Analyst says 4th CRO may shake up Pfizer's deals with Icon, Parexel, and PPD

By Melissa Fassbender contact

- Last updated on GMT

(Image: iStock/atchanida thippayos)
(Image: iStock/atchanida thippayos)
Icon and Parexel recently announced renewals with pharma giant Pfizer, but according to analysts, PPD and an unknown fourth player may disrupt business as usual.

In Parexel’s announcement on Friday last week, there was no mention of a contract length. David H. Windley, CFA, CPA, Managing Director, Healthcare Equity Research, Jefferies, told us this suggests the duration could be different, and for that matter, the terms. Additionally, for Icon, the length has changed from the previous contact.

The first alliance partnership contract was five years … This one is 3 years with 2 year extension; It’s not a committed five years​,” said Windley – although he suspects the contract will extend the full five years.

Windley added that another factor to consider is recent low award activity out of Pfizer, specifically to Icon. However, analysts suspect this may be because attentions have been focused on the renewal. Yet, Parexel said that that hasn’t been an issue.

It could be racked up to Parexel exposure to Pfizer being smaller​,” explained Windley, “so relative movements don’t move the needle as much for them.But they [Icon and Parexel] seem to be saying different things​.”

A slice of the pie

Pharmaceutical Product Development (PPD) was brought as a third partner in April 2015, as part of a “rebalancing​” Windley previously​ told us.

While PDD doesn’t publically acknowledge working with Pfizer – a representative from PPD told us that the company “neither confirms nor denies involvement in any specific study or work with any specific client​” – Windley said he is “pretty confident​” they work with Pfizer.

As for the partnership, Windley added that he believes it’s off to a decent start.

[PPD] didn’t come roaring out of the gates, which is to be expected​,” he said, as the relationship has been more organic and is only a year in.

At this point, Windley said that the share of business is not being taken away from one CRO and given to another. However, with approximately $755m in business between Icon and Parexel, the question is how much is being spent with other companies? Windley’s best guess is around $200m.

I think the intention is that $200m in spending will eventually migrate into the alliance partnership [Parexel, Icon, PPD]​,” he explained. Although he said some of that spending will be allocated a fourth player.

Whereas a year ago, I thought that the addition of PPD was relatively non-threating, even to Icon or Parexel, because PPD would get the $200m –now I think there’s a fourth name in the mix that has an effect,​” said Windley. And apparently it is a player that is already doing “a lot​” of business with Pfizer today.

Windley said if we dial forward a couple of years and examine how “the pie​” is sliced up today, Icon will have a smaller slice. “I don’t think Pfizer wants to be as exposed to one vendor as they have been in the past​,” he added, as the company, and the industry as a whole, strives to reduce risk.

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