Biotechs generate 30% annual CRO revenue

By Gareth Macdonald

- Last updated on GMT

Related tags: Pharmacology, Fda, Goldman sachs

The estimated 15 year period, $800m (€509) investment and one in 5,000 chance of successfully developing a new drug is likely to see more and more pharmaceutical firms partner with CROs in a bid to offset risk, according to a report Turner Investment Partners (TIP).

The study revealed that while contract research organizations (CRO) are in demand across the whole of the pharmaceutical sector, such firms are particularly important in helping smaller-scale biopharmaceutical and biotechnology companies with the development of early-stage drug products.

This report estimates that 30 per cent of global CRO revenue is generated by biotech firms, up from just 21 per cent in 2003. Theses findings suggest that demand and therefore competition amongst the estimated 500 CRO operating worldwide is likely to intensify in the short to medium term.

The authors also suggest that industry regulators worldwide favour the diverse patient groups provided by international clinical trial programmes, and that as a result CROs are likely to benefit from increased demand for such services, particularly those with existing international operations.

Overall, TIP forecast that the market offers considerable scope for growth, citing a Goldman Sachs prediction that the sector, which generated $16.3bn in 2006, would be worth as much as $29.4bn by 2011. TIP suggested that CROs will be involved in up to 50 per cent of drug development projects, both at the pre-clinical and clinical stage, in the next few years.

TIP also predicted that among CROs, Covance, Icon, Kendle International, Parexel and Charles River Laboratories would be the key beneficiaries of the continued move towards R&D outsourcing.

CRO driven innovation is key

The authors also argue that, despite a sustained 8-10 per cent increase in R&D spending over the last few years, 2007 saw the number of new drug products approved by the US Food and Drug Administration’s (FDA) slump to its lowest level in a nearly quarter of a centaury.

They conclude that growing costs, concerns over product safety and the resulting increase in red tape and legislation are turning drugmakers off developing new medications and that this poses a significant threat to innovation in the drug industry.

TIP suggest that: "pharma companies must innovate to survive, which means that while they are striving to control costs, they also need to keep spending on research and development to create profitable, proprietary new drugs and replenish the pipeline."

The report concludes that partnerships between understandably risk-averse drugmakers and CROs are vital to sustain the viability of pharmaceutical pipelines and therapeutic development programmes worldwide.

Related topics: Preclinical Research, Preclinical

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