CROs will support sponsors through unprecedented change

13-Apr-2011 - Last updated on 18-Apr-2011 at 11:18 GMT

Related tags Strategic partnerships Partnership Parexel

Pharma is going through an absolutely unprecedented, once in an industry sea change, says Parexel, and CROs will play a key role in the process.

Need to boost innovation, cut developmental timelines and increase the probability of success, while limiting spending, is forcing biopharm to evolve. Increased outsourcing and strategic partnerships are two consequences of this more open, innovative approach.

“Demand for strategic partnerships accelerated faster than we expected”, Mark Goldberg, chief operating officer at Parexel, told Outsourcing-Pharma.

Underpinning surging sponsor interest is the realisation that relatively few CROs (contract research organisations) have the scale and global reach to make these partnerships work, says Goldberg. In response to this realisation sponsors have moved quickly to make sure they get “a seat at the table”.

Moving to the new model had unforeseen consequences for Parexel. “We have come to realise, and, I guess accept, that the conversion of backlog from partnership new business, is just slower”, said Josef von Rickenbach, CEO of Parexel, in a conference call with investors.

"I actually believe that eventually over time, maybe as much as two years into a partnership, that conversion rates will come up to roughly the same levels...as in the past, but in the ramp up...it's just slower", said von Rickenbach.

Deal structure variation

While these issues impact some strategic partnerships others are unaffected. Variability was referred to by Eric Coldwell, managing director, healthcare equity research at RW Baird, who said the term strategic partnership has been applied to a range of deal structures. As such, it is unclear exactly what the term means.

At this stage it is also unclear if strategic partnerships work, said Coldwell. Having emerged relatively recently there is too little data or history to base an opinion on but it is clear smart, successful CROs back the concept.

“Our view: when 100 per cent of our conversations with the signers of these deals provide the same response: “We want these deals and we believe that they will provide superior margins,” we’re inclined to give the benefit of the doubt”, said Coldwell.

"Underpinning surging sponsor interest is the realisation that relatively few CROs (contract research organisations) have the scale and global reach to make these partnerships work, says Goldberg"

Posted by JeanMarie Markham, 14 April 2011 - 12:35 GMT

an interesting comment from one of the many very large CRO's that have spent the better of the last decades modeling themselves after the very same large BioPharma industry. There is a huge tailwind coming; and we are being to feel just a bit of these ramifications. But I do not agree with the assessment that the opportunity is solely there for the very large "global" CRO's. To effectively navigate change, an organization must be facile and lean, have a global reach, with the ability to scale efficiently and cost effectively. There are number of smaller CRO’s with that requisite skill, with frankly more experience working with smaller organizations in the industry.

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