News & Analysis on Clinical Trial Services & Contract Research And Development
By Melissa Fassbender
- Last updated on
As capacity continues to tighten, demand for contract research organizations (CROs) and contract manufacturing organizations (CMOs) remains solid, which Price said is good news.
However, the industry is also seeing increased consolidation, which “may or may not be good news for the owners and investors of CROs and CMOs, depending on the valuation,” he said.
According to Price, acquisition presents an element of risk for sponsors who want the focus to be on their project, “not on the potential impact on the project team.”
He also said tightening capacity and increased consolidation might make it more difficult to find a CRO or CMO with the skills and capacity to take on their projects.
And while there was much M&A activity among CROs this past year, last year saw a decrease in the number of Big Pharma and life science acquisitions, but Price said this should change in 2017.
“Still-low interest rates will continue to make acquisitions cheap but we do expect that the new administration will push for two things that will fuel mergers,” he said.
The two things Price expects the new administration to push for are 1) Encourage the SEC to lower the bar restricting mergers; and 2) Change corporate tax codes to allow US-based Big Pharma – and with this repatriate dollars currently sitting in offshore bank accounts owned by international subsidiaries.
“If that tax code reform occurs, we think Big Pharma will use those offshore moneys to help fund acquisitions,” explained Price.
“It’s hard to say if the mergers will pay off for investors but with fewer players, drug prices will increase and have a cascading downstream effect. In other words, this may not be good news for patients.”