Top 7 CROs soon to exceed 50% market share, Parexel CFO says

By Zachary Brennan contact

- Last updated on GMT

Top 7 CROs soon to exceed 50% market share
Top 7 CROs soon to exceed 50% market share

Related tags: Strategic partnerships, Strategic management, Outsourcing

As PRA Health Services goes public this week, nearly all of the top CROs are now public and the top tier of these companies could control about half of the outsourcing industry, Parexel CFO Ingo Bank said Tuesday.

Clients are trusting us with increasing number of products and some large biopharma companies are streamlining pipelines as necessary to be competitive, and this has led to increased outsourcing​,” Bank said at the Credit Suisse Healthcare Conference.

The CRO market is growing at a rate of about 7%, and it’s conceivable that two or three years from now, the top tier of CROs could make up about 60% of the market, compared to about 40% of the market a couple of years ago, he said.

He also mentioned the relatively recent shift to strategic partnerships, which makes the larger CROs better positioned to capture new opportunities, though he didn’t initially mention the recent downturn in strategic partnerships​ cited in the company’s latest quarterly earnings.

We believe the market opportunity is still very healthy​,” Bank said when asked specifically about the recent downturn. “What we need to understand is that typically in that segment, these partners allocate business in large chunks, so if you win the business, you get a large chunk​.”

Our outlook for new business wins remains positive​,” Bank added. He also noted that the company’s number of employees in India has more than tripled over the past four years.

Quintiles

Quintiles CEO Tom Pike spoke at the same conference a few hours before Bank and told attendees that he hasn’t seen a fall-off in recent opportunities similar to what Parexel recently announced.

When it comes to market opportunities, we continue to see the same as we’ve seen over the past year…management teams embedded within the major customers – key is execution and closing some of those deals. I wouldn’t read much into the lumpiness of the industry – market is strong,” ​Pike said.

As far as the recent consolidation in the industry – specifically, LabCorp’s acquisition of Covance​, Pike said, “For us, we view it as an opportunity​” as there will be a period of transition for the two companies that Quintiles needs “to take advantage of as the number two lab provider. It’s good for us from that standpoint, [and the acquisition] doesn’t strengthen the clinical side of Covance​.”

 Top 7 CROs soon to exceed 50% market share

In general, Pike sounded encouraged by the mix of customers coming to Quintiles seeking multiple services, noting “small biopharma really came on the stage in the last year or so –  we’re consistently seeing that the ones who picked their strategies [in terms of either strategic partnerships or service contracts] are continuing to execute against those strategies.”

He also praised the recent Novella acquisition, noting how the company has benefited from Quintiles’ global capabilities.

In addition, Quintiles is “trying to get more SG&A leverage so in general you’ll see we can hold down SG&A costs​,” Pike said.

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