The recently renamed preclinical services contractor shared its take on industry dynamics this week, telling us demand from biopharma companies is a key driver for contract research organisations (CRO).
COO Adrian Hardy said: “Envigo and other non-clinical CROs are seeing a rising tide of work from across pharmaceutical development, from smaller biotech companies through to the larger pharmaceutical companies.
“One obvious increase which we experienced over many years is the number of biological molecules entering development” Hardy said.
Global financial markets are also playing a part according to Hardy who told us: “Smaller companies have had more access to capital in recent times, and larger companies have refocused on early development after concentrating their resources on later stage assets for the last few years.”
At present, around 40% of Envigo’s pharmaceutical development business has come from smaller pharma and biotech customers.
Hardy added that: “This has coincided with a general strengthening in demand - the money has clearly returned to this market, both public funding and corporate venturing, particularly by the major pharma companies.”
The upswing in biopharma drug testing demand has changed the preclinical services sector in terms of the scientific expertise CROs need to be competitive according to Hardy.
“With the rise of biologic technologies, understanding the pharmacology of drugs has become increasingly important, which has interestingly had a knock on effect with small molecule drugs too.
Hardy added that: “There is a key focus on the actual pathway during drug development and how the drug acts, from late research into preclinical and clinical.
Capacity and pricing
The increase in demand for preclinical drug testing – from both small molecule developers and biopharmaceutical companies – has increased capacity utilisation industry-wide.
For example, in February Charles River Laboratories (CRL) said it was re-opening a site in Massachusetts as a result of demand.
The same is true for Envigo according to Hardy, who told us “We have been seeing improving capacity fill rates for some time, from all parts of our non-clinical contract research services.”
The normal interpretation is that higher capacity utilisation allows CROs to increase prices – less laboratory space combined with high demand allows contractors to pressurise pharma customers to pay more.
However, while there has been movement – Covance owner LabCorp was about positive about pricing earlier this month – the full impact of higher capacity utilisation has not been seen according to Hardy.
“I also think that we and the other major players in the early development space have been fairly careful in talking up any immediate or significant impact on pricing levels. We have definitely seen some directional improvement, but at this point in time it is difficult to make any specific claims.”