds from the sale of the shares, which are being divested by a diverse group of investors [page 46] including former CEO Dennis Gillings.

The CRO also used the document to outline its view of the contract research industry, and forecast that demand for third-party services will increase.

“R&D spending was approximately $137bn [€99bn] in 2013 and will grow to approximately $145 billion in 2016,” the firm said, adding drug development accounted for around 68% - $93bn – of the total expenditure.

This was broken down further by the firm, with spending on clinical development – rather than preclinical – reaching $51bn.

“We estimate that the potential market for Product Development’s services will experience a CAGR of 6%-8% from 2013 through 2016 as a result of increased research and development spending by biopharmaceutical companies and the increased outsourcing of this spending as compared to 2012.”

R&D spend

Efforts to replenish revenue from the ‘patent cliff’ has led to this surge in R&D spend, as has an increase in access to capital by small and mid-tier biotech firms.

Furthermore, recent increases in pharmaceutical approvals by regulatory authorities have encouraged further spend, the report said, with 2013 seeing 4,060 drugs in the Phase I-III pipeline (a 19% since 2008) and 27 NME (new molecular entities) approvals by the United States Food and Drug Administration.

Outsourcing Trend

Of total development clinical spend, Quintiles estimates around $19bn (37%) of this was outsourced last year, a figure expected to grow to $23bn by 2016.

The need for firms to “maximize productivity and lower costs in their product development and commercial operations” will drive this, Quintiles predicts, as will the emergence of more complex therapeutic areas, such as biologics, genetically targeted therapies, and stem cell therapies.

Increased regulatory oversight will also encourage this outsourcing trend as will a continued global outlook. “Understanding the epidemiological and physiological differences in different ethnic populations and being able to conduct trials locally in certain geographies will be important to pharmaceutical product growth strategies, both for multinational and local/regional biopharmaceutical companies.”

The CRO also predicted the industry’s move towards long-term strategic alliances would continue: “Biopharmaceutical companies have historically preferred, and will continue to prefer, financially sound, global service providers with broad therapeutic and functional expertise such as our company when selecting strategic providers.”

Quintiles inked a five-year exclusive deal with Merck Serono just days after its IPO was finalised.

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