Parexel: Strategic partnerships are reshaping the CRO industry

Last week Outsourcing-Pharma.com went to PCT in Vienna, Austria and one subject ripe for debate was how strategic partnerships between contract research organisations (CROs) and their sponsors were working and changing the industry.

One major CRO avidly backing this model is Parexel who earlier this year published its Strategic Partnerships 2013​ report highlighting the growing importance of such alliances.

For CRO relationships this “is the next phase,”​ Christian Buhlmann, Parexel’s VP of Marketing, told Outsourcing-Pharma.com last week.

Over the last fifteen years, “the growth of the CRO world has been achieved by pharma outsourcing more, and the percentage going outside has increased massively”​ he continued, but “pharma and CROs need a scalable model” and “the traditional [model] of outsourcing doesn’t work anymore.”​

Fifteen to One​

According to the report, 85% of the pharma executives said strategic partnerships worked for them and though only 26 were surveyed it reflected the views of Pfizer, Novartis, Baxter and Amgen​ who - in a session earlier that day - spoke of their mostly positive experiences with strategic partners, though high-lighted that oversight was still key in such relationships.

Bulhmann said, however, strategic partnerships gave pharma the opportunity to cut costs dramatically by reducing pharma’s internal personnel sitting in ona project.

In traditional, tactical partnerships he told us “one person in the pharma industry manages three people in the CRO.”​ With strategic relationships, he continued, Parexel has “driven that to one to fifteen - That’s a huge saving.”​

Mid-Sized CROs to be Squeezed Out?​

However, such a change in sponsor-CRO relationships is affecting the CRO industry as a whole, he told us. Reducing a pharma’s mirror team is a fundamental part of these partnerships but “at the moment only the big ones are able to do that.”​

Small niche CROs are able to remain competitive by offering access to a certain country, therapeutic area, expertise, or technology - according to Buhlmann - but for mid-sized CROs “they’re neither here nor there,”​ and may be forced to consolidate or lose out as strategic partnerships reform the industry.

This explains such activity in the mid-sized sector as the recent merger of PRA and RPS​, who came together to form what they say is the fourth largest CRO, Buhlmann added.

Works in Theorem​

However, one mid-sized CRO who disagrees is Theorem, and we spoke with CEO John Potthof at the show about how Theorem planned to adapt itself as pharma looked towards more complex relationships.

“We’re engaged in a number of strategic alliances now,”​ he told us, with a mix of full service and functional service contracts.

He added as the industry changes to incorporate more technology coming into play on the drug side, Theorem is in “a good place to be as a company”​ as it is one of the few CROs that has a focus in both the pharma and medical device sides of the business.

“There has been a lot of consolidation and we think it’s going to continue,”​ Potthof told us. “There are areas of our business we would like to reinforce through strategic acquisitions and we’ve been very active at looking at quite a few companies.”​

However, any acquisition would not be simply for scale, he said, but rather to reinforce specific parts of the business.

Here to Stay​

We asked Parexel’s Buhlmann if there was a chance strategic alliances may be a passing fad within the industry:

“There are a few people out there who are saying this may go away - strategic partnerships are like the latest fashion and in two years they’ll just disappear -but I don’t think they will as this is a scalable system.”​

With strategic partnerships, “[pharma and CROs] are in this boat together, we have to work together on something that is much more integrated.”​

Furthermore, when asked if Parexel’s own partnerships were likely to be renewed by the relevant sponsors, he said he was “very confident across the board.”​

And there is still time to enter our readers’ survey as to whether strategic alliances are good for the industry as a whole by clicking here​.​