These firms' rankings in overall perceived quality of clinical research services (Phase II/III) ties in closely with their ranking in terms of size and revenue, showed the investment bank's survey, which was based on the responses of a number of R&D managers at a mix of pharmaceutical & biotech companies. The world's largest CRO, Quintiles, topped the list, with ICON in second place and the number two CRO in terms of revenue, Covance, in bronze position. The three CROs scored 2.44, 2.52, and 2.63 respectively in a ranking out of five, where a score of one indicated "excellent" and five signalled "unacceptable". Quintiles, as the market leader in Phase II/III, "clearly benefits from its global capabilities", while ICON, who is the fifth-largest CRO in terms of revenue, is "particularly vigilant on keeping studies on track" said Lehman Brothers Equity Research analysts Douglas Tsao and Lawrence Marsh. "Our survey results indicate that ICON's dedicated team model does lead to enhanced responsiveness and better customer satisfaction". The firm noted its surprise at Covance's clinical development group capturing third place in the rankings, as it has a "more modest market presence in this segment relative to others (roughly $260m in revenues)," however, the analysts said the result suggested that the company's investment in this business over the past two years had "begun to pay off". Meanwhile, the survey placed PPD in fourth spot for overall quality, followed by Parexel, Kendle, PharmaNet, PRA International and i3. Scores were 2.99, 3.01, 3.08, 3.12, 3.33 and 3.67 respectively. The analysts took particular care to note that although PRA "scored close to the bottom, we recorded the fewest responses for them [in the survey]". "Moreover, emerging biotech companies, who represent almost 50 per cent of PRA's customer base, was not sampled heavily in our survey given our emphasis on top 50 drug companies", the analysts said. They also noted that the company was well-respected in its expertise and capabilities in oncology, although "we suspect that negative responses were elicited from studies in which PRA's teams were plagued by numerous staffing changes since turnover has been the company's biggest problem over the past three years". The analysts also said that too much emphasis shouldn't be placed on the overall rankings themselves, "since there was some bunching", but that the take-home message from the results was that "CROs can differentiate themselves". "This suggests that CROs can build competitive advantage and that could alter market share". Indeed, the respondents that believed the performance of CROs had "improved" or "greatly improved" over the past five years largely attributed this to more intensive competition which has forced them to improve their execution. Improvement in meeting project timelines was the most frequently cited area of enhancement. Project management and start-up speed were other areas in which some companies felt CRO performance had gotten better. Although, the majority of those interviewed (55 per cent) actually believed that CRO performance had remained "unchanged" or become "somewhat worse". Meanwhile, the CRO industry which has been riding a growth wave for the past few years can expect to see its good fortune continue. 63 per cent of those surveyed indicated that they expected the volume of outsourcing by their respective organisations to continue growing, with "lack of internal resources" being cited as the number one reason - all respondents said this was either an "important" or a "very important" factor. "The biggest driver for increased outsourcing was lack of internal capacity, which we see as the result of budget cuts/headcount freezes imposed at major pharmaceutical companies who have begun shifting from a variable to fixed cost model", commented the Lehman Brothers analysts. "We note that 'variable versus fixed costs' was seen as 'very important' or 'important' by almost 50 per cent of our survey respondents". The therapeutic/scientific expertise of CROs was listed in the survey as the next most prominent consideration in relation to outsourcing decisions, with 33 per cent identifying it as a "very important" factor. Many respondents also indicated that they expected to outsource more because their respective companies' pipelines were improving. Moreover, CROs' global capabilities (i.e. access to international sites) were also cited as a significant driver in outsourcing studies - 73 per cent of respondents said it was "important". "Most drug companies lack clinical development infrastructure in regions such as Latin America, Eastern Europe and Asia in which growing percentage of clinical studies are being carried out due to faster and more consistent patient enrolment", said the analysts. Lehman Brothers said the survey, its first on the CRO industry, was carried out with the aim of gaining a better understanding of the dynamics affecting this market, including the factors that drive outsourcing decisions, and identify areas of heightened opportunity and risk. "As the current cycle matures, we believe quality of execution will become increasingly important and lead to market share shifts between companies in the group", the analysts concluded. "In the near term, we note an upcoming cycle of preferred provider agreement renewals should see some shuffling as better performing CROs earn a spot at the table and those with poorer execution are edged out".