Dispatches from PCT

Not all good news: CROs must prepare for Private Equity exit, experts say

By Dan Stanton

- Last updated on GMT

Related tags Contract research organization

Private Equity has to exit CRO industry at some point, experts say
Private Equity has to exit CRO industry at some point, experts say
Private equity will be looking to exit the CRO industry and could pose a threat to recent strong growth, according to financial experts at PCT

As opposed to pharma companies hit by high costs, patent expiration and trailing pipelines, contract research organisations (CROs) are reporting high growth rates: “about as high as they’ve ever been with Wall Street thinking they will continue to do well,” ​Director of Fairmount Partners Michael Martorelli told a crowded room at PCT Vienna last week.

However, he warned, “trees do not grow to the sky”​ and whilst the overall industry may be in a boom there are still a number of potential landmines that could overturn both individual companies and the wider market.

One of these is the growing interest from private equity (PE) firms in the sector and the future opportunities for them to exit as - he pointed out - a fruitful exit strategy was why they had invested in the first place.

In the last three years twelve CROs had been acquired by (all US-based) PE firms including inVentiv​, INC Research​, PRA​, MedPace​, Theorem​ and PPD​, he said.

Uncertain Exit

Paul Richter, Head of Life Sciences at Jina Ventures also spoke about PE’s involvement in CROs, saying whilst there is a certain amount of transparency amongst the public CROs - Quintiles, Icon and Covance for example reporting book-to-bill ratios of 1.44, 1.4 and 1.21 respectively - when it comes to the private CROS and how they are doing: “We have no idea!”

He concluded: “PE firms have to exit its CRO investments within the next five years”​ but how exactly is unclear.


However, Martorelli acknowledged private equity firms didn't all have the same motive. “Saying one PE is the same as another PE is like saying one CRO is the same as another CRO. All PEs are different and differently motivated.”

“Done correctly, a PE should use appropriate amounts of private finance,”​ he continued and “some CROs only find out they needed financial discipline once a PE came in.”

Other Pitfalls

Other fears Martorelli highlighted that may make the CRO industry stumble included clinical research issues in India​, nervous stock investors and unexpected quality and financial problems.

One other is Big Pharma’s limitations on R&D spending. For example Merck & Co.’s recent announcement that it was to cut R&D by $2.5bn has since led to stakeholder uncertainty and questions at CROs Charles River Laboratories​ and WuXi​.

Related news

Show more

Related products

show more

Drug Solubility and the Need for Speed

Drug Solubility and the Need for Speed

Lonza Small Molecules | 28-Mar-2023 | Technical / White Paper

A growing number of new chemical entities are highly insoluble, leading to problems with bioavailability. Drug manufacturers therefore have to find ways...

Are You Prepared to Meet the New FDA Guidelines?

Are You Prepared to Meet the New FDA Guidelines?

Elligo Health Research® | 23-Mar-2023 | Insight Guide

On April 15, 2022, the U.S. Food and Drug Administration issued a new draft guidance to clinical research sponsors on creating a plan to enroll more participants...

ODM and CDASH in CRF design

ODM and CDASH in CRF design

Formedix | 10-Mar-2023 | Technical / White Paper

The lesser-known Operational Data Model (ODM) standard is often overlooked as it's not required by any regulators. So, why should you be interested...

4 Warning Signs Your Research Site Is in Trouble

4 Warning Signs Your Research Site Is in Trouble

Elligo Health Research® | 10-Mar-2023 | Insight Guide

You want your clinical research practice to be a success for your business and your patients, but how can you tell if it’s in trouble? Read this article...

Related suppliers

Follow us


View more