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Specialty Pharma and Biotechnology Drive Contract Research Organizations’ Growth - Biotechnology remains the strongest driver of incremental Contract Research Organization (CRO) revenue growth, followed by specialty pharmaceuticals and niche/startup pharmaceuticals
Specialty Pharma and Biotechnology Drive Contract Research Organizations’ Growth

 

NewswireToday - /newswire/ - Mountain View, CA, United States, 2008/11/26 - Biotechnology remains the strongest driver of incremental Contract Research Organization (CRO) revenue growth, followed by specialty pharmaceuticals and niche/startup pharmaceuticals.

   
 
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Greater growth potential exists for CROs in early stage work with increased potential for outsourcing, especially in areas such as toxicology studies where outsourcing penetration is lower. Several CROs are adding early stage capabilities to garner a greater share of outsourcing within this market segment. Companies looking to expand and capitalize on these opportunities, however, expect to increase capital expenditure and build new facilities or acquire them.

Frost & Sullivan (pharma.frost.com) finds that the U.S. CRO market earned revenues of $9.77 billion in 2008 and estimates this to reach $23.78 billion in 2015.

If you are interested in a virtual brochure, which provides manufacturers, end users, and other industry participants with an overview of the U.S. CRO market, please send an email to Johanna Haynes, Corporate Communications, at johanna.haynes[.]frost.com, with your full name, company name, title, telephone number, company email address, company website, city, state and country. Upon receipt of the above information, an overview will be sent to you by email.

The U.S. CRO market has witnessed strong double digit growth since 2003 and expects strong growth through the forecast period. Before 2003, the market witnessed a sharp drop in growth rates between 1998 and 2002 due to several mergers and acquisitions that led to a decrease in outsourcing relationships of the newly merged entities. There was also a significant slowdown in biotechnology funding from the meltdown of global markets.

The markets, however, have since recovered strongly and consistently added over $1.50 billion in incremental revenues each year. This increase in incremental revenue is primarily driven by growth in R&D spending and the subsequent increase in outsourcing penetration.

There is a strong demand for early stage services from the supply side (R&D spending) that could translate to higher business for CROs if their services are positioned to meet the demand and requirements of sponsors.

As CROs continue to expand their global presence, they must ensure closer coordination with IT vendors to ensure the systems are in-line with the rapidly changing requirements of the market. Also, moving forward we are likely to witness a greater role for CROs in deciding on the IT systems and platforms to invest in as the decision making moves away from sponsors.

“With rising competition and fragmentation of the CRO market, these organizations witness lower margins for contracts,” continues Shankar. “For this reason, translation of a strong backlog into revenues over time is likely to be more challenging than before, especially as CROs have not been able to match the growth of backlog with revenue growth.”

One of the most significant trends within the U.S., as well as global CRO markets, is the move from transactional to strategic outsourcing by sponsors. The fact that the CRO market growth has consistently outpaced R&D spending growth is an indicator that outsourcing penetration is on the rise. It is also interesting to note there have been several preferred partner announcements, the Covance-Eli Lilly partnership being the most recent and interesting one.

More deals expect to be announced, signifying a move from a transactional relationship to a more strategic-based relationship between CROs and sponsors. These types of partnerships are driven by the fact that despite significant increases in R&D spending, the number of new drug approvals is at a historic low.

U.S. CRO Market is part of the Pharmaceuticals and Biotechnology subscription, which also includes research in the following markets: U.S. Clinical Trials Management Systems Markets, Global Biopharmaceutical Contract Manufacturing Market, Global CRO Spending Trends, and Strategic Analysis of Opportunities in the CRO Market. All research services included in subscriptions provide detailed market opportunities and industry trends that have been evaluated following extensive interviews with market participants. Interviews with the press are available.

Frost & Sullivan, the Growth Partnership Company, partners with clients to accelerate their growth. The company's TEAM Research, Growth Consulting, and Growth Team Membership™ empower clients to create a growth-focused culture that generates, evaluates, and implements effective growth strategies. Frost & Sullivan employs over 45 years of experience in partnering with Global 1000 companies, emerging businesses and the investment community from more than 30 offices on six continents.

U.S. CRO Market
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Specialty Pharma and Biotechnology Drive Contract Research Organizations’ Growth

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Publisher Contact: Johanna Haynes 
210.247.3870 johanna.haynes[.]frost.com
 
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